Friday, October 5, 2012

31 Days to Financial Freedom, Day 6: Student Loans

I'm publishing this post a bit early because I've got plans for tomorrow, and I'm not sure if I'll have the time to do it at a normal hour!  Tomorrow is my hospital's annual Associate and Family Fall Picnic.  The hospital does this every year for our associates, and yours truly plans the event (I'm the Activities Committee Chairperson . . . thank you very much).  It's free lunch and free fun for the kiddos.  It gets us out of the house, and . . . it's free.  Did I mention that?

I think I've been completely honest with you all, 100%.  I've told you how much I make an hour ($18), how much my husband makes an hour ($14.15), how much or mortgage payment is ($619), and how much I weigh (haha . . . just kidding).

I'd like to talk to you about the $33,099.25 elephant in the room.  I have student loan debt.  A lot of student loan debt.  A whole bunch of student loan debt.  I went back to school to move up in the hospital where I work.  I graduated in August 2012 with a Bachelor's of Science Degree in Healthcare Administration.  To date, what do I have to show for it?  $33,099.25 in debt ($1,138.25 is accrued interest alone).  I got a promotion back in August of 2011, and I do credit that promotion to being in school at the time, but I have yet to get a pay raise since my initial pay raise for switching jobs (I requested one two weeks ago, still waiting to hear back . . .), and I think that kind of blows.  But I digress.

Wait, no I don't digress.  I un-digress.  Did you know that women are less likely to ask for a pay raise (even though they often deserve it) than men?  And it's still common knowledge that women are paid less than men.  Why is that?  Drives me nuts. 

I figured up how much I will have to pay for my student loans per month and it stopped me dead in my tracks.  $448 per month.  $448 PER MONTH.  I'll be honest.  I cried.  I cried for a few days.  $448 per month for 30 years of my life?  There's no way that I could afford that, and any raise I would get would just go to paying off those loans.  My solution?  I'll get another degree!  Deferment!  Yahooooo!  Except this time I applied for the hospital's tuition loan program, meaning the hospital would pay for me to get my Master's, and I would "pay them back" in hours worked.  If I hadn't been accepted for the tuition loan program, I wouldn't have gone back to school.  It will cost me about $41,000 to get my Master's, and the thought of graduating with $80,000 in debt sends me into an anxiety attack.

I now have another two-ish years before I have to start paying on that debt.  A lot can happen in two years, including (hopefully) getting a promotion (or moving for a better job which isn't out of the question).  But I'm not just going to let those student loans sit and accrue thousands of dollars in interest.

Here is my loan situation:

Loan 1 (UnSub): $6,446 principle, 6.80% interest
Loan 2 (Sub):      $5,500 principle, 4.50% interest
Loan 3 (Sub):      $5,500 principle, 3.40% interest
Loan 4 (UnSub): $4,552 principle, 6.80% interest
Loan 5 (Sub):      $4,500 principle, 4.50% interest
Loan 6 (UnSub): $4,446 principle, 6.80% interest
Loan 7 (UnSub): $554    principle, 6.80% interest
Loan 8 (UnSub): $371     principle, 6.80% interest
Loan 9 (UnSub): $72       principle, 6.80% interest

Oh, I also need to add in my husband's student loans!

Loan 10 (UnSub): $3239 principle, 6.80% interest
Loan 11 (Sub):        $2241 principle, 4.50% interest

The bottom three of my loans will be easiest to pay off, so that's what I will do first.  It's dumb to pay $19 per month paying off a $554 loan for the next 30 years.  I will pay off those three loans by February of next year. 

I plan on tackling all nine of my loans, one at a time (mostly), during the two years that I am getting my Master's.  We currently pay $62 per month on Pen's student loans.

My plan:

First, I will pay off Loans 7-9 through two full-time payments and three months of monthly payments, to be paid in full no later than February of 2013.

I receive $1,000 per year from my employer just because I go to school, so I will apply $1,000 in 2013 and $1,000 in 2014 to Loan 1.  We always receive a large tax return because we each take only one exemption.  I also receive a $2500 tax credit for going to school.  I will apply the $2500 tax credit I get in 2013 to Loan 1.  Then, I will make monthly payments on the remaining balance of Loan 1 for it to be paid off no later than October, 2014 (when I graduate from college)

I will apply the $2500 tax credit I get in 2014 and 2015 to Loan 4, along with making monthly payments. 

(Unsubsidized loans accrue interest whether I am in school or not.  Subsidized loans do not accrue interest while I'm enrolled at least half-time.  That's why I'm focusing on the unsubsidized loans.)

A portion of our tax returns aside from the $2500 will also go the student loans, but until I know how much our returns will be for 2012, 2013, and 2014, I won't know how much will go to the loans. 

I also plan on paying off the accrued interest every month, so I'm not paying interest on the interest!  I'm tackling the loans with the higher interest first, saving me money in the long run. 

There's also a possibility I will take some of the money the hospital gives me to pay for my Master's degree and pay down my unsubsidized loans faster.  Undecided.

$33,099.25 seems daunting.  Overwhelming.  Breaking it down into 9 separate amounts makes it seem more manageable, even though it's the same amount.  There are programs that allow us to reduce our monthly payment, but that won't change the amount we owe.  Ignoring it won't solve the problem.  Are any of you paying off student loans?  What's your system?

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