by Ashley
Wow!
That is all I can say. Check this out…
| Place | Current Balance | APR | Last Payment Made | Last Payment Date (original debt, March 2014) |
|---|---|---|---|---|
| Capital One CC | - | 17.9% | - | Paid off in March ($413) |
| Mattress Firm | - | 0% | - | Paid off in May ($1381) |
| Wells Fargo CC | - | 13.65% | - | Paid off in May ($7697) |
| BoA CC | - | 7.24% | - | Paid off in June ($2220) |
| License Fees | $2723 | 2.5% | 250* | December ($5808) |
| PenFed Car Loan | $16941 | 2.49% | 1400 | December ($24040) |
| Navient - Federal Student Loans | $4422 | 8.25% | 16 | December ($4687) |
| Navient - Dept of Ed | $72056 | 8.25-6.55% | 260 | December ($69191) |
| ACS Student Loans | $21040 | 7.24% | 77 | November ($21035) |
| Medical Bills | $6485 | 0% | 75 | December ($9000) |
| Totals | $123, 667 (Last month = 126,285) | Starting Debt = $145,472 | ||
I’m glad you all urged me to include beginning balances, because otherwise I never would have noticed that this month (December) marks a big milestone! We’ve officially paid off over $20,000 in debt since I started blogging (back in March 2014).
I remember that when I hit the $10,000 mark it felt monumental. If that was monumental, then this is Herculean! I still have so far to go, but at the same time I’m so proud of how far we’ve already come! At the beginning of 2013 my goal was to be credit card debt-free by the end of the year. Little did I know we would nearly double that goal. We paid off the full $10,330 credit card balance within mere months after starting to blog. And now here I stand, only 9 months after starting to blog, a full $20K paid off. It feels so, so good.
And because I can’t afford to let up steam anytime soon, let’s talk about some of the things that jump out at me from looking at this table.
First, how depressing is it that my student loan balance has grown?! For months, my payments were not even large enough to cover the interest, so the loan balances just grew and grew. My payments still aren’t any larger (I’m focusing first on paying down other debts), but I’m now on Income-Based Repayment, so my unpaid interest is forgiven for all subsidized loans. Just for transparency’s sake, I do have a couple unsubsidized loans that will continue to grow in balance (due to accumulating interest), but I’m still resolved to focus on other debts first.
Second, look at those payoff dates. My first few months blogging I was paying things off left and right! Now I’m working on larger balanced items, and it’s been a full 6-months since my last payoff. I go around and around on the order of my debt payoff, always coming back around to determining that the car needs to be my main focus (for personal satisfaction reasons). But a quick, easy win would really be nice.
And so I’ve placed an asterisk next to the license fees payment.
I don’t want to say I’ve made my mind up 100% (I keep waffling on these payment order issues), but I think I might shake things up a bit in January and make a larger license fee payment instead of putting extra money toward the car.
I can practically hear the groans. I know, I know. If I keep splitting priorities and waffling back and forth then NOTHING gets done. I really need to just pick something and focus. But clearly I’m struggling with this.
I’ll think about it more in the coming month (the next license payment won’t be due for nearly a full month), and make some decision about where to go with this.
If you were to ask me: “Which is more motivating? Paying off the car or the license fees?”
I would answer: “The car. 100% for sure, the car.”
But…..that satisfaction is still a long way off. The license fees, although perhaps less satisfying, could be tackled in just a couple short months. And that’s the type of pay-it-off satisfaction I’m really craving after 6 months with no pay-offs.
So, yeah. Decisions, decisions.
What would you do??? I know I ask this nearly every month, but humor me and give me your opinion on the matter! ; )
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!
You might want to think about or ask your husband how he feels about this. As I recall, the license fees are not really what they sound like, and are a reminder of a pretty big mistake he made in the past. He may feel much better about getting rid of that potentially painful monthly reminder quickly.
Given the very small interest difference between the two, I’d say there’s a slight benefit towards paying the license fees first to free up a little more cash flow, but not enough to really influence payment order if you guys have other strong feelings about it.
Although I don’t really understand why you prioritize the car payment so high. I think I’d be working toward some of those much higher interest student loan debts first, especially if any of those aren’t the income subsidized ones.
No question, for me personally, highest interest first. If you are looking for satisfaction, there is that 4k student loan at 8.25%.
Yes, definitely the higher interest student loans would be my preference. I understand the thinking of retiring smaller debts and getting those “wins”, but I think the smart and objective way to look at debt is to look at interest rates first. I know the Dave Ramsey school of thought, and many people have bought into that, but debt payments should not really be about feel good methods. It should be what is the most expedient ( and cheapest) way to unload debt.
