by Ashley
It’s been awhile since my last debt update! (See previous from 1.5 months ago here)
Updating all the numbers really makes me feel at peace with my decision to switch my student loans from deferment into income based repayment (IBR). We’ve been putting so much money toward debt, and yet the overall figure of money owed has barely dented because the student loan balances have been continuing to rise (since they continue accumulating interest). My ACS loan IBR went into effect in July, but August will be the first month of IBR for my Sallie Mae loans. So hopefully this will put an end to the climbing balances since unpaid interest will be forgiven (on the subsidized loans).
With that said, let’s look at my big debt picture. Note that the balances reflect the amount owed at the end of July/beginning of August (after July payments had been made, before any August payments have been made).
| Place | Current Balance | APR | Minimum Due | July Payment Made | |
|---|---|---|---|---|---|
| Capital One CC | $0 | 17.9% | - | - | |
| Mattress Firm | $0 | 0% | - | - | |
| Wells Fargo CC | $0 | 13.65% | - | - | |
| BoA CC | $0 | 7.24% | - | - | |
| License Fees | $4015 | 2.7% | 55 | 1069 | |
| PenFed Car Loan | $22377 | 2.49% | 411 | 411 | |
| Sallie Mae - Federal Student Loans | $4459 | 8.25% | 62 | 62 | |
| Sallie Mae - Dept of Ed | $5666 | 8.5% | 0 | 0 | |
| ACS Student Loans | $21164 | 7.24% | 246 | 247 | |
| Sallie Mae - Dept of Ed | $66114 | 7% | 0 | 0 | |
| Medical Bills | $6931 | 0% | 150 | 150 | |
| Totals | $130726 | 924 | 1939 |
*Note: The “July payment made” in the license fee category only reflects the regular snowball payment for July. An additional $500 was put toward license fees from June’s surplus funds that are not included in the monthly payment figure.
I asked for your feedback regarding focusing my snowball toward my car loan (what I’m calling my “race to 20K“) or my higher-interest Sallie Mae student loans. Although there were advocates of each, I think most people were advocates of focusing on the student loan debt first. However, ALL said that whatever I decide to focus on (either the car or the student loans), that I should not split my causes (and try to pay money toward each). Everyone was pretty much in agreement that I should pay minimums of whatever is the non-focus and put all extra money toward the one current priority.
I think I still prefer to pay the car off first (and be free of consumer debt forever!!!!!!!). I mentioned that I have been making minimum payments toward 3 different medical entities for bills incurred during my husband’s mystery illness (from back in Nov-Dec 2013 timeframe). Two should be paid in full within about another 4-ish months and will free up $150 in payments. Instead of snowballing that toward the car, I may move that money toward the student loans. That way I’m not putting extra money toward the student loans, but its like I’m just moving my minimum payment from one entity to another. I’m not married to this idea, but its something I’ve been batting around.
But before I can turn my attention to the next debt down the list (either the car or the student loans), we first have to eradicate the license fees. Husband and I are having a budget meeting tonight to see where we’re at financially after such a painfully expensive month of July. I plan to have a budget update up by Monday.
Hope you all have a great weekend!
Let me know what you think if you haven’t chimed in yet – focus on student loans or on the car? I keep going back-and-forth (obviously), but I’m still leaning toward tackling the car. I know its a higher amount and lower APR, but it just feels like something tangible that, once paid, we can say is OURS (as opposed to student loans….which I pay and feel like nothing has changed since I’ve got my degree either way). I think the psychological boost of crossing another debt off the list is nice, but I also think the car is a much more rewarding goal. Decisions, decisions…
Hi, I’m Ashley! Arizonan on paper, Texan at heart. Lover of running, blogging, and all things cheeeeese. Freshly 40, married mother of two, working in academia. Trying to finally (finally!) pay off that ridiculous 6-digit student loan debt!
Focus on paying off the car first – it’s obviously where your passion is!
Thanks for the update – great to see all those $0!!!!!
Pay off the car first! It may not make sense when looking at the interest rates, but speaking from experience I can say that being free of consumer debt will provide a level of comfort. I believe it was Dave Ramsey who said that the rational thing is to pay off the highest interest rate loans first, but going into debt isn’t rational, so paying off debt doesn’t have to happen the most rational way either. Debt reduction can be emotional, and the small wins make a big difference.
I agree with this wholeheartedly.
This.
Good point by Den to focus on the area where you’re most motivated.
In the next update, I would add a column for amount paid off. This way you could watch the amount owed decreased and feel a sense of accomplishment as amount paid off went up. For example, I would use the balances at the time of your introduction to BAD. You’ve done great work. Seeing zero balances is AWESOME!!!
