Month 8: -$114,659.31
I have two super exciting announcements in this post! I’m not going to take much time here, so that you can read about them below without me spilling the beans!
Remember, calling this “Month 8” is a misnomer. This is year 5 & Month 8 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 was my private bar exam loan. Since paying off my car and credit cards, I’ve focused all of my attention on my bar exam loan!
Extra Income This Month
Affiliate links are used in this post, and most posts here on WMSB. If you click on a link and make a purchase, WMSB receives a small commission. You don’t get charged a penny more for this, but it keeps WMSB running, and makes my debt repayment happy.
Amazon Affiliate: $0.00
SiteGround Affiliate: $0.00
Day Designer Affiliate: $0.00
Sponsored Posts: $85.00
Side Hustles: None. This project should start again next month.
Expected/Unexpected Reimbursements: None – Waiting on my refund from Century Link which seems to be taking forever.
Where My Payments Went
March was a three pay period month for me. I budget by pay check so I didn’t totally notice the difference in income, but my debt did! Because guess what?! I paid off my bar exam loan!!! I did cheat a little bit by taking money out of savings, because the suspense was killing me. But I repaid over half of it with my next pay check.
Bar Exam Loan: $470 (Paycheck #2) + $3 (Because I wanted to see the balance below $1,000 and after my $470 payment it was $1,000.23) +$999.35 (Paycheck #1/Savings)= $1,472.35
Unsubsidized Loan: $236.00 (minimum) = $236
Subsidized Loan: $604.58 (minimum) = $604.58
Extra Blogging Expenses: $80 (Sponsored Post Supplies)
Discover Card at 0% Interest from Household Projects: $150.00
Total Payments: $2,542.93
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 & caused me to attack this more than ever – Screw you, Wells Fargo.
Subsidized Student Loan: 7.125% Interest, Accruing $5.71 Per Day
Unsubsidized Student Loan: 7.125% Interest, Accruing $14.63 Per Day
I am surprised to see that I’ve paid $1,000 toward the Unsubsidized loan. When I say that, though, it’s really toward the accrued interest that built up while I was on income based repayment. I’m still on income based repayment, but for the first time, it actually pays off more than what accrues that month. Before I can pay ANY of the $104,490 of capitalized principal (the principal at graduation, before any interest capitalization, was $82,000), I have to pay off what is now $10,169 of interest. It makes it feel impossible to overcome. So I’m surprised to see that I’ve made any progress at all on the big Federal loans.
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.
THE BALANCE IS ZERO DOLLARS!!!!!!!!!!
I PAID OFF THE BAR EXAM LOAN!!!!
There are still things to accomplish, and goals to achieve that I’ll discuss below. But we definitely need to take the time to celebrate the wins we achieve throughout the payoff process. If we don’t, we will burn out or get discouraged. I’m speaking from experience here. I have the urge to run through the streets and cheer. Maybe I will! haha But I know for a fact I couldn’t have gotten here if you all weren’t holding me accountable each month! And I can tell you for certain now, that this feels way better than buying that $180 fit bit I wanted last month! (Btw, I still want it, but this is better.)
My Debt Repayment Goals
1) Pay off my car. 3) Pay off the Bar Exam Student Loan.
I stuck with the snowball method, to pay off the bar exam loan, and it totally worked!
4) Re-evaluate my savings and retirement plan.
I did this a little early, because I got my annual wage increase and figured it was best to start contributing more money before I got used to the increase. I set up my office 401k to remove 8% of my pay toward retirement. Because it reduces my income before taxes are taken, and I did it when I got a raise, it only changes my take home pay by about $100, despite contributing over $200.00 a pay check toward my future. Watching that account grow makes me wish I had that money to spend, but I know that I’ll be very happy I did this when I’m ready to retire!
I’ve also re-budgeted to adjust some of my snowball payments to go toward savings for big life events. You’ll see the impact of that next month when I lay out how I plan to pay off that dang $114,659.31 left between me and freedom!
5) Tackle the accrued interest from my income based repayment plan. CHANGE OF PLANS! Big Announcement #2 is this goal: Refinance my Student Loans.
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.
I am also paying the really stupid interest rate of 7.125% (that’s after a graduation and auto-pay rate discount). Why the government is surprised that our generation struggles more than our parents and grandparents did is beyond me. Anyway, in the last few years, multiple companies have come out to help refinance student loans. They were very appealing to me, but I have some credit in the Public Service Loan Forgiveness program, and I wasn’t sure that it was worth taking my loans out of the 20-25 year forgiveness we get no matter what area of practice we go into. (Spoiler: You have to pay income tax on whatever is forgiven at the end of your payments, after already paying a shit ton of interest. It’s not free money.)
After hearing the experience of so many of you in the comments (I’m looking at you, Sarah! :) ), and taking an informal poll of my friends on Facebook, I really started crunching the numbers and realized that if I take my loan through the entire 20 year term remaining on them, I’ll have paid $101,000 in interest. ONE HUNDRED AND ONE THOUSAND DOLLARS! That’s 19,000 more than what it cost to go to law school, in interest alone!!! And that number doesn’t include the $32,000 that has already accrued in interest.
So, I started the process of refinancing this week! I have received three pre-approval rate quotes, and heard back on one application. That officially approved interest rate is 2% lower than what I’m paying now, and changes that $101,000 interest to about $32,000 if I only paid the minimum. That’s a savings of $70,000 in interest, and I’d pay it off in 10-15 years, vs 20-25 years. It only increases my monthly payment by $90, and as you can see from my snowball payments above, I can definitely pay more than even the increased minimum if I remain even minimally focused. Now I’m just waiting to hear back on the other applications before I make a decision. I’m hoping to hear back tomorrow, because now that I’ve decided to refinance, I want it nnnooooooooooooowwwwwwwwwwwwww!
I am going to write an entire post (maybe 2?) about the process, how it went and what I thought, so I’ll stop talking about it here. But thanks for all of your support and encouragement!
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.
- The Real Life Tracking Sheet I use to track my financial, health and self development goals.