I know. I know. Why am I worried about the next student loan I’m going to pay off when PSL3 is still lingering? Well, did you not read this blog subheading? One OBSESSIVE post at a time. Further, I sometimes have analysis paralysis where my need to investigate all options to a level of minutiae result in me procrastinating or not making a decision until it is too late…which sometimes results in me making a poor choice. So, you’re judgement of me aside…
In September of 2020, I asked the Pennyfolk which loan I should payoff next. Six of the eight responses said PSL3. I began targeting PSL3 in December 2020 and next month, assuming no unforeseen obstacles, it should be paid off. While paying off PSL3 is my primary focus, looking down the road just a bit helps me keep focus on exactly why I make the day to day financial choices that I do. Because it’s not just PSL3, it’s all the financial choices I will need to make long after PSL3 is paid off.
As I stated in my 2021 Financial Goals post, the plan this year has very much been to pay off PSL3 and then PSL4, and finally rid myself of 1) PSL3’s egregious interest rate, 2) AES as a student loan servicer, and 3) the large minimum payment associated with PSL4. However, yesterday, when I logged into my student loan servicing sites to get the “high” of seeing my balances a wee bit lower, I noticed something…
PSL4 – 06/02/2021
PSL2 – 06/02/2021
Hint: Look at “Unpaid Interest” and “Outstanding Interest.”
Yea…so, despite the fact that PSL2 has a balance of -$6,827.01 and PSL4 has a balance of -$9,474.11, PSL2 generates the same amount of interest as PSL4 because it has an interest rate that is 1.36% higher. I feel like at this point I don’t have the right to be shocked by how terrible interest is anymore but AHHHHHH!
It was after the scream that my mind began opening up to another plan… My University Student Loans have a combined, weighted interest rate of 6.87% per month and a current balance of -$7,475.12. I was not really considering paying off these loans next, last September, however, seeing how significantly interest impacts debt repayment has put these firmly on my radar. I have hesitated to pay these off because they have friendly terms, including interest free forbearance if you enroll full time in school; however, that only seems important if I wouldn’t have these paid off by the time I would enroll full time next fall. If I am enrolled full time next fall.
The last and largest loan group are my federal student loans which have interest rates that go from kind to egregious. However, there is no incentive to pay these off ahead of my other student loans while there is a federal interest and payment forbearance (although it likely ends in September). Right now, it is my goal to whittle down my student loan balance as fast as I can before applying for a refinance on my federal student loans.