Month 7: -$116,353.
I didn’t expect to have extra money this month or make major progress on these loans, but I did! I’m so excited! I can’t believe it. I truly believe that tracking these numbers, and having to tell you guys about it, has made a massive difference. I have been really super tempted to buy the (affiliate link) lilac and rose gold fitbit. But as nice as it would feel, it would be even more exciting to see my bar loan go down that extra $190 (after tax). Plus, how could I tell you guys that I’m paying a 7.75% interest loan and also buying a $200 watch, even if you didn’t know I already own the older fitbit Charge HR model?!
Yay for accountability! :)
Remember, calling this “Month 7” is a misnomer. This is year 5 & Month 7 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! This is a simplified report with just the most updated information. If you want more detailed information, check out November’s payoff report.
Extra Income This Month
Amazon Affiliate: $13.21
Sponsored Posts: $60.00
Expected/Unexpected Reimbursements: Tax Return $825.00
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 was really worried I would owe taxes because last year I made more money on my blog than the year before, and I had renters in my house. As it turned out, I still got almost $900! I put $825 immediately toward my bar exam loan.
Bar Exam Loan: $825 (Taxes) + $400 (Paycheck #2) + $530 (Paycheck #1) = $1,755.00
Unsubsidized Loan: $236.00 (minimum) = $236.00
Subsidized Loan: $604.58 (minimum) = $604.58
Extra Blogging Expenses: $0
Discover Card at 0% Interest from Bathroom Remodel: $100.00
Total Payments: $2,695.58
I also set up my 401k contributions this month. It feels a little weird to be saving more money when I’m so close to paying off debt, but I know I needed to do it now instead of later. Future me will be thankful to be debt free and also able to retire, even though it might take a little longer for the debt free part so that I can benefit from some of that compounding interest that the government has been getting from me for years now.
Oh yea, and I bought these suitcases, which were definitely a need not a want with my goal to fly 10 times this year, but they’re also SO STINKIN’ CUTE!!!
Current Law School Student Loans Balances
If I hadn’t made a chart for these loans, I wouldn’t feel like I’d done much at all. Even though I’d see how low the bar exam loan balance was becoming, I wouldn’t feel like I was making overall progress. It’s easy to see how HUGE my federal loans are, and not recognize the fact that every dollar of reduction makes a big difference.
The snowball method works exactly like Dave Ramsey said it would. Look at those payments growing!! I know the payment difference won’t be as exciting when I’m paying off the bigger loans and dealing with a lot of accrued interest, but hopefully this feeling of excitement will continue!
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 am thinking about refinancing them. It feels risky because refinancing to a private company doesn’t come with the same protections as the federal Subsidized and Unsubsidized loans. Have any of you tried it? I’ve heard amazing things about a couple of companies, but haven’t gotten official quotes from any company because I still haven’t decided whether it’s the right choice for me. I’d love to hear more people’s insights on their experiences.
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 want to see a zero dollar balance so badly!!!!!! I don’t even know how I’ll feel to not have this loan anymore. To have conquered a student loan, not just the tiny $500 summer school one I decided to pay off rather than consolidate right after graduation, it will be the first time I’ve declared victory over the cost of law school! I think I’ll have to celebrate somehow, but I don’t know how. Any ideas?!
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.