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?!?