Personally, I agree with the above commenters that you should consider paying off the highest interest loans since it means you’ll pay the least amount in the long run….but since this is personal finance and you’ve chosen other priorities maybe go for the licensing fees. It will allow you guys to fully move on from a mistake, and you may want to consider using the money that frees up to throw at the student loans so that your payment will at least cover the interest. I don’t want to be negative but even though you’ve accomplished paying off 20k (great job!), you’ve accumulated almost 3k in new debt from interest. I don’t know the nature of these loans but if that accumulated interest gets rolled into the principal it just gives the interest more power to take money from you.
I had to laugh – I KNEW you were waffling on the car loan/license fees……but here’s my opinion – do what motivates the heck out of you!
If paying off the license fees first (and I think you could do it in 3 months if your income continues to be great – $1,000 a month to the license fees) and then paying off the car next gets you fired up – do it! That quick win will keep you motivated and then once you pay off the license fees you can add that $250 payment to the car loan and have that sucker paid off by Christmas – go for it!
What if you split the difference? So, for 6 months, continue with the $250 to the license fees and $1400 to the car loan. Then, in July, the license fee can be swept with one large-ish payment of $1200, even if you have to take some of the extra from the car loan payment. Then you’ll have the satisfaction of eliminating a debt. And, starting in August, if you roll the $250 to the car payment, for a $1650 payment each month, you can just about be done with that one by this time next year, so you’ll knock off another debt.
And then– oh, how awesome will it be to have $1650 to throw at your student loans each month!
Great idea!
The win/motivation factor really helps encourage attacking those debts like crazy! Personally I also like knocking off the loans to get rid of the payments and reduce my “minimum load”, or the minimum amount of payments I have to pay each month. Plus, since you are making payments on the other loans over time, the balances are smaller when you start attacking those.
You potentially have another two quick wins – Licenses and Navient — that you could use for motivation. So pay the car until you feel like you are losing momentum, then switch to those for 2-3 months and knock it out, then go back to paying the car aggressively.
It’s not perfect, but ultimately you do what is best fro you and keeping your spirits up so that you continue to attach this debt with all of energy you have this past year.
I love this idea!
Congrats on the $20k milestone!!! If it were me, I would absolutely wipe out the license fees purely for the satisfaction of the payoff & the cash flow. It’ll be a while longer before you can pay off the car, so it couldn’t hurt to get a motivational boost in the meantime. Also, I agree with Judi above about putting that $250 towards your student loans just to keep your head above water on that interest!
If they are federal student loans maybe you should look into refinancing/consolidating. I know it was big before the 2008/2009 crash. But I’ve heard companies have started offering it again in the past year. If you could switch it to a variable rate connected to prime, the prime rates are predicted to stay fairly low over the 1-2 year future. It might be worth it if you are commited to paying them down.
SOFI seems to be the big player now. Definitely something to look into to lower that rate if you can.
I still haven’t talked to anyone from the student loan companies (or the financial aid office from my grad school), but I’ve been told from commenters that consolidations these days only give you the average of your current student loan rates. In other words, no real benefit in terms of lowering interest. Like I said, I haven’t checked into this to verify (I plan to do this at the beginning of the new year), but based on that assumption I was going to leave the loans unconsolidated and simply knock out the higher interest ones first (which, incidentally, happen to have lower balances)
Congratulations on the 20K mark – what a huge accomplishment! I LOVE following your debt pay-off journey and am so thankful for you sharing it with us. Your posts are interesting, organized, and articulate. I feel like I know you and your family a little and am sitting on my laptop crossing my fingers for you!!!!
My 2 cents and probably crazy advice – but, what if you could knock out the license fees before the end of the year and start 2015 completely fresh and freed from that memory?
First, congrats on a HUGE accomplishment! Twenty thousand dollars is amazing!
I still think you should focus on license fees first. I wanted that one paid by the end of 2014 however I’d tackle that first and then the student loan of $4k due to that 8.25% interest. I know that’s higher than the license fees too but I’d still get those license fees out of the way first. As for that student loan, I’d hate to be putting that off with the car loan at only 2.49%. Once those are done, I’d do the car loan with a push to get that paid in full by the end of 2015. I think once those other two are out of the way, it would be a huge incentive to get that car loan paid off. Plus, if your income goes up in the summer, you’ll be able to throw more money on the car loan but for now while things are slower, you’d get the benefit of a quick win with the license fees. From an emotional standpoint, I think it would be great to put that part of your past behind you.
Great job. It’s been fun watching your journey. You’ve come a long way. And kudos to hubs too!
I know everyone has opinions on the order of payoffs, and of course it’s smart to pay off higher interest first. But I also feel like you shouldn’t spend so much energy worrying about it when it ALL needs to be paid. Just tackle what feels right to you in whatever order and get it done! You’re doing awesome!!
