Loan payback examples ?

Parents Forum
1

<p>HELP ? </p>

<p>I have seen a few examples of loan payback schedules in variious post, but it seems like now would be a great time to gather scenarios into one thread. This is where the high school seniors and parents could really benefit from some insights of those who have gone before...</p>

<p>I know that things are highly dependent upon interest rates, which can be researched on general loan calculators. But I see a variety of loans being offered, in our case mostly unsubsidized (interest accrues from day 1, and I think in some cases paymant starts at day 1). These are not the lovely student loans that I enjoyed in the 1980s. I'd like to read about real scenarios. </p>

<p>So please post away, including details on loan type, amounts and monthly payments. Many, many thanks. This will help many folks. Heck today I heard of one school that offerred $60K in loans/year... crazy !</p>

2

<p>I found a really good chart related to this on Penn State’s website. Also, if you go to simpletuition.com, enter your school name and loan amount, it will give you monthly payments (for private loans), length of loan and real cost. A real eye opener when I showed my college-bound D.</p>

3

<p>[FinAid</a> | Loans | Repayment Plans](<a href=“http://www.finaid.org/loans/repayment.phtml]FinAid”>http://www.finaid.org/loans/repayment.phtml)</p>

<p>This explains a lot I think. It goes into the types of repayment plans out there and links to calculators for some of those plans.</p>

4

<p>If you get unsubsidized stafford, PLUS, or a private loan, Start Payments Immediately that minimally pays the accruing interest. The lender, whomever it may be, will want to start billing you at the end of the term (Dec) thus you would have accrued 4 months of interest and you already have a jump in paying off the principal. </p>

<p>For instance, You borrow $10,000 for fall term. The lender will not send you a payment coupon until Dec or Jan. In that 4 months, (Sept,Oct,Nov, Dec) you would accummulated ~$300 in interest (8.5% rate) on that $10K. But if you start paying immediately (Sept) of $100/mn by Jan your principal balance with be less than $10,000. You have to begin payments sometime; Its better to start early rather than let the lender compound the interest and get another $4-600 out of that initial delay. </p>

<p>This will drive the lender crazy and you will force them to do special handling on receiving your payment. But it is you, that has to work for the money to pay off the loan. I’m lazy and never want to work unncecessarily harder to do somthing that’s easy.</p>

5

<p>Thanks for the quick replies!</p>

<p>Does anybody have an example to put the numbers into perspective. Something like this:</p>

<ul>
<li><p>I borrowed $<em>K/year unsubsidized loans at _</em>% interest. </p></li>
<li><p>During school I paid $<em>/month starting </em>months in. </p></li>
<li><p>At graduation I owed balance of $___ </p></li>
<li><p>The repayment schedule was $<em>__/month for _</em>_months</p></li>
</ul>

6

<p>My nephew borrowed 19.000 and has to pay 221.00 a month (to my memory) at 6.8% interest. My son had a little less and it’s around 200.00 a month. (although grad school might add some)
Rates for the next few years.
Unsubsidized stays at 6.8% My son would have saved about 30.00 on his monthly payment with the new rates.
2009-10 5.60%<br>
2010-11 4.50%<br>
2011-12 3.40%<br>
2012-13 6.80%
I always found that paying online (interest and some principle) helped a great deal. My son had mainly unsubsidized loans and I paid the interest every month or so. He put money on the principle, along with myself when he could. It didn’t seem like much, 25,00, 50.00 or 100.00 when we could, but over 4 years dropped his loans by about 2,000.</p>

7

<p>Debruns, the above rate reductions apply only to subsidized loans. Afaik, unsub stays at 6.8%.</p>

8

<p>I did mention that right above the amounts. I know for my son, he got mostly unsub in school, but for others, at least for 2 years, they can save a bit.</p>

9

<p>I think I could do the calculations myself for subsidized loans since interest and payment starts after graduation.</p>

<p>But like may families, we only qualify for unsubsidized loans. They are tricker to figure out. And I think the interest rate is almost 8%… that could really add up.</p>

10

<p>I’m still hoping that we can get some posts with real live examples. Here’s my proposed template again, but other students/parents may have better ways to present the info. </p>

<ul>
<li><p>I borrowed $<em>K/year unsubsidized loans at _</em>% interest. </p></li>
<li><p>During school I paid $<em>/month starting </em>months in. </p></li>
<li><p>At graduation I owed balance of $___ </p></li>
<li><p>The repayment schedule was $<em>__/month for _</em>_months </p></li>
</ul>

<p>Thanks again. I want my son to have some skin in the game in college, but I hate to see debt compounding during school.</p>

11

<p>I can’t fit the complete template because I honestly don’t know.</p>

<p>D borrowed about $22K, spread among three different loans. She paid off the highest interest one (unsubsidized) first, then started working on the others. She didn’t make any payments while in school, all deferred. She’s been very disciplined about making accelerated payments, including renting further “out” with a more awkward commute to her job to save a couple of hundred a month and sharing a 2 bed/1 bath place with a roommate. (Her commute is still under 30 minutes but it involves a bus/subway transfer since where she lives isn’t on the subway line.)</p>

<p>I think she’s paying around $300/month total. </p>

<p>Personally, I wouldn’t worry about the interest accumulated during college. In the total scheme of things, it’s not <em>that</em> much.</p>

