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Your Feedback on the Big Student Loan vs. Investment Portfolio Decision

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Thank you to everyone who commented on this blog, on my Facebook page, who sent me an e-mail, text message, or BBM regarding the big decision that needs to be made in my student loan repayment plan. The aggregated feedback from everyone seems to be that I need to cash out of my investment portfolio and use the proceeds of the cash you to retire my New Jersey Higher Education Student Assistance Authority (NJHESAA) student loan.

I concur.

Not only has NJHESAA been troublesome to deal with (including sending their friends and allies onto this blog to consistently attack my previous entries regarding their horrible customer service), but the interest rate that they charge me is damn near criminal. When you combine the fact that this private student loan company has been very tough to deal with and the fact that they have been charging me an arm and a leg in interest, this question becomes almost a no-brainer.

Of course, a thorough review of the pros and cons of this plan also requires that I project out the possible return on my existing investment portfolio. Trust me when I say that I’ve done that time and time again and while I like the fact that I’m in the stock market, I think the bulk of my “big” returns have already been achieved. Plus, there’s nothing stopping me from getting back into the market on the very next paycheck that I receive after the NJHESAA loan is retired.

In real numbers, my NJHESAA loan has about $19,800 outstanding in principal right now. The accumulated value of my investments as of today is about $17,500. Obviously, I’m not quite at the point where I could cash out all of the investments and completely retire the NJHESAA loan, but I estimate that my investment portfolio will match my total outstanding principal balance sometime around mid November (you guys all know how I ridiculously overpay this student loan each month, so this estimate shouldn’t be a big surprise).

Thank you all for helping me make this big decision. Stay tuned for the latest and greatest with my student loans – the next few weeks are going to be very big!

Two More “G’s” Down the Drain and Now a Big Decision to Make

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We start today’s student loan story with a note to my roommate to buzz off! The other day he told me how when he reads my blog he glosses over the student loan repayment posts because they’re repetitive. While his assessment of these entries may be correct (how many times can I say, “I’m down another thousand,” and not come off as repetitive?), there are two reasons why I report each decrease in my total student loan debt. First, I want to show the rest of the overburdened student loan carrying population out there that it can be done. Second, reporting my student loan debt reductions is a good way to hold myself accountable to stay on the repayment plan. In fact, I took the very same approach during a previous iteration of this blog back when I was in graduate school in 2004/2005 and attempting to lose a tremendous amount of weight (which I did – and then gained 70% of it back!).

Down to $74 thousand

Aside from my roommate’s comments, what’s more important about this week’s update is that the principal balance on my New Jersey Higher Education Student Assistance Authority (NJHESAA) loan is less than half of what it was when I started this repayment plan at the beginning of the year. In real numbers… On January 1, 2010, my NJHESAA loan was just over $41 thousand and now it sits at $19 thousand.

That’s a pretty impressive decrease for a 10 month period, huh? 🙂 And, actually, if you look at how much money I’ve dumped into my student loans since January 1, 2010, the average amount that I’ve spent PER DAY on student loans this year is $95. Amazing, right?

In fact, if you look back at some of my earlier writings around this repayment plan, I was looking forward to this moment in particular. And for those of you who haven’t read these entries (or stopped because they were repetitive), you can read this clip from the December 21, 2009 entry regarding my student loans:

My plan for the coming year is to send as much excess money as I can to pay down the NJHESAA loan. Once I get it down to a manageable level (unfortunately, $41 thousand is not manageable) my plan calls for me to revisit my savings and investment accounts to see whether my aggregated funds can finish off this loan and still leave me with some playing money.

