Student Loan Calculator

What are the most common mistakes people make when financing their post-secondary education?

The availability of student loans is both a blessing and a curse. Student loan funds make it possible for students to cover educational costs, but since the loan funds are paid directly to the college or university, they are relatively invisible to the student.

Students should consider what the salaries are of possible post-college jobs in which they might be interested. Compare the potential salaries to the monthly loan re-payment requirements. If the salary of post-college job options will not cover the loan payments, then borrowing now to pay for college will create personal financial crises after graduation.

Students should consider all options for financing their college education. Apply far and wide for scholarships. Work summer jobs. Perhaps even slow down the academic advance to be able to work part-time while in school and cover as much of the cost as possible.

What should people consider when applying for student loans?

Students need to try to map out their plans for college, including expected major (which may change), coursework needed to obtain the desired degree (which may change), and the length of time needed to complete the desired degree (which may change). Then, considering realistic academic goals -- how much will it cost and how will they pay for it -- and revise their financing plans as they revise their degree plans.

Student loans will come due six months after graduation (or after the student is no longer enrolled). Borrowers need to obtain some type of employment as soon as they can after leaving school, even if it is not the dream career job. Borrowers should also be aware that if they take a hiatus from college, their student loans will still come due in six months.

What programs or other steps would you recommend to anyone having trouble making their student loan payments?

Students should pay what they can to show good faith and contact the lender to try to work out a slower repayment arrangement. They can try to obtain part-time employment to bring in extra funds to try to pay down the student loan debt.

What impact, if any, does the large and growing amount of outstanding student loan debt have on the economy as a whole?

Having large student loans to pay off sets up new graduates for many years of financial struggles, even if their chosen major offers many job opportunities.

Parents need to be extremely careful about co-signing on student loans. If the son or daughter cannot pay the loan, the parents will have to make the payments. It is unfortunate to see so many folks paying on their children’s school loans during their (the parents) fixed-income retirement years.

What are the most common mistakes people make when financing their post-secondary education?

Not planning ahead and not gaining a full understanding of the loan process prior to borrowing loan amounts for educational expenses.

Not understanding the different loan types and differing interest rates/repayment options. There is a difference between federal and private loans and a difference between a subsidized federal loan and an unsubsidized federal loan. It is important to understand that the federal government pays the interest on a subsidized loan and the borrower pays the interest on an unsubsidized direct loan. A helpful guide is available here.

What should people consider when applying for student loans?

The borrower should consider the return on their educational investment and borrow responsibly. The borrower should become informed of the rights and responsibilities of borrowing federal and private student loans. Most importantly, borrowers should not take on unnecessary debt by over-borrowing student loans. It is helpful to many students to borrow to invest in their education, but some students borrow more than they actually need.

What programs or other steps would you recommend to anyone having trouble making their student loan payments?

The servicer of your loan (federal or private) should be the borrower's best friend until they finish repaying the outstanding debt. Students often refrain from contacting their servicer because they feel they will be made to pay a bill when they have no means to do so. The servicer does not want them to default on their loans and the government has put various programs into effect for students who are facing hardship. The ultimate goal is successful repayment of the loan(s) and students should seek out help from their servicer.

What impact, if any, does the large and growing amount of outstanding student loan debt have on the economy as a whole?

Successful loan repayment helps build a strong credit history which is why it is so important for students to borrow wisely. Students who carry a large amount of student loan debt could be less likely to purchase real estate or cars. High student loan debt could impact the amount students in repayment start investing and saving for their future.

What are the most common mistakes people make when financing their post-secondary education?

The biggest mistake probably is selecting the wrong institution to attend. Applicants need to pay attention to retention/graduation rates as well as loan default rates. After that, failure to save or saving for college in the wrong way. I encourage families to investigate 529 plans as a way to save tax-free for college. Since the need-analysis system “taxes” funds in the student’s name much more heavily than funds held by the parent(s), saving money in the student’s name or using UGMA/UTMA accounts may well reduce eligibility for need-based aid.

