As a personal finance blogger, this is a bit embarrassing to admit. But I recently made a mistake. A mistake that cost me $425.
Like many of us millennials, I’m struggling to pay back my student loan. The monthly payment they expect me to make is close to $600. (Which, in case you were wondering, is more than 25% of my monthly income.) It is not an amount that I can afford to pay.
Before getting married, I qualified for repayment assistance (which gives me a more affordable monthly payment, based on my income). This program really was my saving grace for the last several years, as the government was covering the interest portion of my loan, while my payments went straight towards the principle.
Now that I have to include my husband’s income, however, our household income has been deemed too high for me to qualify for the program. In the eyes of the National Student Loan Service Centre, we can afford the $600 payment each month. But as I said, in reality, we cannot.
After being denied, I had little choice but to ask to be put on interest only payments. I now pay $175 a month. All of which (as the name suggests) goes towards interest only.
(My current student loan debt is over $40,000, if case you were trying to do the math.)
My student loan interest is my second highest monthly payment. (Rent is the highest.) And yet, none of what I’m currently paying is going towards the principle amount. Meaning I’m spending all this money, but am not getting ahead – at all.
It feels like I’m in a lose-lose situation.
So you can imagine how this feeling was only made worse when I realized too late that I was no longer on interest only payments.
I knew that like the repayment assistance program, you have to reapply every 6 months. And I was all set to reapply in June – which is when I thought my 6 months were up. Apparently, I was wrong. My 6 months were up in May. And I didn’t realize this until May 30th.
I immediately started to panic.
I called the student loan centre to see if they could put me on interest only payments right away. Of course, that would have been too easy.
Basically, I was left with two (sort of three) choices:
I could make the full $600 payment on its due date (which was the next day). And would have to re-apply for interest only payments which would start in June.
But I didn’t have $600. It was the day before pay day, and we’re unfortunately living almost paycheque to paycheque. I had $200 left in my account, which would have covered what I thought I owed.
(This is yet another perfect example of why you need an emergency fund!)
I could call my bank and ask them to stop the payment. There’d be a $10 fee and no guarantee that the payment would be stopped in time. (Option 2 B was to do nothing and be charged a $45 NSF fee because there wasn’t enough money in my account.)
Either way, I’d be considered delinquent on my student loan and I would still owe them a payment for May. Hopefully, when I re-applied for interest only payments they would allow me to back date it for May. Otherwise, I’d still owe them the full $600.
It took us months to catch up on our bills. And with one mistake, I basically had undone all our progress.
I am usually extremely diligent when it comes to all things related to my student loan, so I felt especially foolish that I made this mistake.
Unfortunately, it was out of my control at this point. All I could do was call the bank and hope they could refuse the payment on time. I’d have to sort out my missing student loan payment afterward.
Not being in control of my finances started to trigger a panic attack. (While I was at work.) I haven’t had a panic attack in years, but thankfully I somehow managed to calm myself down.
It was still on my mind all day, all night, and the following day, though. I kept checking my bank account to see what happened.
But by the time I went to bed on May 31st, nothing had happened.
No $10 stop payment fee, no $45 NSF fee, no student loan payment taken off.
When I woke up on June 1st, I immediately checked my account. My balance was a lot less than I expected it to be.
I had been paid correctly, but the full $600 student loan payment had also been cleared.
This was sort of good news, sort of bad news.
The good news is that I avoided having to pay any additional bank fees. My student loan account is still in good standing. And the $425 all went towards paying the principle and decreased my student loan debt by 1 whole per cent. (Which is way better than the money going towards nothing.)
But it means that we have $425 less than we had anticipated.
Although $425 isn’t nearly as critical to us as it was a year ago, it’s still quite significant. I was just starting to allow myself to spend (a little bit of) money on the things I need after years of going without.
My mistake, however, has made me rethink things. If I’ve made do this long without the things that I thought were needs, are they really needed? Isn’t paying down my debt or building up an emergency fund just as (if not more) important?
YOUR TURN: What mistake have you made – and hopefully learned from – lately?
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