The goal of this college calculator is to share the reality of how student loans impact our financial lives after college. Keeping it plain, America has inflated the price of education in such an absurd way that loans are unavoidable for most college students. This is why our goal is not to deter students from taking out loans, but to understand what mistakes are avoidable when it comes to taking out loans.
You may notice that the monthly loan payback amount is a bit higher than you expected. The number that is given from the calculator is probably very different than what you’ve heard from people you know who are currently paying off their student loans. Our older siblings or cousins could be paying as low as $100/month, slowly chipping away at their student loan debt. What we want students to understand is that paying the minimum student loan payment may get the job done in the short term, but the long-term effects are extreme.
Let’s put it into numbers. Say you end college with $50,000 in student loan debt. If you choose to pay a low monthly payment of $175/month, with a 3.7% interest rate, it will take 57 years and 8 months to pay off that loan and the $70,000 accrued in interest. If you choose to pay $286/month, that same $50,000 loan could take 21 years to pay off and would only add $21,000 in interest. That extra sacrifice makes a huge difference in the long run. The average loan repayment period is 21 years, so you’ll notice the calculator also defaults to that length of time.
You should also be aware of options like loan consolidation, which is specifically useful for those who take out both private and federal loans. Oftentimes with loan consolidation, you’ll end up with a lower interest rate and you’ll only have one bill to pay monthly instead of multiple bills with a bunch of different due dates and interest rates. Overall, the Sleeping Giant team is working to ensure that students are aware of the decisions that could impact their experience with student loan payback.