Tuesday, July 17, 2012

Student Loan DISGUST

I was poking around at my student loan account.  This loan is mostly from graduate school (with a small amount of undergrad for flavor and zest).  I only took out what I needed for tuition and books, with the exception of my final semester when I was student teaching.  Then I took out living expenses, as I was not working (for pay!) at that time.

I consolidated the loans (each semester was considered a new loan) in July 2003 (so 9 years ago).  Almost immediately, we put them in deferment.  The kids were not even a year old; I wasn't working.  We were still dealing with the aftermath of their birth and adjusting to EVERYTHING.

When the deferment ran out (I don't remember when that was), we went back to paying the loan.  Then the "brilliant" financial planner talked me into putting the loan in "interest only" payments to increase cash flow.  That was only good for 2 years, so I knew it would revert to "interest and principal" in October 2011 (for long time readers, I had talked about my student loan payment going from $90 to $229, and why we needed to have G-man's car paid off by then). 

All of this seemed to make sense at the time, as I was really only looking at our month to month costs. 

DUMB.   I so wish I knew what I know now.  In reality, I wish I had paid off my undergraduate loans way sooner, so I could have tackled the graduate loans sooner, and be done with all of this.  But hindsight.....

Anyway, I looked at the current loan....and when I actually saw the numbers (based on my current statement), my jaw hit the floor.

  • Original loan amount:  $30,303.17
  • Total principal paid:      $4,128.43
  • Total interest paid:        $7,851.38
In 9 years, I have paid a measly 13.6% of the original loan.  And have paid 90% MORE in interest.  Of the $11,979.81 I have paid in 9 years....only a third of it has been principal.

UGH.  DISGUSTING.  Almost $8,000 in interest....that could have gone so far towards other things.  UGH.  And the current payoff date is July 2024.  12 year more to go, on top of the 9 I have already put in.  Ridiculous.

So, I am considering going on auto-debit for the loan, which will reduce the interest by 0.25% (not alot, but it all counts), and increasing the payment by $20 a month (not alot, but this will get adjusted).  That makes the payment a round $250 a month. What I have to find out is if the extra money will go to principal, or interest!!!  I am not paying more to interest, thank you very much. 

So to my friends out there, look at the big picture.  It may seem like a good idea to drag it out, since student loans have a low interest rate (mine is 3.375% fixed).  But it all adds up.  Just look at mine.

Anyone else ever look at their loans like this and just feel sick?


17 comments:

  1. I didn't have any student loans as I went part time at night and my employer at the time paid my tuition and books. But, what you are describing is so what I am worried about for my son's girlfriend! She has 2 years left, plus she wants to get her masters. Just this coming school year's loan will be $15,000. She wants to be a teacher, but I'm really not so sure the cost of a masters and paying it off the rest of her life is a smart move. Is she really going to make that much more, as a teacher, to cover the cost of her loan for the masters? Scary!

    ReplyDelete
    Replies
    1. The short answer is she will make more with a Master's than a Bachelor's. And depending on the state requirements...she may HAVE to have a Master's to get tenure.

      But she should pay it back as soon as she can, before life gets in the way.

      Delete
  2. I had just about 10k in undergrad student loans. When I started my first full time job, teaching, I wasn't making a fortune, but compared to my part-time work in college I was rich! Instead of increasing my spending I started putting massive payments toward the loans, about $500 a month, way above the $70 minimum payment. I wanted to get rid of that 10k anchor as quickly as possible.

    The issue of risk is often not discussed when young people take on student loans. Sure lawyers may be able to make six figures, but what about life? It sounds like you've had a lot of life (married, kids, a home) all stuff you should be very proud of. These are the kinds of things that 18 year olds often don't think about when signing up for Sallie Mae. Good luck getting rid of the debt!

    ReplyDelete
    Replies
    1. My first job after college...I made 21k a year. I couldn't have paid $500 a month.

      But I wish that I had really worked to pay off my undergrad as soon as I finished. I got married at 22, moved at 24, got my Master's at 27, and had my kids a few months later. In those 5 years, I wish I had really known the big picture.

      Thanks for reading!

      Delete
  3. Yes and no. What's done is done and I have enough to give me grief in the present so i try not to add the crap from the past to the list.

    Thanks for entering my giveaway, good luck!!

    ReplyDelete
    Replies
    1. I look at this as an opportunity to teach my kids what NOT to do!

      Delete
  4. It took me 18 years to pay off my 2,500 loan. Yes 18 years, I was queen of deferment. We just had no income and sick kids yada.yada.

    ReplyDelete
    Replies
    1. My "small" student loan that I paid off a little while back? It was $5,000...and I paid another $5,000 in interest. Took me 18 years as well.

      We all just do the best we can.

      Delete
  5. One thing I have found about paying my (massive) student loan is tracking when it gets paid. The due date is the 20th of the month, but if I wait that long then most of the payment goes to interest. If I pay at the beginning of the month, more goes to principal. It took me a while to figure it out, but they get paid early every month!

    ReplyDelete
    Replies
    1. My due date is the 25th, but it seems that even if I pay the next month's amount on the 1st, the interest builds. I pay $230 a month now, and $75-ish goes to interest.

      Delete
  6. yes yes yes! I have like 7 loans when they're all divided out. One I consolidated and it is a giant chunk loan now of about $12 grand. In the six years since I've gradtuated college, I've only paid about $1000 into principal, with the rest of it all on interest. It's sickening. I'm focusing on paying off the smaller student loans for now. and then will work to pay off that massive loan.

    ReplyDelete
    Replies
    1. Oh please.....I know you are saving for a house and a trip....but knock this one out before you have kids! You have no idea how much harder it is the longer you wait.

      Delete
  7. That is depressing. If it makes you feel any better, my BIL has about $135000 left to pay off. when he graduated about 4 years ago, he was up around $150k.

    ReplyDelete
    Replies
    1. $150k? I am assuming he is a doctor or lawyer? Hopefully his earning potential is HIGH!

      Delete
  8. I am still paying off my student loans after graduating in 2001. Unfortunately, a bachelor's in psychology does not qualify you for much in the way of career and then I got sick and couldn't go for the master's or work. I had massive student loan debt - around $55,000, I think. We ended up paying off about half with a home equity loan that will only go for 15 years. I pay $179 every month and most of that has gone to interest. It's just disgusting. And it lasts longer than a mortgage without the benefit of the house.

    My oldest son has decided not to continue his education after his two year associates degree because he does not want to accrue student loans when he doesn't know what he wants to do. In some ways, I think that is smart, but he won't be qualified for much of anything. He's working as a waiter at a retirement home right now and has 4 classes left on his associates. He's making about $8.50 an hour and hoping to go full time there this fall. I have extreme doubts as to whether he will ever be able to support himself and I have two teenagers coming up right behind him.

    What are we leaving our children with????

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  9. Thanks for this post Mysti! The Princess has taken out loans for this year, and we are very nervous about it.... I'll make sure she reads this about the true costs of deferrment and interest only.

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    ReplyDelete