So after my post on Friday, I’ve become pretty much convinced that the cosmic financial Gods must read my blog. After working quite late, I go home, grab a bite and take care of the bills. The next morning, with that dirty work behind me, I skip down the driveway to check the mail and inside was a notice from the lender on my private student loan. This loan is my least favorite of all bills to pay. I took this loan out so that I would have survival money during the Bar exam and post Bar job hunt. While its still technically a student loan, the rates are higher. That rate interestingly correlates with the level of my blood pressure come bill week. I am quite put off by the lender and here is why. This lender (who I will allow to remain nameless) wants at all costs to make sure that you take 20 years to pay off the loan. This will ensure them a nice fat return on their loan. I don’t want to pay them any more than I have to, so much to their chagrin, I’m paying that loan off as fast as I can. In the little more than a year that I’ve been paying, I’ve received 3 payment re-negotiation letters – the most recent which was in Saturday’s mail. Here is my Reader’s Digest version of the letter.
Dear Eager Student Loan Pay-off-er,
Thank you for making your extra principal payments. You are must be smart and beautiful. We, however, don’t like it when you do that because we won’t make as much money. So if you don’t mind, you can make a payment of $X.xx which will ensure that you won’t be rid of us for at least 20 years. We promise, that smaller payment will be so cool! You can buy stuff you want right now like shoes and purses and we can make a BIZILLION dollars in interest because we are patient and student loan pay-off-ers are impetuous and short sighted.
We love your interest!
So for all of you out there who are also paying off some student loan (or any other type of loan with a scheduled payoff) you keep making those additional payments. Check your state law. There is no prepayment penalty on student loans of any kind, and in most states there is no prepayment on mortgages up to a certain value (Currently in SC, you can pay your mortgage off early without penalty for mortgages under $150,000.00). Your bank will send you letters about how smart and beautiful, and in time, while you may have fewer shoes, you will be working your way towards that beach house on Edisto Island.