We start today’s student loan story with a note to my roommate to buzz off! The other day he told me how when he reads my blog he glosses over the student loan repayment posts because they’re repetitive. While his assessment of these entries may be correct (how many times can I say, “I’m down another thousand,” and not come off as repetitive?), there are two reasons why I report each decrease in my total student loan debt. First, I want to show the rest of the overburdened student loan carrying population out there that it can be done. Second, reporting my student loan debt reductions is a good way to hold myself accountable to stay on the repayment plan. In fact, I took the very same approach during a previous iteration of this blog back when I was in graduate school in 2004/2005 and attempting to lose a tremendous amount of weight (which I did – and then gained 70% of it back!).Aside from my roommate’s comments, what’s more important about this week’s update is that the principal balance on my New Jersey Higher Education Student Assistance Authority (NJHESAA) loan is less than half of what it was when I started this repayment plan at the beginning of the year. In real numbers… On January 1, 2010, my NJHESAA loan was just over $41 thousand and now it sits at $19 thousand.
That’s a pretty impressive decrease for a 10 month period, huh? 🙂 And, actually, if you look at how much money I’ve dumped into my student loans since January 1, 2010, the average amount that I’ve spent PER DAY on student loans this year is $95. Amazing, right?
In fact, if you look back at some of my earlier writings around this repayment plan, I was looking forward to this moment in particular. And for those of you who haven’t read these entries (or stopped because they were repetitive), you can read this clip from the December 21, 2009 entry regarding my student loans:
My plan for the coming year is to send as much excess money as I can to pay down the NJHESAA loan. Once I get it down to a manageable level (unfortunately, $41 thousand is not manageable) my plan calls for me to revisit my savings and investment accounts to see whether my aggregated funds can finish off this loan and still leave me with some playing money.
I imagine that once I can get the NJHESAA loan down to $20 thousand or so, I’ll be able to give some serious consideration to wiping it out with one payment. And, if I continue to stick to my plan, then I might be hitting that number right around this time next year…
Well, as it turns out I skipped that $20 thousand “remaining outstanding” number on my NJHESAA loans and went straight from $21 thousand down to $19 thousand. Oh, and I reached $19 thousand two months earlier than I originally projected. As you can see from the quoted text above, back in December 2009 I was anticipating that – at this point – I could cash out of my savings and investment accounts and use the proceeds to repay the remaining outstanding balance on the NJHESAA loan. In truth, though, while my investment account has increased this year, my savings account is all but depleted. And now I’m faced with an interesting personal finance situation. I’ve been mulling over this situation and running internal financial projections on this question for two weeks now:
Do I clear out my investment account and put all of those proceeds towards eliminating the NJHESAA loan? Or do I keep my investment account and just stick to this repayment plan? Here’s one pro and one con for each…
Keeping the Investment Account. Pro – I bought some of these stocks at a very low price and have realized some amazing gains on them. If I sell out of the investments, then I lose that huge return (and I have to pay taxes on my gains). Con – I’m not sure how much higher some of these stocks are going to go in the current market, so I might just be sitting on dead money (dead in that it’s not earning a return in excess of the interest being generated each month on the NJHESAA loan).
Cashing out the Investment Account. Pro – If I opt to wipe out the investment account at some point in early to mid-November, I could use all of the proceeds from the sale of these stocks to wipe out the entire NJHESAA student loan. Con – I lose all of my investments and have to pay taxes on the gains I realize (note that taxes go up on these investment gains come the new year).
The other aspect of this that I have to project out is how much more money I’ll have each month since I won’t be sending checks to NJHESAA any more. During this time of the year (the autumn months and early winter) when I have my income from my day job and two teaching incomes flowing into my account, I typically send about $3,000 each month to the student loan companies ($2,700 or so to NJHESAA and $300 to the USDOE). The $2,700 figure to NJHESAA is more of an average for each month; in September, for example, I sent NJHESAA $3,500. If I was to eliminate the NJHESAA loan, my total monthly student loan payment would be reduced to about $300 each month. A 90% drop in money-out isn’t so bad; and neither is an average of an extra $2,700 each month to play with…
What would you do in this situation? I know which way I’m leaning, but I’d love to hear your thoughts so I’m leaving this post on JerseySmarts.com for a few days, uninterrupted by new entries!
In May 2006, I graduated from Rutgers University with a Masters Degree and $120,720 in student loan debt. I currently owe $74 thousand, which breaks down to $19.8 thousand owed to the New Jersey Higher Education Student Assistance Authority and $54.5 thousand owed to the United States Department of Education. Follow my student loan repayment story on JerseySmarts.com.