student loans?

Question

how does a student loan work
how long do you usually have to pay it off,
and what are the payments usually?

Answer 1

Don't listen to these people...
Student loans are a great investment in your future, because the interest rate you have to pay is LOW (sometimes even lower than the rate of inflation) and the interest is tax deductable (and you may even get a tax CREDIT.) It's one of the best debts to have. But that said, it's still a debt.

There are three kinds of student loans -- the first is the "subsidized stafford loan," that means you get money, you have to pay it off, but you don't have to pay any interest while you're still in school. The second kind is a "unsubdisized stafford loan," these are loans like the unsubsidized, but you DO get charged interest while you're still in school. The third kind are private loans under various names. These interest rates are not so good, and you're dealing with a private lender instead of the federal government.

Once you're done with school you can "consolidate" all of your loans into one debt with a lower, fixed interest rate.
Most student loans are paid off in 10 years (although you can get longer payment schedules if you can't afford a 10 year repayment plan right away).

For example, if you have $40,000 in student loans, and they're at a 3% interest rate (low, I know, but mine's even lower because I consolidated when interest rates were really low... and the Dems are lowering student loan rates as we speak) you will pay $386 per month for $120 months, or $46,320 (not double or triple like you do with cars or credit card debts or the like). Plus most of that interest is deductable, provided you make under $80,000 a year or so when you get out of college.

And staying in school longer to not have debt is a bad idea.
Let's say you can make $15,000 a year part-time in school (that's $15 per hour working 20 hours per week... decent pay for part-time work without a college degree), but because of that you have to stay in school an extra 2 years. The average salary of a person with a college degree is $43,159.
By staying in college, you lose $56,318 of before-tax income ($43,000 x2 years, minus the $30,000 you would have made at the part-time job in college). Compare that with the $6320 in interset you'd pay over 10 years on a student loan. Which makes more sense!?!?! Even if the interest were triple, you'd still be making nearly 3 times more money in those two years. PLUS you get to deduct interest payments from your taxes.

More of what you need is at the government's student loan website:
http://studentaid.ed.gov/PORTALSWebApp/students/english/index.jsp

Of course, if you can get scholarships, grants, or work-study at your school, those are preferrable (because you don't have to pay them back at all). But student loans are not the terror that some people make them out to be.

Answer 2

If you don't have to get them then don't. I'd suggest working full time and going to school part time if you have to. Yes, it drags college out to about 7 or so years... but it would be PAID FOR. Where as, a student loan, you will pay on for anywhere from 15-20 years, plus interest.

To give you an example, let's say you have a $40,000 loan, you are looking at about $275/mo payments (that will increase over time mind you) for about 20 years. By the time you pay it off, that $40K loan will have cost you about $95K.

If you absolutely must take out student loans, then try to keep it under $10K. Oh, and keep in mind, student loans aren't covered if you ever have to file bankruptcy, so you would still have to pay them.

Answer 3

good Lord! dont do it if you don't have to!!!! My b/f will be paying his off for the next 15 years(literally) i think he said. He pays @200 a month. Try to get grants or something