I have dreaded actually sitting down to calculate how long it will take us to pay off the remaining approximately $100,000. I was afraid of what the numbers would say and what that would mean for our future. We really are enjoying our time living in my in-laws’ basement, but we still look forward to the day when we are done with student debt and can start saving for a place of our own.
The bulk of our loans (about $56,000) is at a 7.9% interest rate. The next $34,000 is at 6.8%. The remaining $10,000 is currently at 2.9% interest, but will jump to a then-current rate if not paid before August 2014. I calculated a nice even $100,000 at 7.9% interest for the sake of simplicity and because I would rather slightly over-estimate and have a wee bit more wiggle room.
I experimented with a student loan calculator using different monthly payment and put together the following data for a debt of $100,000 at 7.9% interest:
Look at the enormous difference between paying $1,000 per month and $1,500 per month. You would pay off the loan in almost half the time, paying half the interest, for a difference of only $500 each month. For many people, freeing up $500 per month is just a matter of swearing off restaurants and fast food.
Our Current Income
Currently, my husband’s draw at work is $3250 a month (before taxes and tithing). After taxes and tithing, there is $2,633 remaining to live on and pay down our debt each month.
Our secondary income stream is my very part-time Etsy shop. It has slowly grown into a monthly income we can kind of count on. There really is no telling how much I will make each month. This year has averaged around $400 per month. I have not done much to promote it. My inventory hasn’t changed much in the past couple years. Any new designs I add to the shop are usually the result of a custom order request that I take pictures of and add to my inventory.
We have other occasional income from selling things on ebay, craigslist and our local facebook group. We already sold any big ticket items to put toward paying off the first $32,000 of debt. We’ve never make much more than $200 per month by selling off random household stuff.
Those three income sources add up to about $3,200.
Our goal is to pay off the remainder of our student debt in 3 years (by the end of 2016), so we are aiming at the $3,000 per month plan. Obviously this is a leap of faith since our current income would barely handle that hefty loan payment, let alone allow us any living expense.
We are already have a pretty frugal and tight budget, but we are determined to make this work.
Since we have pretty well shaved off any fat in our budget, our plan has to involve increasing our income.
Even though my husband’s income is still fairly small, his potential is great. He has been a practicing attorney for just over 9 months. He makes 30% commission on the work he does. When he starts to consistently bring in more than his current draw, he can have an increase in his draw, so we are working on building clientele.
As for my etsy shop, I have set a goal for myself that every day I will pre-make three items for my shop. I usually make all my items to order, but there are many products that sell well consistently without any customization. Having orders ready to ship frees up my time to make new products. Also, making three of the same item at a time (assembly line style) is much more efficient than making three items on three separate occasions. I will also work at increasing my other forms of side income.
We would love for you for follow along with us. Are you in a similar situation? Maybe we can encourage each other?
One of the benefits of blogging about our journey is the built-in accountability, even if it is to people I haven’t met! At the beginning of each month, I will give an accounting of where our money went in the previous month and the progress we have made toward our goal.
We are ready to meet the challenge!
We finished paying off our debt. In total, we paid $144,046. You can read our announcement to get a behind-the-scenes look at the process, see our timeline, and see what we’re doing next.