Friday, December 23, 2011

Student loan update 12/23/11

Merry (almost) Christmas everyone. I stayed home from work to hopefully vanquish this cold so I'm not sick for weekend holiday travel celebration fun. In the meanwhile I've been looking over my student loans. I figure it's about time for an update.

Remember that time I said my principal balance of the larger of my two student loans was $25,706.29? Well imagine my surprise when I logged into my account and the balance was instead $25,945.14. That's $240 more! That and my next due date changed to January instead of February. I smelled something fishy so I decided to call customer service.

It turns out my double payment didn't actually go through. The customer service rep I talked to said the ACH withdrawl was declined. The checking account I use for auto debit is an Electric Orange account from ING Direct. It has an overdraft credit line that would more than cover the $385 payment, so I'm not sure what's going on there. Maybe you can't use any form of credit to pay off student loans? Or the DoE's system checks your account balance first so your bank won't charge you an overdraft fee?

At this point I'm willing to chalk it up to the DoE trying to be nice. Still, it went counter to my expectations. I'm glad I've been keeping my eye on my student loans. Diligence is very important to a Mustachian.

The old pre-Mustachian me wouldn't have even noticed. He wouldn't care what the payoff balance on his student loans were — only that the auto payment was set up successfully so he wouldn't have to think about it anymore. And he'd continue making payments every month for ten years and wind up paying interest through the nose so he could go on consuming things he didn't really need.

Update: the balances

  • Direct Loans (US Dept of Ed): $25,945.14
  • Sallie Mae: $5,880.40 (expected)
  • TOTAL: $31,825.54
The balance is up about $200 from last time on account of my extra payment not going through. Sallie Mae debited my payment today, so it hasn't posted yet but that's how much I'm expecting to owe after it goes through.

I'm getting ready for a big move. Along with the money I've been saving up, I got a year-end bonus of about $2k after tax withholdings. That plus my paycheck means I have around $4700 in my savings account and I'm gearing up to throw it at the Sallie Mae loan. If all goes well, I'd like to have the Sallie Mae loan totally paid off by the beginning of February.

Parting words

Now that I'm logged into my Sallie Mae account, I have some information to leave you with. Here is the net effect of having interest accrue while I was in school, just for this particular loan:
  • Original principal balance: $4,725.00
  • Capitalized interest: $1,517.74

1 comment:

  1. Sorry about the late comment, but I'm just finding you. It is generally a rule that most student loan lenders won't let you pay with credit of any kind, because SL interest is non-dischargable, while other debt typically is. Before the change to the bankrupcy rules a few years ago, when it was easier to get a bankrupcy, you could transfer the SL debt to a credit card and then just declare bankrupcy to discharge the whole thing. (i.e., you have 40k in lons, get enough credit cards with a limit of 40k, take cash advances for the whole thing and send in that 40k payment.) It wasn't a bad deal if you didn't need a line of credit for the next few years.

    So the SL companies (and DOE) along with other financial institutions, made it much harder to finance payments.

    Now the laws are much harder...any cash advance of a credit card that goes toward non-dischargable debt is also non-dischargable for the first year or two, so there's less of a reason to do this.