I know it's cool to blame the education system on kids failure to grasp the concepts of interest and to understand simple vs. compound and mortgages and amortization schedules. Give the current students a break. I'm 68, Catholic school grad (meaning math heavy) and I was just looking over my kids loan porfolio and i'm just blown away at how much my kids owe, and I"m just a concerned father looking out for the interests of my children. Life was easier in those heddy Eisenhower days of "National Defense Students Loan" program. I think it was a 3% SUBSIDIZED program. Now, my kid racked up those unsubsidized loan of about 160K. (granted, he's going to be taking over my practice, but still....) Your video has done more to educated me in 8 minutes as one fine primer toward getting an old duffer off the couch and now educating my son of how to clean up this debt problem as soon as possible. I wasn't there to advise him when these loans were taken out, but time for old Popsy to grab all my kids by their collective stacking swivels (look it up) and have the "come to Jesus meeting" and put this stuff to rest. Thanks for an excellent excellent video!
This is a nice simplified version of what is happening but it does not take into account the monthly accrue that the loan is accumulating will it fluctuates. The bottom line is to start paying off your loans as soon as possible and in amounts as large as you can budget for. Thanks for the informative video
It is so sweet of you to reply that quick. My daughter will be a freshman this year , and we do not have money to help her, so we did apply a parent through FAFSA
Excellent explanation on this, can you do something that shows the calculations for in-school deferment accrued interests which also capitalizes for students planning to start bachelors and continue on till finishing PhD?
I just starting taking personal finance seriously this year. I use reddit /r personal finance and Dave Ramsey for some of the basics. It is a fun thing to pick up!
Thanks for explaining it!! So that's the interest rate but what is the "loan fee"? and how's that calculated? Unsubsidized loan for graduate school right now, the interest rate is 4.30% and the loan fee is 1.059%. Do you know how the loan fee is calculated? Please let me know! Thank you!
I only looked at the simple case of compound interest, excluding the loan fee. The purpose of the video was to give an easy approach to understanding the basics of student loans. I am not sure about how loan fees are calculated , but I imagine it is just another way for loan companies to make more money off of you! Good luck with your loans! My wife and I got rid of ours by living cheap and paying them back as fast as possible.
For graduate degrees, the interest rate averages 6.05%. I broke down a CD and used that for my education instead. No loans. But my Bachelor's degree was free by winning scholarships. Apparently colleges hand those out like candy for students with high-end grades.
It is important to understand, that it unlikely, you will pay the full amount of 44k, upon graduation. Therefore, the interest continues to compound. You need to continue your formula, for the amount of YEARS and INTEREST, it will take, to pay it off. Ten years is a realistic and easy number to use.... Now see how much that loan really cost you.
Also, when you make a payment, it gets applied to the interest FIRST. Only a small goes to reducing your principle. That is why it is very impirtant, to make more than your minimum payment.
I have both subsidized and unsubsidized loans. I am not expected to begin paying towards my student loans until year 2020. On my unsubsidized loan, I have been paying towards the interest rate. Should I begin to pay off my student loans while I am currently in school?
I work with student loans and your not taking capitalization into account. 10k borrowed as a freshman interest accrues then 6 months after graduation the interest adds to the principal amount. Making a new principal amount then the interest rate is calculated on the new amount. Example (numbers won't work out but it's an example): 10k loan 5% interest. Let's say after 4.5 years it accrues 3k interest. After the 6months grace period. The 3k adds to 10k =13k then the 5% interest is based on the new 13k. Then you start making payments. 10 loan will be about 30k when when done
Excellent. However, I always use approximation for interest or cost problems; so rounding off the interest rate to 4%, that’s about $400 per year for every 10,000 borrowed. Thus, 4 yrs x 400= 1600 in accrued interest, for year 1 loan. Very easy to estimate all, 3 yrs x400= 1200 for year2 and so on. The numbers are very close to the actual totals and give a quick answer to what it will cost in accumulated interest. This does not account for the fact that you will also owe interest on any interest accrued as it capitalizes (is added) to the balance owed each year. This is also how credit cards work. So, as others have noted, if you are working, try to pay off all interest every year so your balance at graduation equals what you actually borrowed, not interest on interest.
