Daily Debt: The Invisible Cost of Student Loans

This is a guest post by Nick Baldo from OwnMyLoans, a site dedicated to curbing the student loan crisis.

How much student debt do you have? Hopefully you have a fairly quick answer to that question. What if I were to ask you the same question tomorrow? Would the answer be the same?

To bring this into context, try calculating how much your loans cost you in interest per day. Many borrowers are surprised to learn that lenders add interest to your debt on a daily basis. That means that you are going further into debt every single day…and getting nothing for it!

Imagine $10 Falls Out of Your Pocket Everyday… For 10 Years.

You can calculate your interest per day by taking the balance of each loan, multiplying by your interest rate, and dividing by 365 (You could also use the OwnMyLoans Repayment Calculator which calculates this for you)

It’s typical for loan borrowers to have an interest per day above $5.00. If your total debt is over $100K, it’s likely that this number is at $10, $15, or even $20 per day!

Steph’s Note: When I first checked out out the OwnMyLoan calculator, I was shocked. I had never bothered to calculate what the interest was costing me in the short term. Turns out I’m losing almost $10 a week in interest! That STINKS. All the more motivation to pay back my student loans ASAP.

How to Patch Up That Hole in Your Pocket

So what can you do about it? For one, you can and should create a repayment plan that accelerates your student loan repayment. This is a lot easier than it sounds. Something as simple as allocating an extra $25 / month can shed years off your repayment and save you thousands of dollars in interest. Using the example above, a monthly payment of $333.11 ($25 over the minimums) will pay off the loans 1.6 years faster and save the borrower almost $2,000 in total interest.

Would you be able to find an extra $25 if it saved you years of repayment and thousands of dollars in interest? We think you can! You might have guessed that you could save even more time and money by allocating more than $25 per month. It’s a simple fact: The more you allocate on a monthly basis, the faster your loans are paid off and the more you save in interest. 

How difficult is it to find $25 per month? Its a lot easier than you think. For the typical 20-30 year old, you could allocate an extra $25 to your loans by making any of these relatively simple sacrifices:

  • 1 night out at bars / clubs
  • 1 restaurant dinner
  • 3 fast food / quick meals
  • 1 week of buying coffee every morning
  • 1 case of beer
  • 2 bottles of cheap wine
  • 1 bottle of liquor
  • 2 iTunes albums
  • Premium cable/internet upgrade

But where does that extra money go? If your plan is to optimize your repayment strategy, that extra payment will always go toward your highest interest loan. This strategy is known as the “Avalanche” or “Snowball” strategy. The strategy bares its name because your extra payment continues to grow as you methodically knock out your high interest loans. In fact, we call that “extra payment” of $25-$50 your “snowball payment”. Increase your snowball, pay off your loans faster.

You are in control of your student loan repayment. It’s up to you to get organized, create a plan, and Own Your Loans!


More information about OwnMyLoans: OwnMyLoans was started by Mike and Nick Baldo with the intent of curbing the student loan crisis. The founders themselves post a combined personal student loan debt of over $270K (Steph’s note: holy crud!). Necessity and frustration drove the brothers to build a solution

OwnMyLoans is building a web application to decrease student loan debt through cooperative, rewarding repayment. By applying the features of OwnMyLoans with their personal advice and coaching, these entrepreneurs are devoted to helping others pay off their student loans faster. Be among the first to sign up for OwnMyLoans for free.

Interested in refinancing your student loans?

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