What should people consider when applying for student loans?

Use federal student loans first. If private loans become necessary, pay attention to the interest rate and whether it is fixed or variable. Be sure you understand the terms of the loan, such as when payments need to begin, and any provisions for loan forbearance. When looking at potential repayment amounts, plan for the amount you will need to borrow to complete your program. What looks to be affordable for the first year may not be by the time you borrow the same amount (or more) for four or more years.

What programs or other steps would you recommend to anyone having trouble making their student loan payments?

The most important advice is not to ignore the problem; student loan debt will not go away. If you get into trouble, contact the lender or servicer to discuss options that might be available to you.

What impact, if any, does the large and growing amount of outstanding student loan debt have on the economy as a whole?

One concern I have witnessed first-hand is the growing number of parents trying to send a child off to college while still having outstanding student loan debt of their own.

What are the most common mistakes people make when financing their post-secondary education?

Common mistakes include overburdening themselves with debt -- some even include housing and living expenses and live at higher lifestyles than they would otherwise. Secondly, not paying attention to rates and alternatives. They should consider an option to pay a portion of interest so principal amount does not grow as quickly; going to a less expensive school or borrowing less.

What should people consider when applying for student loans?

Better education regarding the responsible use of debt is lacking and it should probably start at the family level. The information people receive now is better, but taking out student loans is somewhat ingrained in our system. Many schools have borrowers go through a tutorial before being able to sign up for a student loan, but it is at the time they take out the loan when the decision has already been made.

There are companies that will refinance student loans at lower rates -- for borrowers with good credit -- this then reduces the amount of good loans on Sallie Mae’s books increasing losses for the government, i.e., taxpayers.

What programs or other steps would you recommend to anyone having trouble making their student loan payments?

The government offers forgiveness for those entering certain careers or a partial repayment based on a percentage of income over a specified number of years (so full debt and originally scheduled interest is not repaid -- thus another shortfall (for taxpayers).

What impact, if any, does the large and growing amount of outstanding student loan debt have on the economy as a whole?

The high debt from student loans reduces the ability of those burdened to save up a down payment, pay a bigger mortgage, buy as many cars, etc. So could be a drag on housing and the economy.

What are the most common mistakes people make when financing their post-secondary education?

Common mistakes include not saving for college, not planning ahead, and not taking advantage of net price calculators that offer a ballpark estimate of the cost of a particular college. Also, it's a mistake to fail to take advantage of the resources offered by the financial aid office, including counseling. Common missteps students make are living beyond their means, not understanding their budget or not even having a budget.

What should people consider when applying for student loans?

People should borrow only as much as they need and not a dollar more. They can always borrow more later if their situation changes. It's vital to understand the terms and conditions of student loans, and the financial aid office is the best place to acquire that information and understanding. Another good resource is a loan calculator that will determine how much you will repay when your loan becomes due.

For private loans, compare rates, fees, repayment options and customer service ratings before borrowing. It's important to remember that loans aren't bad. They can be a cost-effective way of affording an education. Many students have successfully used loans to finance their education.

What programs or other steps would you recommend to anyone having trouble making their student loan payments?

Don't ignore the problem. Contact your lender or servicer right away to determine if alternative payment plans exist. Be sure to ask about deferment or forbearance options. Keep in mind that lenders want you to successfully repay your loan.

What impact, if any, does the large and growing amount of outstanding student loan debt have on the economy as a whole?

Although the exceptional cases of students deeply buried in debt tend to attract massive media coverage, the vast majority of students pay their loans back successfully. Large student loan debt may delay students taking on other consumer debt, but college graduates have higher earnings potential over time and their degrees will help them add to the economy in the long run. It's likely that college graduates are more apt to create jobs for others, so the debt associated with earning a college degree is offset by what is contributed to the economy overall. If everyone stopped borrowing for college today (and, therefore, did not attend), it’s difficult to imagine that our economy would realize greater benefit than loss.

What are the most common mistakes people make when financing their post-secondary education?

