I’ve been considering writing this for a long time but I have finally decided to go ahead and open up to you all with the progress on our debt pay off plans.
I originally wrote Our Debt Pay Down Strategy to explain where my girlfriend and I are in terms of debt. Currently we only owe for her student loans and the townhouse mortgage.
We aren’t married yet so we keep our finances separate but I intend to help her pay her student loans down in a major way. We plan on paying off her student loans as fast as we can.
However, we aren’t going to go into crazy insane debt payoff mode where we only eat rice and beans, never go out to eat and cancel our cable. We’ll be taking a more balanced approach. We also do not plan to pay our mortgage off prior to its due date, but that may change later down the road.
Student Loan Debt Update
Currently there are six groups of student loans that have balances on them.
Private Student Loan 1 – 8.125% Variable Interest Rate
The current balance on this student loan is $9,423.88. This is the student loan we are working on paying off first because it is the highest interest rate debt and is also a variable rate. It originally was well over $20,000 when my girlfriend began paying this down after college about a year and a half ago.
Federal Student Loan 1 – 6.8% Fixed Interest Rate
The current balance on this student loan is $7,942.43. This a strong contender to be the second student loan we pay off since has the second highest interest rate.
Federal Student Loan 2 – 6.8% Fixed Interest Rate
The current balance on this student loan is $7,464.42. This is a also a strong contender to be the second student loan we pay off for the same reason as above.
Federal Student Loan 3 – 6.8% Fixed Interest Rate
The current balance on this student loan is $4,106.38. This is the strongest contender to be the second student loan we pay off because it has the second highest interest rate AND the lowest balance. On top of that, we hate the bank this loan is through so it gives us even more reason to pay it off.
Private Student Loan 2 – 5.75% Variable Interest Rate
The current balance on this student loan is $22,959.72… ouch! This is the highest balance loan but it has a lower interest rate for now. Unless interest rates start rising we’ll wait to pay this loan off until the federal loans are paid off.
Private Student Loan 3 – 4.75% Variable Interest Rate
The current balance on this student loan is $8,368.70. This is the lowest interest rate loan and, unless interest rates rise, this will likely be the last loan to be paid off.
Total Student Loan Balance – $60,265.53
You may be wondering how I’m helping to pay the student loans down if we keep our finance separate. Great question. I am actually saving money in both a savings and investment account. Then, when we combine our finances after we get married, I’ll be able to help her pay!
Part of the money I have set aside I am in the process of moving, along with the money in my savings account, into a more appropriate investment for my time frame.
In total I have saved $22,380.49 to contribute toward this goal. This money is 100% going to be used for the student loan pay off when we get married. It won’t be used for anything else until then.
I am also working on some other side projects that will hopefully generate some money to pay toward the loans. In addition, I am considering transferring money left over from my monthly budget toward the student loan pay off.
We have a long way to go but if everything goes according to a pretty aggressive plan we hope to have the student loans all paid of by the end of 2013! That only leaves us a little tiny bit more than a year… Aggressive, but completely possible!
Do you have any debt you’re trying to pay off? Do you have a goal for when you want it paid off by?
Lance Cothern, CPA holds a CPA license in Indiana. He’s a personal finance, debt and credit expert that writes professionally for top-tier publications including U.S. News & World Report, Forbes, Investopedia, Credit Karma, Business Insider and more.
Additionally, his expertise has been featured on Yahoo, MSN, USA Today, Reader’s Digest, The Huffington Post, Fast Company, Kiplinger, Reuters, CNBC and more.
Lance is the founder of Money Manifesto. He started writing about money and helping people solve their financial problems in 2012. You can read more about him and find links to his other work and media mentions here.