Monday, March 8, 2010

Persistence Paying Off

A while back I wrote about issues with a student loan benefit. The short version is after 24 on time payments they do a 1% rate reduction. In month 22 they pulled funds 1 day later than my payment date & I set transfers too close together so it overdrafted. At first it looked like things were going to be fine, until the next months payments. Then my payment counter reset to 1.

Since them I've called my student loan company to talk about this 4 times. The first 3 times I was essentially told 'sometimes life sucks.' Since my counter was still moving (at this point 2 payments were made) I came up with a plan to get the rate reduction sooner. I was on standard repayment ($316) and realized if I lowered my monthly payments by switching to graduated payments ($209) but still payed $316 each month I'd hit 24 payments in 15 months instead of 24. The only thing about this that is a pain is I'll have 2 payments for the loan each month. They auto debit $209 each month and I have to manually make another payment for $107 each month.

The math is ($209 x 24)/$316= 15.8 months.

My student loans are fixed at 6.5, so the rate reduction was a big deal. With the graduated payments the amount I pay goes up every 2 years. Since we'll keep paying my standard payment this won't increase interest on the life of the loan. Also the student loan is next up in our debt snowball. It should be on deck (ie the Prius should be paid off) before the end of 2011.

When I called to sign up for graduated payments I got very hypothetical with the guy I was talking to. I told him my master plan was to get the rate reduced and asked if there was a better way for me to go. He got me signed up for graduated payments and said he'd look into the rate reduction problem.

I geared up for the 15 months of weird payments and forgot all about his promise. Yesterday I logged on to get numbers for our net worth spreadsheet and scanned all of the info like always when I saw the rate reductions. A little happy dance may have ensued.

The rate reduction won't change any of our plans for payment in the years. I'll make the two payments each month and we'll get to the next rate reduction (at 48 on time payments) that much sooner. Each of these changes will reduce the total interest we'll pay and the overall length of the loan, but at this point I'm late for work.

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