If you select a major that will then require a master’s degree and if you add all of these education costs up, and the resultant incremental salary is not sufficient to pay off the debt, a student has made a financial irreversible mistake.

I see many students pass up a more economical state school education for more expense private school and go in major where the state school offers competitive programs. Parents need to be parents and not simply give kids what they want in terms of college education, but agree on viable plan, monitor the plan and make changes as necessary.

What should people consider when applying for student loans?

Parents and students should sit down and map out the costs, the amount borrowed and the likely salary, so the student sees the economics of this path from the beginning. And if the student elects to change path midstream, which most students do, the plan may need be revised. For instance, a student enrolls at an expensive school with a plan of going to medical school, a career that can justify the loans, but the student elects to change majors to a less lucrative major. The student should consider strongly at that point a state school program, which is less expensive.

What programs or other steps would you recommend to anyone having trouble making their student loan payments?

Unfortunately, the best step is to live at home with mom and dad.

What impact, if any, does the large and growing amount of outstanding student loan debt have on the economy as a whole?

I think if we fast-forward 15 years, we are going to have whole slew of disillusioned young people who owe a lot of money and have disappointing career paths. You already see declining home ownership number with young people. You will have less tax receipts, less consumer spending and higher debt delinquencies. The impact of a disillusioned generation cannot be quantified.

What are the most common mistakes people make when financing their post-secondary education?

One of the mistakes people make is estimating the cost itself. Tuition is one piece but there are also fees, books, room and board, etc. Also, while you can look at the posted tuition for a university or college online, consider that, via financial aid from the school and discounts offered, the posted tuition is not what you will pay. Lastly, another common mistake is thinking of loans as financial aid. Yes, loans help you pay your bills but, unlike true financial aid, they must be repaid.

What should people consider when applying for student loans?

As stated above, remember that loans must be repaid, and, if the payments become too great, you cannot get relief from student’s loans via bankruptcy. When you are getting loans, consider what your payments will be when you graduate. How much is this relative to what your expected salary will be for your field. Taking out loans to be an accountant is different than taking on a lot of debt and being a social worker.

What programs or other steps would you recommend to anyone having trouble making their student loan payments?

Mostly this comes down to budgeting. As stated above, once you have student loans, you are stuck with them. Create a budget to make sure you can pay your student loans and other expenses.

What impact, if any, does the large and growing amount of outstanding student loan debt have on the economy as a whole?

In general, going to college increases your earning potential so it benefits you and it benefits society because we need increased education in an increasingly complex and technologically advanced world. However, higher levels of student debt decrease the benefits of education to you and society. For every loan payment you make, that is less money you are saving, less you are spending on good and services, and, in general, less you are using to make the economy grow.

What are the most common mistakes people make when financing their post-secondary education?

• College costs are on the rise while federal, state and institutional aid has remained mostly stagnant in comparison to rising costs of a higher education. Families need to begin to save and prepare for a higher education while their children are young.

• For first generation college students and even parents who graduated from college, the financial aid process is an ever-changing anomaly. Completion of paperwork to apply for financial aid can change from year to year or in the middle of the financial aid cycle. Families need to consult the financial aid professionals at their local colleges or their college of choice for assistance.

• Students tend to borrow the full amount of loan funding offered to them by the institutions, even if the funds are not needed to cover mandatory costs. Students envision the additional funds as a means to cut hours at work or to utilize for nonessential costs while not realizing the impact of how much the increased loan amount will cost them after graduation.

• Many students miss priority deadlines published by institutions and state agencies. Even though it seems a little premature, students should start investigating their different colleges of choice in the beginning of their senior year.

What should people consider when applying for student loans?

First year students should be conscious of the amount they are borrowing and the required repayment amount per month on just their first year's loan. Currently enrolled students need to be aware of the total amount borrowed to date, repayment on the amount already borrowed and the real amount needed to pay the current year expenses. Students should also consider alternatives to borrowing student loans, such as applying for scholarships and obtaining a job to cover basic costs.

