Friday, March 12, 2010

Forecasting...

It’s hard for me to forecast my debt payoff to see how long it will take me to repay all of my debt. First, I am on a graduated repayment schedule on most of my loans which means that I am paying interest only for 2 years before I start principal and interest payments on some of my loans. Not all of them qualified because the loan balance was too low. So, I am paying principal and interest on those loans. Second, a lot of things in my life are up in the air. Will I finally land a higher paying law position, will my current employer finally pay me market (I am grossly underpaid…more on that later), will I ever get married and share expenses? If I got married, would I sell my condo and use the equity to pay down my loans. Will I, Would I, Will I….

Assuming things pretty much stay exactly the same, with minimal salary increases and the application of my annual bonus ($7k after taxes this year), it would take me about 12 years to pay off all of my debt.

If you look at the snowball calculator below….I used the custom method to determine my order of payoff. Now that I have a short-term emergency fund, my immediate concern is the payoff of my credit card debt. The promotional rate is set to expire at the end of January 2011. All of my private student loans pretty much carry the same interest rate so I placed those in the order of principal amount due. My federal loans may have a higher interest rate right now but those rates are fixed. A few years ago, the rate on my Private Loans were over 10% variable so paying off the variable rate loans take priority.

I am not at all concerned right now about the $64,000 in federal loans that I have consolidated at 3.5%. If it took me the entire 30 years to pay that off, I wouldn’t be too upset. The rate is so low as well as the payment. Push come to shove, once the other loans are paid off, I would rather focus on my retirement savings instead of the $300 payment on the consolidated loans. That’s neither here nor there because I have so many other loans to pay off first.

With Bonus - 12 Years


Without Bonus - 19 Years


11 comments:

Aaren said...

Sigh. That's a bunch of debt. Mine looks similar, but still. Amazing what we do for education, isn't it? Anyway, you've got few loans at fairly small amounts, like that Perkins loan and Group T. Have you thought about using next year's bonus and just paying those off in full? This assumes you're able to re-transfer your CC balance and keep a low interest rate, of course. You could still get the card paid off in 2012, and the total interest paid might work out in your favor.

I mean, there's just no reason to pay the Perkins loan for another 8 years (which I don't think you were seriously considering anyway) when it's $2,500.

Marathon, not sprint. Rinse and repeat.

Chitown said...

Ha...I guess the chart and breakdown really puts it in perspective eh?

Anyhoo...Assuming that I can get a balance transfer for my credit card at a decent rate, then I will leave it alone and concentrate on the student loans.

If get a bonus of ~ $7,000 next year, I was thinking of paying off the $5,600 loan and liquidating the stock from my employee share purchase plan and my small sharebuilder account. Those currently amount to ~ $1,400. That would leave $2,800 remaining for debt repayment.

Then, I could pay off the $2,300 perkins loan or I could put a nice almost $3,000 dent in Group D and reduce that balance from $11,000 to $8,000. At least I know if I stay at the Bank and get another bonus then Group D could be paid off relatively soon.

The $32 payment on the perkins loan is so small each month that I would much rather make a nice $3,000 dent in Group D. Plus, the rate on the perkins loan is fixed.

Chitown said...

BTW...I wish it was all just for education. Some of it was just plain stupidity.

Aaren said...

"I wish it was all just for education. Some of it was just plain stupidity."
^^^Preachin to the choir!

I've been remiss in writing my monthly post on networthiq, so I'm linking it for you, if you're interested. It's about paying off loans, and you can take a look at mine :D. So sad, so very very sad.
https://www.networthiq.com/people/Ronnieaj/journal/student-loans-and-
monthly-obligations

Chitown said...

Hi Aaren...I just checked you out over on networthiq. The lawyer in me wants to be nosey. I asked you a few questions over there.

Also...feel free to email me. I would love to know more about your family law practice. It is the area of law that I was most interested in but people discouraged me saying it had a high burnout rate.

Thanks!

Aaren said...

Okay, so I sent you the LONGEST email I've ever typed in my LIFE!! Read it at home, with a glass of something, and I apologize in advance for its long-windedness!

Anonymous said...

WCB,

I am impressed. That would put you at about the time frame my husband and I are taking to pay off debt from school. It is good to have some goal to shoot for. And as your situation changes (we hope only for the better!) you can update the forecasting.

As the devil's advocate in this situation, I would not recommend including your bonus into your calculations or even your thought processes. Treat it as what it is: bonus if you get it, not there if you don't.

I have to say, I paid off my Perkin's loan simply b/c it got annoying.

Kris

Chitown said...

Hi Kris,

Without my bonus in there then I guess I will be an old lady with a walker by the time I pay all off my loans. lol

I've been with the Bank for 10 years and every year I've gotten a bonus even during this down time.

Aaren said...

Actually, not using your bonus adds around 6 years to your total payoff. I know that seems like forever, but it's definitely not old lady walker!

Chitown said...

I posted the difference. It would take another 7 years and cost another ~$42K in interest. Oh Boy!

Aaren said...

Well, yes. Approximately $7,000 for just over 6 years equals approximately $42k, lol. But June 2022 and September 2028 is not seven full years--don't add more time than necessary!!