Interest on student loans is why student loans make an already expensive education even more expensive. And the longer you drag those loans out the more expensive you are choosing to make your education.
As each day goes by you have the freedom to choose to make the education you already received either more expensive or less expensive. You are making that choice every single month.
Start by looking at the total interest expense you will be paying based on your current approach to paying off your student loans. Then look at how much money you could save by making some sacrifices in your budget and paying the loans off faster.
Here’s a quick example assuming your student loan balance is $20,000 and the interest rate is 6.8%. Pay if off over two years and your total interest expense is $1,447. Pay if off over 20 years (which many people do) and your total interest expense is $16,640. Dragging the loan out over 20 years means you basically pissed away over $15,000. You basically threw away 150 $100 bills. That doesn’t sound smart (or educated) to me.
Borrowing money comes at a price. You have to pay the money back (the amount you borrowed) plus interest (the expense you pay for borrowing the money). Interest is the reward, or profit, the lender receives for loaning you the money. Part of your monthly payment on your student loan is to repay the loan and part is to reward the lender for having made the loan.
You can save a lot of money by paying your student loans off quickly. It’s a decision you can make right now.
Make the wise choice.
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