Paying off Student Loans Ten Years Sooner!
Posted on June 20, 2006 by Her and tagged student_loan
After realizing that for every $100 extra we put toward my private student loan debt, we save $1326.76 in interest, we've been tossing around the idea of shortening the term on my loan. Tonight I finally called my lender to get rate quotes. My loan term is currently 25 years at about $750 per month, but we've been adding $100 to our payment every month for a while. My lender said that if they cut the term by five years, we would need to pay $785 a month. And to cut it by ten years, we would need to pay $869 a month...or roughly what we have been paying anyway.
I was shocked! It feels so fantastic to be able to see the light at the end of the tunnel. To think that we will be completely debt free in 15 years, even if we pay nothing more than the new minimum, feels great! I'm sure that as our incomes rise we'll be able to chop away at it even faster. This is the best I've ever felt about my loans!
If you have any flexibility in your budget, and you're paying off student loans, consider shortening the term. You'll save with a lower interest rate and pay less compound interest.
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LSD | Jun 20, 2006
I'm with savvy saver. Unless the rate is lower with the shorter term, instead of locking into the loan, you should have just put an extra payment every month.
Yes, I am going to lock in the new term (just as soon as I confirm with Him, as we make these kind of decisions together). The shorter term comes with a lower interest rate by about 2%. So we'll save both time and interest charges.
Congrats!
Tonight at a chamber of commerce event I met the owners of a local debt councelling place, and we discussed various things people can do to get out of debt, and the various reasons people get into debt.
You two are doing a great job of being disciplined (even if it doesn't always feel that way) and paying your debt off consistently, and you should feel good knowing that it was incurred for positive reasons (an investment in your future, rather than useless consumer retail debt).
Keep up the great work,
Benjamin
Lowering your rate and shortening your term is great. All too many times though, people sign a shortened term with a higher rate since that's how the bank is still going to try to make the same amount of money off you.
I had some really low interest rates on my student loans and so I just made sure to send in a 13th monthly payment once a year when I could afford it, or else round it up to the nearest hundred where I could.
I had three types of student loans. I got one loan retired early through my parents. (I was sneaky and left the bill going to their house so they'd tear it open and offer to pay it.) I had another loan retired a year early on my own, and the last one retired 6 months early after doing all my finances for buying a house. When school was finally paid off, I felt really great!
Good luck!
savvy saver | Jun 20, 2006
I'm confused, did you lock yourself into the shorter term? If so, did you get a lower interest rate with the new loan? If not, it made no sense to lock in the higher payment.
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