Recently there has been uptick of news articles talking about companies offering student loan repayment programs, similar to how companies provide you with healthcare and retirement benefits, or even tuition reimbursement for continuing your education. I think that it’s great that companies are realizing that many people see student loan repayment as a priority and incentivizing people to come work for that company by offering more perks. It’s refreshing to see in this time period when the strategy for many companies seems to be to offload as many of these costs onto the employees, instead of increasing the benefits for employees. Even though these benefits may not go directly into your pocket or checking account, they are in fact little raises. Every dollar that you receive in benefits is a dollar that you don’t have to spend out of your paycheck for that item. But are these plans really that effective? I’m going to analyze one of these student loan repayment plans to see just that.
The past two months I have been very aggressive towards paying off my student loans, putting $2400 total towards them each month. Unfortunately this also led to my budget being on the negative side both months, as I spent more money than I earned. Not a huge deal in the short-term as I have a significant amount of buffer between my checking and emergency funds, but I feel much better having a bit of a surplus at the end of each month. I’ve also still been trying to build my emergency back up to the levels it was at previously and that has been pretty slow going so far.
October has allowed me to continue the rapid pace I’ve set for paying back my student loans. I went camping this month which did lead to increased spending, but I still felt comfortable putting a sizable towards my loan. I’m thinking that I may need to adjust my payments down slightly in the next few months, because based on my budgeting and student loan payments I’m cutting it pretty close. But for now I’ll enjoy the progress that I am making and keep pushing forward as fast as possible. I should be able to pay my loans completely off by early 2016, the only question now really – how early?
I’m trying to hold onto Summer temperatures and weather, but the weather doesn’t seem to be cooperating with me at this point in time. The high temperature each day gets lower and lower, but luckily my expenses have also gone down now that Summer is coming to a close. I’ve had some bad luck this year, which has caused me to shift some of my goals and take on more debt, but I’m now able to refocus my goals back towards eliminating student loan debt. That shift back towards student loan payments started last month, and I’m happy to report that it continued into my September payments.
I seem to receive a lot of questions around how interest works on student loans as well as how it is calculated. I’ve also seen a lot of confusion in general across the internet when it comes to student loan interest. I think it’s important to understand how much of your money is going to interest or how much you are saving on interest by making extra payments. On large loan balances interest can really eat into the progress you are making, so it’s important to understand what is actually going on. I’m hoping that this post can clear up some of the common misconceptions, and hopefully it will also be able to help you calculate on your student loans easily.