Student Loan Payment Countdown!

The 20th is the day that my wife’s student loan payments come due.  We have them automatically deducted from our checking account.

One of the payments is within striking distance of being paid off.  When we got married, it was the ‘larger’ of two loans, as it had the larger balance, the larger monthly payment, and the larger interest payment.  We aggressively worked to pay it down, applying ‘extra’ money that we came across at various points (including portions of our tax refunds, an inheritance, and my wife’s income while she was working) to bring the balance down.

In January 2009 it actually became the smaller of the two loans from an outstanding balance perspective, which was a great milestone.

We are now on track to have this paid off by the end of the year.  The December payment will bring the balance down to $0!

That will free up approximately $200 per month in payments.  We had originally planned on applying this balance towards the second student loan, which would allow that balance to be paid off around the end of 2012.

We are currently re-thinking this strategy.  Instead, we plan to just spend the money frivoulosly each month on electronics, video games, clothing and music downloads.

Cool, right?

Just kidding!

That’s totally not what we’re doing.

We are going to apply the $200 towards debt.  We may, however, apply that toward the mortgage instead.  The mortgage and the second student loan payment are the only two debts we’ll have.  The mortgage has a larger balance, a much larger interest rate, and while it won’t bring our payoff anywhere near 2012, it will eat the balance away a lot quicker than the student loan payment would.

In other words, it’s the instant gratification (well, as much instant as two years can be) or the more bang for your buck.  We still have a few months to make a decision on what to do with the ‘extra’ funds, but either way, we’re committed to applying the entire amount to debt once this particular loan goes away.

Any thoughts?

5 thoughts on “Student Loan Payment Countdown!”

  1. My vote is paying off the mortgage. Save more money and get the security of owning your house sooner than if you paid the other down first.

  2. My vote is for the mortgage. It has the larger interest rate and so you'll be saving a whole lot more in interest with each payment that you make! It may not be instant, but it's probably best for your finances.

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