I imagine that once I can get the NJHESAA loan down to $20 thousand or so, I’ll be able to give some serious consideration to wiping it out with one payment. And, if I continue to stick to my plan, then I might be hitting that number right around this time next year…

Well, as it turns out I skipped that $20 thousand “remaining outstanding” number on my NJHESAA loans and went straight from $21 thousand down to $19 thousand. Oh, and I reached $19 thousand two months earlier than I originally projected. As you can see from the quoted text above, back in December 2009 I was anticipating that – at this point – I could cash out of my savings and investment accounts and use the proceeds to repay the remaining outstanding balance on the NJHESAA loan. In truth, though, while my investment account has increased this year, my savings account is all but depleted. And now I’m faced with an interesting personal finance situation. I’ve been mulling over this situation and running internal financial projections on this question for two weeks now:

Do I clear out my investment account and put all of those proceeds towards eliminating the NJHESAA loan? Or do I keep my investment account and just stick to this repayment plan? Here’s one pro and one con for each…

Keeping the Investment Account. Pro – I bought some of these stocks at a very low price and have realized some amazing gains on them. If I sell out of the investments, then I lose that huge return (and I have to pay taxes on my gains). Con – I’m not sure how much higher some of these stocks are going to go in the current market, so I might just be sitting on dead money (dead in that it’s not earning a return in excess of the interest being generated each month on the NJHESAA loan).

Cashing out the Investment Account. Pro – If I opt to wipe out the investment account at some point in early to mid-November, I could use all of the proceeds from the sale of these stocks to wipe out the entire NJHESAA student loan. Con – I lose all of my investments and have to pay taxes on the gains I realize (note that taxes go up on these investment gains come the new year).

The other aspect of this that I have to project out is how much more money I’ll have each month since I won’t be sending checks to NJHESAA any more. During this time of the year (the autumn months and early winter) when I have my income from my day job and two teaching incomes flowing into my account, I typically send about $3,000 each month to the student loan companies ($2,700 or so to NJHESAA and $300 to the USDOE). The $2,700 figure to NJHESAA is more of an average for each month; in September, for example, I sent NJHESAA $3,500. If I was to eliminate the NJHESAA loan, my total monthly student loan payment would be reduced to about $300 each month. A 90% drop in money-out isn’t so bad; and neither is an average of an extra $2,700 each month to play with…

What would you do in this situation? I know which way I’m leaning, but I’d love to hear your thoughts so I’m leaving this post on JerseySmarts.com for a few days, uninterrupted by new entries!

In May 2006, I graduated from Rutgers University with a Masters Degree and $120,720 in student loan debt. I currently owe $74 thousand, which breaks down to $19.8 thousand owed to the New Jersey Higher Education Student Assistance Authority and $54.5 thousand owed to the United States Department of Education. Follow my student loan repayment story on JerseySmarts.com.

Problem Situation with NJHESAA Averted

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In a bit of a reprieve, I checked my online account with NJHESAA today and they finally posted the payment that I dropped in the mail ten days ago. For the life of me, I’ll never know why they don’t post these payments quicker (though I really think that it has to do with them holding back on payments so they can collect more interest). However, I’m glad that I didn’t have to engage in that nightmare scenario that I contemplated in my entry a little bit earlier. Score one for the good guys!

What Are We Waiting On Here, NJHESAA?

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I’m not going to waste my time retyping something that I posted on this blog a few months back, so allow me to copy and paste something I wrote a few months ago. The topic of this post is how I sent a check to those nonchalant student loan payment processors at the New Jersey Higher Education Student Assistance Authority (NJHESAA) LAST MONDAY (TEN DAYS AGO) and it has YET to be applied to my balance as per my online account statement.

From back in February 2010:

Well, another issue that I’ve been aggravated about with NJHESAA is their inability to process my paper check payment in a timely fashion. For example, after I send a student loan payment to this private lender it generally takes them 10 – 15 days to process the check. WHY!?!?!

Why does it take NJHESAA so long to process a payment!?

Well, if you know anything about finance and how loans work, then you know why it takes NJHESAA so long to process payments. It’s very simple – the longer you hold a payment and not process it, the more the interest due on the payment grows. Here’s my real world example:

On Thursday, February 11th I sent my latest payment to NJHESAA. As of that date, I owed about $62 in accrued interest. Now, I understand that it takes some time for my payment to work its way through the postal system, through the NJHESAA’s mailing system, and eventually to be deposited in the bank. In 2010, that process should take between 3 and 5 days.

