May 2020 – Student Loan Balance(s) Update

Straight to the numbers!

April 2020 – Student Loan Balance(s): $125,192.33

May 2020 – Student Loan Balance(s): -$121,891.82

Difference: $3,300.51 – 😲 Largest single month debt payoff to date!
The first thing you probably noticed is that the payoff order of my loans changed a bit. You can find a far too drawn out explanation of that, as well as my revised financial goals for the year, here and here.

The second thing you probably noticed is the appreciable drop in my balance. 😲 Yea, I double checked the formula in Excel twice just to be sure. Ultimately, the drop came down to a couple of very expected and predictable things:

  • Federal interest rate freeze – The bulk of my student loans are Federal Student Loans and have a balance of almost $75,000.00. Under the current interest freeze, there is a temporary reprieve from the more than $300.00 in interest that usually collects on them each month.
  • COVID-19 Stimulus Payment – While it’s probably not what Congress wanted or expected me to do with the stimulus check I received, as I explained here, I put the entire $1,200.00 towards Private Student Loan 1.
  • Spring 2020 mileage reimbursement – University B reimbursed me $300.00 for miles driven on my vehicle. While I had wanted to put this in the beginnings of my car fund, applying it to Private Student Loan 1 gives me a bit more breathing room with it’s repayment by the balance transfer end dates, and is less necessary given that I will begin saving for my new car and the cost associated with turning in my lease (more on that later) once Private Student Loan 1 is paid off in August.
  • I stuck to my budget in March – I get paid on the 1st of each month and what I am able to pay in student loan payments is most significantly impacted by how well I stick to my previous month’s budget (if I stick to the budget, there is not miscellaneous spending that I need to pay off). For the most part, I stuck to my budget in March which allowed me to make a $900.00 payment towards Private Student Loan 1 on April 1st.

Of all the reasons that I was able to make more headway in April, I am perhaps most proud of sticking to my budget in March. While the ongoing COVID-19 pandemic certainly impacted my ability to spend money, the behavior changed started in February, which allowed me to make a $1000.00 payment on March 1st, and will probably have the biggest impact on my ability to pay my debt off in the long run.

Whooo. I know my debt is still massive but this is one of those moments where I feel like I will crawl out of it.

$1200.00 COVID-19 Stimulus

It seems like everyone in the YouTube personal finance community is currently doing a video on what you should do with the stimulus check from the federal government for COVID-19. So, if I set aside my skepticism that most Americans will actually see this money anytime soon and my theoretical debate as to whether or not I should even been getting a stimulus check (I am presently employed and was not laid off by my employer…) then my thoughts on how I would WANT to spend it are as follows:

1) Pay off University Student Loan 4 (USL4), which had an April 1st balance of -$663.25, at 8.00%, and a monthly payment of $30.00.*

2) Put the remainder in savings.

Shocking, right? Ugh. During my down time I have been watching so many folks on the Dave Ramsey plan pay off small balances and I must acknowledge that I miss that rush. While there are few worlds where paying off debt is a bad thing, paying off USL4 is probably not the wisest choice and my desire is mostly psychological. I think I have been bummed out realizing that while I will pay off PSL1 this year, I will have a zero chance of paying off PSL2, and should the current state persist into the summer, I will have no opportunity to earn additional side income from summer school/activity work. There was one major opportunity in particular that is likely gone now, however, they haven’t announced anything official. So with it seriously unlikely that I pay of PSL2, and while USL4 is with a very good servicer, freeing up the $30.00/month would be good, and give me a psychological boost. Ugh.

Even if the above scenario is the dream, more than likely, the following is what I WILL end up doing:

1) Putting a $1000.00 towards PSL2.*

2) Putting the remainder into savings.

*NOTE: This assumes the money is received AFTER I finish paying off PSL1. Otherwise, the money obviously goes there.

This scenario is much more prudent given that a much larger percentage of my payments on PSL2 go to interest than do my payments on USL4 even though USL4 has a higher interest rate. However, I still think there is some argument to be made for freeing up the additional $30.00 a month in minimum payments that I am currently making on USL4 and applying it to PSL2 payments or to the payments on another loan, like PSL3 where I currently pay more in interest than I do on principal…