Monday, January 21, 2013
A Different Student Loan Scheme
Yes, you read that right: I'm overpaying on my loans and the amount owed keeps increasing. I am literally in a no-win situation.
I've decided to take a slightly different approach and see if that pays off. Last month, $2.53 of my $300 payment went toward the principal balance of the loan. Looking at that paltry amount made me realize that there actually is no way that I can ever pay these loans off. I already knew that, of course, but I keep re-realizing it.
My loans are currently unconsolidated. Each semester I took out loans is represented as a different group, A-H, and they have about three different interest rates. My largest loan also has the highest interest rate at 6.5%, whereas the smaller ones are 2.1%. My new plan is to focus on that big guy and hopefully actually make some more progress in getting the principal down. After all, I can only write off $1500 worth of student loans interest payments on my taxes for the year, so I might as well see if this new strategy actually makes a difference.
It's pretty much like that credit card debt reduction strategy where you tackle the biggest debt first and then work your way down to the smaller ones. It is mighty tempting to try to wipe out one of the smaller loans, just because it would go faster, but that really wouldn't save me as much money since the interest is so high on the large loan.
It's all kind of like treading water and even if it does make a difference, it won't be a significant one, but I have to try. I just look at that number get bigger every day, and it makes me sick. If I can feel like I'm making some kind of progress, maybe it won't feel like I'm just throwing away my hard-earned cash every month.
I'll keep you posted...