One of the things I have planned for 2013 is to pay off at least one third of my outstanding student loan of around 15k. I have 15 years to pay it all back to the government, and I am currently doing so in monthly installments of around 150 euros. Until recently, I was fine with this way of repaying my debt. The amount I pay monthly is small enough not to bother my other expenses, and even though 15 years is a looong time, I used to be fine having an outstanding debt. However, there are a couple of reasons I have changed my mind recently:
- Having student debt now results in banks granting you a smaller amount of mortgage, which wasn’t the case before. We have no plans to move in the next couple of years, but you never know.
- Interest on the debt is now larger than the interest on my savings account, meaning I am losing money by not paying it back. This also wasn’t the case a couple of years ago, but the financial situation in the world has resulted in lower interest rates on savings accounts, amongst others.
- I am starting to feel less comfortable having outstanding debt. Far less tangible a reason than the first two, but no less important in my opinion. Even though I don’t think student debt is the cause of the current financial situation in the world, everybody being in debt in general is. I’d like to do my share of making the world a better place financially, and even though this is just one little step, it’s better than nothing. Plus, I’m currently in a situation where I can pay off more, so why not just do it?
These things resulted in me submitting a first substantial payment today, meaning my debt is reduced instantly by just about a third. Even just the feeling is great.
Oh, and because it’s not 2013 yet, and my goal for 2013 was to pay off at least 1/3 of my debt, I’ll raise the bar and try to make another one of these payments before the end of 2013, meaning there will be no more than 1/3 of the total debt left come this time next year. Ideally, I’d like to have it all paid off by then and start chipping away at our current mortgage, but that might be a bit of a stretch given that we have some other investments planned for next year as well.