Our financial story – student loans – part 2

Today, it’s time to focus on my student loans. I was very fortunate to not have to take out any loans for my graduate studies – a small but sufficient graduate stipend combined with my husband’s income helped us out.  However, I spent 5 years completing my undergraduate studies (I am a geek who did a triple major) and my last year was expensive. In total, my federal undergraduate student loans totaled roughly $15000, which included an unsubsidized loan for $1450. I also had to take out a private loan in my last year for $6000.

Even while in school, I have always paid the accrued interest on the unsubsidized loan and the private loan. There is a variable interest rate on the private loan, which is currently at 8.5%. The private loan is the first debt we want to get rid of, since it has the highest interest rate of all the debt we carry. We have considered transferring it to a credit card with a lower interest rate, but it is with the same company that we get our best balance transfer offers with, so it has not been eligible. Also, I have hesitated to transfer this loan since it would be forgiven if I died (isn’t that nice?).

In August of 2003, while consolidating my husband’s student loans, we decided to lock in the low (3.5%) interest rate with my federal student loans as well. Even though I was still a full-time graduate student on deferment, the federal student loan program (Direct Loan Servicing, if you’re interested) allowed for consolidation of my federal loans.

I have been paying down the private loan since starting graduate school in 1999, even if it has meant just paying the accrued interest. The balance on the private loan is currently $3570, and the monthly payments are around $50. I just started paying my federal loans in October (I am not sure why, but the government thinks I graduated last May. Rather than deal with the craptastic registrar’s office to resolve this issue, I decided to start paying them a couple of months early.) I owe $14668, and the monthly payments are just under $150.

Without taking into consideration the opportunity cost of spending 9 years in graduate school (instead of at a real job) as well as some intangibles (for example, you can’t put a price on the sanity I have lost over the past decade), our education has cost us roughly $45000. Certainly this is nothing to take lightly, but it is also not as expensive as some luxury vehicles. Neither of us had family who helped us out financially, so I think that overall we did pretty well.

In closing, here’s our current picture:

student loans at 3.5%: $25,156 (payment per month of $230)

student loans at 8.5%: $ 3,570 (payment per month of $50)

totals:                             $28,726 (obligations per month at $280)

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