The second goal that I’m going to discuss today is putting extra money towards student loans. Her’s student loans come in two flavors: private and federal loans. The federal loans have interest rates that are <4% and have balances totaling ~$40,000. The minimum payment for these loans are automatically deducted from our account once a month.
The remaining ~$80,000 are private loans, with interest rates high enough to kill most vermin and maybe other small mammals.
For 2007, we decided to attack this a little more aggressively. The minimum amount owed per month is ~$775 for this loan. Instead of paying this amount once per month, we paid $450 every two weeks. This ensures that we tack on an extra $900 on the student loans for the year since we’ll be making the equivalent of an extra payment, plus another $150 per month we pay over the minimum. Our total extra student loan payment for this year is then ~$3,000. In our experience, paying every two weeks also limits the amount of interest that accrues so more of our payments go towards principal.
Looking back at this, the additional amount seems pretty measly, but then again a year ago we weren’t anywhere near the financial place we are now. We’re going to look to revise this goal for next year.
We also helped out this goal by transferring $11,000 of the private loan balance to a credit card with a lifetime interest rate of 1.9%. That alone saves us a ton in future interest costs.