Disclaimer: I’m not a certified financial planner, nor am I your attorney. I’m just a person in baby step 2 working on paying down debt and giving you some tips that have helped me, many of which have come straight from the horse’s (Dave Ramsey’s) mouth.
My husband borrowed around $12,000 to go to paramedic school over a decade ago, several years before we ever met. His was a private student loan, and for some reason I honestly still don’t understand, his Navy enlistment not long afterward didn’t pay it. So we’ve been stuck with it for our entire marriage, making $100-ish payments each month. We didn’t even apply for a forbearance or a deferment when we had zero income for six months in 2013 because the monthly payment was just so low. But because the payment is so low, this debt has stuck around forever. We should not have allowed it to do so. But we can’t change the past, right? We can, however, change our future.
When my husband was in the military and deployed, his interest rate on this particular loan was about 6%, not great, but not too bad for a student loan either. However, given our current economy and rising loan interest rates, that rate has been steadily increasing. The rate increased about half a percent between summer 2016 and summer 2017, then one and a half percent between summer 2017 and summer 2018. The rate is currently nearing 8%. We were due to receive a notice at the end of this quarter (September 30th) letting us know the rate had increased again.
I’ve grown to intensely dislike the company that services this loan, partially because of the frequent interest increases but also because the company frequently reduces our direct debits based on the additional $15 we’ve been throwing at this loan each month. (Originally our payments were $125 per month, but have migrated their way down to $108, so I frequently have to change the additional amount paid toward the loan to keep that balance reducing as quickly as possible.) But as Proverbs 22:7 tells us, the borrower is slave to the lender. So instead of complaining to a huge lender not likely to care, we decided to focus on the loan and pay it off.
When we knew we were going to pay off the last $1,000 within the month, we opted to suspend our direct debit directive. We waited until just after the current monthly payment had been taken to avoid problems. Except the company would allow us to suspend only the following month’s debit online. See this lovely confirmation message?
And then after the payment was temporarily suspended, the company waited a day or so before sending us multiple messages letting us know that our “request” to suspend our direct debit was “approved” but also letting us know our payment would become delinquent if we didn’t make the next payment due–you know, in approximately 20 days.
These messages came after we’d paid about $3,000 on the debt within a month or so. Clearly we weren’t going to let the loan become delinquent.
So we just paid that thing off. Oh, happy day!
A few months ago, I heard Dave Ramsey tell someone to pay off the debt for a creditor that was giving the caller problems. We were blessed that this debt was our smallest (but not by much!) and our highest interest debt as well, so paying it off first was a no brainer. But if you have a creditor giving you substantially more problems than your others, consider paying that debt off first even if it’s not the highest interest or the smallest debt.
Because don’t you have enough hassle in your life? Exactly.
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