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Started By
Message
re: Student Loan Planning/Strategy
Posted on 12/27/14 at 1:08 pm to LSUJay13
Posted on 12/27/14 at 1:08 pm to LSUJay13
I feel like consolidation really wouldn't make sense for me. Perhaps if I wasn't planning on paying off the 6.8% quickly, but since I am, I don't think it'd be the right call.
Anyway, I think what I'm actually going to end up doing is paying the $100/week all to C at first (since I know now interest is tax deductible, I might as well put it all to C, rather than only $85 to C and then split up the rest of the $15 to B and A just to stay ahead of interest). And then once C's equal to A pay them roughly equally, etc., until C, B and A are all gone. I understand the snowball effect, but I'm really confident in my ability to keep up with this, so I think it makes more sense to lower the higher principal balance first rather than just eliminate one.
Looking at this conservatively and if I paid all of C first, which I'm not even planning on doing:
My interest right now for C is about $40/month. My automatic payment to C is about $90/month, so if I pay $100/week, we'll call it $500/month (it's actually a little more), which means I'm reducing $460/month from about $7,500. That would pay off C completely around early May 2016. And that doesn't even take into account the reduced interest amount.
For A, when factoring in interest and automatic payment, I'd be netting about $28/month off the debt, so in May 2016, the debt would be around $3,900. If I then pay my $100/week to A plus the automatic payment, that'd be (conservatively) about $430/month. This doesn't even factor in the extra portion of the automatic payment that would now go to A, since I no longer have that portion going to C. A and C are paid off by February 2017.
And lastly B. Here, I was netting about $16/month off the debt, so in February 2017, the debt would be at about $2,100. With the extra $100/week, I'd be paying (conservatively) $416/month. This doesn't take into account the extra portion from C in May 2016 and then A in Feb. 2017. That debt would be gone around July 2017.
Doing this, I'd have A, B and C ALL gone in July 2017. This uses conservative estimates and doesn't even take into account lowering interest payments and that I would pay A, B and C at a nearly equal rate once they get to similar balances, rather than continue paying more to C once it has a lower principal than B and A.
I will also set up a Roth IRA. I'll try to put in around $1,500 for the 2014 year in a few months and then hopefully max out for 2015, 2016 and 2017. It will require some real frugality, particularly for these next 12+ months until I get that pay boost to the low 50s, but it can be done. That would leave me at age 25 with around $18,000 in contributions to my Roth IRA (plus the TSP) and less than $9,000 total in undergrad debt at rates less than 4%. I'd be pleased. I'd be comfortable taking out loans for grad school at that point, because, if I'm going to go back, it's not to get a Masters in Art History. And if I don't go back, I'm on solid footing and have very little debt remaining.
That was a very long post, but it was largely for me, not anyone in particular. Wanted to plan it out a little bit.
Anyway, I think what I'm actually going to end up doing is paying the $100/week all to C at first (since I know now interest is tax deductible, I might as well put it all to C, rather than only $85 to C and then split up the rest of the $15 to B and A just to stay ahead of interest). And then once C's equal to A pay them roughly equally, etc., until C, B and A are all gone. I understand the snowball effect, but I'm really confident in my ability to keep up with this, so I think it makes more sense to lower the higher principal balance first rather than just eliminate one.
Looking at this conservatively and if I paid all of C first, which I'm not even planning on doing:
My interest right now for C is about $40/month. My automatic payment to C is about $90/month, so if I pay $100/week, we'll call it $500/month (it's actually a little more), which means I'm reducing $460/month from about $7,500. That would pay off C completely around early May 2016. And that doesn't even take into account the reduced interest amount.
For A, when factoring in interest and automatic payment, I'd be netting about $28/month off the debt, so in May 2016, the debt would be around $3,900. If I then pay my $100/week to A plus the automatic payment, that'd be (conservatively) about $430/month. This doesn't even factor in the extra portion of the automatic payment that would now go to A, since I no longer have that portion going to C. A and C are paid off by February 2017.
And lastly B. Here, I was netting about $16/month off the debt, so in February 2017, the debt would be at about $2,100. With the extra $100/week, I'd be paying (conservatively) $416/month. This doesn't take into account the extra portion from C in May 2016 and then A in Feb. 2017. That debt would be gone around July 2017.
Doing this, I'd have A, B and C ALL gone in July 2017. This uses conservative estimates and doesn't even take into account lowering interest payments and that I would pay A, B and C at a nearly equal rate once they get to similar balances, rather than continue paying more to C once it has a lower principal than B and A.
I will also set up a Roth IRA. I'll try to put in around $1,500 for the 2014 year in a few months and then hopefully max out for 2015, 2016 and 2017. It will require some real frugality, particularly for these next 12+ months until I get that pay boost to the low 50s, but it can be done. That would leave me at age 25 with around $18,000 in contributions to my Roth IRA (plus the TSP) and less than $9,000 total in undergrad debt at rates less than 4%. I'd be pleased. I'd be comfortable taking out loans for grad school at that point, because, if I'm going to go back, it's not to get a Masters in Art History. And if I don't go back, I'm on solid footing and have very little debt remaining.
That was a very long post, but it was largely for me, not anyone in particular. Wanted to plan it out a little bit.
This post was edited on 12/27/14 at 1:09 pm
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