So true! (re: it all needs to get paid) : )
I think it would be wise for you to plan out your next year of “ideal” spending. I like to start by developing a 12-month budget when I do my big picture projections. Then take your worst income month and use that as a baseline for the minimum income you plan to have in 2015. The difference between the annual income and your full expenses will be the amount of cash you have to split between savings goals, debt pay off goals, “special projects” like dental work and upgrading your husbands work truck.
After that calculation, you should know how much debt you can reasonably pay off in 2015 and use that to drive your decision of what to pay off first. Perhaps your plan calls for maxing out one Roth, taking care of $10k of dental work, paying off the license fees, the car and the smaller student loan in 2015. Great. Now figure out which of those you want done sooner and which you’re fine waiting until late in the year on. Any extra income that comes in can simply accelerate your time line. Who knows? Maybe you’ll end up with gangbusters income this next summer or maybe the economy will slow up and you’ll thank your lucky stars that you don’t have credit card debt to keep you away at night anymore!
I love this plan! I really like doing big picture thinking (long term planning/projections/goals, etc.), but I still really haven’t had a chance to do this for 2015 yet. I really need to carve out some time to make this happen!
I think you need to make sure that you are not accumulating interest on any student loans (i.e the ones not in income-based repayment) esp. if you are paying off something with a lower interest rate. BUT $17,000 in debt repayment in 9 months is GREAT! It is a good victory to stay motivated in the New Year.
I think you are doing great. Every month with forward progress is a good thing.
Thank you!!! : )
$20,000 is such an accomplishment. Congrats to you! I have no advice about which to payoff first, except to do what you feel is best and whatever will give you the most motivation to keep going. When I was getting out of debt I liked quick wins, as that fueled my feeling of progress. But if tackling the car will get you jazzed, then I say do that.
I thought all along the license fees should go first (or at least after the credit card debt). So, I think that sounds like a wise decision. You have just needed some time to come around to that yourself… From what you said about them before I don’t know that the 2.5% interest rate you quoted is accurate anyway. Did you say you pay 2.5% with every payment or something like that?? I don’t remember the details but it sounded like the actual interest rate was potentially much higher. Plus, throw in the emotions with that and the low balance (relatively) and it would be nice to get rid of that and to move on with your life.
You’re right about the license fee “interest rate” (as I’ve called it for simplicity’s sake). They actually do not have any interest at all. What I’m charged is a convenience fee per payment. I did calculations to figure out the percentage of the fee (because it seemed to vary) and learned that it was a percentage of the payment price. The more money I pay, the lower the convenience fee (“lower” proportionally, not in absolute value). The highest fee is 2.5% (for minimum payments), but it drops down to as low as 1.5% for larger payments. So, yeah. It’s not traditional “interest” in that its not capitalized, doesn’t get added to the balance, etc. It’s technically a “convenience” fee for each payment (and I say “convenience” in quotations, because I incur the fee regardless of how we pay – phone, internet, or check in the mail….most convenience fees seem to disappear if you pay in the method that is desired – generally online or mailed – but that’s not the case with this bill)
I’m going to suggest a different direction. If I were in your situation, I would stop paying extra on the car loan and put enough money in the emergency fund to cover your husband’s projected dental care costs so he can have that work done ASAP. Also, I would start saving for moving expenses in case you have to relocate for a new job. Once those costs are covered, I would focus on the license fees for peace of mind. After those fees are paid, I would pay off the highest rate student loans that aren’t part of the income-based repayment.
I know that you’re motivated to pay off the car, but that loan has the lowest interest rate, and if you had to, you could sell the car to pay off the loan and get a cheaper vehicle. Nothing will erase your student loans other than paying them off or, God forbid, your death, unless someone co-signed with you, and then that person would still be responsible for paying them.
Once you know about your job situation, if you won’t relocate this year, you could use the money you put aside for moving for debt repayment. Also, if you do get hired, once you know what your guaranteed income will be with the new job, it will be easier to make longer range plans. Then you could also ramp up your payments as your husband gets his business re-established in a new location.
You’ve really accomplished great things in 2014! Good luck with interviewing and decisions in 2015!
Thank you! I really appreciate the different view, too!
License fees — absolutely no doubt in my mind! It’s the smallest balance and the biggest reminder of a painful episode. Just get them out of your life AND get another paid-off balance. After that, I’d work on the high interest student loans. I’m not sure why you find the car so motivational when the rate’s so low (I understand that you do and I’m not saying you’re wrong to feel that way — we feel the way we feel! — just that I myself would feel much more motivated by the higher-interest debt.)
good job!
i totally think you should pay off your 4000ish Navient – Federal Student Loans sitting at 8.25 percent. You can wipe that out in a couple of months. Doesn’t make sense to me for a loan balance to go up. As someone said, push comes to shove, you could sell your car to pay off the loan.