<p>I, too, believed in her having some “skin in the game.” It’s an appropriate amount, imho, and she’s handling it well. Loans will again be deferred if/when she gets into grad school as planned.</p>

12

<p>There are a variety of loan calculators here:
[FinAid</a> | Calculators](<a href=“http://www.finaid.org/calculators/]FinAid”>http://www.finaid.org/calculators/)</p>

<p>Check those calculators – I’m not really sure what you want posted here, but everything can be figured out with the calculators. There are all sorts of different scenarios.</p>

<p>One important thing to keep in mind is that with Stafford or Plus loans there is never any sort of prepayment penalty, so you can modify your payments upwards from whatever the bank requires, and that can have a dramatic impact. </p>

<p>For example, lets say that a someone borrows $10,000 at 8% interest. If paid off over 10 years, the monthly payment will be $121.33 – there will be 120 payments and cumulative interest paid of $4,559.16. </p>

<p>Let’s say you simply round up that $121.33 to $130.00 (if you can afford $121 a month you probably can afford $9 more). Then the same loan is paid off in 109 months – almost a full year earlier – and total interest paid is $4,069.66, or almost $500 in savings. </p>

<p>Suppose you decide that if you can afford $120 you can manage to scrape together $150 – with a $150/month payment plan, the loan is paid off in 89 months (a little under 7 1/2 years) – and total interest paid is $3,269.36.</p>

<p>Anyway – it really makes no sense to have people posts the loan schedules they were given when you can simply run the calculations yourself and create whatever plan you want to deal with the loans. </p>

<p>I do agree that you want to avoid interest running without payments, so it really is best to at least pay the interest from the outset. Interest only payments on a $10K loan at 8% interest, would run $67 a month – but if you are going to pay that, why not get a little jump and pay slightly more --say, $70 or $75 a month? In that case you are paying down the principal just a tiny bit – but after 4 years that will add up to a couple of hundred dollars.</p>

<p>(FWIW I wouldn’t let my kids take unsub loans – I don’t want the interest running – I’ve taken PLUS loans for myself and of course the payments start immediately. My d is graduating this year and I have started accelerating the payments somewhat. I’m kind of hard up for money, and I’ve got balances with 3 different lenders - so I just increased the payment by about +$50 for the lender with the highest interest rate).</p>

13

<p>I also didn’t like unsub loans, but it’s all my son got the last 2 years. I also had a small parents loan. I just paid the interest for my son online, it wasn’t a bother at all. With Salliemae I think you could even set up auto payments (but I’m not sure) to deduct the amount. This way, in our mind, he ended up with a subsidized in college, at least for the original amount, and I was able to add some to the principle over time.
I know some students still use payment books, but I personally feel online payments are easier to track, easier to pay and it’s quicker.</p>

14

<p>I think our only choice is unsub loans. If we go that route, my son would be paying (he is rallying to take on some debt to cover part of the delta between a school with full tuition scholarship and his favorite college which would be full-price). So he really won’t be able to pay anything during college years. </p>

<p>So if I want to try to get ballpark payback from calculators… say for $10,000/yr… do I do it in 4 parts (Freshman loan, Sophomore loan, etc). </p>

<p>Hmm… I guess I am still confused how to deal with the deferred angle.</p>

15

<p>Colorado_mom,</p>

<p>For the sake of simplicity, you can estimate the total amount of loans upon graduation and then calculate (using an online calculator or Excel) the monthly payment.</p>

<p>Whether the interest piles up during school or not will be relatively small and can be ignored for planning purposes if he starts paying after finishing his undergrad. For planning purposes, it’s simpler just to add maybe 15% to the loan balance and estimate from there.</p>

<p>So in your case, I’d do $45,000 or $50,000 loans starting at graduation. Whether the actual number turns out to be $42,000 or $47,000 or $52,000 will be relatively minimal for planning purposes.</p>

16

<p>

</p>

<p>I don’t believe your son will be able to get Stafford unsubsidized loans for $10,000 per year in his name only. The Stafford loan limit for freshmen is $5500.</p>

17

<p>“Stafford loan limit for freshmen is $5500”</p>

<p>Yes, you are right. That is what several schools offered us. I suppose if he were able to get more loans elsewhere it would be an even worse deal than unsubsidized Stafford.</p>

18

<p>Thanks for the help, folks! </p>

<p>As a starting point for ballpark discussions with son, I will look just at the Stafford unsubidized $5500/year scenario. Since there are origination fees and compounding interest in college - he will owe more than $22K at graduation. I’ll assume $25K at graduation. </p>

<p>From calculator ([FinAid</a> | Calculators | Loan Calculator](<a href=“Your Guide for College Financial Aid - Finaid”>Loan Payment Calculator - Finaid)), $25K loan at 6.8% interestes paid back over 10 years will have $287/month payment. </p>

<p>**** STAFFORD UNSUBSIDIZED BALLPARK ESTIMATE *****
$5500/year ==> $300 monthly payments after graduation</p>

<hr>

19

<p>So does the above ballpark look right? If yes, I am really stunned about the fact that students woudl consider loans $25,000/yr (or more) for undergrad. That would mean $1500+/month for school loans - you’d really need a heft salary to support that kind of debt.</p>

20

<p>Where do you get a total of $1,500/month for school loans?</p>

<p>D is paying around $300/month and doing just fine with a salary that started under $40K.</p>