The question that Cress and Little ask says "If you take out a college loan of $5,000 per year for 4 years, how long would it take to pay it off? research government subsidized loans, non-subsidized loans, and bank loans. What are current interest rates? how are payments and interest calculated?". In short, this question is asking how long would it take to pay off $20,000 using the 3 different types of loans. This all depends on interest rates and what a reasonable amount would be based off your income.
If you're using a government subsidized loan, the federal government will pay off your interest while you are still in school, meaning that you will be responsible for paying the interest only after you graduate.
If you're using a government subsidized loan, the federal government will pay off your interest while you are still in school, meaning that you will be responsible for paying the interest only after you graduate.
Here is a Loan Calculator. Keep in mind interest only kicks in once you are out of college. using a 5% interest rate, which is the current subsidized loan rate, you would pay $212.13 every month over the course of 120 months, or 10 years. As of 2013, the average salary a person makes straight out of grad school is $45,478, so this is a reasonable rate. |
The next option is a Non-subsidized loan. The interest rate is lower than that of the federal subsidized loan, but the non-subsidized loan collects interest while you are in college. Everyone applies for a non-subsidized loan, as opposed to the subsidized loan, where not everyone applies, but the college you go to will cap how much money you can borrow in a non-subsidized loan.
Here is the Loan Calculator for a non-subsidized loan. Since you have to pay 4.25% (current rate) in interest for the 4 years you are in college, the total loan amount gets readjusted to $22,289.87. over 10 years (only 6 years after college), you will pay $228.32/mo.
The third option is a private bank loan. This is usually the alternative to the federal subsidized loan if you don't apply. This type of loan gains interest while you are in college, and the rate is significantly higher; about 7.5%.
With the 7.5% interest rate accumulating through college, your final amount comes out to $24,209.50. after 10 years, you will be paying $24,209.50 monthly.
In conclusion, if you can apply for a government subsidized loan, go for it. Thanks for reading.