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Read This Post BEFORE You Take on a $200,000 Student Loan

By JLP | November 30, 2010

In light of my recent posts, I thought I would take an opportunity to take a look at a student loan. The situation I looked at recently was a woman who owed $200,000 in student loans. What’s mind-boggling about that amount is that EVEN with no interest financing, her monthly payment would be…

Now, here’s that same loan with a 5% interest rate:

If you graduated from college with a $200,000 student loan, and you wanted to pay it back within 5 years, your annual payments would be over $45,000. If your goal is to pay it off in 10 years, your annual payments are around $25,000. That’s a lot of money at a time in your life when you don’t have a lot of money.

Of course there are variables in these numbers. The amount borrowed is pretty high at $200,000. Many college students will get away borrowing much less than that. Interest rates will also vary. It was my goal to give an estimate.

Every college student should take a good hard look at those two graphics BEFORE they accept a student loan. I’m planning more college-related posts in the future.

Topics: College Funding | 6 Comments »

6 Responses to “Read This Post BEFORE You Take on a $200,000 Student Loan”

  1. BG Says:
    November 30th, 2010 at 2:16 pm

    $200k is no joke. It is almost double my mortgage. I graduated with “only” $25k of student loan debt, nearly a tenth of what some people are doing today.

    There are vastly cheaper alternatives, like using public universities, community college for the first two years, etc.

    And lets face it: after you land your first job, nobody gives a hoot where you graduated from — because only experience matters at that point.

  2. Jack Says:
    November 30th, 2010 at 7:46 pm

    We have a fantastic community college system here in Northern Virginia. Do well, and you can transfer to one of the State four-year colleges.

  3. Stacey Says:
    December 1st, 2010 at 12:29 am

    Ditto in IL, Jack. It’s about the only thing we are currently doing well in our fair state…

    If each of my 3 sons chooses a community college for their 1st two years, life would be pretty darn good for them and for us. With what I have saved to date, plus what I will save in the next 11 years (when the last is 21) each could be able to escape without any debt. Now I have to change my husband’s mind…he thinks they have to go away for 4 years “to grow up.”

    Life is pretty good at home w/us. (Plus I’ll miss my cheap labor pool!) Even if one chooses to do it, it’ll save a boatload of money.

  4. JK Says:
    December 3rd, 2010 at 12:52 am

    “Every college student should take a good hard look at those two graphics BEFORE they accept a student loan.”

    And the corollary of that should be that the colleges and universities of all levels should be HONEST about what their graduates make on the open market. For many 22-year olds, going to law school or business school sounds like a financially-sound proposition b/c the school advertises 60-85k median starting salaries. Even after taxes, there’s plenty left over to pay back 2 or 3 years of loans over a 10-year period and still have enough to live comfortably.

    Of course, the starting salaries are a downright illusion in multiple respects. The median graduate makes far less than that, and many of the higher earners are spit out of the system after 3-5 years and forced to make due on considerably less.

    I’m all for holding students accountable, but ONLY if the students have FULL and ACCURATE information. Demanding less from our colleges and universities is being complicit in the bigger problem.

  5. JLP Says:
    December 3rd, 2010 at 1:04 am

    JK wrote:

    “I’m all for holding students accountable, but ONLY if the students have FULL and ACCURATE information.”

    I agree but I also think that that information is not that hard to find with some research.

  6. BG Says:
    December 21st, 2010 at 6:05 pm

    CNBC is airing a special tonight on student loans (9pm eastern). I heard a blurb about how there is now more outstanding student loan debt than credit card debt now.

    Likely will be available on this link after the airing: