Timeline So Far

One thing I should mention about variable-rate student loans. Keep a close eye on your interest rates.

I had a Sallie Mae Signature Student Loan for $5000 dollars. With capitalized interest it came to about $5500. My monthly payment was $52 dollars a month. I started happily paying this minimum every month. I was just proud I could make the payments at all! I also noticed that if I paid more than was due, my payments were "advanced" by the amount I had paid. For instance if I paid $110 dollars, I didn't owe a payment the next month. So I got into a bad habit of paying in advance then waiting for the next payment notice.

One day in 2005, I received a notice that my interest rates were going up. Okay, I could deal with that. My monthly payment only went up a dollar or two. Soon after, my interest rates went up again. I started to become annoyed. I was making my payments on time. I was not a problem account. But again and again, the rates went up, from 7% to 11% within 6 months or so. I was furious! I also noted that often, over $50 of my payment was applied to interest while only $10 was applied to my principal balance.

By then I had received two raises and was making $44,000 a year, plus 10-15,000 a year in overtime. In January of 2006, I was promoted to executive assistant and received a raise to $47,000 and started paying hundreds more towards that account, as much as I could spare. By May, I had paid it off, much to my relief.

My $45,000 loan loomed large. Next up was to tackle my monster private student loan which had scooted up to an 8.2% interest rate.

I was 23, and my need to concentrate on my debt seemed ludicrous to friends who had none or low student loans. I tried to explain my desperation, but they didn't seem to understand. They thought I was money-obsessed when I calculated how much I could contribute each month to my debt.

Now, by no means was I living a severely frugal life. My apartment was nice, I bought decent clothes and went to the Caribbean for a vacation. I was making quite a lot in comparison to my friends. When I look back, I realize I could have paid off a lot more by now. But I did spend Saturdays and evenings working and on the internet learning about money management. In 2006, I paid $4000 in student loan interest alone. The kicker is I could not write if off because I made too much money.

Time to take a break!