by Ashley
There has been a LOT of discussion here about my student loans.
This is predominantly fueled by the fact that I’ve been paying minimums on my student loans while opting to pay extra on other debts (see last debt update here). But since my minimum payments do not even cover the interest portion of my student loans, their balances have continued to grow.
I think this has caused some psychological pains for readers (or maybe even physical pains – i.e., headaches!). Seriously. I thank you guys for being so invested in my debt situation and me, in general. I apologize for getting so many of you riled up over the situation!
I recently had some great comments on this post that I want to copy and paste verbatim:
Debtor said:
I’m going to make one last pitch for you to get those student loans to a reasonable level.
Can you see that in a year, your ACS and Navient loan balances have INCREASED? I know you want to get rid of the car debt but really this is hard for me to understand. At 2.49% why not just pay a little above the minimum car payment – enough so that it pushes your actual due date forward (like you are) but don’t focus on it.
An average interest rate of 7.5% on 72 grand is a LOT of money. But that’s just me. Like I said, this is just my pitch – i know you’ve said you have the emotional thing with the car but really, it’s such a big balance there too, it’s not like you’re going to pay it off this year. In other words, you paid off 8500 of the car in a year but your loan balance grew 3300. If you had allocated that money to your loan, your overall debt would be lower!
Ok, the accountant in me will give it a rest but does anyone else see what I’m saying?
And here’s a comment from V:
I know that loan seems huge, but I’m gonna just comment here that something funny happens when you tackle a really large number. At first, it feels pointless, and you plod a long and suddenly you take a look and go, okay it’s still huge but not that bad, then at some point you go…oh wow, I can totally kill this, and that is the most motivating thing ever!! I guess what I’m saying is avoiding looking at the huge loan is actually taking up more mental energy than you think; it’s like that giant elephant in the room, best to acknowledge it and tackle it head on. Are you really paying off the car first because you care about it more emotionally or because it allows you to avoid looking at the large loan for awhile longer? Just something to think about; perhaps your focus on the car is really just avoidance in disguise.
And here’s my response, in a nutshell…
- I agree 100% that I have got to STOP letting these loan balances continue to grow. It’s counterproductive to be paying down some debts while others continue to rise. In the past I’ve basically ignored the problem because I haven’t viewed it as “new” debt (e.g., like buying a car or TV financed), but it totally IS new debt. That’s exactly what it is! Dave Ramsey says the #1 goal when you start trying to get out of debt is to avoid all new debts!!! I’m not doing this. And the only one suffering as a result is ME. This is going to change.
- I stand firm with my decision to focus predominantly on my car loan (as opposed to the student loans). Here’s the deal. ALL of my student loans have a much higher APR than my car loan (for reference, car loan = 2.49%; student loans range from 6.55-8.25%). I feel like many of the comments are akin to saying “just pay off the highest APR student loan, then you can go back to the car.” But it’s not like that. Even if I were to do that, I feel like many of you would STILL be upset that I’ve gone back to paying off the car, given that it’s still half the APR compared to other student loans. So then I’d be stuck in this (seemingly) never-ending student loan pay-down that will take years and, meanwhile, be paying minimums on my car for the entire length of the car loan. I mean, my car balance is about $15,000; my student loan balance is about $95,000. That’s a HUGE difference and those student loans are going to be a HUGE mountain to climb. My preference is to pay off the car in full within the year and then throw that $450/month toward student loans. That $450/month is my largest monthly debt obligation. I want to get rid of it asap!
So here’s my solution to this dilemma….
I’ve finally – for the first time on the blog – opened up “Pandora’s Box.” In the table below you will see ALL of my Navient Department of Education Loans. But let me explain a couple things first….
First, this isn’t all of my student loans (I still have ACS loans and Navient Federal Loans, too). Also, you’ll notice that I’m predominantly focusing on the UNSUBSIDZED loans.
You may recall that I’ve signed up for the income-based repayment plan. In this plan, any unpaid interest on SUBSIDZED loans is forgiven. With my ACS loans (which are subsidized), my minimum payment does not even cover the interest, but my balance has remained steady because unpaid interest has been forgiven instead of being added to my loan balances.
