Month 6: -$118,382.
It’s Valentine’s Day, which I think is a made-up holiday (yes, I know it is based on an actual Saint, but the expectation of how to celebrate is made up). But, in honor of it nonetheless, today’s photos are Valentine’s Day theme colors, taken by Rekita Nicole. There’s no reason loan payoff needs to be serious and drab, right?
This is the second month where we skipped an integer entirely. We went from 120 to 118! This was due to an unexpected and large sum of “extra” money, so I expect that next month will be normal and somewhere in the 117 range.
I hope you guys like this new format. I simplified the details so that it will be easier for you to follow along with and will save people who have read prior reports from scrolling through repetitive information. Thankfully, some awesome friends helped give me feedback on how to make it easier from a reader’s perspective. Yay! If you want more detailed information, check out November’s payoff report.
Remember, calling this “Month 6” is a misnomer. This is year 5 & Month 6 of payoff. And guess what? For the first 5 years of my student loan payoff I paid NONE of the principal balance on the Subsidized and Unsubsidized student loans, which makes up almost all of that balance. The remainder is my private bar exam loan.
The great news is that now that I’m credit card and car debt free, I can take this debt by the horns and show it who’s boss!
Extra Income This Month
Amazon Affiliate: $0.00
SiteGround Affiliate: $50.00
Day Designer Affiliate: $18.60
Sponsored Posts: $250.00
Side Hustles: None. I took the Winter off from Bar Exam grading. I’m hoping that I can come back up for air, catch up personally and at work, and go back to grading this summer.
Expected/Unexpected Reimbursements: Escrow Refund, $1,346.00
Where My Payments Went
In previous posts I put in parentheses when something was a snowball payment. One of my friends who is also a lawyer, pointed out that people may not know what “snowball” means. That did not even occur to me because I have been using the snowball method for two years now. I am changing the designations from snowball payments to where they came from in my budget so that it’s more clear.
I refinanced my house last year. As a result, I got a refund of the escrow account funds. An escrow account is where your money is saved to pay things like insurance, property taxes, etc. When I closed on my refinanced loan, I funded that escrow account. My mortgage officer told me I could do whatever I wanted with the refund from the original loan. I expected it to be only a couple hundred dollars and planned to put it toward my mortgage. Then, Wells Fargo increased my interest rate on my bar exam loan, and I realized it didn’t make sense to put that money toward my mortgage when I had a loan with a 7.75% interest rate. So I took almost all of it and made an immediate payment toward the bar loan. It felt AWESOME.
Bar Exam Loan: $1,300 (Escrow Refund) + $400 (Paycheck #2) + $530 (Paycheck #1) = $2,230.00
Unsubsidized Loan: $236.00 (minimum) = $236
Subsidized Loan: $604.58 (minimum) = $604.58
Extra Blogging Expenses: $119.00 (Tailwind) + $42 (Instagram Giveaway) + $70 (Sponsored Post Supplies)
Discover Card at 0% Interest from Bathroom Remodel: $200.00
Total Payments: $3,501.58
Current Law School Student Loans Balances
I can’t even tell you guys how fun it is to update these charts. I even go into Numbers in between updates here to plug new numbers in and see what happens. Paying off six figures of student loan debt feels like a bottomless pit. But seeing the progress in a graph and chart form helps to see that there really is progress.
The interest rates on these loans are what make my payments look almost meaningless on the subsidized and unsubsidized loans.
Bar Exam Student Loan: 7.75% Interest – Went up .25% in December
Subsidized Student Loan: 7.125% Interest, Accruing $5.71 Per Day
Unsubsidized Student Loan: 7.125% Interest, Accruing $14.63 Per Day
I received an e-mail from Wells Fargo last month claiming that my Bar Exam Loan is a variable interest rate loan. I was furious because I did not think I would have intentionally accepted a variable interest rate loan. Sure enough, in the fine print of my document, it says variable. I’m working to pay this stupid loan off as soon as possible now. By the way, if I had a variable interest rate loan, there is NO reason why the lowest rate I’ve paid over the last 6 years is 7.5%. The economy sucked for years with no reduction in my rate, and now it’s finally good and they didn’t hesitate to up it. I’m very reminded why I left Wells Fargo as a checking account customer many, many years ago.
What is a Bar Exam Loan?
The bar exam loan was to pay for the cost of BarBri, the only bar exam preparation course in Nevada in 2010 (roughly $4,000), the video iPod I had to buy to take my classes remotely because I took a clerkship in the middle of nowhere and back then there wasn’t reliable online streaming (roughly $200 I think?), the cost of applying for the bar exam (roughly $1,000), the cost of moving to a different state in the middle of nowhere (roughly $1,000), my apartment deposit and first month’s rent (roughly $1,200), oh and my two best law school friends got married during bar prep/the week after the bar exam and I flew to both their weddings/stayed in hotels/etc (roughly $800 – totally worth it), and then the cost of living for 2.5 months while I studied for the exam.
I worked part time while I took the bar exam. I don’t recommend this, but remember, the economy sucked and I had to take the job I was offered. That job required me to start three days after graduation. At the end of the exam period, I had a little bit of money left over, and I used it to pay a super high interest rate credit card I’d gotten to buy furniture in my 1L year.
I am so close to paying this loan off, I can taste it!!! I can’t wait to have a zero dollar balance on that account. Then, my only debt will be the federal loans and my house. Gah! So exciting! It has been several years of hard work and dedication, but it was worth it. I’ve never had to deal with weight issues, but I’m kind of wondering if this is what those graphics on Pinterest mean when they say, “Nothing tastes as good as skinny feels.” Nothing I’ve purchased brings joy like paying off debt and tasting freedom!
My Debt Repayment Goals
1) Pay off my car.
3) Pay off the Bar Exam Student Loan.
I’m sticking with the snowball method, to pay off my loans.
4) Re-evaluate my savings and retirement plan.
I already had a phone call with my financial planner about my plans and have started doing the math on how to increase my retirement contributions without harming my ability to live my life now and still pay off debt.
5) Tackle the accrued interest from my income based repayment plan.
Because I have been on an income based repayment plan, without making a ton of income, my monthly payments did not cover all of the interest on my student loans. I cannot make principal payments on the loans until I pay the accrued interest. The balance of the accrued interest is incorporated in the balances you see above. Once I start tackling this goal, I’ll list out the accrued interest separately.
6) Attack those Federal Student Loans!!
I’m coming for you, law school student loans!
I’ve written a few posts about finances and being a lawyer already. Here are the links if you’re interested:
- September 2016: Progress Report #1
- What is the Snowball Method?
- How I Paid Off $11,000 in Credit Card Debt
- 4 Changes I Made to No Longer Hate Being a Lawyer
- The Hosting Service I Use for Blogging – which allows me to earn extra money by blogging
- Why I Bought A House When my Boyfriend Already Owns One
- Why I Have a Roommate at 30 Years Old – published on The Huffington Post
- How to Start a Prayer Binder in 3 Easy Steps – if faith is impacting your financial journey
- In October, I also found a great website that answers a lot of good questions at Clear Point. I would highly recommend reading the post and the comments if you’re dealing with student loans.