College tuition continues to increase every year! I cringe to think how much it will be when our youngest goes to college. The reality for most families includes getting student loans to finance college. The harsh reality of borrowing via student loans hits when the excitement of graduation comes to an end in four short years.
Student loan lenders will charge interest on whatever amount you borrow. Depending on your rate, you will pay back much more than you borrow.
To put this in perspective, the average student loan debt in 2016 was $37,172 and let’s say you have a Stafford student loan with an interest rate of 6.8%. If you pay around $280.00 monthly toward your loan, you will have paid $30,927 in interest alone plus the $37,172 you actually received. That is almost 50% more than you received and it would take you twenty years to pay it.
Payback with Interest
Let’s look at some different amounts: $25,000 would take around $150-200 a month and you’d need a salary of $30,000 to $40,000 to repay it off in twenty years.
$50,000 would take around $300-390 a month and you’d need a salary of $40,000 to $50,000 to pay it off in twenty plus years. This is the equivalent to a car payment monthly.
$100,000 would take around $600-775 a month and you’d need a salary of $80,000 to $90,000 to pay it off in twenty plus years. This is the equivalent to rent in the Montgomery area.
This is why students must keep in perspective the career field they are choosing to enter versus the amount of money they are borrowing! A teacher with a bachelor degree will not earn enough to repay a student loan of $100,000!
You may have heard that some career fields allow your student loan to be forgiven. However, the Public Service Loan Forgiveness (PSLF) program may qualify you for loan forgiveness if you work full-time for a qualifying employer such as a non-profit, public service or government organization. The catch is that you have to make 120 monthly payments under a qualifying repayment plan before you will qualify for forgiveness.
If we can assist you with your finances, please give one of our Bond and Botes offices a call for a free consultation.
Gail Hughes Donaldson is a Managing Partner of the Bond & Botes Law Offices in Montgomery and Opelika, Alabama. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Thomas Goode Jones School of Law. She’s been helping families work through the bankruptcy process since she started with Bond & Botes back in 1993 as a paralegal. Read her full bio here.