What programs or other steps would you recommend to anyone having trouble making their student loan payments?

Students have the right to request a deferment or forbearance, which allows for a temporary break in repayment of student loans. Borrowers should contact their loan servicer for further information on how to apply for these options.

What impact, if any, does the large and growing amount of outstanding student loan debt have on the economy as a whole?

The biggest impact on the economy and student loan debt is made by the students who never graduate and still owe a large amount of money. Most of these students will not secure a job that can pay the monthly payments required to keep their loans in good standing. Loans not in good standing damage credit which impedes the student’s ability to support the economy through purchasing.

What are the most common mistakes people make when financing their post-secondary education?

Not weighing all their options. Often, students elect to borrow rather than seek part-time employment or other non-obligatory options such as parental support. In addition, they modify their spending habits to emulate peers that may be in a position to afford a more extravagant life style. Many students, especially those from low income families, have little or no money management skills when they begin college. Receiving large amounts of financial aid and not knowing how to budget these funds can severely impact their ability to meet their educational expenses. That is why institutions should make every effort to provide comprehensive training on financial literacy and budget management to their students.

What should people consider when applying for student loans?

There are at least three important factors that should be considered when applying for loans.

• Amount to borrow

Students should only borrow what they need to fund "modest but adequate" educational expenses.

• Type of loan

There are many educational loans available for students ranging from institutional, state, federal, and private. These loans vary in their interest rates, eligibility criteria, funding sources, and origination fees. It is important for students to consider all the factors associated with these loan options prior to making their final decision. It is not uncommon for borrowers to have a blend of two or more of these types of loans.

• Repayment options

Choosing a loan is big decision and repayment options differ depending on the terms of the loan agreement. It is critical for borrowers to determine the loans that best suit their individual situations. Elements such as: salary after graduation, repayment schedule, interest calculations, income-driven repayment plans, and public service loan forgiveness are just some of the factors to consider.

What programs or other steps would you recommend to anyone having trouble making their student loan payments?

It is extremely important for students to develop a close relationship with their lender/loan servicer. These providers can be a valuable resource to assist student borrowers to successfully repay their loan obligations. They have the ability to offer options such as: loan consolidation, income-based repayment, forbearance, and loan forgiveness. These options can sometimes be a life-line for students who at risk of defaulting on their loans.

What are the most common mistakes people make when financing their post-secondary education?

The most common mistake, I believe, is that when students are accepting the student loans offered in their financial aid package it is assumed that the entire loan amounts have to be accepted. Award packages, which invariably include student loans, are usually based on the total cost of attendance. (An itemized cost of attendance should be available on the school's website or through the financial aid office.)

Tuition and fees, which are "direct" costs, are constant. One cannot change the amount that is charged on this line item. The "indirect costs" are what the average student might spend on living expenses. So, it is important to look at the line items given by the school for each category of room, board, transportation, and miscellaneous and see what may actually be needed and try to see where costs can be minimized. For instance, if a school's room and board is based on a double room, consider a triple room which can bring substantial savings. If attending a commuter school, the room portion is based on what the average student might spend on rent. If a monthly budget is less than the average rent, adjust the accepted loan accordingly. At the same token, if car ownership is not in the picture and instead, there is public transportation, transportation costs may be less.

It is not uncommon to also overlook outside/private scholarships/grants that may be available. There are a number of search engines where a student enters information about him/herself and the engine does a search for all scholarships for which the student may be eligible. Do not go for those "scholarships" where you win by twittering the most on a topic given by the scholarship sponsor. Most scholarships require a topic essay and range in amounts from $500 and up. $500 does not sound like a lot, but it can pay for books. Any scholarships/grants that are received reduces the amount of loans that may be needed to pay for an education.

Never pay for somebody to complete your Free Application for Federal Student Aid (FAFSA) or for a person/company to search for scholarships. FAFSA's can be completed easily enough by an individual, but if you get "stuck," contact the FAFSA toll free number or request help from your financial aid office. Even if you are at the point of choosing a school, most financial aid offices would be more than happy to assist.

