The Good, the Bad and the Ugly on Student Loans

by Erika Torres

The Great

First, the GREAT news: I paid off my FOURTH Student Loan on Friday!

Can I just add that this brings down my student loans to $13,788.01?!?!? I started off the year with $18,248.01 in student debt.  I’ve paid off $4,460 in student loan debt in five months!

Happy dance for me.


It feels so good to be knocking these babies out, thanks mainly to the Side Hustle. It helped a lot that most of my loans were broken down into small manageable chunks, because it keeps my motivation going.

I have one more private student loan before I face the behemoth of a $10,000+ federal student loan. I also have a 0% interest student loan from high school left (I went to private school), but I do not planning on paying that one off beforehand. I’d rather attack the federal student loan, until I get my own loans to under $10,000.

The Bad

I think that after I attack my last private student loan (only three more student loans to go!) and get my federal loan balance to under $10,000, I am going to focus on paying off Eric’s student loans, which is running close to $6,000 right now. His credit score is a bit lower than mine, and if we want to buy a house in the next few years, it would help to bring his score up a little bit more. I think paying down his debt will help (greater income to debt ratio). His score has already gone up about 30 points since I first checked it almost two years ago, so we’re on the right track. I’d like to get it above 750.

The Ugly

Here’s something that really pissed me off. My federal student loan of $10,000+ is on automatic payment. Every month, they take out money automatically from my bank account. This helped lower my interest rate by .25% (whoopty-do). Well, this month, they didn’t take it out. I waited a few days before I actually called. I asked if something was wrong, and they said they had received information that I was back in school (I started grad school in March) so my loans were automatically placed into deferment.

Excuse me?

You would think that you would either a) wait for me to ask to put my loans in deferment or b) send me a notification that this happened. Deferment may be good for some students that are in school full time and not working. However, when your loans are in deferment, you no longer make payments but the interest keeps accruing. So essentially you’re just delaying your payoff date. NO THANK YOU!

I asked them to please take my loans out of deferment. And then I paid off my fourth student loan in full. You’re no longer going to be taking my money, bitches!

What’s your progress on student loans?


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Paul @ The Frugal Toad June 5, 2013 - 6:29 pm

Congrats on your progress in paying down your student loans Erika! Scary to think that Congress (Republicans) want to and have tried to eliminate Federal Funding to subsidize student loans. Imagine the impact of that on the cost and availability of a college education?

Sonya May 21, 2013 - 5:21 pm

My parents had one of those parent loans with my brother. He is the one that was paying for it after college, but when my dad took college classes while unemployed they put the loan on deferment because my dad’s name was on the loan. I think my brother just paid it off because there wasn’t much left and he didn’t want to mess with them.

Ceci Bean May 21, 2013 - 2:07 pm

Awesome! I have one loan left and about $5k left to pay on it. My husband and I just went on a pricey vacation which set us back a little, but I a determined to pay that loan off before the end of the year, even if we have to live on ramen noodles for a few months. Ha! (ok, it shouldn’t require that, but I will have to stay focused.)

Lisa @ Lisa the Vegetarian May 21, 2013 - 7:55 am

Congrats on paying off another loan! It sounds like you have a similar strategy to me when I was paying mine off – attack all the private loans first, then save the federal for last. Sounds like the end is in sight! I definitely would have been angry to have my loans placed in deferment without my knowledge too.

Richard May 21, 2013 - 7:14 am

Hey –
They did a similar thing to my loans a couple months ago when I took a smaller Grad course loan one semester. They notified me that the University had alerted them that I was no longer “part-time” and as such, the deferment period would end in six months. One of my loans is subsidized, so it was a red alert that it could start earning interest again.

However, I’m back in class “part-time” and should earn my deferment status soon. However, they still let me make payments on each loan, together or individual through their website. I like that option because I’m able to make payments on my 6.8% grad loans and just keep my 1.26% undergrad loans on hold.

I wouldn’t get too discouraged with the people at the loan site. Just stay motivated and keep making those payments! Your progress sounds great!!

kelly May 21, 2013 - 4:27 am

congrats! i always double check when my loans are withdrawn…you never know if a system glitch will occur. keep up the great work and can’t wait to read more!

Well Heeled Blog May 20, 2013 - 1:46 pm

Congrats on your payoffs! You are going to go through those in no time. My husband and I started with $40K in college loans but fortunately they are around 3% interest. I think we have around $20K left.

