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Financing an education is at once very easy and very difficult. Students can fill out the Free Application for Student Aid (FAFSA) online and within minutes they can be qualified for a student loan. The difficult part comes in structuring the loan with appropriate repayment options, paying compounded interest, and simply keeping up with monthly payments.
Thankfully, this page has the student loan calculator that all students need. There is no need to fret about calculating interest rates, tracking principal amounts, or worrying over any other complicated financial computations. Here, all students need is their projected total loan amount and the term of the loan. That is, the number of years it will take to repay the debt.
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What are Your Loan Payments and Interest Paid Going to Be?
What You Will Need
To apply for a loan, students will need their basic identification information including their social security number. Since most younger students don't have much of a credit history their lender will likely require them to have a co-signer. This is often a parent or other person who has great credit, collateral, or other assets to help secure the loan.
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- Loan Amount:
The loan amount is determined by the college or university’s tuition, but the federal lender also has caps for how much each individual student may borrow. Most students never reach this limit so long as they stay on track with a four-year plan to graduation. Students who change their major or who need to re-take non-transferred courses may reach or exceed the loan cap. - Interest Rate (APR):
Interest rates are determined each May and are tied directly to the current Treasury note rate. Thus, when the economy is strong and Treasury bills are paying high dividends, student loan rates will be likewise high. When the economy is down and Treasury bill rates are low, the corresponding low student loan rates are an incentive for citizens to renew their academic credentials and stimulate more economic growth. - Term (Years):
After graduation, or after students cease taking classes for six or more months in the case of most federal loans, payments will start to come due. Monthly payments will be calibrated according to the total loan amount, the interest rate, and the term of the loan. The term is a measure of time in which the loan is due to be paid in full. Thus, a 30-year loan means that payment on both the interest and the principal loan amount will be calibrated so that regular payments will terminate at the 30-year mark. - Graduated Repayment Plans:
This option can help students get on their feet after college. This sort of plan starts with low initial payments and then increases the minimum monthly payment every two years. This way, borrowers aim to increase their income as their financial responsibilities increase. - Standard Repayment Plans:
These plans set a monthly payment amount that is calibrated to the term of the loan and its interest rate.
What are the Terms and Types of Loans?
Types of Loans Available
Students have many choices when it comes to financing their education. Student loans are available from many sources including the federal government, private student loan sources, family members, and ordinary banks. The most sought after type of loan is a subsidized federal loan. These loans are for students who demonstrate financial need. One key benefit of a subsidized loan is that the federal government takes care of any interest that accrues while you're still in school. Unsubsidized loans are also available from the federal government. However, students are responsible for any interest that accrues while they're still enrolled in classes.
Private student loans are also an option. However, these loans are all unsubsidized and may have steeper interest rates and penalties. Further, private student loans tend to have less forgiving repayment plans. Students may only want to resort to private student loans after exhausting every other option, including their family.
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Individual lenders, including parents, uncles, or some other individual may be able to offer a loan to a needy student in their life. These loans can have any sort of terms agreed upon by both parties. Frequently, such loans come with a very low interest rate, if any at all. It's also possible, if not likely, that the repayment plan will be quite favorable and even negotiable.
Students may also be able to take out personal loans from their bank while still in school. However, these loans are frequently allocated for specific items such as automobiles or homes. Banks often to extend credit to people for personal expenses. So-called bridge loans are intended to cover living expenses and not tuition. However, consult with your lender to determine the specific stipulations surrounding a personal loan.
How Can You Avoid Excessive Debt?
Students who wish to avoid excessive debt at graduation have many options, but it's important to research these options and make a plan before enrolling in your first college course. When students begin with a sound academic and financial aid plan, it’s easier to avoid long-term payment plans and excessive interest payments.
One excellent way that students can avoid accruing too much debt is to take core courses at a community college. It's advised to ensure that the credits will transfer to a university so as to avoid re-taking courses later, but core classes such as Composition 101, College Algebra, and other requirements can be taken for lower cost at a community college. In fact, students who complete an associate degree at a low-cost, two-year institution can begin a career and return to school later to finish a four-year degree.
Budget-minded students should also be sure to attend public colleges and universities. Though some private institutions are affordable, they tend to be far more expensive than their public cousins. Students may also want to stick with public schools in their own state. With the exception of students who qualify for the Western Undergraduate Exchange (WUE) or other similar programs, students who attend a public school from out of state will pay approximately the same that they'd pay for a private education.
Finally, students can seek to avoid long-term debt by making preemptive payments while still in school. For instance, some students secure well-paid summer jobs and are able to apply those earnings to their subsidized loans before interest begins to accrue. Others may have private or unsubsidized loans and are able to eliminate some accrued interest before graduation. Work-study, co-op programs are another way to earn, pay down debt, and accrue valuable experience before graduation.
Some of the best options for students is to look for federal grants and scholarship money. Both grants and college scholarships do not need to be repaid like student loans.
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