<p>Obviously I'm not a math person...</p>
<p>My kid has a few less preferred options that between savings and merit aid that will allow a debt-free graduation, and no pressure to work too hard during the summers, breaks, and school year. There are also a few favorites that would require her taking on the maximum unsubsidized loan each year (she did not qualify for any subsidized loans) -- accruing 7.9% interest while still in school. </p>
<p>I want her to choose the debt-free option, of course, but think it is healthy for her to flesh out the options. So, can someone explain how I can calculate what the principle will be upon graduation, and what her monthly payments will be if she takes the $5500 freshman year, $6500 sophomore year, and $7500 both Junior and senior year?</p>
<p>It isn't as simple as adding those amounts up, right? because each separate loan starts accruing interest immediately? But they must consolidate when she graduates? She wouldn't be able to pay on them while in school, as she would be using her summer earnings, and some earnings during the school year to meet the rest of what she would be obligated to be responsible for (according to our own personal agreement.)</p>
<p>I'm hoping someone can help my tired brain! Please be kind if this is actually a very simple question. :)</p>
<p>Fortunately, the loans have simple interest rather than compound, so it’s a bit easier to compute. Aren’t unsubidized loans at 6.8% (rather than 7.9%)?</p>
<p>By my computation, if loans were disbursed on September 1 and Jan 1 each year, and simple interest is applied at 6.8%, on June 1 at the end of senior year, the student will owe $30586, and a monthly loan payment of $351.98 will be required to pay it off in 10 years. During that time, an additional $11,652.41 in interest will be paid, above and beyond the $3586 that accrued while in school. </p>
<p>I used a simple excel spreadsheet to compute the interest on each loan disbursement, and then used the calculator here: [FinAid</a> | Calculators | Loan Calculator](<a href=“Your Guide for College Financial Aid - Finaid”>Loan Payment Calculator - Finaid) to come up with the loan payments. Plugging in the $30586 debt will show your student more info about how much income they’d need to make those payments without suffering “economic hardship” according to a couple of different definitions of the latter.</p>
<p>I would recommend you or she pay the interest as it accumulates. We have done this semiannually for my DD2 so when she graduates she just needs to pay off the principal and interest accrued after graduation.</p>
<p>Since the interest is simple rather than compound, I think you’d actually be better off applying any money you have available for paying off interest as you go, to instead just taking a lower loan the next time. Unless any payment you make while still is school is actually applied to principal rather than interest in which case it’s a wash. (I’m not sure how that works.)</p>
<p>I’m going to share with her the numbers from post #2 and the link (thanks, mathmomvt!) and, as she is generally frugal, my hope is that she will run with open arms toward one of her debt free options. Thanks for your reply!</p>