A few weeks ago, I was slapped in the face with this fact. In 2017, I paid $60,000 in interest on my student loans and less than $8,000 towards the principal. Once I recovered enough to breathe, I immediately realized, taking out student loans was necessary at some points during my education. However, the stupidest decision I ever made, and kept making repeatedly over a 20 year span, was to not pay any attention to what it all meant. I made no effort to find out about interest and how postponing payments impacted my balance. Well, I damn sure know now.
I can say without any doubt that close to 50% of what I owe is capitalized interest. For all the years that I was in and out of school and I had forbearances and deferments, the interest was accruing and then, it was added to the principle. Then, I paid interest on again. Then it accrued and I paid interest on it again. I think you can see where this is going.
I also discovered in the last few weeks (call me an idiot because I am for not knowing this 20 years ago) that interest on student loans accrues daily. Yep, every single day, interest is added to my balance. I found out because I made a payment and went back in a few days later and thought, “Hey, this balance is different”. I checked the next day and sure enough the balance had increased by $23.
In the last month, this whole student loan debacle that I so naively created has almost made me physically sick.
What keeps me smiling and moving forward is that I am smarter about money than I have every been thanks to the bankruptcy. So, my first thought was, “Carolyn, you can get through this, you just need a plan”.
I took about a week and came up with a plan that reduces my 30 year payment plan to 5-7 years. In order to do this, I will greatly reduce how much I am putting away for the things I save for because it makes no sense to save money when I am drowning in another area.
I feel shame for not being smarter about repaying the student loans and/or the interest but life is nothing if not full of lessons and “ah ha” moments.
I keep saying to myself that I must find the good in this (I have to say that about 20 times each day) but there is good.
The good is that I am one of the fortunate ones who got degrees that pay me a salary that allows me to make a very sizable payment each month.
The good is that when I pay this off, I will still have several years that I can stash money into other accounts.
The good is I am smarter for having been so stupid.
The good is I am taking full responsibility for my stupidity and I am fixing it, staring now.
What’s the dumbest decision you have ever made and how did you fix it?