The plan, Part 1.

-$133,259.74. How does one even go about repaying such an amount? Well, I don’t know how one would do it, but I can tell you my current plan. Input welcome.

Including this month, there are 77 months between me and my 40th birthday. According to an online debt reduction calculator, if I only paid my current minimum payments, it would not be possible to become debt free in this time frame. In fact, I would need double the amount of time (see below).

Principal: $133,259.74
# of Payments: 144
Interest Rate: 6.55%
Payment: $1,344.48

To be fair to this online tool, there are a couple of of things greatly affecting this projected repayment term: 1) While the total is for the total amount remaining, the interest rate is only an average of the non-zero interest rates, 2) the minimum payment does not include minimum payment amounts for my federal student loans but does include minimum payments on my personal student loan and car lease and, 3) it does not include any additional non-minimum payments.

Yea, so huge caveats. But it’s something. The calculator says that to payoff my loan in the time frame I want, 77 months (although sooner would be great), I would need to pay and additional $800.00 each month.

Principal: $133,259.74
# of Payments: 77
Interest Rate: 6.55%
Payment: $2,144.48

It is surprising, but that payment amount doesn’t scare me anywhere near as much as it should. Maybe it’s because I have become desensitized to the amount I owe? Or maybe it’s because $2,144.48 seems like a lifeline as I sit at financial rock bottom.

So the plan…if you read my debt breakdown post, then you will remember that my loans are broken up into roughly five (mental) groups: private loans, university loans, federal loans, a personal loan, and a car lease loan. Given these categories, my plan for repayment is as follows:

Private loans – These will be paid off first, interest rate descending, since the balances are not too dissimilar (if they were, and I had a really high balance with a low interest rate, I might  move that loan up as a payoff priority, as I would be paying more in interest on that loan every month even though it had a lower rate).

University loans – Even though three of these have a higher interest rate than some of my private loans, the repayment terms are much more generous and the ability to defer these should I encounter financial hardship is a benefit I am currently prioritizing while my repayment amount is so high.

Federal loans – As you will remember, there is a mix of interest rates here, with subsidized and unsubsidized loans. Unlike the private and university loans, this group is ordered in terms of total interest per month, so I am prioritizing the payoff of larger loans with lower interest rates over very small loans with marginally higher interest rates.

Personal and Car Lease loans – As these loans do not accrue additional interest, I will make no additional payments here. These loans will be paid off based on their minimum payments and will be paid off in December 2019 and December 2020 respectively.

So there is the loose plan as to how I will prioritize my debt repayment. Anyone who is paying off debt knows a plan isn’t a plan without a budget, so part 2 of the plan will include a budget and how I plan to earn the income necessary to pay off my debt in 77 months (or less).

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