Analyzing My Student Loan Repayment Plans
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When I calculated how much debt I had accumulated after 4 years of college, I made the foolish mistake of forgetting that you always owe more than you borrowed when dealing with major loans.
Recently, the official mail came in from ACS Education services giving me the choice between two repayment plans so that I can get ready for paying back my loans. For each of my two school loans, there is a Graduated Repayment Plan and a Level Payment Plan. Both have a 10-year repayment period.
Subsidized Stafford Loan #1
- Borrowed $6,352 @ 6.441% APR
Subsidized Stafford Loan #2
- Borrowed $2,625 @ 1.880% APR
Which Repayment Plan?
The Level Payment Plan of course! If I chose the Graduated Repayment Plan for both loans, I would end up paying about $800 more in interest. Even with the Level Payment Plan for Loan #1, I’ll be paying $2,000 in interest over 10 years. There is no way that it is going to take me 10 years to repay both these loans.
Repayment Strategy
I still have about 5 months before I must start paying back the loans. In these coming months, I’ll attempt to pay off some part of Loan #1 (the one with the higher interest rate). Once December comes, I’ll be getting statements asking for a total of $121.94. If I happen to come across more money, I’ll be using the Debt Avalanche method of debt reduction.
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