Hello everyone! I am back with another installment of the “two sides” series, which features the viewpoints of R and I on certain topics. I haven’t done one in a while, and with our taxes being done and going toward our student loans, I figured it was appropriate.
We’re both in student loan debt
R has a bit more student loan debt than I do, but he also went away for four years, while I chose to attend community college for a year. Student loan debt is the only debt we have, thankfully, but it still seems like we have a long road ahead of us in getting them paid off.
We are currently focusing on our loans separately, as we are not married or engaged. We also didn’t know each other until after R graduated, so they’re separate from our relationship. If circumstances change, I know we are both open to helping the other out if one of us should finish paying our loans off first. This is largely because we unfortunately feel like they’re holding us back. I don’t exactly want to get married and start off being in debt. We both want to see our balances at 0 in the worst way before continuing on with the next stage of our lives.
R’s side: put any extra money toward debt
R believes in having a small buffer in his bank account, and everything else should go toward debt. The majority of the bonuses he gets from work go toward his student loans. Last year, his tax return went to paying off his car. This year, the entire amount went toward his student loans.
In the beginning, he had three separate student loan companies he was paying; he paid off one, and now he is targeting the next one. These two have smaller balances, and they both had decently high interest rates. His last account has six separate loans, making it a bit more complicated. Three of the six have balances are $2,000 and have higher interest rates. R would rather have the one company to make payments to, as it’s easier. They were all also due at different times during the month, so I can understand his reasoning.
R got back around $1,300 from Federal and was able to bring the balance of the smaller loan down to $1,130. The original loan amount was $3,500, and seeing $1,130 is killing him. It’s not a large amount, and he wants more than anything to get rid of it.
However, he’s being sensible and keeping the buffer in his bank account. I rubbed off on him a little bit in saying he should be saving up, especially with the condition his car is in, and he listened! His bank account has steadily grown since we’ve been together. Of course I attribute that to my awesomeness =) (and his dedication…).
Instead, he decided to pay $500 next month, and then the pay off amount the month after that. Only two more months, but it seems like forever! After that is his larger loan with an outstanding balance of $18k. With the other two balances paid off, hopefully he can afford to make larger payments toward this one.
As you can tell, R kind of chose to go with the snowball method of paying off his student loans. Getting the two smaller balances paid down is a mental win for him, and will help him in his longer journey to pay off his last loan.
My side: save and pay off debt
I take a slightly different approach. For some reason, seeing the numbers in my bank account increasing is more exciting than seeing my student loan debt decrease. I have to admit, as I get closer to paying the smaller one off, it’s a close competition!
I’ve admitted that when I got my first full-time job out of college, I used the 6 month grace period to create an emergency fund, rather than make payments toward my student loans. Part of me regrets this; I think if I could go back, I would have split it evenly.
Before I started blogging, and before I was reading the wonderful PF blogs that exist, I truthfully wasn’t worried about my student loans. They were there, and they would be for many years to come. My minimum payments were not troubling – they were easily manageable. I decided to keep saving my money and pay the minimums.
As we all know, that’s foolish. It took R and I coming to an epiphany on a walk (soon after I was exposed to all the awesome debt bloggers out there), to figure out we should be focusing on paying our student loans off ASAP. I didn’t want to have this hanging over my head ten years from now!
I decided to increase my payments to a feasible amount, and still continue saving. I have a set amount I put toward my loans each month, and depending on what happens during that month, I’ll try to pay even more. In any case, as long as I am paying above the minimum payments (which I have been), I think I’m making progress.
I saw my parents end up in precarious financial situations from not having enough saved up, and honestly, it has “scared me into saving.” Emergencies happen, and you need to be prepared. I know that some people out there think debt is an emergency, but there are other emergencies that life can throw at you (yes, I’m a worrier).
So while I may have enough in my savings to currently pay off my smaller loan and then some, I don’t touch it. Sadly, if R and I were to ever break up, I would likely have to move back in with my parents, which means quitting my job, moving, and a lot of uncertainties in a new area. Regardless, I’m going to be jobless when we do move (together!), and having a nice cushion will help me feel a lot better about it.
I will say that once everything is said and done, hopefully in a few months, I want to pay off my smaller loan. As of right now, it’s pretty close to being $2,000, which probably wouldn’t hurt that much in the long run.
Who is right?
I don’t think there is a right or wrong answer when it comes to paying off debt. It’s whatever you’re comfortable with! As long as you’re making payments and you’re knowledgeable about your situation, you’re winning in my book. I really do admire those that throw everything they have toward their debt, but I couldn’t sleep at night without a buffer in my bank account.
I am really proud of R and all that he has managed to accomplish while we’ve been together. Paying off his $3,000 car loan, paying off one student loan, and getting closer to paying off the other is amazing progress! I’m just glad to be with someone that shares the same intense desire to get out of debt.
How have you gone about debt repayment? Have you used the snowball or avalanche method, or whatever felt right to you?