Emily @ evolvingPF May 20, 2013 - 12:16 pm

That is weird that they put your loans into deferment without even notifying you… Well it’s actually not weird. I’m sure they are doing every tricky thing they can to extend your term and make you pay more interest. Good on you for being on top of things!

SavvyFinancialLatina May 20, 2013 - 11:56 am

Congrats!!! It must feel great to pay off the loan. I know I was ecstatic when we paid off our car loan.

Debt and the Girl May 20, 2013 - 10:45 am

Happy to hear this. Keep kicking that loan butt!!

Michelle May 20, 2013 - 9:51 am

You are doing awesome! I can’t wait until my loans are gone.

Money Beagle May 20, 2013 - 9:37 am

Regarding the deferment, I think that’s always been an automatic opt-out where you do have to manually opt-in to make the payments. Good work on paying off the loan. That has to feel great!

Remy @MLISunderstanding May 20, 2013 - 9:10 am

Congrats! That’s major progress. I’m having my own headache with the student loan servicing folks: I paid off my loans a couple weeks ago, and it turns out that if you pay off a loan less than 120 days after it’s disbursed (my spring semester from late January), they count it as a cancellation. And that means you don’t have to pay the interest. Which is awesome, right? Only that wasn’t factored into the payoff amount they quoted me, so now I have a credit of several hundred dollars sitting on my FedLoan account… and the earliest they can send me a check is like 2 months down the road. (30 days after the final payment, then up to 45 days to receive the check, because it has to “go through the US Treasury”. Um, so did my taxes, and they were processed in two weeks.) There are worse problems to have… but I find wading through the bureaucracy annoying.

Mk May 20, 2013 - 8:47 am

I’ve had my loans placed in deferment because I also went back to grad school but they allowed me to keep making payments on them. It was actually nice because the loan stopped accruing interest while it was in deferment so my payments actually had more of an impact on the principal balance.

newlywedsonabudget May 20, 2013 - 9:03 am

wow, that’s the first I’ve heard of loans not accruing interest in deferment. I wish I could do that!

Emily @ evolvingPF May 20, 2013 - 12:20 pm

This is the difference between subsidized and unsubsidized loans. When in deferment, the federal government pays the interest on subsidized student loans.

Tina @ My Shiny Pennies May 20, 2013 - 8:47 am

Congrats on your progress! I had set up automatic payment but was confused that money wasn’t being withdrawn. It made me very nervous and three months later, I figured it out that I had transposed two numbers in my bank account. It was definitely my fault, but I was surprised that Direct Loans never notified me of the error.

newlywedsonabudget May 20, 2013 - 9:05 am

Isn’t that nuts? You really have to stay on top of these.

CeCe @Frugalista Married May 20, 2013 - 8:32 am

That’s crazy that they just automatically assume you don’t want to pay it if you start school again. And isn’t it kinda creepy that they know? A lot of people are all over getting those loans deferred. Some go to school just to keep them deferred but not you!!! You are making such good progress!

Mrs PoP @ Planting Our Pennies May 20, 2013 - 8:23 am

Congrats on the paydowns! As for raising Eric’s credit score, I don’t know how much effort I would go through to do so. Obvs, not letting bills slide is bad all around, so don’t so that, but it’s not a certainty that it will matter for your mortgage. Our lender told us that they used the scores from the higher earner or the spouse with the higher scores for rate qualification purposes. Not sure if that’s industry wide, but that’s what they told us when we or our HELOC and when we refi-d our house. We were both in the 700’s but only one over 750.

SavvyFinancialLatina May 20, 2013 - 11:57 am

Hmm I didn’t know this. I thought it was both our scores. But if you are right, that’s awesome. My credit score is lower because I never had any debt, and I just opened my first credit card one year ago. My husband has a mid 700 credit score.

Tanner May 20, 2013 - 8:22 am

We must have the same student loan, with the meager .25% reduction. I recently took it off auto because, as I paid one of the 4 that are included in this loan group, the payments are messed up, they didn’t take it this past month and I couldn’t make an additional payment because they said it may double pay. I’d rather pay things in my own terms, so I’ll take that huge .25% hit.

Budget and the Beach May 20, 2013 - 7:45 am

congrats on what you’ve paid off so far! I hate when things just change without any kind of notification! What’s up with that??


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