Hi Erika, for subsidized loans, just take the lump sum of your student debt and start calculating interest the right after you graduate. Someone that borrows 80k of subsidized loans will owe 80k right up until graduation then the interest starts.
Absolutely.. Student loan interest takes on a snowball effect.. More interest accrues the longer you wait to pay it. If you can reduce the amount of money that you owe, the 5% or 7% interest will not do as much damage.
I have an unsubsidized loan I was rewarded for $1500. I just wanted to make sure I made the calculations right. If I multiple P (principle) x # days since last payment x interest rate factor, I get my month to month interest accrued on the loan. To find my interest rate factor I divide my loan's rate (4.29%) by # days in year (365.25). Just to confirm my loans interest rate will be determined by moving the decimal two places to the left (0.0429). I want to make sure I'm correct because I was diving 4.29 by days in year and then inputting it into the P x # days since last payment x interest rate factor formula and getting 500+ of monthly interest and that didn't seem right lol. So I'm hoping it was just thag I wasn't moving the decimal over two spaces initially to get the correct format of the interest rate.
Can you please redo the video? I don't understand how to calculate the powers. You did not show that step. I was told that the interest accrues if the interest is not paid each period. The loan is also simple interest, according to the loan servicers.
and this does not count the interest that you pay AFTER you begin repaying the debt. Assuming you make a plan of repaying debt for 30 years, you will end up paying almost twice the amount that you own.
Hang in there! There was a point when I thought I would never pay back my loans. The key is to focus on just today, and make the best financial decisions you can. Set up a payment plan based on what you can afford. While I was in school, I thought of my debt as monopoly money until I had a job that paid enough for me to start paying the loans back.
Now do a calculation on how much money you would have if you choose not to go to college and work for those four years instead and save every dollar that you earn in those four years and invest it. How much money will you have in 4 years at the time that your friends are graduating college? Now continue the calculation with you adding to that investment for the next 20 years while your college graduate friends are making that same payment to pay off their student loans. At the end of the entire 24 years you will see that the 42 year old college graduate just finished paying off their debt and is now ready to start investing starting with $0 accumulated so far in their life. Meanwhile the 42 year old high school graduate is a very wealthy person.
I know it's cool to blame the education system on kids failure to grasp the concepts of interest and to understand simple vs. compound and mortgages and amortization schedules. Give the current students a break. I'm 68, Catholic school grad (meaning math heavy) and I was just looking over my kids loan porfolio and i'm just blown away at how much my kids owe, and I"m just a concerned father looking out for the interests of my children. Life was easier in those heddy Eisenhower days of "National Defense Students Loan" program. I think it was a 3% SUBSIDIZED program. Now, my kid racked up those unsubsidized loan of about 160K. (granted, he's going to be taking over my practice, but still....)
Your video has done more to educated me in 8 minutes as one fine primer toward getting an old duffer off the couch and now educating my son of how to clean up this debt problem as soon as possible. I wasn't there to advise him when these loans were taken out, but time for old Popsy to grab all my kids by their collective stacking swivels (look it up) and have the "come to Jesus meeting" and put this stuff to rest. Thanks for an excellent excellent video!
This is a nice simplified version of what is happening but it does not take into account the monthly accrue that the loan is accumulating will it fluctuates. The bottom line is to start paying off your loans as soon as possible and in amounts as large as you can budget for. Thanks for the informative video
HOLY SHIT!! NO WAY! Thank you for the video. I'm definitely not taking out any loans.
Great video. I need this because I need to make a decision on how much to borrow.
Do not borrow Unsubsidized loans!!!
Abdul Rennane what is that
oh really? i thought you were watching this to learn how to make a squash casserole
wonderful video!we learned so much in just few minutes. THANK YOU
I am happy to help! If you have to take out student loans, I wish you the best with college and your career after!
