Student Loan Budgeting Dawn Hughes Johnson

Hypothesis Most people do not have several thousands of dollars to pay for college tuition and expenses out of pocket. It is almost always necessary to borrow for some type of lender to pay for their education. I will need to determine the type of loan acquired to finance tuition, fees, and other expenses. The type of loan will determine the interest rate and how repayment is set up. I will be able to find information about federal student aid loans at MYFedLoan.org. I can find other information about student loans through the Department of Education. An important question to ask will be if the lender or financial institution has taken steps to ensure the borrower understands the terms of their loan to pay for their education and the full responsibility of repayment.

Student loans are a complicated matter across the board    Student loans are a complicated matter across the board. I focused on federal student aid because generally that is the first option to start with when trying to secure a loan for educational purposes. The rates for the different types of student aid are at 3.76% for direct subsidized and unsubsidized loans (Dept. of Education, 2017, para 4). The Department of Education has several resources for people looking to borrow money to pay for school. It has detailed explanations about how loans work from beginning to end and how to manage borrowing and repayment including the benefits of reducing the payback amount by paying interest while you are still in school (MyFedLoan, 2017, p.1). 

It is very important to be informed about what you are getting yourself into when borrowing money to pay for anything but especially in the large amount needed to cover the cost of education. There have been big increases in the amount of people who are borrowing to pay for school and there is a consequence of high financial stress in the long term because of it (Hershein & Hollenback, 2015, p. 287).  With a federal loan there are some options to help manage repayment through income based repayment (Hershein & Hollenback, 2015, p. 416). The consequences of not paying back student loans to the federal government can follow you for the rest of your life. Ruining your credit, wage garnishments, and limiting the type of job you may be able to get are just a few of the areas that can be impacted (Hershein & Hollenback, 2015, p. 381).

Medical Reimbursement and Coding Associate Degree Tuition and fees = $34,380 Books and supplies = $ 3,600 Total Degree Cost = $ 37,980

#1 #2 LOAN AMORTIZATION SCHEDULE LOAN AMORTIZATION SCHEDULE   LOAN SUMMARY Loan amount $37,980.00 Scheduled payment $380.21 Annual interest rate 3.76% Scheduled number of payments 120 Loan period in years 10 Actual number of payments 113 Number of payments per year 12 Total early payments $2,240.00 Start date of loan 2/15/2017 Total interest $7,165.60 Optional extra payments $20.00 LENDER NAME Federal Student Aid #2 LOAN AMORTIZATION SCHEDULE   LOAN SUMMARY Loan amount $37,980.00 Scheduled payment $225.38 Annual interest rate 3.76% Scheduled number of payments 240 Loan period in years 20 Actual number of payments 213 Number of payments per year 12 Total early payments $4,240.00 Start date of loan 2/15/2017 Total interest $14,065.86 Optional extra payments $20.00 LENDER NAME Federal Student Aid

Conclusions: The 1st loan amortization schedule shows that making the monthly payment over 10 years with an extra $20 added to the required amount makes for a significant payment due each month. A $400 monthly payment is a lot for someone who will be looking at an entry level starting salary. The 2nd loan amortization schedule shows a much more manageable monthly payment with twice as long to pay the loan back. This also doubles the amount of interest that would be payed to the lender. The information leads me to believe that students may not realize the long term implications of having to borrow so much money to further their education. Lenders of all types of loans need to take steps to ensure the borrower comprehends the real life long term impact of borrowing.

References Department of Education Student Aid. (2017). Interest Rates. Retrieved from https://studentaid.ed.gov/sa/types/loans/interest-rates Hershein, B., Hollenback, K.M. (2015). Student Loans and the Dynamics of Debt. W.E. Upjohn Institue for Employment Retrieved from eds.a.ebscohost.com.libproxy.bryantstratton.edu:2048/eds/ebookveiwer/ebook/ZTAwMHhuYV9fOTcwMjUyX 19BTg2?sid=d36e2388-a9c8-4278-9545-1864ee2f448d@sessionmgr4008&vid3&format=EB&rid=5 MyFedLoan.gov. (2017). LifeCycle. Retrieved from https://myfedloan.gov.org/borrowers/student-loans-101/lifecycle