Today I made the final payment on my student loan. My repayment journey began seven years and three months ago. I graduated from a small private college in May of 2006. Like most, my loan was deferred six months while I diligently searched for a job and some cash flow. I worked hard in college, and was blessed to not have to wait long before landing in a decent, albeit entry level and low paying, job that I liked.
My loan was for $36,000. The payoff period was supposed to be 10 years, with an interest rate of 5.125 percent. It me took exactly seven years, and three months to pay it off. While having extra money in my monthly budget will be awesome, the best part about paying off early is the money I'm not going to be paying the lender in interest. By paying of my loan 33 months early (87 months vs. the original 120 month term), I saved $2,907 dollars in interest. Call me bitter, a poor sport, whatever you want, but just knowing the lender won't get another dime of my money gives me a tremendous sense of satisfaction.
To pay off my loan I picked up a second job working weekends, and I poured my tax returns into my loans each year. Plus, when possible I'd make extra payments. This made a big difference, but what really helped was snowballing a few other payments into my monthly student loan payment. If you're unfamiliar with snowballing payments do the following: when you pay off one loan/recurring payment, add that amount to your next loan. Once that loan is paid off, take those two amounts and put it into your third payment (like a snowball, it just keeps growing). Repeat until all debt is cleared.
I didn't realize how powerful this could be until about 2 years ago. Looking back I wish I would have started this much sooner. If I would have been on the ball a little sooner I could have potentially paid of my loans in five years, saving me almost another $2,300. Regardless, I've now got extra money in my budget, and the satisfaction of knowing I won't be paying my lender any more money, which is pretty awesome.
- Investing Education