Planning For the Future - Episode Two
Part of the conversation my mom and I had was about aligning my student loan debt repayment plan to reflect our goal of having all of our debts paid of prior to buying a home in a few years. With Jordan ramping up his truck loan payments, I think I should increase my payments as well.
So, below I present two cases. One is to apply this years 'left over' $1,300 towards my debt AND re structure my payments to have them paid off in two years. The other is to assume the lump sum goes somewhere else and JUST re structure the payments to have them paid off in two years.
As of August, 2009 I owe the following:
Alberta Student Loan Owing: $ 5,593.78
Canada Student Loan Owing: $ 3,118.16
Scenario One: Use the $1,300 towards student loan debt.
I would of course use that money towards the debt with the highest interest, which happens to be the debt with the lowest principal owing which would bring my balances to the following:
Alberta Student Loan Owing: $ 5,593
Canada Student Loan Owing: $ 1,818
Scenario Two: Use the $1,300 towards something else entirely.
If I had a minimum payment of $75 on the AB loan and had a payment of $375, it would take me approximately 9 months to pay off the Cnd loan. After that I would have a full $450 to pay down the remainder of the AB loan. In those nine months, my AB loan would be brought down to (with the $75/month payment) $4,918. It would take me about 11 months to pay this amount off with payments of $450/month. For a total debt reduction timeline of 20 months.
So using scenario one will only actually save me about 3 months if I choose to increase the money dedicated to paying off my student loans by $300/month AND use an extra $1,300 to help pay them down.
That's not actually a very big difference between the two. Of course, I would actually have to be able to come up with $300/month for this to work as well, which should be doable because I did have $500/month going towards my credit card debt.
With that in mind, I don't think I'll use the $1,300 for my loan - but I do think I'll look at increasing my payments again.