Month: April 2015

THE NUMBERS: Student Loan Wrap-up

The time has come for me to wrap up my student loans, seal the box and send them on their way. I paid them off almost a month ago and the loose ends are finally tied up. The last loose end was my final Paid In Full confirmation from my loan servicer. When I submitted my final payment, I was notified that it could take up to 30 days to receive confirmation. So even though I made my final payment on March 27, I didn’t receive official confirmation until April 18! That’s 3 whole weeks of second guessing whether or not my loans were really paid off. As proof, here it is! woot!

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Before I send my loans on their way and switch my focus to saving, I wanted to do one final analysis of all my numbers. To do that, I requested a full official record of my student loans from my loan servicer. Disbursements, Interest Capitalization, Payments, everything.

Requesting the record was pretty simple. I submitted my request through the online portal and it was sent to me within a week. Of course they sent it in a format that I couldn’t easily transfer into an Excel spreadsheet, but these are student loans. They aren’t meant to be easy. After some number crunching, here is what I came up with!

Total Amount Disbursed: $44,468

Before any interest or payments, the United States Government loaned me $44,468 to pay for my graduate school education.

Total Interest Paid: $5,474.50

Over the course of incurring and repaying my loans, I paid a total of $5,474.50 in interest. Three of my loans were unsubsidized, meaning they accrued interest while I was in school. On November 11, 2013, all accrued interest was capitalized onto the balance of my loans. This meant that I could pay interest on my interest. Oh joy! The total amount capitalized was $2,401.77. This would have been $461.10 higher, but I used my tax refund in 2013 to make a payment on my loans.

Number of Payments: 66

Holy crap, that’s a lot of payments over 16 months. That’s an average of 4 payments per month, but I was hitting 6 payments per month for most months toward the end. The biggest thing that hits me about this number is all but 16 of those payments were manual. That means me transferring money around and logging into FedLoan Servicing to make the payment. It’s going to be pretty weird not logging into that account again. It had been such a constant thing for me.

Largest Payment: $5,240.50 (House Fund)

Smallest Payment: $51 (Ain’t no payment small enough!)

Days in Repayment: 459

1 year, 3 months and 4 days. Technically, I made my first payment 3 days early so this could be 462 days, but I was just being generous. 459, it is!

Evolution of my Minimum Payment: $525.86 – $154.63

The Snowball works!

The Snowball works!

  • December: $525.86. My minimum payment on standard repayment.
  • January: $311.xx. Immediately after I made my first payment and was still unemployed, I switched repayment plans to graduated standard repayment. This lowered my payment to $311 something. I paid $312 that month.
  • February/March: $296.58. I paid off my first loan in February, resulting in a lower payment.
  • April: $256.57. I paid off loan 2 in March. This dropped my minimum payment, but apparently more than it should have.  This is why you need a buffer for your student loan account. This payment makes no sense.
  • May – July: $266.34. After the mysteriously low April payment, my minpay went up $10 for the remainder of Loan 3.
  • August – October: $205.77. With two loans left, I paid $205.77.
  • November – March: $154.63. Finish line!

Total Amount Paid: $ 49,942.50

This amount represents the total amount paid for my graduate school education. It cost me $49,942.50 to go to Law School. This includes books, fees, transportation, The Bar Exam: prep classes and taking the actually test, a new computer, a professional wardrobe, and living expenses during school and while looking for a job over the 3.5 years.

I am over the moon that this is under $50,000. I barely made it ($57.50!) but hot damn! That feels freaking fantastic!

One thing noticeably missing from all these numbers is $45,330, the number I thought I was facing this whole time. I’m not sure where this number came from. It was probably the balance when I got my first loan payment notification, but it doesn’t fit nicely with any of the numbers I have now. Per my calculations based on the record of my account, my balance with the capitalized interest should have been $45,408 around that time. Close enough. Interest is a fickle thing.

Now to the graphs…

 1. Unburied

My favorite website for inspiration during my payoff was Unbury.me. I could plug in all my numbers and what I thought I could pay and it would give me a beautiful payoff schedule and a graph similar to the one below. I played around with that thing a lot. The best thing about it was that it clearly showed what an extra $50, $100 or $200 would do per month. If that doesn’t drive you to put extra toward your debt, I’m not sure anything will.

