Monday, September 19, 2016

Personal Progress Report: Private Student Loan Debt

I would like to take a moment to share a progress report about my own journey to financial freedom.  Frequently, I am telling you about products or services that you should know about.  Today, I thought I might update you about my recent victories and how I've achieved them.

When I first started this blog, I was approximately $5000 in credit card debt plus student loan debt, which includes both private and federal loans. Last year at about this time, I had just paid off all of my credit card debt, and I have never gone back.

Today, I just paid off the smallest of my student loans!  It's original balance was around $7000 (roughly). During the past year, I paid off over $4000 of it.  I have to admit, I feel like a million bucks, because I have never paid off a student loan before!  This is one of the private ones, and I have one more private student loan to go before I only have federal loans to go.

Okay, here is where I am going to get a little educational on you,  If you have both private and federal student loans, pay the private ones off first.  Private loans are tricky.  Actually, I don't really recommend getting them in the first place, but I can't go back and UNget them.  All I can do is get them paid off.  Private student loans are tricky for a few reasons.  First, they are at variable interest rates.  Right now, I am only paying 3% interest on my private student loans!  Super cheap, right?  My federal loans are at higher interest rates than that, so what's the problem?  Well, the variable interest rate that I have on my seemingly cheap private loans could soar to rates way beyond my federal ones.  The problem is that you just never know.  My super cheap payments could suddenly swell, leaving me in a terrible position.  The other issue with private student loans is that you don't have the same deferment options with them that you get with the federal ones.  The federal government will let you stop paying your student loans for a whole bunch of reasons (unemployment, low income, going back to school again, and many more).  They have a zillion super-flexible payment plans, and ways of putting a pause one your payments as long as you communicate with them, and fill out the appropriate paperwork.  Private loans will not let you defer payment, and have less options regarding payment plans.  That being said, you should definitely pay off any private student loans first.

So, my back to my progress report.  I have one more private loan to pay off, before I move on to the federal ones, or change my game plan.  I anticipate it taking me until next year at this time (roughly) to accomplish this one (it's bigger), but I now feel as though I have the motivation (AKA mental fuel) to get the job done.  A few other victories from the past year include:  continuing to live credit card free, living on one income while having two full incomes (this is new, more on this strategy later), visiting my cousin in the UK and paying cash for it (very special circumstance, but worth taking), and paying cash for a few repairs on my rental property--to name just a few.

I encourage you all to count up your victories periodically.  Some of them may be small, but when you add up all of the things you have accomplished, it can be incredibly rewarding and motivating.

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