Understanding Student Loans in Real Terms

nerdwallet UNDERSTANDING STUDENT LOANS %24 IN REAL TERMS %24 We have all heard the statistics: Tuition keeps rising, while student debt continues to increase. In fact, the United States now has more total student loan debt than credit card debt. The good news? Borrowers are eager to provide students with loans to make their college aspirations a reality. The bad news? Those same students will graduate with thousands in loan payments. Unfortunately, students often do not recognize the full impact of taking on additional debt. Let's get nerdy and put an average debt load in terms anyone can understand. COPYRIGHT NERDWALLET R ALL RIGHTS RESERVED 2012 Let's start with some background on student debt: THE AVERAGE CREDIT CARD MI S15,956 DEBT IN THE US IS: AVERAGE STUDENT DEBT AVERAGE IN 2010 PUBLIC SCHOOLS PRIVATE NON-PROFIT $25,250 $22,420 $30,690 STUDENTS ACCUMULATING DEBT 2/3 OF ALL STUDENTS GRADUATE WITH STUDENT LOAN DEBT DEBT DEBT-FREE PUBLIC 62% PRIVATE NON-PROFIT 72% SCHOOLS ..... ....* ......* INTEREST RATES 13.5% 6.8% 9.5% STAFFORD UNSUBSIDIZED AVERAGE 5% 3.4% PERKINS 3.4% STAFFORD SUBSIDIZED FEDERAL LOANS PRIVATE LOANS NOTE: VARIABLE INTEREST RATE PRIVATE LOANS CAN VARY FROM 3-17% So how much will your payments be? $5,555 FEDERAL LOANS $25,250 REPAYMENT COSTS $19,695 PRIVATE LOANS (IN 2010) MIX OF FEDERAL/PRIVATE LOANS ABOVE WITH CONSERVATIVE 5.1% EFFECTIVE INTEREST RATE $8,559 TOTAL INTEREST AT 10 YEARS $282 PAID INTEREST RATE MONTHLY ...... V.S. V.S. AT $18,634 TOTAL 20 YEARS S INTEREST SI83 PAID INTEREST RATE MONTHLY ...... How much is $183/month, really? LEASE A BRAND NEW CAR EVERY THREE YEARS 2012 .... 2015 2018 .... 2021 BUY A NEW IPOD EVERY MONTH FOR 20 YEARS THAT'S A TOTAL OF 240 IPODS BUY ONE IPOD AND 38K SONGS THAT'S ROUGHLY 152,640 MINUTES 106 DAYS OF MUSIC. THAT'S RIGHT, NON-STOP. BE INVESTED IN A 40IK 100,000 AND WORTH OVER AFTER 20 YEARS BUY A TROPICAL ISLAND SOLD YES, REALLY. $30,000 WILL GET YOU A NICE SPREAD EVEN ROBINSON CRUSOE WOULD ADMIRE SKYDIVE TWICE A WEEK FOR 20 YEARS THAT'S OVER 2,000 JUMPS But don't avoid college just because of debt. The average college graduate with a bachelor's degree is expected to earn $1.2 million more over the course of their lifetime than those with just a high school diploma. Š1.20000 V.S. 8.8% STUDENT LOAN PAYMENT AVERAGE SALARY 30% TAXES (APPROX.) AVERAGE ..** $3,100 BACHELOR'S DEGREE SALARY OF YOUR GROss $33,000 - ANNUAL SALARY WILL BE $51,171 NEEDED TO COVER $2.200 TAKE HOME PAY (APPROX.) IN LOAN PAYMENTS (AFTER TAXES) Student Debt is not all bad, but it's important to be aware of your future obligations and understand that responsible planning now can save you a lot of money later. SSOURCE http://projectonstudentdebt.org/files/pub/classof2010.pdf http://projectonstudentdebt.org/files/File/Debt_Facts_and_Sources.pdf http://blogs.wsj.com/economics/2011/10/04/average-salary-up-for-class-of-2011/ http://theinformationdiet.blogspot.com/2011/11/probability-distribution-of-song-length.html http://usgovinfo.about.com/od/moneymatters/a/edandearnings.htm http://www.bloomberg.com/personal-finance/calculators/401k/ http://projectonstudentdebt.org/files/pub/private_loan_facts_trends.pdf http://answers.yahoo.com/question/index?qid=20080106162137AAHEISA http://www.privateislandsonline.com/isla-gatun-panama.htm నో