Day 258 | $17,274.17 paid | $54,801.41 to freedom

It’s time to analyze exactly where I am at and what needs to happen in order to get to the finish line.

$55,231.08 left in principal to go (prior a $500 additional payment last week).

37 monthly payments before my 30th birthday.

I have a big spreadsheet that lays out my path to financial freedom using the following recursive formula to calculate each month’s new balance:

This is a bit of a conservative estimate, I believe. Most, but not all, of my loans carry a 6.55% APR. To play it on the safe side, I calculate as if all of them do. According to the math, making $1,100 payments each month* (then graduating to $1200 a month and eventually $1250) for the next 37 months results in a balance of $21,049.33.

Yikes. Of course, this doesn’t account for any additional payments. If I were to evenly space out $3,000 of payments per year, that balance drops to $11, 575.

That still not quite enough. If I can grow my savings balance as expected, I need to get the loan balance down to about $8k by January of 2017. Therefore, I’m looking at the following to kill my student loans by 2017:

$1,100 a month payment

$4,000 in additional payments per year

This will be tough to do in year 1, but would overshoot my initial plan of $12k. Theoretically, I should have more income (knock on wood) as the years go on and the first year would be the toughest. My initial graduated plan ($12k, $15k, $20k) assumed this to a hyperbolic extent. If I am able to pay down $1,100 a month plus an additional $4k this year, that would result in a principal deduction of $13,859.1 (minimally). Repeating this for the remaining two years gets me to a remaining balance of $9,700. Therefore, it is a good plan for year 1 since, if I can pull it off, I don’t need to improve on it tooooo much in the subsequent years. Of course, that extra $4k will not be easy.

As I mentioned in my New Year’s Resolutions post, this is a “make or break” year. If I am able to pull off the goal of $12k+, then I probably continue with the quest to defeat these loans by my 30th birthday. However, if that doesn’t happen, then it will probably be time to re-evaluate. After all, what’s the difference between paying off my loans in 3 years versus 4 years? Emotionally, that’s a big difference. Financially, it may be only a difference of a thousand or so dollars in interest. Though, it is also another year that I don’t fully contribute to my Roth IRA and another year I don’t contribute extra to my 401k. Lots to factor in.

The bad news is it looks to be quite the uphill climb. The good news is I have a plan to get there that isn’t too unrealistic. And that’s the key, right? It’s one thing to say “I’m going to pay off my student loans in 3 years.” It’s quite another to say “Here’s how I’m going to pay off my student loans in 3 years.”

*By the way, I have that big post I’ve mentioned before coming out on Wednesday… A bit of a challenge for any other PF bloggers out there that are interested…