That is a very good idea! That definitly could boost the motivation 🙂
I agree with this as well, and would love to see a column for Amount owed last month and another for amount owed this month (or change). Right now I can’t tell how much your debt overall has grown or shrunk.
You’re doing great, have your head on your shoulders and will make the right decision about which one to pay off first.
If it were me, I would focus on getting rid of those two reasonably small student loans with the interest rates in the 8 percent range. They would be relatively quick wins to celebrate and it makes the most sense from a math perspective. For me, making the list of outstanding debts shorter (and knowing I’m minimizing my interest) would be the most motivating.
Consumer debt versus education debt is really more of an issue when taking on the debt – some debt being worthwhile and some not. Once you have the debt, it doesn’t really matter if it’s consumer or education unless you are concerned you are going to default on it and have your car repossessed. Since I doubt that is your case, that is a worthless distinction.
All that being said, the best strategy is going to be whatever motivates YOU the most. So if that is focusing on the car loan, then do that.
I learned the hard way that things can change in an instant. Luckily when I had a job loss, I had another, better job lined up immediately. But I think it’s folly to assume you won’t be threatened with default if you have a sudden life change.
I probably would have done the student loans first in this case too, but I totally understand the decision to get the car paid off.
I might disagree with Mrs. H.
If something horrible was to happen, like God forbid she and her husband lost their jobs, and couldn’t make payments, the student loans could go into forbearance. However, if they couldn’t make payments on the car it would be repossessed and that could make an already stressful situation more stressful.
Like everyone else, I think she should go after what she’s passionate about which seems to be the car.
I agree that the emphasis should be on a couple of the smaller student loans which have higher interest rates than your vehicle. The thought of debt increasing because of interest rates is very scary to me!
Ashley, may I add that you are SO organized with your debt payment! You are always aware of what is owed and the status of your snowballs. I think knowledge (and not our heads in the sand) is all part of the process.
I agree with your focus on the car loan. I think paying off consumer debt first is what would make me feel more secure. Student loans, although unforgivable, do have better options should something unexpected arise. The car loan doesn’t care if you need to adjust the payment due to life uncertainties. But whatever you decide is best is the right option I support. I think focusing on one thing at a time will be easier on you. The last few posts about what to focus on made you appear scattered. I know how that feels – when I had multiple debts to juggle it took a while for me to calm down and focus on what will help me kick the deb’s butt. You are doing great, keep up the great work and thanks for such a detailed post!
Yeah I think its hard since there’s such a big discrepancy in the balances, too. Before it was easy because I knew I would do all my credit cards and started with highest APR first. Now its more emotional (car loan > student loans), but there’s a huge difference both in balances and APRs!
I am going to say medical bills, although that wasn’t an option. I know the interest rate is zero however I think it would be great to put all of the negative stuff behind you for 2014 (license fees and mystery medical illness). For 2014, you’ll have eliminated credit cards, license fees, medical bills and mattress account. For 2015, you could then focus on the car and then after that the only debt left will be the student loan debt. I think this would be a great way to go into 2015!
I like you listing the debts, the only suggestion I might have is to put the item that you are snowballing in parenthesis next to the item so a person would know at a glance which item has your focus.
Good job on paying down the debt. It is inspiring and exciting to see the changes you’ve made.
First of all, Ashley you are so inspiring! I love how organized you are and I’m definitely trying to emulate that!
I agree with the others that you should probably focus first on paying the “small” student loans (the Sallie Mae ones under $6k) first just to get them done and out of the way and stop accruing a lot of interest on them, and then focus all of your energy on the car because you are passionate about it!! And – if something were to happen and you had to sell your car – whatever you sold it for would be pure profit as you own it, as opposed to still owing on it. Can’t wait to hear whatever you choose to do!
Agreed with some of the others. I’d pay off the smaller student loans. Moves the snowball along, knocks out highest interest rates, and greatly simplifies life with two less bills to keep track of. (I am very anti-debt, and a lot of it is the simplicity of not having an extra 10 bills to keep track of – know what I mean? Student loan entities sound particularly brutal to deal with).
Personally, I’d sell the car and buy something more modest. Win-win.
I think you really want to pay off the car first, but you’re trying to convince yourself to do the more numbers-based logical step of paying off the 2 smaller student loans. The rational accountant in me would be the same.
You seem really motivated to attack the car loan, and in my opinion, you should go for it! The way you have gone gangbusters on everything so far, you could potentially get there really quickly! It would be a big boost for you to knock out the consumer debt.
The 2 student loans, while higher in interest and smaller in amount individually, still add up to almost half the total amount of the car loan…not a sum that would be paid off overnight. My hunch is there is little motivation in getting those “quick wins” because psychologically you would still face a mountain of student debt, just in other loans. Hard to get excited about that :-/
You should be angry at the 7-8% student loans. They are stealing your money.
