Wednesday, April 07, 2010

Early Student Loan Repayment…

I am a little bummed that my student loans are going into repayment a month earlier than I expected. On top of that, they were talking on the news today about when Bernanke was going to start raising interest rates again. I swear my heart started to palpitate.


Terry said...

It could be worse. I'm stuck with a semi-high rate I can't shake.

Aaren said...

Well, at least you know about it now rather than finding out when your account overdrew in June because you weren't expecting the payment to be until July. (Is that right? If the forbearance ends in May the first payment will be June right? It's been a long day already.)

So you should get at least two checks at the higher salary prior to the increased SL payment coming through. You're allowed to let your heart palpitate; now it's time to plan. How do you manage that increase in costs?

Am I semi-accurate in that if you pay interest only your payments will be around $885/month? I got this from adding up the interest only column of your vertex42 sheet of your loans from back in March, but my math is always a little suspect :D.

Chitown said...

Hi Aaren,

I hope you're having a good day. It's gloomy, cold and raining here in the Chi today.

I actually only get one more check to bank before I start paying the higher amount. My check at the end of the month pays the bills the next month. So I get paid April 29th and will pay May's bills and then I get paid May 27th and I will start paying the higher amount in June.

Right now, a little less than $300 accrues each month on the federal loans not in repayment. All of those loans should quality for the graduated repayment plan which allows for interest only for the first 2 years. Not all of my private loans qualified for interest only so those loans are on straight amortization.

The minimum payment under the interest only option has to at least amount to $50 so not all of my loans qualify with the current low interest rates. I can continue to watch rates and if they increase to the point where interest only would meet the $50 threshold then I can also enroll those loans in the graduated repayment plan.

All that being said, my payment to Access Group was $781 this month so I am looking at $1, roughly $1,100 with my perkins loan come June.

Aaren said...

What I meant about the paychecks is that you have a month to figure out how the inceased payment will affect your finances before it hits, rather than just trying to figure it out all at once.

You're clearly at a place where you either need to bring in more income or further reduce expenses without tapping your emergency or short term funds. While your student loan aggregated amount is your largest expense outside of rent, one of the single largest expenses is the credit card payment. As in, if you didn't have to pay that, the upcoming increase in student loans would still leave you with a net positive of around $150, higher when combined with the increased income.

Might you reconsider getting a part-time job, even if only for a year or so, to get that expense paid off entirely? Out of the $1600/month you listed for your outstanding debts, $460 of that was for the credit card, over 25% of the total monthly debt. That's the monkey you really need to get off your back, low interest rate be damned.