The biggest downside of Unbury.me was that you could only play with one month’s numbers at a time. My payments were inconsistent, so it was tough to get a gauge of what the upcoming months looked like. This, along with my aggressive payments, resulted in me always getting ahead of schedule. It was fun to get ahead of schedule, but it made planning difficult.

Now that my payment plan in finished, I have a full picture of what it all looks like. It looks pretty good!

All my hard work summarized in one chart

A Debt Snowball in Action

Important Dates in order:

  1. April 2013: Made an early payment, knocking down my smallest loan.
  2. November 2013: Unsubsidized interest was capitalized onto the balance of my loan.
  3. February 2014: Things got serious. I had a steady paycheck and I could attack!
  4. January 2015: Drained my House Fund and took a big bite out of my last loan.

2. Gutenachspitze!

One of the metrics I wanted to look at was the lifecycle of my loans. How long did it take to incur the debt and how long did it take to pay them back? What did that all look like? When I charted the numbers, it was beautiful. To quote Rudy, it was “the most beautiful sight these eyes have ever seen.” Well, not quite, but beautiful all the same.

My debt resembles the mountain I always thought it was.  I named it Gutenachspitze, or Goodnight Peak for those of you that don’t speak German.

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I’m so proud of this mountain. I created it, but I also conquered it! Look at how steep it is on the east face. I did that.

Hubs and I did that.

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Where’d all the money go?? Part 1

As I prepared to make the shift from debt payoff to saving, I imagined all this extra cash I was going to have. Over the last year, my payments averaged $2663*, ranging from $1726 to $4416.* That’s like a small briefcase full of cash now available for my next goal. I was worried about all that cash burning a hole in my pocket. What would I do with so much cash? Spend it? I hope not. Save it? I hope so.

Thinking about potential savings goal progress, I got excited. Saving on average $2663 every month over the next year is more than $30,000. Throw in a little bonus money or a little help from Hubs and I could be a SAVINGS MASTER.

Then I paid off my loans and that money magically figured out a way to disappear.

Where’d all the money go??

While I was in debt repayment mode, debt was priority #1 with little competition. Sure, I was saving for retirement, but my 401k diverted a whopping 1% and my Roth IRA was getting $100-200/ month. Prioritizing debt happened naturally, even though I sometimes fought it along the way. Anyone remember my habit of building and draining savings accounts?

Now that I’m saving, my money is going all over the place. Yes, I want to save for a house, but I also want to save for other things. I gave my 401k a serious bump right before my loans were paid off and my Roth is back on track to be maxed out by the end of the year. My HSA is full again and I also set aside $1000 in an FSA this year. That’s a whole bunch of savings accounts taking money away from my poor, poor house. #thieves

Maybe that’s just how it has to be because I don’t want it any other way.

While I would love to make excellent house savings progress today and tomorrow and be done by next summer, missing my house savings goal doesn’t bother me. I have 22 months until I need a down payment. To raise the rough minimum for 20% down, I am going to need approximately $40-50k. That’s about my average payment without windfalls from now until then. If can only save 10%, that’s just over $1000/month. $1000 each month is doable even if I go crazy and try to max out my 401k. If we decide to stay in the apartment for one or two more years, that’s fine too.

What I do know is that time is still on my side to save for retirement.  I want to take advantage of that. I already gave up a year for my student loans. It is going to feel pretty gosh darn sweet to get my retirements accounts to a critical mass so they can do a little bit of the leg work themselves. Then, if I need to put on the brakes, I can.

I also know that going to Japan is more important than buying a house on a fixed timeline. The house can wait, Japan may not be so flexible. My uncle’s days in Japan are limited so I need to visit while he’s still there. Otherwise, I may never find another reason compelling enough to go. I’m still kicking myself for not visiting my cousin in Rome when I lived in England. I’m going to Japan.

My biggest take away from this stage of my early transition to saving is that so long as I try, it really doesn’t matter how much progress I make toward my savings goal. I could knock it out of the park, or I could strike out. If I’m spending and saving according to my values, I already won.

Winning with money feels a lot cooler than a rigid savings goal.

*I put $9624 on my loans in January thanks to cashing out my House Fund. I don’t have another savings account to drain, so I removed the House Fund addition as a statistical outlier.