While I’m focusing on paying down my car debt, I have GOT to STOP accruing interest on my loans. That means I’ll be paying extra toward them, but only on the unsubsidized loans. I hope this is not a controversial point. I owe all of this money and, eventually, all of it will be repaid. But it just makes most sense to accept the gracious gift from our government (there aren’t a lot!), to have my interest forgiven on the subsidized loans. That means I’ll continue to pay minimums on them and ONLY pay extra on the unsubsidized loans so I can keep the extra interest from accruing. Make sense?
Here ya go…
| Number | Type | Amount | APR | Minimum Monthly Payment | Monthly Interest | Difference |
|---|---|---|---|---|---|---|
| 1-01 | Unsubsidized | 5612.47 | 8.25% | $20.42 | $38.59 | 18.17 |
| 1-02 | Subsidized | 8762.69 | 6.55% | $31.87 | ||
| 1-03 | Unsubsidized | 6967.40 | 6.55% | $25.34 | 38.03 | 12.69 |
| 1-04 | Unsubsidized | 6794.02 | 6.55% | $24.71 | 37.08 | 12.37 |
| 1-05 | Unsubsidized | 2215.90 | 6.55% | $8.06 | 12.09 | 4.03 |
| 1-06 | Subsidized | 860.80 | 6.55% | $3.13 | ||
| 1-07 | Subsidized | 7433.45 | 6.55% | $27.00 | ||
| 1-08 | Subsidized | 6572.02 | 6.55% | $23.91 | ||
| 1-09 | Subsidized | 8762.69 | 6.55% | $31.87 | ||
| 1-10 | Unsubsidized | 17557.99 | 6.55% | $63.88 | 95.83 | 31.95 |
| Total: | 260.19 | 79.21 |
As you can see, my minimum monthly payment is $260.19. To this, I’ll be adding extra payments to cover the interest on my unsubsidized loans in the amount of $79.21, which equals a total monthly payment of $339.40.
Luckily, this won’t really seem like a larger payment, because I’m almost done paying off the license fees (which were $75/month minimum) AND one of our medical bills (which was $50/month minimum). So, thanks to the magical debt snowball, this shouldn’t be a big ding in terms of eating up additional income.
What this does mean, however, is that I’ve got to gear up to face a SERIOUS battle ahead.
Not only will I be facing this horrific monster (aka: HUGE student loan debt), but I’m going to have to spend a LOT of time dealing with my loan service provider on a monthly basis. You see, all of these loans are grouped together online so there is no way for me to pay extra only on certain loans. Instead, if I want to pay extra it is divided evenly amongst ALL my student loans. The only way to correct this is to call in every month to have a representative re-allocate the funds toward the specific loans I’m working on. Every month. Also, I’ve heard horror stories about how difficult this can be. Often times funds are still not applied correctly, causing interest to continue to be accrued. I’m not even going to lie. This is going to suck pretty badly.
But I do agree that I cannot continue to bury my head in the sand and allow these balances to keep going up. No way. So starting next month (April)….I’m waging war. Wish me luck as I prepare for battle!
Anyone have experiences dealing with Navient? How would you rate the ease of specifying extra payments and/or dealing with customer service?
Just for fun, check out this post that former blogger Adam wrote about dealing with Great Lakes. Read the comments, too!! What a nightmare, right?!?
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!
Boy that sounds like a nightmare! Good luck!
Consolidate!
That’s the answer to your problem. Consolidating doesn’t change the interest rate math. Usually, your new interest rate is just the weighted average of the current interest rates of all of your loans.
You will have one payment to make, and one loan. (Well, two, if you choose to consolidate all federal and all private separately).
I did that and it worked out well for me. Happy to share my consolidation story via e-mail. =)
I wonder if its possible to consolidate the subsidized and unsubsidized separately? I don’t know the rules, but if it means that my interest would no longer be forgiven, then that wouldn’t be the best deal. I’ll have to do more research first.
I did tons of extra payments with little headache to Sallie Mae prior to them turning into Navient. Since it appears Navient is a mere clone of Sallie Mae just with a different name this may work the same for you.
