I'm obviously new here, so a quick intro is in order. I started reading MMM June 1st, while I was spending 110% of what I was earning. I saved about 60% this month and loved every minute. I used the savings for student loans. I plan to pay them off as fast as I can. But I don't really know the inner workings of how exactly these loans work and how interest compounds, so I need your help.
So here is my dilemma:
I have four student loans:
1. $10,000 @ 6.8% annual (w/ daily compounding; e.g. ~$2/per day); this loan is unsubsidized and is already accruing interest
2. $8,500 @ 6.8% annual (w/ daily compounding); subsidized and grace period ends 11/14/2013
3. $6,000 @ 6.8% annual (w/ daily compounding); subsidized and grace period ends 11/14/2013
4. $8,000 @ 5% annual (not sure how often it compounds [or even if that is the right word]); subsidized and grace period ends 3/1/2014
Total Loans: $32,500
Already paid off: $2,500 (just this month :))
Round about what I'll be able to put towards loans every month: $1,500-2,000
So here is my question (/lack-of-knowledge) about how interest works (I studied humanities, so all the engineers must resist laughing at me). In what order should I pay these off in order to minimize interest accumulation?
I'm pretty confident about these two things: until 11/14/2013 I'm throwing everything at loan #1 because it's already accruing interest, and until 3/1/2014 I should not touch loan #4. Once the first three loans all start accruing interest should I try and pay off their balances at the save time (i.e. having all three principles come down together: $8k, $7.5K, $7k ...) or should I pay minimum on 2 of them and tackle the third?
Again, sorry for the complete lack of understanding when it comes to interest compounding, but I could use a lesson from a Mustachian.