It can be very tempting to sign up for a student loan, but before you make that big decision, it's important to know three very basic things:
- What your loans will cost you to pay back
- If you’ll be able to afford those loans over time
- The number of years you’ll need to borrow money for college
Get a quick estimate of your monthly payments and total cost
The two charts below can help you see just how much money might be involved with taking out a loan.
One gives you a rough estimate of what your monthly payments would be on different loan amounts, assuming a 5.5% interest rate on a ten year loan. The other shows you what type of salary you'd need to earn to comfortably make those payments. (Note: the $28,000 amount is the most you can borrow in Federal student loans over 4 years in college. Any amounts over that are calculated at 9% interest, to represent the cost of borrowing from a private lender.)
Interest rate on first $28,000 = 5.5%
Interest rate on any amount over $28,000 = 9%
"Safe amount" is 10% of salary per year
10 Year payback
Interest rate on first $28,000 = 5.5%
Interest rate on any amount over $28,000 = 9%
"Safe amount" is 10% of salary per year
10 Year payback
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