For extra payments:
1. Make sure your minimum for the month on the target loan is paid.
2. For extra payments, I mailed a check I have CapitalOne360 so mailed checks are free and can be sent online just as easy as any payment.In the memo line I wrote the account number with the dashed sub-account number followed by PRINCIPAL ONLY .(ex 123456879-11 – PRINCIPAL ONLY).
My payments were always applied correctly. I never had to call once. This worked with probably 60+ extra payments while I paid off a 50k private student loan that was lumped with multiple federal loans. I think the key is to continue to have your minimum paid on auto pay. Then only make extra payments after the autopayment but before the next statement.
I hope this works for you!
LOVE this idea! I have CapOne 360, too, and I never take advantage of the free online checks, but this is a great plan!!! Thanks for the tip!
yay, i’m glad. I definitely didn’t think you should pay off ALL your student loan first… before the car – that would take forever, just glad you are not covering the interest at least. Hopefully, when it’s small enough that you feel comfy – you kill it off in one fell swoop.
sorry about navient – i had my loan sold to mohela – and they let you target you payment right there on the website. So it sucks that navient is so hard to deal with. I would also look into your consolidation options.
i’m not sure i understand your subsidized loan forgiveness explanation. If the interest is forgiven, why is the loan balance staying the same? Shouldn’t it be going down? Or are you saying you are just paying some interest – the rest is forgiven and the principal stays the same. If that is the case, i hope you realize, you are not really getting “free” money. You will eventually pay the same principal plus the “convenience fee” of not paying the loan. Instead of your interest getting smaller year by year – you will be accruing the same amount and this might end up being larger than the interest you would pay if you made more than the minimum.
Angie, she’s not making extra principal payments, she’s paying off the interest as it accrues. I’m not sure this would change the strategy of sending in checks, but I thought I’d note it.
Yes, but student loans accrue daily interest. So any extra payments after the autopay date would first pay any accumulated interest, then pay towards principal. At a certain point it really doesn’t matter whether you’re paying “principal” or “interest” if it all accumulates anyway.
If you wanted to ensure you were paying all the interest each month, just send the check for the amount of interest accrued a few days before the next statement date. Otherwise, all you need is a rough estimate. If you expect $75 interest for the month, pay $75 extra anytime. It doesn’t really matter. It will lower the principal initially but charge you more interest the month after. It will all even out.
Coordinating this sounds like a total nightmare. You’ll definitely want to get a system set up that you can easily replicate every month.
I do think the bright side of not consolidating is that once you get to the point where you’re actively paying extra to the student loans, you’ll be able to chip off the small balances easily. The satisfaction of paying off ten loans tallying to 60k is more enjoyable than just one loan at 60k. Mathematically the same, but mentally different.
I agree. And, for what its worth, I’ve been toying around with the idea of really trying to pay extra toward the 8.25% loan. It’s the smallest balance and the highest APR, so it just makes sense to start throwing extra (above the interest) to try to knock it down!
I’m crossing my fingers for some awesome income months for you guys. Once you clear up the rest of your debts, you could knock out some of those smaller unsubsidized loans in no time!
Yes! This! That was what I was trying to say when I posted. I can’t imagine staring at a 60+ number every time you type up your debts is good for your mental health. Breaking them out might be a pain in terms of coordinating payments, but it also breaks them out into little steps and makes them feel far more manageable and that is great for mental health even if the math stays the same!!! Motivation is important and it’s not just about the wins, but also about what is staring you in the face! I’m really susceptible to procrastination so I know how valuable breaking things down into bite size chunks can be to one’s ability to get things done ;). One hill at a time, you’ll get there!
check out this blog too. she has navient and has written quite a bit about the struggles of paying extra
https://mintlyblog.wordpress.com/2015/03/23/navient-update/
Thanks for the link! I”ll check it out (but also a little scared to hear more horror stories.) Gotta love student loans – NOT!
Thanks, debtor, for the shout-out! Ashley, I have (obviously) had some issues with Navient. I think I might be getting to a place where I at least sort of understand how they do things, but it’s been super frustrating.
Our loans are different from yours in that ours are consolidated, and I have no idea whether your experience in trying to pay down more than the minimums will mirror ours or not. Once I feel like I’ve got a handle on how they manage payments over the minimums, I’ll let you know!
