Paying Off Student Loans

The dreaded student loans!  Ughhhh!!!  Our student loan payments each month are a killer and that is mostly my fault.  When Cody and I met I had about $75,000 in student loan debt while Cody ony had about $13,000.  His monthly loan payment is $161 a month and mine was $808.

As you may know by now we want to be debt free in 10 years and that includes our student loans.  If we pay the monthly payment each month we will have them paid off within 7 years.  However, as with any loan, you also pay more interest the longer you have the loan so we knew we had to pay them off earlier than 7 years.

We were at church one Sunday and the pastor showed us a Dave Ramsey clip about debt.  You have to watch the whole thing but below is just a clip.

This video struck a cord in me. I knew God was calling me to pay off my debt.  Luckily for Cody and me, neither of us have credit card debt nor a mortgage; we only have student loan debt and his truck loan debt.  We paid cash for Ruby, our fifth wheel.  We paid cash for my engagement ring, so when Cody gets around to proposing we already have the ring and we have no debt on it.

If you watch the whole video Dave Ramsey suggests taking all your debts and writing them on a piece of paper in order from the smallest to the largest and displaying it in a prominent place in your home where you will see it often.  I did just that.  Rather than write the total amount of my student loans I actually wrote them as each individual loan.  Cody's student loan is second to highest, while the rest are mine.  We did not include Cody's truck loan because we want to first focus on our student loans. 

We still make the monthly payments that are due on the student loans however we are paying a little bit more when we can.  For example, when we received our tax refund this year (we claim zero all year so we receive a refund when we do our taxes) we used all of that money to pay off my smallest student loan.  It is a small victory being able to cross off one of those loans. 

By paying off the smallest loan my loan payment each month went from $807.83 to $726.28, which is a $81.55 savings each month. Since our budget already includes $808 for my student loan we are now paying $80 more each month to the next smallest loan amount.  If we had just made the minimum payment to that small loan it would have been paid over 89 months and would have cost us $7257.95 rather than the $5765.84 lump sum, so we saved $1492.11 by paying it off when we did.

We will not be able to pay off our debts overnight but it is our hope that with the money we save from living in the fifth wheel that we will be able to pay them off much quicker.