So Sick of Student Loan Debt

[kalikala1980]

As of today, I have $43,153.01 in graduate loans. Luckily they are all federal loans and my interest rate is 6.55% since I do automatic debit from my checking account. I have been paying on my loans for over two years and the balance has only gone down about $2,000.00. It makes me absolutely sick to think about all the money I've paid in interest and will have to pay in interest. I do not have any other debt thank goodness but this student loan debt hangs heavily over my head and suffocates me. It is hindering my ability to buy a home. I want to get rid of this debt as fast as possible but due to the amount I owe, it will be a long and arduous task. To jump start things and get me motivated, I took $1,000.00 out of emergency fund and will pay it to my dear Aunt Sallie Mae. I pay $259.32 a month plus an additional $300.00 a month towards mostly principal and some interest. I was wondering if anyone else can relate to this and if so, do you have any strategies that I can use to help accelerate this process? I was thinking about splitting the extra $300.00 payment into 4 $75.00 payments since I send the one lump sum extra payment when my other payment comes out of my checking account. I've read that splitting my extra payment, more will goes towards my principal. Thanks.

[Wino]

I've read that splitting my extra payment, more will goes towards my principal.

That's not the scenario where this works. The splitting pre-supposes that you pay at week 1, week 2, week 3, and then week 4, instead of ONLY at week four. The difference is minimal, also. I wouldn't waste the effort.

The best bet is to throw the $300 at it every month like you're doing, and increase that amount when you get raises, bonuses, or extra money from whatever source. Just don't borrow anything more, and throw all the money you can at it. If you cut back, you can probably get rid of that bill more quickly. You just need to keep at it, and continue to pay more (much more) than the minimum.

[5MinuteMoneyTips]

Teach

Now that you have your graduate degree, you can teach college level classes. I teach online and it is a great extra source of income. I got my job through networking, however there is a great book on Amazon, Make Money Teaching Online: How to Land Your First Academic Job, Build Credibility, and Earn a Six-Figure Salary, that I recommend.

Another strategy I use is to keep my pay the same. With your Graduate degree, I hope you are earning more money. After I got my Graduate degree, I received a raise and several subsequent promotions. Every time I received a raise I put that money in savings. In your case, you could put the extra money toward your loans.

Jake Posey

[Mesem]

I don't see how splitting the payments would help? Anyways, you could try telling your family members about your situation. Maybe they could help?

[ktmarvels]

I would make sure those extra $300 go towards the principle only. I prepaid my loans doing a similar method, and the extra payment strictly went to the principle. You have to be careful because sometimes you are just pre-paying the interest not lowering the principle to create less interest.

Otherwise, you are doing the right thing by paying as much as possible as quickly as possible. The difference in interest is probably minimal, if at all, if you divide up the payments weekly versus the same lump sum monthly. My student loan was compounded monthly (or maybe quarterly) so it didn't matter at all, if yours is compounded daily it may make a slight difference, but probably not enough to bother with keeping up with the additional payments. Keep up the good work!

[TheKayla]

Sucks doesn't it? I'm in the same boat, except I have $80,000 in debt and make half that as a salary (before taxes, ugh). I know with MyGreatLakes, I can put a payment towards my debt every single day, and that helps significantly with the interest. I just divide what I know I can put extra towards this month by 30 and go through and schedule around $20 every single day, instead of one lump sum extra payment of $400 or so. Make sure with who ever your servicer is though that you can do with without penalties.

I also freelance on the side and throw most of that money at my debt as well. I may be able to get out of debt in about 7-8 years at my current pace, but the biggest "trick" I've found is how to live happily and feeling fulfilled on very less.

Keep it up, it'll all be worth it once you're debt free! It's a shame that we have to treat student loan debt in basically the same way as credit card debt. :/

[TheKayla]

I don't see how splitting the payments would help? Anyways, you could try telling your family members about your situation. Maybe they could help?

The more often you pay the less interest you pay, and especially true for student loans who's interest compounds at a daily rate. It pays off the interest and part of the principle more often, meaning you pay less when it does compound. Basic debt reduction strategy, specifically when stretched thin because you can make the same additional payment stretch further.

[stoney508]

I actually had about that much debt with my student loans when I first got out of college. With a graduate degree you should at least have a better income coming in now or should shortly.

I started attaching my loans with "bad debt" (all debt to a point is bad debt) starting off with my car loan because it depreciated. Then I used a smaller amount loan to boost my spirts and paid that off. From there I went to and am working on my private student loan because the interest rate was variable. I am currently at this step but I would recommend if you do not have any other debt like I did to go after either the highest interest rate but since you stated that they are at 6.55% I would go after the highest amount and make sure your 300 goes to this loans priciple.

I am going at it a different way and going after the loans that are smaller but will free up the most in my payments. Ex. 2 seperate loans at 2,000 each with the same interest (6.55) but one has a payment of 52 dollars and the other a payment of 36 dollars. I am attaching the 52 dollar amount first. This may not be everyones case but its what im trying to do with mine.

[snafu]

Is this type of student loan front loaded like a mortgage amotorization schedule so each payment prepays interest? I tried to check to see if there was a lower rate since mortgage and savings rates are so low. I discovered your SL rate is super low. Do you qualify for a super low Personal Line of Credit where your large payments are mostly applied to principal?

[TheKayla]

Deleted post -- sorry I posted this in the wrong spot so I'm editing in repalce of this.

[YLTL_Dan]

Yes, I've been there and I had a breaking point.

I think you need to look further than just making extra payment on your loans. Have you done everything you can to take control of your spending and really attack the debt? I'm talking tracking every expense you have and knowing where your money is going each month? That's what finally helped me, I tracked my expenses for 2-3 months, figured out where all of my money was going, and finally "found" extra money. I then cut that even further and paid more on the debt.

[SeanH]

Forget these convoluted multi-payment strategies. Send more money by either increasing income or cutting expenses.

[Wino]

The more often you pay the less interest you pay...

That is not correct. The SOONER you pay, the less interest you pay. For example, let's say I have $300 to pay during June for my account. Paying all of that on June 1 will end up being less interest paid that paying it $10 per day for the entire month.

What I said in the first response is correct, and the preceding paragraph illustrates the misconception some people have.

Now, if you make the $300 June 1 payment, and are able to pay additional money during the month, then you will come out ahead by doing so rather than waiting to make the payment on July 1.

[kalikala1980]

My payment comes out on my account on the 12th of the month. I have been making an additional payment about a week after that. I have recently paid $1,450 towards my loans in the last week or so. I plan on using my Xmas bonus of about $1,700-$1,800 to put directly towards that. I could pay more then I do but I thinks it's important to put money in an emergency fund to because there's always some unexpected expense.

[Goldy]

Are all of the loans consolidated into one large 43k loan or is the 43k the summation of smaller loans? If its made up of smaller loans then the debt snowball method would be an idea to help pay it off faster by you targeting the loans with the highest interest rate. If they all have the same interest rate then you target the loan with the lowest balance and once that is paid off you can take the money you were throwing at that loan and turn it to the next one in line. The process is great at turning large loans into smaller bit sized loans that are easier to deal with.