GI Jane Finances

January 3, 2008

Game plan

Filed under: Kicking Sallie out of the house — gijanefinances @ 1:03 am

My biggest thorn is my side…Salliemae.

Next due date: 10/16/2008
Monthly payment amount: $288.95

Past due amount: N/A
Late fee(s): N/A
Other charges: N/A
Present amount due: N/A

Pay this amount: N/A

Original principal balance: $41,176.29
Capitalized interest: $2,921.84

As you can see, after my consolidation in Feb 2002, I started with $41,176.29. The capitalized interest is from when I deferred my loans beginning in Jan 1997. In 99, I went to graduate school and used about $5,000 a term. It was a private school that offered a military discount. At the time, the military only paid 75% of college tuition (now it is 100%). Every semester, the school messed up my GI Bill submissions. So instead of using my late GI bill payments and paying my loan balances–I lived very well. It was like a $500 monthly raise. It would not have paid my bill in full, but it was better than doing nothing. At the time Suze Orman was preaching that student loans were “good debt” and to not worry about them. I also thought the interest was tax-deductible and with future promotions, the payments would be more bearable. I was correct in both, however, the more you make the less of a tax deduction you receive.

After haggling with their customer service reps in India about Salliemae not posting my payments properly, I decided to become aggressive in paying this off at $1,000 a month. Since I consolidated the loans in 2002, it was not eligible for any point reductions (of course!). I began with $41,176.29 (enough for a nice Lexus) at 6.5% and now it is at $11,629. I posted everything from Salliemae and the finaid.org calculator for your reading pleasure. Apparently you need an income of $120,000 a year to make huge payments…ha! I must be doing a job living below my means because my friends think I’m broke. Anywho…enjoy!

GI Jane

Salliemae
Account information
Next due date: 10/16/2008
Monthly payment amount: $288.95

Past due amount: N/A
Late fee(s): N/A
Other charges: N/A
Present amount due: N/A

Pay this amount: N/A

Original principal balance: $41,176.29
Capitalized interest: $2,921.84

Outstanding principal balance: $11,629.62
Accrued interest: $33.11

Total amount outstanding: $11,662.73

According to finaid.org:

Loan Balance: $11,629.62
Adjusted Loan Balance: $11,629.62
Loan Interest Rate: 6.50%
Loan Fees: 0.00%
Loan Term: 1 years
Minimum Payment: $1,000.00
Monthly Loan Payment: $1,000.00
Number of Payments: 13

Cumulative Payments: $12,044.68
Total Interest Paid: $415.06

Note: The monthly loan payment was calculated at $132.05 for 120 payments (10 years). Since this amount is less than the $1000 minimum, the term of the loan has been shortened to 12 payments of $1000 plus a final payment of $44.68 .

It is estimated that you will need an annual salary of at least $120,000.00 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $80,000.00, but you may experience some financial difficulty.

The following table lists the minimum income necessary to repay the debt without encountering a partial economic hardship. Partial economic hardship is defined as having annual education loan payments in excess of 15 percent of discretionary income, where discretionary income is the amount by which Adjusted Gross Income (AGI) exceeds 150 percent of the poverty line. This figure is shown in the Minimum AGI (IBR) column. The Minimum AGI (ICR) column uses an alternate definition of economic hardship, based on 20 percent of discretionary income which is defined as the excess of AGI over 100 percent of the poverty line.

Household Size Minimum AGI (IBR) Minimum AGI (ICR)
1 $95,315.00 $70,210.00
2 $100,535.00 $73,690.00
3 $105,755.00 $77,170.00
4 $110,975.00 $80,650.00
5 $116,195.00 $84,130.00
6 $121,415.00 $87,610.00

By paying $1,000.00 per month instead of the calculated payment of $132.05 , you save $3,801.32 in interest charges.

These results assume that the student is paying the interest charges on any unsubsidized loans and is not capitalizing the interest while in school. If the student is capitalizing the interest, the cumulative payments and total interest charges will be higher than shown here.

Payment Schedule

Payment
Number Payment Interest Principal Cumulative
Interest Cumulative
Principal Remaining
Balance
1 $1,000.00 $62.99 $937.01 $62.99 $937.01 $10,692.61
2 $1,000.00 $57.92 $942.08 $120.91 $1,879.09 $9,750.53
3 $1,000.00 $52.82 $947.18 $173.73 $2,826.27 $8,803.35
4 $1,000.00 $47.68 $952.32 $221.41 $3,778.59 $7,851.03
5 $1,000.00 $42.53 $957.47 $263.94 $4,736.06 $6,893.56
6 $1,000.00 $37.34 $962.66 $301.28 $5,698.72 $5,930.90
7 $1,000.00 $32.13 $967.87 $333.40 $6,666.60 $4,963.02
8 $1,000.00 $26.88 $973.12 $360.29 $7,639.71 $3,989.91
9 $1,000.00 $21.61 $978.39 $381.90 $8,618.10 $3,011.52
10 $1,000.00 $16.31 $983.69 $398.21 $9,601.79 $2,027.83
11 $1,000.00 $10.98 $989.02 $409.20 $10,590.80 $1,038.82
12 $1,000.00 $5.63 $994.37 $414.82 $11,585.18 $44.44
Payment
Number Payment Interest Principal Cumulative
Interest Cumulative
Principal Remaining
Balance
13 $44.68 $0.24 $44.44 $415.06 $11,629.62 $0.00

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