Paying Off My Student Loans Before Graduation

Subtitled: 3 years of scrimping was worth it. Jury still out on the extremely busy schedule.

Audio accompaniment: Omigod You Guys

In a post for Women's Money Week 2012, I discussed my plan to graduate debt-free from grad school. (It's still one of my top-viewed posts.) More than a year later, I can finally say that I've done it. It's very exciting!

How'd I do it? Hard work, over time. The steady employment certainly helped.

• I've been saving for 27 calendar months with automatic transfers from my paycheck (varying in amount based on my other living costs and saving goals; after the wedding they increased to about the same as my monthly rent). Grad school saving was the biggest factor in most months of saving 50% of my income last year.
• On top of that, I added "snowflakes" of cash from selling on Amazon and Craigslist, or from birthday gifts, bonuses, and other windfalls.
• To make up the last ~9%, I redeemed US Savings Bonds that my grandmother had given me as a baby. These had 30-year maturity, and I just turned 29. With the oldest one dating from the month of my birth and continuing for a few years afterward, I got nearly all of the potential interest out of them. (And if I had the equivalent cash on hand now, I would have kept the bonds for the full 30 years. They were a good investment at the time! But the 6.8% interest on the student loans would have eaten that up if I'd waited to pay off the last chunk.) My grandmother -- who died in February at age 91 -- had written on the outside of the gift envelope: "For Remy's education", and I'm proud to say that I used them for just that.

How'd I actually DO it? 

It's not a problem to pay off your student loans early. The lender misses out on all that interest that you WOULD'VE paid over time, but there aren't penalties for paying your whole balance at once or doing so before graduation. Because I had all of my loans with FedLoan, it was straightforward. I signed into my account, and then navigated to Payoff. I ticked the boxes for both loans (I had one from academic year 2011-12 and one from 2012-13) and the site calculated my payoff amount, which included the amounts I'd borrowed plus any interest or fees. 

The older (subsidized) loan was not accruing any interest. Because of some changes in the law last year, my second loan was unsubsidized and had already accrued a few hundred dollars in interest. However, I'd yet to receive a bill, as it was not due until graduation. It's still part of the payoff amount -- but at least it won't get any bigger! I consider that interest a reasonable fee for two years of up-front funding.

Then I started an ACH transfer from my grad school savings account and dated it a few days in the future (it took a little time to collect all the funds in one account -- I closed out my CapitalOne360 sub-account and moved that money to another bank with a smaller grad school savings fund). When the 7th came along, the auto-transfer went right through (cleared today), and now I can download a confirmation letter from FedLoan with a big fat zero on it!!

OMG THAT IS THE BIGGEST CHECK I'VE EVER WRITTEN.

I'll admit, I quailed at the total amount -- that could have been [most of -- in the local real estate climate] our down payment on a house. Heck, it would've been a couple years of rent payments. BUT. Now it's gone. AND so is the debt. I won't have a monthly bill hanging over me for ten years or more. Instead of paying interest, I'll be saving that money. And instead of putting away a big chunk of my income every month for THIS goal, I'll have it available to fund the next ones on the list: the adoption fund, the house fund, and the retirement fund. Yay!