As an aside, when comparing scholarships and grants that schools may award (federal and institutional), it is very important to consider the "net" price that would be paid out of pocket and/or with financing. A school whose cost of attendance is $30,000 may award $10,000 in grants while a lower cost school may award only $5,000 but the cost of attendance is only $15,000 to begin with. The net cost of out-of pocket and/or student loans would be $10,000 at that lower cost school and $20,000 at the higher cost school. The federal government has mandated that schools provide "net price calculators" to determine the true cost of the school to the student.

Finally, keep track of what is being borrowed. The National Student Loan Data System for Students provides detailed information of everything you wanted to know about federal loans but were afraid to ask. Up to date information on disbursed loans, the interest rate for each loan, and your loan servicer who is your primary contact once your loan is disbursed are available on this website.

What should people consider when applying for student loans?

Students should consider the interest rate whether it be fixed or variable, any fees involved (federal loan fees are deducted by the federal government directly from the amount that a student borrows), and the fact that a student loan does have to be repaid over time. Private/alternative loans often have much different repayment terms, flexibilities in changing repayment plans (how much one has to pay over a length of time), and forgiveness/cancellation provisions than the federal loans.

A student should also consider what career they are considering and certainly, the typical salary for the given area of interest and the status of the job market in the sector of interest. These factors can help one determine if it is feasible to have to include a loan payment in a monthly budget. Student loans are a long term investment, but education is something that cannot be taken away. StudentAid is an excellent website sponsored by the U.S. Department of Education that does not require a sign in.

What programs or other steps would you recommend to anyone having trouble making their student loan payments?

Some employers, although there are not many, offer repayment of student loans as a benefit. If you are considering working in public service, there is the Public Service Loan Forgiveness Program. If you work in the public service sector as defined by the IRS (501-c3 organization) for 10 years or work for any federal or state entity or certain non-profit agencies, student loans would be forgiven after 10 years of on-time payments under an income based repayment plan. Even so, income based repayment plans are available for everybody and vary by whether discretionary income or income to debt ratio are considered. Www.studentloans.gov, which is accessible to any student who has completed a FAFSA (FAFSA sign in information is required) has a listing of all available repayment programs. Payment calculators are also provided.

Even if you think that you are going to have problems making a payment, contact your servicer. This is the company that has contracted with the federal government to service your loans. There are many options, including temporary forbearance, deferments, and different repayment programs to help a student's loan not become delinquent and then ultimately become defaulted.

What impact, if any, does the large and growing amount of outstanding student loan debt have on the economy as a whole?

The total amount of outstanding student loan debt, I believe, has a two-fold impact on the economy. The growing debt is in part due to the increase in the number of students enrolled in post-secondary education. The more students, the more aggregate debt. This has a positive impact on our economy in that students who graduate typically are higher wage earners and thus, in spite of student loan debt, have more discretionary income to spend. The down side is if a student does not succeed and leaves school with debt, this lowers ones discretionary income to spend because of the added cost of having student loan debt.

What are the most common mistakes people make when financing their post-secondary education?

Families should be careful to look at the financial aid package in relation to the total cost of attendance at the institution. The financial aid award from school A may look better than the award from school B, but if the cost of attendance at school A is significantly higher, it may not be the better deal. Likewise, if the student will have to move into a residence hall to attend school A, but could have lived at home and attended school B, the better financial aid award from school A may not be better in the long run.

What should people consider when applying for student loans?

Financial aid administrators often see two extremes. There are those students who are afraid to take on any student loan debt, and those students who take on too much.

For the first group, I recommend looking at student loans as an investment in your future. If you take on student loan debt with a clear academic and professional goal in mind, with a realistic understanding of what careers in that field pay, it will usually pay off. For the student who is ambling through undergrad without real commitment to a major or career goals, student loan debt may be something to avoid. A gap year or lower cost institution may make more sense for those students. Statistically, the students most likely to default on their student loans are students who don't complete their degree programs, so the student’s focus and commitment are good things to assess when making a decision to borrow student loans.

