How $2000 saved us $6000

This is a post about student loans. For more info on student loan repayment changes, see this post on Forbes. In a prior post, I had mentioned the skyrocketing cost of our variable student loans. The amount due on 8.23% annual interest was greater than our payment! This month, the payment amount went up almost $100 a month!!! That makes sure the loan is paid off in 20 years, our original payment term. We’ll show how a $2000 pre-payment of our student loan saves us a total $6,320.65 in interest over the next 20 years and 2 years of payments.

Yep, I’m feeling good today. Note: neither person is smilingdad. Photo courtesy of WordPress.
Background info

There are 221 payments remaining on our loan. The current interest rate is 8.23% a year. Our balance is about $40,000. Our new payment is about $350 a month.

The lifetime interest is almost as much as the original loan balance.
Today’s payment

Today, I made a $2000 payment on our graduate student loans. This is how the numbers change.

With a $2000 payment today, our lifetime interest went down to $31,291.91, a savings of $6,320.65 and 24 months. This is huge savings!

This is $6,320.65 that doesn’t go to the bank and goes into our pocket. These savings are capital gains tax-free. This is phantom income, as the savings are real to us and the government broadly only taxes you on labor income or gains from your capital. This $6,320.65 can be invested in our future, rather than making bank executives richer.

For every $100 we save for rewirement every week, we’ll earn 50 points. And, 50 points will be worth $10.

smilingdad, two posts ago

Earning an 8.23% return after-tax return, risk-free, is tough to beat. Therefore, our $2000 savings earns us 1000 points, and those points are worth $200. I haven’t decided what to do with those $200. I might save it for the next $2000 loan dump.

You might say, this is all semantics, you’re taking money out of your own paycheck, and giving it to yourself to spend. This is true. But, I am rewarding myself for making our retirement better (less debt), and I encourage myself to keep saving and paying down debt. The reward for my good actions is an important motivator. Plus, the more attention I pay to our finances, the more disciplined I become in spending money elsewhere. It’s a win all around.

Keep your head up. We’ve dug ourselves out of credit card debt 3 times. It can be done.

Sincerely yours,


Published by smilingdad

My story is one of tragedy and redemption. We've made many mistakes along the way regarding our money. Our goal here is to show you how to take care of your money life long, and as much as we can, help the Earth along the way. I call it sustainable personal finance and ethical capitalism. Currently, I am a part time writer for Cleantechnica and part-time licensed financial professional, along with being a full-time dad.

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