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February 22, 2007

Paying the Piper

In 2001 I graduated college with $17,718 in student debt. Over the next few years, I paid $447.41 plus interest and my mom paid $7147.73 plus interest (thanks, Mom!) toward this debt. Then I went to grad school and my loan repayments were deferred. Now that I have left grad school, however, the payments for the remaining $10,122.86 are coming due, and the companies that own my loan are not into giving advance notice. Yesterday I got a letter from Sallie Mae telling me that my next payment of $92.32 is due on February 18. Reader, yesterday was February 21. There is nothing scarier than getting a bill three days after the payment is due! This morning when I logged in to make the payment, I was informed that my account is three days delinquent. If they want people to make payments on time, they should give us a bit of advance warning!

When I decided to go to Pomona College almost ten years ago, I knew I would graduate in debt, and I didn't care. After all, that was still four years down the road, and then I would have ten years to pay off the debt, by which time I would be in my early thirties. It is very hard for a seventeen-year-old to think that far down the road. My dad tried to warn me what it would be like to be in debt, telling me that I would never even be able to buy an ice cream cone because all my money would have to go to debt service. To this day, I still resent him for using the "no ice cream" threat to try to scare me. It is true that being in debt isn't fun, but fortunately -- between my two jobs -- it isn't an overwhelming burden. Yes, it is true that I could have gone to Boston University for free, as my dad wanted me to, and today I wouldn't be in debt, but I still think I got the superior education (no offense, Dad).

Recently, I have been looking at debt blogs, which make me feel a lot better about my own indebtedness. Unlike some people, I don't owe anything on credit cards and, compared to others, owing $10,000 is just the tip of the iceberg.

So today I made my Februrary and March payments on my Stafford Loan, and next week I'll start making regular monthly payments on my Perkins Loan. My goal is to put $300 monthly toward these loans, at which rate I should have them paid off within about five years (accounting for the interest that will accrue as I repay). Perhaps this is tmi (too much information), but this kind of accountability worked for some of the debt bloggers, who managed to pay off their credit cards super-fast once they started blogging about it, so I'm trying to take advantage of it too.

Posted by eklanche at February 22, 2007 07:35 AM

Comments

Justin is getting his certification in financial planning. One thing that is really important to know is that school loan debt is actually "good debt". Not all debt is created equal. SO it looks good to have repaid some debt, it shows you're responsible. Also school loans are usually low interest loans. (Although watch out with Sallie Mae). If you are going to pay extra you should pay the highest interest one faster, and pay the min. on your low interest loan. I am assuming that Sallie Mae is the highest interest loan. (You probably already know all this.) My main point is that although people try to scare students, there is !absolutely! nothing wrong with school loan debt. As long as you don't have to repay 50,000$ with a low-paying job, you'll be fine. It often helps improve your credit score, and *some* financial planners actually advise not to pay the loans off early if they have supper low interest rates.

Posted by: kisha at February 23, 2007 02:15 PM

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