A Solution to the Underwhelming Nature of Savings

Submitting my final loan payment two weeks ago is officially my biggest achievement with the smallest celebration. Selecting “Loan Payoff” felt cool, seeing that final amount was nice and making sure the full payment was in my account was good. But then I clicked “submit” and that was it.  No balloons fell from the ceiling, no celebratory gif on the screen, not even Kool & the Gang to cheer me on. It was just me and my screen, by myself at 6:30am with some peanut butter toast and a yogurt. Talk about underwhelming.

In contrast, the process of paying off debt was a ton of fun. Those who haven’t played the debt game will probably think I’m crazy, but winning at the debt game is an excellent time. There is so much strategy to it. You have to choose your repayment plan, how you pay, how often you pay and what loan to target. Each day while you are paying off debt is a challenge.

“What can I do today to add a little more snow to my snowball?”

Then you can create elaborate spreadsheets to track everything. SPREADSHEETS, FTW!

Now that I’m shifting into Save Mode, I struggled to find the game in it. There are no payment plans to strategize, I don’t get an extra bonus for direct debit, I suppose I could save as often as I want but there aren’t really any savings accounts to target.

Paying off debt was like running a race from the back of the pack. Every success felt like passing the next competitor as I got closer to the finish line. Saving feels like I’m the only one in the race. Don’t I win no matter what?

To combat my feelings of blah-ness, I have a plan. I think it’s a good plan. Feel free to steal it for your own savings adventures.

My plan?

*Ding!* Round Two!

I am going to save, in cash, the equivalent of my student loan debts. I will break it out by the 5 loans I originally had. To make it even more aggressive (because I love aggressive goals) I’m going to try to do it in less time than it took to pay off my loans. 459 days? LET’S GO FOR 458!

The Plan!

Savings Goals:

  1. $2,125 (Baby saver)
  2. $2,125 + $5,828 (Middle saver) = $7,953
  3. $7,953 + $8500 (Thing 1) = $16,453
  4. $16,453 + $8500 (Thing 2) = $24,953
  5. $24,953 + $20,377 (Big Momma) = 45,330

Timeline: July 12, 2016

I submitted my final student loan payment on March 27, 2015. I’m giving myself 2 weeks to breath, which brings us to April 10, 2015. 458 days from April 10 is July 12, 2016.

Potential Road Blocks:

1) What about the savings? To pay off my loans, I cashed out 2 savings accounts. The value of these accounts credited to my loans was $6,863 I don’t have any money stashed that I can magically deposit in my House Fund. This makes it more difficult.

2) What about the interest? My loans had an interest rate of 6.55% that chipped away at the value of my money. My savings account has an interest rate of 0.75%. That’s a swing of 7.3%.  This makes it a little easier.

3) What about your income? For 2 months of my student loans repayment, I was unemployed. Today, I have an income. Pending any disasters, I will have an income for the next 458 days. (and beyond!) My income is also greater now than it was last year. This makes it easier.

4) What about other savings goals? I save much more for retirement these days. I increased my 401k contribution by 10% and went from quarter maxing my Roth IRA to maxing that sucker. This is going to make saving for a house harder, especially because I still have urges to max my 401k. I know I’ll max that eventually, but hopefully it will be after this savings challenge is complete.

I also have a travel fund that needs to be funded, but it’s nearly full for my 2015 travel plans. Next year’s travel goal of Japan is different. That’s going to require a lot more cash. This is the great unknown. Worst case scenario, I can just charge the trip and deal with it later. I’m kidding!!

5) What about Hubs? For at least the first 9 months of my loan journey, Hubs didn’t help. These were my loans and I wanted to pay them back by myself. Then we wised up and realized that my loans helped both of us achieve a higher joint income. A higher income means more opportunity for both of us. Hooray! Hubs will be helping from Day 1 of this experiment. However, his income will be partially diverted to save for travel. This makes it a little easier.

6) What about reality? On paper, this plan doesn’t work. I have too much money being diverted, most notably to retirement. But, on paper my student loan payoff shouldn’t have worked either. I started with small goals when I paid back my loans. I want to go big from the beginning this time. I may get there, I may not but this goal will challenge me from day one.

It was fun the first time, it should be fun again.