How Much Will Extended Student Loan Repayment Terms Cost You?
It’s a fact that obtaining a college degree or vocational training is necessary and that the cost is not cheap.
Education is so expensive that the majority of students must rely on student loans. Borrowing might be unavoidable but worth the expense, especially if it means your family can afford a more comfortable lifestyle.
We may need our student loan, and we can’t control the interest rate the government charges, but we can repay our loans in the shortest amount of time. This blog will help you understand how quickly paying off your loan can help you control your total education costs and your monthly budget.
What Is the Average Cost of College?
BigFuture.CollegeBoard.org reports the average cost in the United States for 4-year degrees were between $38,000 and $130,000.
For 4-year public colleges, if you live in-state, you are only borrowing what sounds like a reasonable amount of $9,400 per year but you must take into account that the loan principal will add up to be about $38,000 by the time you graduate and this does not include interest.
How Much Does Interest On Student Loans Cost?
To keep things simple, we used the average interest rate at this time of 6.8% on student loans. 6.8% does not seem unreasonable or very expensive, but it can be costly.
To give you a better idea of how much that tiny percentage of 6.8% costs over time, this chart uses repayment time frames of 10, 15 or 20 years rather than doing examples with every possible repayment option.
Traditional dependent students can qualify for a maximum of $31,000 undergraduate federal student loans. Independent students aggregate undergraduate loan limit is $57,500. With these examples, to finance the total needed for school, you would need both federal and private loans to cover the cost of education. Private loans and federal loans will have different interest rates and with some rates over 14 %. (See Nerd Wallet for private loan example rates)
$38,000 Average Tuition at Public College (in-state)
- 10 years pays interest of $14,000
- 15 years pays interest of $36,000 which is $2,000 LESS than the TOTAL cost of your education
- 20 years pays interest of $49,000 which MORE THAN DOUBLES the total cost of your education
Savings Calculations on Quicker Repayment
- Pay in 15 years versus 20 years, and save $13,000
- Pay in 10 years versus 15 years, and save $22,000
- Pay in 10 years versus 20 years, and save $35,000
$96,000 Average Tuition at Public College (out-of-state)
- 10 years pays interest of $23,000
- 15 years pays interest of $57,000
- 20 years pays interest of $77,000
Savings Calculations on Quicker Repayment
- Pay in 15 years versus 20 years, and save $20,000
- Pay in 10 years versus 15 years, and save $34,000
- Pay in 10 years versus 20 years, and save $54,000
$130,000 Average Tuition at a Private College
- 10 years pays interest of $31,000
- 15 years pays interest of $80,000
- 20 years pays interest of $108,000
Savings Calculations on Quicker Repayment
- Pay in 15 years versus 20 years, and save $28,000
- Pay in 10 years versus 15 years, and save $49,000
- Pay in 10 years versus 20 years, and save $77,000
Education is an essential part of achieving your dreams. It’s always a wise choice is to utilize any scholarships and grants you are awarded towards your educational costs before deciding on how much to borrow in student loans.
Though the figures we have shared with you in this post are examples, our goal has been to show you how important it is to borrow the minimum and that paying off your loan in the shortest amount of time possible could save you tens of thousands of dollars!
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