For those students who take on too much debt, the question I wish they would ask themselves is, "What do I really need to get through the academic year?” Just because you have been offered the maximum amount of your student loan eligibility, doesn't mean you need all of it. Don’t just borrow the maximum -- instead, do the math to determine what you should borrow. Can you get by just borrowing to cover tuition and fees by living at home or finding a part-time job? If you need to borrow for housing and food, are you making the most economical choices to help avoid debt?

If you are paying for a pizza with a student loan refund, think about how much that pizza costs after the interest that will accrue over the 10 or 20 years. I'm not saying don't borrow, but I am saying be mindful of what you are funding with your student loans.

What programs or other steps would you recommend to anyone having trouble making their student loan payments?

No other financial vehicles offer the variety of repayment options that student loans offer: deferment, forbearance, income-based repayment, extended repayment, even some loan forgiveness programs. The problem is that when former students get behind on their loan payments, they are often afraid to contact their loan servicer. The loan servicers have a vested interest in helping you through the loan repayment process, so don't be afraid to call or contact them through their websites.

You can work out an arrangement with your loan servicer to pay a minimal amount, but it is worth it to not go into default on a student loan. I've seen so many students who were trying to return to school and couldn't because of the burden of their defaulted loans, so I recommend avoiding default at all costs.

What are the most common mistakes people make when financing their post-secondary education?

Students often do not do the following, and by doing so, experience higher student loan debt and increased chances of delinquency and default in repayment.

• Begin financially planning for college years before high school graduation.

• Maximize all of their free college funding options by researching and applying for grants, scholarships, veterans’ education benefits, exemptions and waivers, or by considering student employment.

• Budget their expenses in order to minimize their dependence upon student loan debt.

• Determine how much student loan debt they actually need before accepting the full amount offered to them.

• Fully understand the student loans they are receiving (in particular, their repayment terms).

What should people consider when applying for student loans?

Students should ask themselves the following questions before applying for student loans.

How much student loan debt do I actually need? The Estimated Cost of Attendance provided on a school’s financial aid award letter is helpful, but it’s just an estimate. Students actually need to breakdown their financial resources (financial aid, scholarships, wages, assistance from parents, etc.) and compare it against their expected expenses (tuition, fees, books, dorm/rent, meal plan/groceries/dining out, parking, etc.) in order to determine how much student loan debt they personally need. Otherwise, they may accept unnecessary loan funds which will, one way or another, be spent and ultimately owed back.

Which student loans are the best options for me? Direct Subsidized and Unsubsidized loans have low interest rates, do not begin repayment until 6 months after graduation (or falling below half-time enrollment), and have multiple repayment and forgiveness options for eligible borrowers. If students determine that they are not allowed to borrow enough in these loans to cover their needs (they have lower annual limits), then they need to ask their financial aid office which other types of loans are available to them which might be able to cover their remaining need.

Will I earn enough money after graduation to afford repaying these student loans? Not all degrees provide the same employment and income opportunities after graduation and so students should first determine the likelihood of being able to afford the amount of student loan debt they are considering applying for. TG’s Major Choices tool can help by estimating how much students earn in their first year after graduation and how much of those earnings may go toward student loan repayment.

What programs or other steps would you recommend to anyone having trouble making their student loan payments?

Studentaid.ed.gov provides a significant amount of information regarding various student loan repayment plans, as well as deferment and forbearance. Students who are struggling with student loan repayment, though, should immediately contact their servicer(s) and ask what options are specifically available to them as an individual. Students can use nslds.ed.gov to identify their student loan servicer(s) and how to contact them.

What are the most common mistakes people make when financing their post-secondary education?

When it comes to loan debt, I find what is missing is a long-term financial plan. Loans are borrowed on an annual basis, so often students don't know how much they need to borrow for their entire program. It's important to understand the total cost of your program, potential future earnings, and job market to determine a reasonable amount of loan to borrow.