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.
5,828 PAID OFF!
2,125 PAID OFF!
This puts my overall balance at $36780. With $1400 extra and $300 direct debit, my projected debt- free month is….
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?