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I took out a student loan in January of 1997 to attend graduate school. Since that time, my loan had been deferred or in forbearance off and on for a total of maybe 3 or 4 years, and I’d made regular payments on it when it wasn’t. The original loan amount was over $19,000. As of this June I still had nearly $10,000 to pay on it. That’s right, I still had nearly half to go.

My loan had a low interest rate (about 3%), so it was low on my list of priorities. But mostly I just didn’t give it much thought. It was just another bill. Then this past June my rate went up to almost 7% (when I didn’t consolidate in time because I didn’t realize that you could consolidate ONE loan). Suddenly, I cared.

And I realized that all those years of “just another bill” could have been money in the bank working for ME. And I was NOT going to pay 7% in interest. (Funny that 3% didn’t bother me as much, even though I’ve already paid nearly $4000 in interest alone.) Anyway, since June I’ve been making heavy-duty payments on it, and I’ve gotten it down to $4400.18. (Yes, I now know exactly how much I owe off the top of my head.)

I was telling my husband the other day that I didn’t understand why people who had the money to pay off a debt didn’t do it, when it dawned on me that that described ME. I could pay off my student loan NOW instead of continuing to make payments until reaching my target payoff date of December. But I wasn’t doing it. Why not?

Basically, because I was afraid. That money in the bank was giving me an illusion of security. I was trading nearly 7% of my money to feel a little safer. So, I’ve made a large withdrawal from savings that goes toward my loan tomorrow, and the final amount (which I don’t know exactly yet) will be paid as soon as I do. I’m still a little nervous, but I think I’d rather have one-less-payment reality than an illusion of security.

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