Student loans

[Effigycraft]

Currently I take out about $12K a year to fund my education which interest accrues at 9% while I'm in school and for the repayment process (which can be up to 20 years).

My parents have recently brought into view a local foundation that would offer me the same amount, with no interest during the school, 5% interest after graduation, but a 4 year repayment process.

Would the foundation's loans be more appropriate to take or will the 4 year repayment process be too pressuring when I graduate? I will be majoring in Accounting so a job won't be the hardest thing to come by.

 

[Admires]

I would say the 4 year process just because no interest accumulates during the 4 years you're at school. Also, a job in accounting, like you said, won't be hard to come by, and even thought it could be a bit more pressuring during those 4 years, I feel like in the long run you would be saving a lot more money and pressure.

 

So if we do the mathematics behind it we'll simply the entire thing. So lets say you're taking out 12k yearly for 4 years but 0 interest at that time. So you've accumulated a debt of 48k after 4 years with 0 interest. So we treat -48k as your present worth. At an interest rate of 5% compounding yearly (it's likely to be monthly but this just illustrates it) you'll have to make payments each year of 13536.48 dollars per year. In comparison with option 2 after 4 years you owe 54877.2 dollars, if you want to pay this back over the course of 20 years at 9% interest compounded yearly you'll be paying 6011.8 dollars per year but you'll pay a total well over 50k more due to interest. If you want to factor in inflation and such it becomes another matter but comparing it just like this shows you're paying a ton more the lengthier your payback period.

 

[Admires]

So if we do the mathematics behind it we'll simply the entire thing. So lets say you're taking out 12k yearly for 4 years but 0 interest at that time. So you've accumulated a debt of 48k after 4 years with 0 interest. So we treat -48k as your present worth. At an interest rate of 5% compounding yearly (it's likely to be monthly but this just illustrates it) you'll have to make payments each year of 13536.48 dollars per year. In comparison with option 2 after 4 years you owe 54877.2 dollars, if you want to pay this back over the course of 20 years at 9% interest compounded yearly you'll be paying 6011.8 dollars per year but you'll pay a total well over 50k more due to interest. If you want to factor in inflation and such it becomes another matter but comparing it just like this shows you're paying a ton more the lengthier your payback period.

Nice job on the math, I was too lazy. I just estimated and figured that in the long run, the four year plan is better. Nice work.

 

[Saint Grimm]

Do some Google research... A job in accounting is CONSIDERED not hard to find... But make sure there's plenty of places in your area... It's gonna be real hard to come by if 10 people need accountants, and there's 100 accountants graduating the same time you are.

I'm not sure what an accountant makes... MAKE DAMN SURE you'd make enough to pay off that loan... And just to be safe, only add up 3 years of pay instead of 4, and take out EXTRA taxes - It's best for the estimate to be lower than to expect to get more money than you will. (the 3 years is just in case you can't get a job within the first year)

 

[Starry]

Do some Google research... A job in accounting is CONSIDERED not hard to find... But make sure there's plenty of places in your area... It's gonna be real hard to come by if 10 people need accountants, and there's 100 accountants graduating the same time you are.

I'm not sure what an accountant makes... MAKE DAMN SURE you'd make enough to pay off that loan... And just to be safe, only add up 3 years of pay instead of 4, and take out EXTRA taxes - It's best for the estimate to be lower than to expect to get more money than you will. (the 3 years is just in case you can't get a job within the first year)

This man is smart.