However, since my check has not been deposited yet and here we are – 9 days after the payment was sent – another $85 in interest has been accrued. So the total interest owed on the NJHESAA loan today has gone from $62 on the day that I sent the payment to $147 today. How disgusting is that?

And I don’t believe for one minute that my payment isn’t sitting on someone’s desk at the NJHESAA waiting to be deposited early next week. After all, since NJHESAA is closed on the weekends they get to accrue a few more days of interest by not depositing my check! Awesome! And why do I not believe that the payment isn’t sitting there? Because I have a job and I know that when someone sends me something, I get it in a matter of 2 or 3 days. There isn’t any big secret to the United States Postal Service – you send an item and they deliver it. In the rarest of cases your item might be lost, but the chances of that happening are slim to none.

What bothers me as of when I’m writing this entry (which is the night before it is scheduled to be posted on the blog) is that my check has been both cashed by NJHESAA (as of last Friday) and cleared by my bank (as of this past Monday). Meanwhile, my online account was not updated last Friday, over the weekend, this past Monday, or on Tuesday. What the hell is NJHESAA waiting for?! They have my check deposited in their greedy coffers already – post the damn payment!

I think we know which direction this is headed in… I’m going to wake up today (remember, I’m writing this the night before), the payment won’t be posted to my account, I’ll wind up calling NJHESAA, they’ll treat me like I don’t know anything about student loans or how to repay a loan (HA!), I’ll get frustrated with their insolence, they’ll get frustrated with my insolence, they’ll tell me the payment is lost, I’ll tell them they cashed it and I demand it be posted, they’ll tell me that they need proof of it being cashed, I’ll tell them that THEY CASHED IT and that they have the proof, and we’ll stalemate.

What a wonderful morning to look forward to… I need to get away from NJHESAA and FAST. They are, by far, the worst consumer debt organization that I’ve ever dealt with, EVER! I’ve dealt with every major credit card company, all of the major phone companies, and the major cable companies and always been able to come to some resolution on the phone. The NJHESAA? Ha ha ha!!!

Well, let’s hope that my anger is unfounded and that my already-processed payment is posted to my account when I wake up in the morning.

Two More Weeks, Two Thousand More in the History Books

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The headline of this topic is pretty deceptive. No, I didn’t go from $77 thousand owed during my last update to $75 thousand owed during this update. In total, I only dropped down to $76 thousand owed on my student loans (still not bad!). However, the breakout of my student loan debt has shifted just a little bit so that I owe two thousand less on my New Jersey Higher Education Student Assistance Authority (NJHESAA) loan than I did about two weeks ago.

Another Thousand Down

Not bad, huh?

At this point, I owe about $21 thousand on my NJHESAA student loan and about $54 thousand on my United States Department of Education (USDOE) loan. Some of you might do some quick math and say that 21 plus 54 is actually 75 so my numbers must be off. Not quite. As it turns out, when I report how much money I owe on each of these loans, I just report the quick numbers in order to make it easier to comprehend. So, in reality, I owe about $21,800 on my NJHESAA loan and about $54,678 on my USDOE loan.

See how that could make a difference when I say that I have $76 thousand worth of student loan debt left versus $75 thousand?

Anyway, I’m not worried about it. Now that I (finally) have some additional teaching income on its way in I’ll be able to fix this anomaly without any major problems in my expected free cash flow. Hey – I meant to ask this a few student loan entries ago, but is there anyone else out there paying back student loans? If so, I’d love to hear from you via a comment on this blog if you have the time. I always like hearing people’s stories!

Oh – and before I forget to mention it – this latest payment puts me at a place where I’m really close to cutting the NJHESAA loan in half during the past year. Stay tuned around the beginning of October for that announcement… 🙂

In May 2006, I graduated from Rutgers University with a Masters Degree and $120,720 in student loan debt. I currently owe $76 thousand, which breaks down to $21 thousand owed to the New Jersey Higher Education Student Assistance Authority and $54.6 thousand owed to the United States Department of Education. Follow my student loan repayment story on JerseySmarts.com.