Another milestone reached in my debt journey. As I am writing this the balance of my student loan has FINALLY dipped below my salary. To be totally honest and transparent this journey has been pretty slow. Because of the amount of interest I pay, it takes a while for my payments to make a noticeable dent on my principal. As I am writing this, my balance on my principal is officially $87,348. January was a 3-paycheck month for me (the best kind!). This, combined with my no-buy this month has allowed me to throw $3,500.00 towards my debt.
For context, interest is about $206.89 this month and will likely continue to go down (given that prime doesn’t not go up anytime soon) as I continue to make payments.
I am a bit relieved that I was able to get my loan down to this point. It has really helped me put things into perspective and really celebrate the little wins. As a forecast of the years to come I have gone ahead and made some calculations for the coming months based on my current principal and my repayment plan.
I have made these calculations based on the current prime rate (2.95% which makes my interest rate 3.45%). I have also taken a look at my minimum payment in the month of December and it is $928.21. Since my loan only closed in September 2020, the minimum payment remains unchanged as of the date I am writing this (January 24, 2021).
For those of you that are new or do not already know, I am a Toronto-based lawyer, I graduated in 2018 and was called to the bar in 2019. I am now in my second year of practice. I went to school in Ontario and did a Dual J.D. program (so I have an American J.D. and a Canadian J.D.) which was lots of work and certainly more expensive than a traditional J.D.. During this time, I amassed about $160,000.00 in student loans (consolidated – I used my student bank loan to pay off my OSAP loan) and have been documenting my repayment process in this blog as part of my “debt diary” series.
Ok, so let us get into the numbers and the current forecast (for the purposes of calculations I have assumed that interest will remain at 3.45% which is unlikely but this is what I have assumed for the purpose of this forecast):
Current balance: $87,348
10 year repayment – this is the original term of my loan and under this timeline, my monthly payments would be $862 and by the end of the 10 years I would have paid about $16,056 in interest.
5 year repayment – under this timeline, my monthly payments would be $1,587 and by the end of the 5 years I would have paid about $7,875 (a drastic difference from the 10 year plan).
4 year repayment – this is the closest to my rate of repayment at this moment. With this plan, my month payments would have to be at least $1,951 (currently I make about $2,000 in payments a month). By the end of the 4 years I would have paid about $6,291 in interest.
3 year repayment – this is my ideal situation. Under this plan, I would have to make monthly payments of at least $2,558 (about $558 more than what I am accustomed to paying) and by the end of the 3 years I would have paid $4,724 in interest which is certainly better than any of the above interest totals.
If you don’t already know, I put myself on a “low-buy” this year for clothing and makeup and I am really hoping to be able to take the amount of money that I am saving by curbing my unnecessary spending and throwing an extra $558 more at my loan in order to zero the balance in the next 3 years.
I will continue to update this series as I reach different milestones in this journey to document the process and hopefully provide some inspiration and support to other graduate/law students out there that have a massive student loan and a strong desire to eliminate it (as I do!).
Let me know if you’re reading this and can relate to this struggle and if you’re on the other end of it, feel free to share how long it took you to finally pay off your student loans and how you felt once it was all paid off!