Meanwhile, your car loan is below or at iinflation levels of 3%. There really is no incentive to pay it off other than the security of knowing it can’t be taken away.
With the amount of money you’ve been coming up with extra lately you could have the small student loans gone in 3-months. To me its a no-brainer. But you seem extremely motivated to pay off your car for some reason. If that’s the case go full blast. Why would you want to split your efforts halfway applying the medical debt min payments to student loans? It makes no logical sense at all…
I’d focus on the highest interest rate period! It is all debt so the thinking about consumer debt vs other doesn’t change the way interest is eating away at your earnings. I still wonder too why you have such an expensive vehicle when you are so in debt. On the other had, you have made tremendous progress.
To me, it’s all about interest rates. I know all about the current buzz and how the so-called experts say we all need those “small wins” to get out of debt. But they should really be encouraging people to run the numbers. Look how low your vehicle loan is and then look at the interest rate on some of those school loans. If you just want to flush money down the toilet, then that’s up to you.
I also do not know why you have a $20,000+ large vehicle loan with just two small children and a boatload of debt. A family your size could do very well with a used Toyota Corolla or other similar car. Any thoughts of just unloading that albatross?
To Juhli and Anonymous – in this post: https://www.bloggingawaydebt.com/2014/03/ashleys-nitty-gritty-debt-details/ Ashley explains the car situation. There is another post where she explains how she was able to get the interest rate lowered.
Yes, I have read Ashley’s debt story from the beginning, so I know all about the car situation. Nobody needs to even be looking at cars priced like this with that much debt! In our area, a new Toyota Corolla averages about $17,000. I paid $15,000 for mine new 6 years ago and it’s still going strong, and I expect to drive it for at least 10 more years. (I have pretty low mileage on it.) I also have kids, so I know you can still be comfortable in a smaller sedan like this. Great on gas too. Needs and wants, folks! Ashley is doing great but I sure would like to see her drive something more economical.
I agree wholeheartedly with the “needs vs. wants” especially given that she has mentioned several times that her husband’s vehicle will need replacing soon and his expected high dental work costs. Now is not forever.
I definitely agree the car is a huge debt! When I first started blogging my husband and I talked about the possibility of selling it and downsizing. It’s very hard with our situation, though. When looking for a car we took into consideration the fact that we make many cross-country drives. A vehicle would have to accommodate two car seats plus still have room for a person in the middle between the two babies. We also have a large (100lb.) dog to throw into the mix when we make our cross-country drives. Any regular car (non-SUV) would never fit us. The double stroller, alone, would take up the entire trunk so there’d be no where for luggage. You could certainly argue that maybe we aren’t in a position to be making cross-country trips to visit family, and on this point we’ll just have to agree to disagree. In my defense, we have cut down on our number of planned return trips to visit family, but I will not eliminate them entirely. This has been one aspect of living out of state from the rest of our family that has been very, very difficult (more so now that we have children). Rather than selling the SUV and downsizing to a smaller car that really won’t accommodate our family’s needs, I’d rather focus on trying to pay it off ASAP so the debt-burden is no longer a part of the financial picture and I only have the student loans and medical debt to battle.
From a financial standpoint, you should pay off the student loans first. All of the interest rates are higher than the car loan. I understand that you’re trying to get rid of a monthly payment, but in the long run, it makes more sense to pay down the highest interest rate loans first.
Also, I would sell the car, and get a cheaper car plus a new work truck for your husband. If you can get PenFed loans again for the same amount & interest rate you have now, you’ll be in the same position financially, and you won’t have to worry about his truck breaking down. Good luck with your decision!
i say, get rid of that $4500 sallie mae loan and then you can focus on your car
Have you considered the cost of renting an SUV for your cross-country travels vs. the cost of owning (and financing) the SUV?
Nope. Don’t sell the suv….that’s shortsighted. Just focus on paying it off as fast as you can then attack those small student loans. At that point you can reassess…..work on the rest of your student loans while starting to save for a new vehicle for your husband, a house, etc….
Yesss!!!! I love that you snuck in the saving for a house part. That really hasn’t been part of my debts/debt conversation to date but its definitely something I think A LOT about. Honestly, I think I may leave the blogging position after finishing paying off the car precisely for this reason (I want to start saving for a house and continue paying back student loan debt, but to do so in a less aggressive manner). We’ll see when we reach that point but if this is what happens, I’ll probably stop blogging at that time since I’ll be shifting my focus more toward savings rather than “blogging away debt.” We’ll see……but I definitely have house-fever!!!