2. How a Financial Calculator Can Help Teens Make Deci$ion$ about Student Loans 2002

3. Marsha A. Goetting Ph.D., CFP ®, CFCS Professor & Extension Family Economics Specialist Department of Agricultural Economics & Economics Department of Agricultural Economics & Economics

4. Have you wondered? What the monthly payments would be on a student loan after graduation?What the monthly payments would be on a student loan after graduation?

5. Have you wondered? How much you would save in interest charges if you increased your payment?How much you would save in interest charges if you increased your payment?

6. Workshop You are going to learn how to solve these & similar problems quickly & easily by using a financial calculatorYou are going to learn how to solve these & similar problems quickly & easily by using a financial calculator

7. Financial Calculator Texas Instruments BA-35 Solar Business AnalystTexas Instruments BA-35 Solar Business Analyst No longer available No longer available

8. Introduction Getting Acquainted with your Financial CalculatorGetting Acquainted with your Financial Calculator

9. Turn on MODE CE/C 2ndCPT AC/ON N X 12 % i PMTPV FV 12  12 Fix Fix

10. Financial Mode Fin 0. If FIN is not lower left cornerIf FIN is not lower left corner PressPress MODE AC/ONCPT

11. Decimal Function FIN 0.00 PressPress 2nd 2nd Fix CPT2

12. Clearing Screen/Display Press key once Press key once n Clears Display n Corrects Incorrect Entries n Clears word “Error” CE/C

13. Clearing Financial Registers Press keyPress key n Clears numbers in registers & display N%iPVPMTFV CE/C2nd CMR

14. Finance Keys N % i PMT Number of Periods Number of Periods Interest Rate Interest Rate Payment Amount Payment Amount

15. Finance Keys PV FV Present Value Present Value Future Value Future Value Compute key Compute key CPT

16. Student Loans

17. CalculateCalculate PaymentsPayments Interest paidInterest paid

18. Student Loans Bernie’s Loan $23,000Bernie’s Loan $23,000 APR 8.25%APR 8.25% 20 years pay20 years pay

19. Student Loan $23,000 Clear registers 2nd CE/C CE/CClear registers 2nd CE/C CE/C Loan amount 23,000 PVLoan amount 23,000 PV Periods 20 x 12 = 240 NPeriods 20 x 12 = 240 N % Rate 8.25 12 = 0.69 %i% Rate 8.25  12 = 0.69 %i CPT PMT 195.98 (don’t clear)CPT PMT 195.98 (don’t clear)

20. Interest Paid $195.98 payment $195.98 payment x 240 # months x 240 # months $47,034.02 paid - 23,000.00 loan

21. Interest Paid $24,034.02 interest paid by Bernie over 20 years

22. Student Loans John $19,000John $19,000 APR 8.25%APR 8.25% 15 year loan15 year loan

23. Student Loans $19,000 Clear registers 2nd CE/C CE/CClear registers 2nd CE/C CE/C Loan Amount 19,000 PVLoan Amount 19,000 PV Periods 15 x 12 = 180 NPeriods 15 x 12 = 180 N % Rate 8.25 12 = 0.69 %i% Rate 8.25  12 = 0.69 %i CPT PMT 184.33 (don’t clear) CPT PMT 184.33 (don’t clear)

24. Interest Paid $184.33 payment $184.33 payment x 180 # of periods x 180 # of periods $33,178.80 paid - 19,000.00 loan amount

25. Interest Paid $14,178.80 interest paid by John over 15 years$14,178.80 interest paid by John over 15 years

26. Summary CalculatedCalculated PaymentsPayments Interest paidInterest paid

27. Student Loan Payment knownPayment known How long to pay off debt?How long to pay off debt?

28. Student Loans Red’s Loan $23,965Red’s Loan $23,965 APR 8.25%APR 8.25% $250 payments$250 payments

29. Student Loan Clear registers 2nd CE/C CE/CClear registers 2nd CE/C CE/C Loan Amount 23,965 PVLoan Amount 23,965 PV Payment 250 PMTPayment 250 PMT % Rate 8.25 12 = 0.69 %i% Rate 8.25  12 = 0.69 %i CPT N (months) 157.04 CPT N (months) 157.04 12 = 13.09 years ( don’t clear)  12 = 13.09 years ( don’t clear) 

30. Compute interest paid Press again:Press again: CPT N 157.04CPT N 157.04 # of monthly payments # of monthly payments

31. Interest Paid 157.04 months 157.04 months x $250 payments x $250 payments $ 39,260.99 paid back - 23,965.00 loan amount

32. Interest Paid $15,295.99 interest paid by Red over 13.09 years$15,295.99 interest paid by Red over 13.09 years

33. What if ??? Increase payment from $250 to $350 ….just change the payment amountIncrease payment from $250 to $350 ….just change the payment amount PMT

34. Student Loan Clear registers 2nd CE/C CE/CClear registers 2nd CE/C CE/C Loan Amount 23,965 PVLoan Amount 23,965 PV Payment 350 PMTPayment 350 PMT % Rate 8.25 12 = 0.69 %i% Rate 8.25  12 = 0.69 %i CPT N (months) 92.87 CPT N (months) 92.87 12 = 7.74 years (don’t clear)  12 = 7.74 years (don’t clear) 

35. Interest Paid 92.87 months 92.87 months x $350 payments x $350 payments $ 32,503.53 paid back - 23,965.00 loan amount

36. Interest Paid $8,538.53 interest paid by Red over 7.74 years$8,538.53 interest paid by Red over 7.74 years

37. The difference $250 13.09 yrs = $15,295.99$250 13.09 yrs = $15,295.99 $350 7.74 yrs = $ 8,538.53$350 7.74 yrs = $ 8,538.53 $6,757.46

38. Central Idea By increasing the amount of paymentBy increasing the amount of payment A loan can be paid off sooner You pay less INTERE$T

39. Student Loans Troy’s Loan $34,000Troy’s Loan $34,000 APR 8.25%APR 8.25% $300 payments$300 payments

40. Student Loan Clear registers 2nd CE/C CE/CClear registers 2nd CE/C CE/C Loan Amount 34,000 PVLoan Amount 34,000 PV Payment 300 PMTPayment 300 PMT % Rate 8.25 12 = 0.69 %i% Rate 8.25  12 = 0.69 %i CPT N (months) 220.44 CPT N (months) 220.44  12 = 18.37 years (don’t clear)  12 = 18.37 years (don’t clear) 

41. Compute interest paid Press again:Press again: CPT N 220.44CPT N 220.44 # of monthly payments # of monthly payments

42. Interest Paid 220.44 months 220.44 months x $300 payments x $300 payments $ 66,132.34 paid back - 34,000.00 loan

43. Interest Paid $32,132.34 interest paid by Troy over 18.37 years$32,132.34 interest paid by Troy over 18.37 years

44. Summary Student Loan Payment knownStudent Loan Payment known Computed how long to pay off debt Interest paid

45. How a Financial Calculator Can Help Teens Make Deci$ion$ about Student Loans 2002