Curiosity didn't kill this cat, it just made her feel like a big dope.
As you have probably figured out from reading this blog, I don't go anywhere in a straight line. I take detours, and roads not taken, and wander aimlessly off the path to satisfy my curiosity. I like to think this makes me a more interesting person. Others tend to think it makes me flaky or aimless or lacking direction. Whatever.
In any case, one of those little detours took me to an expensive library school, which was stupid for a couple of reasons, more for the "expensive" part than anything else. In fact, if I have a regret about it, that would be the fact that I chose and expensive private school (which was so NOT worth the money) rather than a cheaper state school. I think I had something to prove to myself, like that, at some point in my life, I actually could go to an expensive, private, northeastern school. Live and learn.
This little detour put me in debt. Heavily in debt. Something that the PhD did not do, incidentally. When I was broke and living on $15/hour, I consolidated all of the loans. That lowered the amount that I had to pay each month. From what I can tell on SM's* website, the consolidation was actually two consolidations -- one subsidized, one unsubsidized -- both with 6.25% interest rates.
Since June 2006, I have dutifully been paying SM the equivalent of a car payment** each month. Pay. Pay. Pay. Pay. Pay. Every month for the past 47 months. I don't even have to think about it because I set up my bank account to pay SM automatically every month, and SM stopped sending paper statements, either by their policy or my request I can't remember. In any case, the paper statements just said, "pay this amount," and nothing else, like how much I still owed and what last month's payment actually paid. All information that I would have liked to have known, and can find on the website, but which didn't change anything in any direction anyway.
From June 2006 until right now, I hadn't really thought about the loan at all except to joke about it. The thing was just there to be paid, right up until I die, and there isn't anything to do about it. It serves as a financial reminder that the road not taken often has a toll booth, and I set it up so that I don't have to be reminded of it too often, kind of like an E-Z Pass.
For some reason, however, I became curious as to how much I had left to pay on it. I figured that, given the amount that I pay every month, even with interest, I should have knocked out a good chunk. In the past year and a half, I've started seriously saving for the first time in my life. That is, I've been saving for something other than yet another degree. I put about as much into savings each month as I put into the student loan and have saved up a nice, comfortable chunk that won't buy me a house or even allow me to purchase a car in full. Hell, it won't even keep me afloat for a year of unemployment if necessary; but it does buy me some peace of mind from month to month, knowing that I have a cushion in case of some unexpected expense.
The point here being that, if I can save up that much in a 16 months, how much of my loan must be knocked out with the same payments for 47 months? I figured that I should have made some headway, right? Imagine my surprise when I pulled up my account and discovered that the loan itself had been paid down only a couple of thousand dollars. Not even half of what I had paid. Not even a quarter.
Children, if you are reading this, this is the reason that you should work hard at math and figure out how percentages work long before you are 42 years old.***
Now, the way the SM website works, you can see your loan history, which showed me taking out the loans, then consolidating them. You can also see your payment history, which showed me dutifully paying the same amount every month for 47 months. With that payment history, however, they show how much of that payment went to the loan and how much went to the interest. For some unknown reason, possibly because I only recently began to understand the concept of percentage, I had assumed that the payment was split equally between the interest and the loan.
Nope. More goes to the interest than to the loan. In fact, early on, almost all of the payment went to the interest. On the history, I see a trend that shows that less of the payment is going to the interest and more to the loan over time. While I don't entirely understand the reason that it is not a consistent decline -- some months the amount going to the interest jumps up above the previous month, and down in the following month -- I do understand that the reason for this is that the slowly declining amount due on the loan means that the amount of interest also declines. This past month, more went to the loan than to interest, so I hope that is going to remain the trend and that the loan amount itself is going to start to decline at a faster rate.
I also understand, after poking about the website, that I cannot pay down that original loan amount. Ever. Any payment that you send goes straight to the interest, which never goes down until you pay the whole damn thing off. So, you can't send more money in the hopes of pushing that original loan amount down in order to lower the overall amount of interest because that extra money just goes to the interest. Essentially, you are taking out two loans when you take out one: the first is the actual loan, the one that goes to the school, and the second is the one that goes to SM for lending you the money. They take their cut first.
I'm going to guess that, if I won the lottery and could pay the whole amount tomorrow, including interest, they would charge me for bilking them out of the continued collection of interest for the next -- jeez, how long? They don't exactly have a schedule that shows how long this will all take until the whole thing is paid off, assuming that I keep paying at this rate.
Yeah, I just figured this out. Remember, it took me to this age to finally learn how to work out percentages. I'm not protesting it because this is how finance works. I'm just processing it. I'm also astounded at how little I know about finance. I suppose if you are shockingly unable to do math, operate on the principle of "don't spend more money than you make," even when you fail at it, and only think in terms of "how much will I have to pay each month" when considering debt, then you end up quite ignorant of how money works.
I'm not any worse off than I was before I decided to take a closer look, except for gathering even more evidence that I am decidedly the most mathematically incompetent person on the face of the earth. I will still be paying this damn thing off until the day I die, and even a little beyond. Of course, then, I can leave it in my will to my worst enemy!****
*SM: hee! I just realized that the loan company's name resembles S&M, which is sort of what it feels like!
**The amount is the equivalent of the payments on my last car purchase in 1999, which I paid off in 2004.
***Really, I just figured out how to work out percentages this year, after 42 years of learning, re-learning, re-re-learning, and failing every time. It was as if the information went into my head, and I understood it while it was being explained to me; but two seconds later, when I tried to do the same thing, I couldn't. It was as if the information had just slid out of my head. Again and again and again, and the way to figure percentages just wouldn't stick. Hell, even the abstract concept wouldn't stick. Then, suddenly, this last year, something clicked and I understood. I'd work percentages just for the hell of it because I finally could.
****I don't think you can actually do that.