A Double Drop on the Student Loans This Time Around

Today is a good day – and not just because the spring weather feels good and it’s a nice day outside. No, in fact today is a good day because my student loan debt has dropped from $88 thousand to $86 thousand. That’s not a typo either, folks. After getting my federal tax return at the beginning of this month, I decided to apply a large portion of it towards paying down my New Jersey Higher Education Student Assistance Authority (NJHESAA) student loan.

The result? A $2,000 check going from my checking account to NJHESAA’s coffers and the reduction of my NJHESAA student loan debt from about $33 thousand down to about $31 thousand. Since I’ve now reached approximately $31 thousand in my NJHESAA student loan debt, I can now officially say that in 2010 I’ve repaid about $10 thousand of this loan…so far.

That’s a significant reduction – very significant. For a quick example of how significant this $10 thousand reduction has been in real terms consider this: As of January 1, 2010, I was paying $8.23 per day in interest alone on this loan. Over the course of a year, that’s $3,003.95 in interest expenses. Gross. Today, I am accruing interest at $6.40 per day or $2,336 per year. Annually, the difference in projected interest costs is $677.95. That’s a lot of money – and I’m only less than four months into my hardcore repayment strategy for the NJHESAA loan! So how much have I paid in interest thus far this year? $769.43. My goal is to keep that amount as low as possible.

Before I wrap this gloat session up, I feel compelled to add that this whole repayment thing isn’t easy. It is fun to write these entries, but repaying so much of this loan so quickly is not easy.

Remember, I created a very strong, very strict repayment plan because I want to get rid of the burden that these student loans cause me both today and tomorrow (and that “tomorrow” part is critical). An essential part of that repayment plan is focusing on wants versus needs…and it’s not easy or enjoyable to make that decision of what I want versus what I need. It’s not easy denying myself what I want to do with my paychecks versus what I really know that I need to do with those paychecks. I really want to take the approximately $2,750 that I spend on student loans each month and put a few hundred into my savings account and a few hundred into my brokerage account and then spend the rest of the money living the type of lavish lifestyle that you see on television. I’d love to do that – I’d love to go out and buy new clothes every few weeks instead of once or twice per year. I’d love to give my Mom back the small Honda Civic that I’ve been “borrowing” from her for almost two years and, instead, go out and buy a brand new hybrid SUV that would give me the roomy drive that I want and the gas mileage that I need. And I would love to travel more (like my recent trip to Nashville).

But I know that I don’t need to do those things. In fact, even more than knowing that I don’t need to do these things, I know enough about money and daily compounding interest to know that engaging in my wanted activities listed above instead of paying off my student loan debt would be condemning my future to a life of bloated student loan payments. Screw that! I’ll make the sacrifices today to make sure that tomorrow is absolutely awesome, thank you very much!

Oh, and now would be a good time to remind everyone of the “next” big repayment goal which I set for myself during the first week of March. Go ahead, click over and take a read.

I’m getting there…

In May 2006, I graduated from Rutgers University with a Masters Degree and $120,720 in student loan debt. I currently owe $86 thousand, which breaks down to $31 thousand owed to the New Jersey Higher Education Student Assistance Authority and $55 thousand owed to the United States Department of Education. Follow my student loan repayment story on JerseySmarts.com.