Is There A Monster In Your Financial Closet?

3 Reasons To Be Afraid Of Student Loans

Have you seen the movie Monsters, Inc.? It’s one of my favorites. Billy Crystal is the voice of Mike Wazowski.  Mike and his friend Sully (played by John Goodman) are the top scream producing monsters at Monsters, Inc. It’s their job to wait behind bedroom closet doors to scare little kids in order to produce the energy needed to power their city. They wait until it’s dark and the lights are out to make their move. They scare the kids, collect their screams and return the scream energy to Monsters, Inc.

It’s a cute movie that sheds light (pardon the pun) on the age old problem of children fearing the dark. I was afraid of the dark myself and slept with a night light until I was fifteen. I wonder if Mike and Sully were the reason I struggled to go to sleep each night.

As an adult, I don’t have issues with the dark and actually need it to sleep well. But I know many adults who still have monsters in their closets which keep them up at night. They are called student loans and I want to share three reasons why they should be removed from your life as soon as possible. They truly are the monsters in the closet.

1.     Student loan interest accrues daily.

Did you know that most student loan debt accrues daily? Keith and I found out the hard way. Keith’s employer offered student loan repayment for a portion of the loan amount each year. It did not wipe out the entire loan, but was a sizeable amount and we always signed up for it.

After it was applied to a Navient loan (formerly Sallie Mae), we noticed our next payment date was not for several months. We decided to use the opportunity to take the Navient payment and apply it to a different loan. Only the next month, we owed more on the Navient account because we had not sent in a payment!

But our statement said we didn’t need to send in a payment?! How was it possible? Sure enough, because interest accrued daily the balance of the loan increased daily until it was paid in full.

Please do not fall for this! DO NOT skip payments, even when your statement says one is not due for several months. It’s a tactic student loan companies use to get as much interest out of the loan as possible.

2.     Student loan consolidation can cost you money.

Our student loan total was crazy big. One day I logged in and realized that the total was made up of lots of small loans. Some of them were as small as a few hundred dollars. Others were tens of thousands of dollars. They also had several different interest rates (based on when the promissory note was signed).

We thought we had consolidated our loans but had simply combined them all into one payment instead. It turned out to be a blessing in disguise. By not consolidating, we were able to pay off the smaller loans faster (and stop accruing interest).

We then used the debt snowball method and added that loan payment to the next smallest loan payment. Within a few months, we had gotten rid of half of our loans!

Don’t let the number of loans overwhelm you. Keep them all separate and pay them off a lot faster.

3.     Student loan forgiveness slows financial wellness.

Lots of companies offer student loan forgiveness programs for their employees. Some offer reimbursement programs. Keith’s agency offered a reimbursement program and since he works for the federal government, he also had access to the federal student loan forgiveness program.

We opted to use the reimbursement program. Each year his agency allowed their employees to apply to have a portion of their student loans reimbursed. Over the course of seven years, we had a total of over $15,000 in debt forgiven.

We chose not to participate in the student loan forgiveness program. Even though it would have forgiven all of the remaining debt, the rules were so stringent, we did not want to risk missing a small item in the fine print and forfeiting the opportunity for repayment.

As it turned out, we were on track to pay off all of our debt (including student loans) in less time than it would have taken to wait for the forgiveness program to come full term.

Don’t allow the fear of hard work keep you paralyzed by fear.

So there you have it. Three ways to get the student loan monster out of your closet. Take action and ownership today and get your life back! You will be amazed at how freeing it is to be done with student loans once and for all.

I’d love to hear about your progress. Share your thoughts below on how you took a stand against the student loan monsters in your closet. Or feel free to ask a question about your individual situation. (Click here for tips on how to comment.)

Get your life back…the Lord is rooting for you and so am I!

See you next week. In the meantime…be well…be encouraged.