Loan Repayment Calculator
Most people dream of attending college and graduating with a degree. Unfortunately, college tuition is not cheap, and tuition costs continue to increase, causing many to rely on student loans for tuition assistance. According to a study conducted by the Institute for Higher Education Policy, 26 percent of student loan borrowers go into delinquency within the first five years of repayment. In addition, there are many examples in the media of college graduates who are unable to repay their massive student loans.
Defaulting on a student loan is a serious offense. Student loans cannot be discharged by declaring bankruptcy. Furthermore, a borrower’s wages can be garnished, your loan can be turned over to collection agencies, and the ability to secure a mortgage or an auto loan can be negatively affected.
Therefore, the best way to make sure that you can repay a student loan is to carefully look at how much debt you can afford and how long you will take to repay that debt using a loan repayment calculator. Before you can use a loan repayment calculator, you must know the interest rate of your loan, the amount of your loan, and the length of the loan.
Advantages of a Loan Repayment Calculator
There are many advantages to using a loan repayment calculator. Student loan repayment calculators allow you to see how your money is being spent and will display the benefits of paying more than the monthly payment. Most important of all, you will truly know if you can afford the loan. A sample student loan repayment calculator is available at FinAid.
How Much Debt Can You Handle?
Some experts recommend that your student loan repayments should not exceed 10 to 15 percent of your gross income while others recommend 8 to 10 percent. For parents, student loan repayment debt should not exceed 35 to 37 percent of your gross income. You should also research how much money your future degree will earn you upon graduation. To see your future salary for you degree, visit Career Ship.
Loan Repayment Options
Student loan repayment options come in four categories: standard, extended, graduated, and income-contingent. Standard repayment loans allow you to repay a loan over a 10 year period. Payments are monthly and equally split over that period. Extended repayment allows a borrower to extend repayment for as much as 25 years. Graduated repayment allows your payments to gradually increase every two years. This payment plan is based on the assumption that your income will also increase. Income-contingent repayment is a payment option that is based on income and allows the borrower to take a longer time to pay off the loan. Other repayment options include consolidation, forbearance, and deferment.
Another option for erasing student loan debt is loan forgiveness. The federal government allows for all or part or a loan to be forgiven if certain conditions are met. Some of the loan forgiveness options available are 15% cancellation of student loans for Peace Corps service, $4,725 for student loan debt for AmeriCorps service, 15% loan forgiveness for first and second year teachers who teach in a disadvantaged area (plus 20% for the third and fourth year and 30% for the fifth year). In addition, students who enroll in the Army National Guard are eligible for up to $10,000 for student loan repayment.
If you are having trouble repaying your loan, communicate with your lender or financial aid office as soon as possible. Your lender and your financial aid office are specifically trained to help borrowers avoid repayment issues. It is better to request a forbearance than to allow your loans to go into delinquency. Allowing your loans to go into delinquency can negatively affect your income and your life for many years to come and can delay many of your future dreams.