I think you are so smart to pay your debts off this way! We are almost out of debt ($9000 in student loans to go) and we paid off debts smallest to largest. It was awesome to pay off our car because if my husband and I lost our jobs there was a lot of security knowing nothing could be taken from us if we didn’t pay our bills. Anyway, I am cheering you on! Keep up the good work!
Thank you!!! I feel the same way. The car is an actual asset that could be seized. No one can ever come and take my education/diplomas away from me. Hopefully we’ll never be in that type of position (and EVERYTHING is going to end up getting paid anyway), but there is a piece of mind in the security of paying the car off first.
This is one area where I disagree with you. This is exactly the opposite of security to me. At least they could take the asset (e.g. the car) and dispose of the debt with you owing a relatively low amount on the back end. With student loan debt, you are basically an indentured servant in perpetuity until the debt is paid off. It cannot be discharged through bankruptcy in most cases and they can attach ALL of your assets and all future assets until the debt is paid in full if you default.
That being said, I do agree that you have to do what motivates you personally. Great job! Pick a plan and see it through, we are all rooting for you!!!
I’m inclined to argue its not worth the headache to do 5 separate extra payments of varying amounts each month and keep track of it. You’re already paying back loans in the least efficient way possible. Having your student loans increase by $80 a month is only going to cost your $40 extra in interest each year. That’s nothing in comparison to the extra interest you are already accumulating to pay your car loan first.
If you think about it logically, let’s say you increase loan payments to cover the 80$. That’s 80$ less you have to pay off the car loan. So even though your student loan balance remains the same your car loan balance would be 80$ higher than if you focused all your money towards it. Really the only difference is the amount of interest that the $80 is causing you to pay which is negligible (~$45 in the first year).
I think this has been a recurring theme on this blog. Choose one path and follow it. Stop changing your mind and switching your strategy on a month to month basis unless its actually IMPROVING the payoff. If you are accepting that paying the least amount of interest possible is not your priority. Then follow your actual plan! There’s not much being accomplished by splitting your snowflake payments in multiple directions.
Thanks for the comment, but I have to disagree because I do think I’ve made a lot of progress. I try to keep an open mind to reader comments and suggestions (many readers have been down this path before and/or have specialized training in areas like finance and accounting, which I lack. I try to learn from them!) Because of this, I think my path is always open to revision as I learn new info. Also, I think it’s important to be able to switch plans when life circumstances change. Originally I was gunning to be done paying off the car this summer. At that rate, I wouldn’t have cared as much about paying extra toward the student loans until that time. But now that our debt payments have gone down we’re in a different set of circumstances.
I totally agree that it’s not good to constantly flip-flop a hundred different directions. But I don’t think I’m in that boat. Instead, I’m trying to be open to what readers have suggested, our changing life circumstances, and make the best decisions possible from there.
I do hope you’ll keep reading though! Sorry if its frustrating to see this switch!
I’m from the mega student loan camp (200k+) and a spreadsheet fanatic so I look at all the nitty gritty details. I do agree that your strategy needs to be realigned occasionally to fit the current situation. For instance, we finally got all our loans paid that were above 6%. Although we still have 60k left to pay off, I modified our strategy to increase retirement contributions for the tax benefits. Additionally, since the interest rates are now lower than average stock market gains I’m funneling what would be extra payments to a brokerage account because it has the potential for higher rewards. We still are focusing on extra cash, but funnelling it to a spot where there are more economical benefits (flexibility, higher net gains, etc.) If you had asked me about this a few years ago I would have said I would never do it. That I wanted to payoff my loans ASAP in the least amount of time possible.
It just seems that the work to get the 80$ applied correctly to multiple loans is an awful lot. And it may not outweigh the risk of having them apply it incorrectly and having them apply it to one of the subsidized loans “forgiven interest”. Maybe an alternative option would be to apply the 80$ to the 8.25% loan only. Then that loan balance will decrease while the other 4 unsubsidized loans balances increase. However, the net effect will be the same by not having the total balance of 11 loans increase. Does that make sense? Then there is only (1) extra payment to get aligned correctly. This would also give you a boost so that the 8.25% loan (which is one of the smallest amounts) will be a little lower when you do go to tackle it after the car loan. Just a thought to make it simpler but accomplish the same idea.
honestly as long as you’re making sustainable and marked progress I’m not too worried about it. I can’t imagine that Ashley actually needs anyone on here to explain the math to her again.
