Plenty of students and their families have to borrow money for college, but when it comes to student loans, it’s easy to get in over your head. Here’s what you need to know about loans, and how to know when to say when!
Many students reach graduation full of excitement only to be hit with a harsh reality: the sizeable chunk of money that paying off student loans will take out of their budget. Unfortunately, most are unaware of what their debt will cost them each month until they see their first student loan bill. We’re here to help make sure you aren’t caught by surprise!
Maybe not, but it is important: Interest is the money you pay to your lender in exchange for borrowing money. Interest is calculated as a percentage of what you borrow. Without interest, lenders would have no incentive to give out loans; in order to make it worth their while, they expect to get back from you more than you borrowed.
Looking at the Average:
The average student loan debt in 2016 was $37,172. Let’s assume that you are the average borrower, and have a Stafford student loan with an interest rate of 6.8%.
If you pay roughly $280 per month toward your loan, you will have paid $30,927 in interest alone, for a total of $68,099. That’s almost double what you originally borrowed, and it will take you twenty years to do it!
- To pay off a $25,000 student loan, your payments would be between $150-200 a month, roughly a used car payment. You would need a salary of $30,000-$40,000 to pay it off in 20 years.
- To pay off a $50,000 student loan, your payments would be around $300-390 a month, a new car payment. You would need a salary of $40,000-$50,000 to pay it off comfortably over 20 years.
- To pay off a $75,000 student loan, your payments would be around $450-580 a month, equivalent to monthly apartment rent for 20 years. You would need a salary of $60,000 to afford this payment.
- To pay off a $100,000 student loan, your payments would be around $600-775 a month for 20 years, equivalent to a modest mortgage payment. You would need a salary of $80,000-$90,000 to afford this payment.
- To pay off a $150,000 student loan, your payments would be around $900-1200 a month, equivalent to a house and car payment. You would need a salary of $100,000+ to pay it off in 20 years.
What About Loan Forgiveness?
You’ve probably heard that some careers allow your student loan debt to be forgiven, but it’s not as simple as it sounds! The Public Service Loan Forgiveness (PSLF) program may qualify you for loan forgiveness if work full-time for a qualifying employer (government organizations, non-profit organizations, publicservice, etc.).
But here’s the catch: You still must make 120 monthly payments under a qualifying repayment plan before you will qualify for forgiveness. For more information, visithttps://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service.
Check out these opportunities for cutting back on college costs!
•Americorps Vista gives an education award or stipend from $1,100-$5,645 upon completion. Some colleges will even match it! www.nationalservice.org
•National Health Services Corps volunteers are eligible for up to $60,000 for student loanrepayment. www.nhsc.hrsa.gov
•National Park Service awards up to $11,000 tointerns. www.nps.gov/about us/jobsforstudents