When I Grow Up…

When I first got my lovely and FREE ipod from Philadelphia Development Partnership (PDP), the first song that I downloaded was all to catchy “When I Grow Up” from Pussycat Dolls. If I knew how to post background music, I’d play it for you all. It’s my thing: cheesy pop songs. They keep me young. But in the song, lead singer, Nicole Schlerzinger (?), sings: “When I grow up, I want to famous, I want t be a star, I want to be in movies, When I grow up, I want to see the world, Drive nice cars, I want to have boobies!” Like I said it’s my thing, but I really took a liking to this song because it reminds me of the daydreams that I still have about what I want to be when I grow up. (I’m still working on the boobies)

Well yesterday, I moved one step closer to adulthood. I made my first payment on my non-deferred, subsidized, graduate school loan. In total, I currently have “good” debt of $6,000. “Good” debt is necessary debt; debt that will ultimately bring me more cash and more assets in the future. As oppose to bad debt: debt that brings me no cash and without an increase in equity (so not money). For example, a car loan could be considered bad debt.

My other student loans, are all on a deferred payment schedule, meaning I do not have to start paying it back until after I graduate. With subsidized loans, repayment begins within thirty days of signing on the dotted line. When I received the bill, it was sort of a pinch in the arm that reminded me that upon graduation I will have quite a large sum of money to pay back for an education that I will have already obtained.

I’d been avoiding this part of adulthood and in sense living and learning surreally (new word). One doesn’t necessarily think about the bill while going to class and living carefree. Now that I know Education Services was for real when they said they’d be back for their money, I have to work harder now, factoring that cost into my monthly expenses. I’ve already got a plan of action, that my beau reminded me of this past weekend. Who, btw, did an excellent job as a guest speaker at an education resource fair.

The plan is to make a thirteenth payment. Not only will I put this bill on automatic bill pay (especially because now I have active debt to repay in which timely repayment will boost my credit score: hello dream house!), but he reminded me about the thirteenth payment. No it isn’t a horror film remake, but it’s the payment that is going to decrease your principal, interest payments and ultimately your length of repayment time, saving you money once again.

But how can this be? Making a thirteenth payment strictly towards principal (the original amount you were lent) only, will decrease the amount of the original loan. For example, after twelve payments my loan balance is $5,050. If I make a thirteenth payment of $50, leaving me with a balance of $5,000, they (they being the education man) will only charge me interest on that amount not the $5,050. In addition, I am paying my loan down faster. Simple. I know. But personal finance does not have to be anything tricky or hard.

When I grow up….