The chopping block: college days debt

If you know me, you know that I hate debt. I got into debt pretty bad about 8 years ago. I got a MasterCard when I was in college, racked up a lot of debt and couldn’t pay it off. That was a hard time in my life. I didn’t know what to do, I couldn’t even pay the monthly minimum, I had collectors calling me. I felt like a bad person and a failure. If you haven’t yet seen this movie, definitely rent Maxed Out, a horrific documentary on American consumer debt.

So I went years without having a credit card. Elise and I now have one credit card that we’re very responsible with, and we pay the balance every single month. We have a mortgage that, unfortunately, I don’t have the six-figures worth of cash to pay of its balance, but I’m cool with having a mortgage as our house was a great investment. And now more recently, we have a car payment because our old Expedition was on the verge of needing some serious mechanic love, and I’d rather get rid of it before it became a problem.

And we have our consolidated student loan that we’ve been paying on for six years. And I’m sick of paying that stupid $219.08 a month. I know that number very well. I’ve seen it drafted from our checking account on the 21st of every month for the past six years. So I’m attacking that debt with full force now. That $219.08 could be working for me in some type of investment.

I emailed Direct Loans (which is run by the U.S. Department of Education) and asked, “if I send an extra payment each month, how can I be assured that the extra will be applied to the principal of our loan?” I asked this because I do the same with our mortgage. Every year I send an extra payment or two and it’s applied to the principal of our loan.

The response that I received indicated that any extra payment that is received will first be applied to any outstanding interest, and the remainder will be applied to the principal. I was also told that interest accrues daily.

So in my reply, I asked, “so, if you draft my checking account on the 21st of every month, and if I sent you an extra payment and it got to you on the 22nd, I’d be paying mostly on the principal, right?”

I received an email response that, if I were to hear the person’s voice who was answering my question, I could totally hear that voice, very sheepishly say, “yes, that would be how you could pay down your loan a lot faster.”

So, I’m stupid for having waited so long to take action on getting this loan out of our life. Elise and I both having degrees is great, I wouldn’t want it any other way, but I want to be done with paying for school. I’ve got a kid whose college education I should be focusing on, not mine, not Elise’s. We’re done with school.

So I setup and automatic payment in our account on our bank’s website to double-up on our student loan payment, and to make sure that my extra payment is received shortly after the 21st of each month, and is applied appropriately. I’m sure I’ll have to monitor this for a few months, just to make sure things are handled the way that I want them to be handled.

And, as the one-two punch, I’ve done pretty well in the stock market over the past 5 years. So, thanks go to Apple, Inc., Salesforce.com and Disney. I’m going to be selling some stocks and put a huge dent in our student loan balance.

If I left things they way they were last week, I’d be 46-years-old when we’d be making the last payment on our student loan and we would have paid nearly $15,000 in interest. And that’s not how I want things to be.

So, Student Loan, you’re goin’ down!