I’m an accountant so the numbers side of me does say that you should mathematically pay the highest interest rate first. On the other hand what is the net effect going to be if she quits 18 months into beating her head against the giant student loans?
I’m not a total believer of everything Dave Ramsey says but there’s a reason he is so successful and is such a personal finance household name. His stuff works.
Ashley, pick a plan; any plan and stick with it. As long as you’re making good progress each week/month/year you’ll be fine.
Thanks to Adam, that is exactly how I feel! Ashley is competent enough to know what is the best strategy for her and her family, not everyone will agree and that is fine because variety is the spice of life. What worked for me was to pay down consumer debt with a fiery passion and laser focus. Now that I just have student loans left, I resumed contributing to my retirement funds and don’t have such a restrictive budget. This plan worked for me and my personal financial goals.
All of the changes have been a bit confusing and sometimes aggravating – not because I disagree with the approach but because I am of the same pick a plan ANY dang plan and please for God’s sake stick with it for more than a week. But, I have no plans on bailing; I do love your posts and I am totally invested in your journey. I also believe that if you just keep up the great work you will get ALL of the debts paid off regardless of the order.
I would not consolidate. Because then you will never feel like you make any progress till the whole thing is paid off. I wish I had not consolidated my husbands loans. Plus often those consolidation loans have a worse interest rate.
Secondly – you need to do a trial payment to make sure that you can pay off your unsubsidized separately from your subsidized. In my case I cannot. Every payment on my loans is sent to both loans.
I think you might be able to, but you have to call in and request the change. This may vary depending on loan company so I don’t know for sure, but I think Navient is similar to what you describe. When I make an extra payment (above minimum) it equally disperses the money to all of the loans. But then if you call and request to have the funds applied to a specific loan(s), they’re supposed to reallocate the money for you.
I wouldn’t consolidate either. Once your car is paid off you can start attacking the smallest and/or highest rate student loans one at a time. And seeing them disappear will be a huge mental boost.
I actually think it is a negative that you look at your student loan debt as ONE HUGE debt. It makes it seem insurmountable. I think if you started thinking of it as several smaller debts, you might be more motivated to start knocking them off the list.
I had student loan debt twice in my life…undergrad and graduate school. The first time my loans were automatically consolidated. It was a bit daunting to pay off. The second time, I kept them as individual loans, and I was able to pay them off much faster. I could see the finish line on one loan and it motivated me to save a little extra to kill that loan. And then the money saved from that loan went directly to the next smallest each month. I ended up paying them off much more quickly than I expected to.
Keep up the good work, Ashley. I have every confidence that you are going to succeed on your debt-free journey. Regardless of the path you take to get there.
Thank you so much! I actually had a commenter (a long time ago) suggest that I look at each individual loan as being for a specific thing (e.g., first semester of grad school, cost of moving from Florida to Arizona, etc.), and I really liked that idea. I’ve always planned to eventually tackle these on an individual level, but keeping them essentially grouped as one until I get to that point made it feel less overwhelming just because of the sheer number of them!
It’s very good to look at interest rates regularly. It doesn’t hurt to be scared! So if you paid off $8,500 of your car loan, and your interest rate on your student loans increased by about $3300, then you have effectively only paid $5,200 on your car. Those are hard facts! The interest rates are the death of student loan borrowers.
I actually don’t mind a bit that you have changed up your debt plan a few times. It’s called life–things change, income is variable, new information changes your mind…the most important thing is that you keep paying your debts every month and making great progress! I really like this new pay off the higher interest loans before the car idea. I see what a struggle it was because the car is such a psychological thing and I was so excited when I thought it could be paid in 2015. But since that isn’t happening (through no fault of your own) making sure your interest doesn’t grow is great. Keep it up and thanks for sharing our journey with us and being so vulnerable! It’s not an easy thing and you must have developed thick skin to keep doing this!!
Also happy year anniversary of starting here!
You may want to check your acs loan. They have been known to charge 8.25% interest daily not annually. Might be reason it is going in wrong direction.