Unsubsidized Student Loans

Unsubsidized Student Loans

6 min read


Student loan debt now totals over $1.5 trillion dollars, billions of dollars higher than it was two years ago. In fact, students graduating college today have an average student loan balance of nearly $40,000! But if you think this number is shocking, consider that many Americans graduate with hundreds of thousands of dollars in student loan debt – and tens of millions of people are struggling to repay these bills even though they’ve never missed a payment.

That means many young adults find themselves buried under mountains of debt … and many of them are just beginning their working lives.

In fact, according to a recent report from the New York Federal Reserve Bank, student loan debt already accounts for 41 percent of consumer credit, making student loans the fastest growing category of consumer debt. That makes sense considering that 43 percent of borrowers say they used high-interest private student loans to pay for school.

But despite these trends, few people understand how student loans work – and how much they cost each month.

To address this problem, we partnered with the Consumer Financial Protection Bureau (CFPB) to create our Unsubsidized Student Loan Calculator. We wanted to give consumers information about their own specific situation so they could make informed decisions about their finances.

This calculator uses actual data collected directly from the latest CFPB data to estimate how much you will owe on your federal student loans once you start repaying your monthly payments.

For example, let’s say that after graduation, you borrowed $25,000 at 5% interest per year—and let’s say your monthly payment is $150. If you paid back $8,500 in 10 years ($1,000 per year), your total repayment would be $21,051.65. After 20 years, your remaining principal balance would be $23,988.61. And if you were to take 30 years to pay off your student loans, your final payoff amount would be $26,145.58.

The calculator does not adjust for any potential future tax increases, so keep that in mind when using it. A good rule of thumb is to always assume that taxes go up before anything else, including interest rate changes or payments.

If you’re curious to know how long it will take to pay off your loans based on your specific circumstances, simply enter those numbers above and click calculate.

You’ll get a detailed breakdown of your estimated loan balance, the date you began repaying your loans, your actual interest rate, and how long it will take you to pay back your loans. You’ll also receive tips and suggestions on ways you can save money while still maintaining a solid standard of living.

Unsubsidized Student Loans

By: Derek O’Brien

A student loan is a type of debt incurred by students enrolled in postsecondary education institutions (including universities, community colleges, vocational schools, etc.) who borrow money from private banks and lending companies to finance their education. The government does not directly provide funds to cover educational expenses. Instead, students and their families often receive loans from financial institutions at interest rates that vary depending on creditworthiness. Students are often encouraged to take out loans in order to pay for college tuition costs. In many cases, they are unable to repay them, end up defaulting on them and/or taking out even larger amounts of debt. These debts can have negative consequences for borrowers because defaults incur fees and penalties that further increase the amount owed. A student loan is viewed differently than other types of consumer debt because the borrower’s income is considered taxable. Because of this, federal law bars tax-exempt lenders from profiting off student loans.

The total outstanding student loan balance increased from $89 billion in 2006 to over $1 trillion in 2011, and now exceeds $1.5 trillion. More than half of undergraduate students carry some sort of student loan debt, and recent research indicates that student loan debt may affect student persistence and graduation rate. As of September 2015, 44 percent of Americans under age 30 had either no savings or were carrying subprime credit card debt, while 46 percent had no retirement savings. Student loan debt was the primary cause of household debt in 2014, accounting for 47% of total household debt.

Student loan debt can be expensive: The average monthly payment for a graduate loan is about $300, compared with $67 for a car loan or $47 for a home mortgage. And a recent study found that the median annual salary for graduates who took out loans is $30,000 less than those without any debt—even after adjusting for inflation.

According to the Federal Reserve Bank of New York, the average loan amount outstanding among households headed by someone between ages 25 and 34 rose from $5,900 in 2004 to $17,400 in 2012. By 2013, more than 10 million people aged 18–34 carried some level of student debt. Among households headed by those ages 35–44, the number jumped from 4.4 million in 2007 to 6.8 million in 2013. By 2013, 39 percent of U.S. adults under 65 held student debt, up from 26 percent in 2007. Student debt levels could balloon even further if current trends continue. If nothing changes, the U.S. Department of Education predicts that the percentage of persons owing student loans will nearly double between 2010 and 2020, reaching 43 million people.

The government offers several programs designed to help ease the burden of student loans. One program, called Income Contingent Repayment (ICR), caps payments at 15 percent of discretionary income and forgives remaining balances after 20 years provided borrowers make 120 qualifying payments. Another program, called Pay As You Earn (PAYE), makes fixed monthly payments based on income.

Unsubsidized student loans have been around since the early 1800’s. However, many people don’t know about them, how they work, or what they’re really costing students across the country.

Unsubsidized Student Loans

How much money do students spend on their student loans? According to CNBC’s latest report, the average college graduate owes around $37,000 after graduation. But what about those who don’t have access to a four-year degree? How does that affect them? In 2017, we looked at the debt load for low-income borrowers, and today we’re going to take a look at what they owe, according to the Department of Education.

Student Loan Debt

For many people, a bachelor’s degree is necessary in order to get a good job. However, not everyone has enough money to pay for school without taking out loans. The government offers financial aid — called federal student loans — to help cover tuition costs. These loans can carry high interest rates, and students are expected to start paying back their loans once they begin earning more than about $25,000 per year.

In 2017, the department reported that outstanding student loan balances were up about $8 billion. That amounts to nearly $33,000 per borrower.

What Does Paying Off Your Loan Mean?

The difference between having a lot of debt and being able to afford to make payments is quite stark. A 2016 study showed that if someone borrows $60,000 to attend college, only 12 percent would be able to make a payment each month without any kind of assistance. If that person borrows $200,000, however, that number jumps to 80 percent.

Unfortunately, student loan borrowers are often left with burdensome repayment plans. While some may be able to manage a plan that makes monthly payments, others are forced to deal with higher interest rates and longer repayment terms.

As we mentioned earlier, student loans tend to be tied to income levels. But the loans aren’t evenly distributed, either. Black and Hispanic borrowers had larger loan balances than white borrowers, even though black and Hispanic borrowers earned less than white borrowers did.

So how much do college grads actually owe?

The average amount owed by undergraduate borrowers was $29,400 in 2012, and the median was $17,500. That means that half of borrowers had lower balances and half had higher balances.

Borrowers who took out private loans generally carried larger debts than public ones. Private loans averaged $40,000, while public loans averaged $26,000.

There’s no real way to know just how big the problem is until now. Because the government doesn’t track data outside of aggregate numbers, analysts have to estimate how many borrowers are facing significant debt burdens.

According to the National Center for Education Statistics (NCES), there are currently about 6 million borrowers with a total debt burden of over $150 billion. That means the average borrower is carrying over $27,000 in debt; the median borrower carries $15,100 in debt.

Of course, the more debt a student takes on, the harder it is to repay. When comparing borrowers across groups, it becomes clear that college graduates are significantly burdened by their student loans.

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