Ah, student loans. The things that remember you long after you’ve completely forgotten the entire college experience.
Although I finished college in 1997 and graduate school in 2000, loan payments to Sallie Mae have been a constant fixture ever since, like a little wound I’d nurse which just wouldn’t stop bleeding.
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Even when making double or triple monthly payments, the amount I owed hardly seemed to diminish at all. I set up direct deposit, did everything I could to nudge that low interest rate down even further, and eventually consolidated my loans, but I was still frustrated, unable to see that light at the end of the tunnel.
Perhaps this was because (and I’m actually facing this number in its entirety for the first time ever right now): that tunnel was pretty darned long. $52,050.74 long. Looking at it actually makes me feel faint.
And that’s just the principal – that number doesn’t even take the interest payments into account. I’m afraid to figure that total out.
I won’t say for a second that my higher education wasn’t worth it – it was just a bit of a hard road to travel, despite my high level of motivation and desire to be self-sufficient. My parents either couldn’t (Mom) or didn’t (Dad) contribute to my college education, so I waited tables like crazy throughout highschool, washed dishes for a whopping $4.50 an hour within the work study program once at college, and got student loans, both subsidized and unsubsidized, to cover the rest.
I still wasn’t anywhere near paying off the 4 years of undergrad study when, after several years in the workforce making double loan payments each month, I decided to go to graduate school. Another $18,000 added to the sum, and that’s because I chose to complete my Masters degree overseas, where it was cheaper.
That loan amount kept swelling like an engorged tick, but because it was in a flurry of separate disbursements, I never really faced the total, just a few thousand here and ten more thousand there. My interest rates were pretty good, so I’d just been paying it down monthly ever since, hoping one day to reach the elusive endpoint.
Last year, I started becoming more financially aware and contributing to my savings account. I was so happy that I had finally amassed some money in savings that was earning 5.25%, but then I noticed that my consolidated student loans were still costing me more than that in interest at a rate of 5.38%. And because of my salary, I don’t get to deduct a single penny of that interest from my taxes.
Because I was just paying under $200 a month, it didn’t seem that bad, but once I really got into crunching the numbers, I realized that I’d been paying around $75 a month in student loan interest, which turned into a big ouch when I looked at the cost annually. And despite all my extra piecemeal payments, nearly ten years later I still owed around $22,000 to my old friend Sallie Mae.
I sought the help of a financial advisor. She explained that although some of my residential and rental property mortgage rates appeared at first to be higher, after tax deductions, my student loans were hands-down the most expensive of all my loans.
Based on her advice, I decided to grab some cash out of my coveted savings account and start hacking away at the remaining loan amount, paying as much as I could whenever I found I had uncommitted funds at my disposal.
My tax refund and all my savings except my emergency fund went right to Sallie Mae, knocking off $10,000 from the total. I moved my emergency fund to a high-yield savings account earning 6% at FNBO Direct, and started funneling every extra penny into that account, elated each time I was able to transfer money in. The interest was a nice bonus, giving me more incentive to store funds at FNBO Direct before surrendering them, never to be seen again. Once there were sufficient funds in the account, I’d do yet another payment to Sallie Mae, $500 or $1000 at a time.
It felt like the wound was hemorrhaging, and I dreamt of having a nice big savings or investment account instead, but I remained committed to reducing that total.
And around 2 months ago, I finally got that total just under $4,000. The end was in sight! I started bringing more lunches, buying less clothing, socking away funds just a little bit more – anything to finish that final lap.
And today, I did it. I sent my final payment of $3,880, and bid my old friend Sallie Mae goodbye with a cheer.
The number was $52,050.74. It was outright terrifying, a giant monster that wouldn’t fit beneath the bed. And as of tomorrow, that number will be zero.
In ten years, I have paid off $52,050.74 in principal, and still more in interest. I say it again because now I like that number; now I’m very, very proud.
Updated October 21, 2015 and originally published October 17, 2007.