The Debt Plan

When I started this journey, I had 5 debts. All of them student loans.

Loan #1- 20,376

Loan #2- 8,500

Loan #3- 8,500

Loan #4- 5,828

Loan #5- 2,125

Both $8,500 amounts were subsidized while I was in school, with the others charging interest along the way. In December, when my loans entered repayment, all 5 became effectively the same. Same borrower (me), Same Lender (Uncle Sam), Same interest rate (6.55%). My original interest rate was 6.8% percent, but I signed up for automated direct debit, which knocked 0.25% off my interest rate.

Without any differentiating factors (e.g. I don’t owe my Momma. If I did owe my Momma or if she had co-signed, she’d be first to get paid!), I decided to utilize the debt snowball method made famous by Dave Ramsey. I did the math on the difference between the debt snowball (attacking the smallest balance first) and the debt avalanche method (attacking the largest balance first) and the debt snowball saves me money in the end. The savings might only be a dollar at my expected pace, but a dollar is a dollar.

For payments, as I mentioned, I have a direct debit every month. This pays the minimum balances on all of my loans automatically. On Graduated Standard repayment (10 years, with payments that start low and increase every 2 years), my current minimum payment is roughly $300.

The rest of my payment is decided at the end of the month. Between expenses, savings, and retirement contributions, I’m planning to contribute an extra $1400 every month. I expect this to change a little as my monthly expenses fluctuate and I toy with the idea of how much I should be putting in the stock market, but I’m hoping to stay within $1300-1500.

As of today, I have 3 debts remaining.

Loan #1 20,376 $20,220

Loan #2 8,500 $8,435

Loan #3 8,500 $8,135

Loan #4 5,828 PAID OFF!

Loan #5 2,125 PAID OFF!

This puts my overall balance at $36780.  With $1400 extra and $300 direct debit, my projected debt- free month is….

MARCH 2016.

Debt free by March 2016 would feel so sweet. On the pessimistic side, this assumes that I won’t have any unexpected/emergency expenses come up between now and then. On the optimistic side, this does not take into account any bonuses or other extra money that I could apply to my debt.

March 2016 it is. 

Have you set an aggressive debt repayment plan? Were you able to stick to it? Do you have any feedback on my plan? 

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8 comments

  1. Sounds like you’ve got an awesome plan, Kate!! We have a HUGE debtload right now, so we’re working on getting our DTI ratio down and then we’ll figure out a more aggressive plan. But for now, it’s working. 🙂

    1. In all the debt number crunching I’ve done, I hadn’t computed DTI! How did I miss that one? Silly me. Good luck with your plan! If it is working for you, then its a good plan!:)

  2. That is so awesome that you had all the same interest rate so you didn’t have to trade-off whether it made mathematical sense to take the quick win. It must be so nice to have the amount of lenders decreasing (even if they are all technically the same).

    March 2016 is not far away at all. Less than 2 years. Keep it up 🙂

    1. It is so nice to have the number of loans decreasing! Even though I have the largest loans left, going from 5 loans to 3 has taken a weight off my shoulders.
      March 2016, here I come!

  3. I’ve been on a super aggressive payment plan this year — I spent last summer clearing credit card debt then attacked my $19K of student loan debt starting in September 2013. I intend to have them paid off by the end of June. This is definitely a frantic payoff rate — my salary is good for my field but it’s not THAT good; the home stretch is requiring three $2500 payments from a monthly $3800 paycheck — but I just want it done, and it’s a small enough amount that I can be crazy for a few months. I don’t know if I could keep up this pace if I had to do it for another year though; you need to make sure you pace yourself. Good luck!

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