After recently finishing the last of my formal education (so far), I was able to consolidate my student loans. I received two pieces of information in the mail from the lender, one good and one not really that good. First, the good news.
You are eligible to receive a 0.25% interest rate reduction when you enroll in our automatic payment program… Enrollment will save you both time and money, and will prevent any delayed or forgotten payments.
This would lower the interest rate from 4.25% to 4%. That’s a good deal. However, another piece of mail — you know, they could probably lower their interest rates further if they’d stop wasting so much paper — makes me want to accelerate my payments as quickly as possible.
The lender has provided an amortization schedule for the approximately $20,000 I have in student loan debt (outstanding undergraduate loans plus graduate loans I didn’t pay back with my reimbursements). Even with a cool 4.25% interest rate, after the twenty-year schedule they suggest, providing a monthly payment of $127.04, I will pay $9,973.84 in interest before this loan has completely disappeared.
That is way too much money to spend on interest in my opinion. While some people say it’s not horrible to carry debt at favorable rates, and I may agree in some cases, I need to find a balance in order to avoid the interest payments that add up to a massive amount year after year.
Updated September 28, 2007 and originally published October 31, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.