Once a month I will update my progress (or lack of progress) on my goal of paying off my student loan. Since interest accrues daily on my loan and it is extremely unlikely that I will be able to make another payment on my loan this month my student loan balance is the lowest it will be this month. That is why I chose today to post my student loan payoff update.
When I first posted about this goal last month my student loan balance was at $138,960. The current balance is $122,195 for a total of 11.9% of the loan paid off. I have made $17,383.86 of payments in the last month. Those payments reduced the balance of my loan by $16,495. That means about $890 of my payments were swallowed up by interest accrued during that time. That seems high to me since I’ve calculated my monthly interest owed at just over $600. I’ll have to write them an email and ask for an explanation of the discrepancy. Also my student loan company stated that my last payment reduced my principal by a little over $200. This is strange to me since my original loan amount was just over $106,000 and I didn’t think any of my payments would be applied to principal until my loan was paid down to that amount. I guess I don’t understand my student loan as well as I thought.
My progress isn’t nearly as good as it seems though. Only about $2600 of the payments were made in cash. The remaining amount of $16,800 was paid by credit card balance transfers. Two of my credit cards had 0% balance transfer offers available. Both of them had 2% balance transfer fees making my effective interest rate on the balance transfers a little over 2%. This is a decent savings compared to the 6.6% rate my student loans are at. There is some risk to using the balance transfers to pay down my student loan. If I don’t have the balance transfers paid off by the end of the 0% promotional period the interest rate reverts to the normal credit card purchase interest rate which is much higher than 6.6%. One promotional period is for a year and the other is for eighteen months. I think I should be able to easily pay off the transfers during that time. I won’t be taking out any more balance transfers until these are paid off since I am at about the limit of what I comfortably certain I can pay off in that amount of time.
Progress on paying down my student loan will be slower in the next few months since I won’t be throwing any more big chunks of money at the loan and I will have to divert some of my money to paying down the balance transfers. I’m hoping that I will be able to make enough money to at least make some progress each month.