It is so sweet of you to reply that quick. My daughter will be a freshman this year , and we do not have money to help her, so we did apply a parent through FAFSA
Excellent explanation on this, can you do something that shows the calculations for in-school deferment accrued interests which also capitalizes for students planning to start bachelors and continue on till finishing PhD?
Thanks so much for the explanation. I was thinking this was the formula to calculate my interest i just wasn't sure.
Excellent! Thanks for posting this video.
Great video!! Very helpful. Just wish I would’ve known to do this 6 years ago 🙄
I just starting taking personal finance seriously this year. I use reddit /r personal finance and Dave Ramsey for some of the basics. It is a fun thing to pick up!
Thanks for explaining it!! So that's the interest rate but what is the "loan fee"? and how's that calculated?
Unsubsidized loan for graduate school right now, the interest rate is 4.30% and the loan fee is 1.059%.
Do you know how the loan fee is calculated? Please let me know! Thank you!
I only looked at the simple case of compound interest, excluding the loan fee. The purpose of the video was to give an easy approach to understanding the basics of student loans. I am not sure about how loan fees are calculated , but I imagine it is just another way for loan companies to make more money off of you! Good luck with your loans! My wife and I got rid of ours by living cheap and paying them back as fast as possible.
I remember this video long ago. I don't have student debt but use this method for credit card.
Great Video!! I noticed that currently there is a fee added, this would change your (P) Principal right?
I would have to look into that more, but typically the amount borrowed is usually the only part that gets hit with interest.
@@vinteachesmath that would be awesome! Wishing you a great one!
Isnt compounding part of it? If so, that would change the amount where the equation should be A=P(1+(r/n))^(nt) right?
Can you please do one for subsidized? I can’t tell when to use one or the other or how they differ in setup.
For graduate degrees, the interest rate averages 6.05%. I broke down a CD and used that for my education instead. No loans. But my Bachelor's degree was free by winning scholarships. Apparently colleges hand those out like candy for students with high-end grades.
It is important to understand, that it unlikely, you will pay the full amount of 44k, upon graduation. Therefore, the interest continues to compound. You need to continue your formula, for the amount of YEARS and INTEREST, it will take, to pay it off. Ten years is a realistic and easy number to use.... Now see how much that loan really cost you.
Also, when you make a payment, it gets applied to the interest FIRST. Only a small goes to reducing your principle. That is why it is very impirtant, to make more than your minimum payment.
True. Not everyone pay the interest right after they graduated
I have both subsidized and unsubsidized loans. I am not expected to begin paying towards my student loans until year 2020. On my unsubsidized loan, I have been paying towards the interest rate. Should I begin to pay off my student loans while I am currently in school?
borrow less money
I work with student loans and your not taking capitalization into account. 10k borrowed as a freshman interest accrues then 6 months after graduation the interest adds to the principal amount. Making a new principal amount then the interest rate is calculated on the new amount. Example (numbers won't work out but it's an example): 10k loan 5% interest. Let's say after 4.5 years it accrues 3k interest. After the 6months grace period. The 3k adds to 10k =13k then the 5% interest is based on the new 13k. Then you start making payments. 10 loan will be about 30k when when done
great stuff!
I am glad you enjoyed the video!
Excellent. However, I always use approximation for interest or cost problems; so rounding off the interest rate to 4%, that’s about $400 per year for every 10,000 borrowed. Thus, 4 yrs x 400= 1600 in accrued interest, for year 1 loan. Very easy to estimate all, 3 yrs x400= 1200 for year2 and so on. The numbers are very close to the actual totals and give a quick answer to what it will cost in accumulated interest.
This does not account for the fact that you will also owe interest on any interest accrued as it capitalizes (is added) to the balance owed each year. This is also how credit cards work. So, as others have noted, if you are working, try to pay off all interest every year so your balance at graduation equals what you actually borrowed, not interest on interest.
Could you do one about subsidized loans. Please
Hi Erika, for subsidized loans, just take the lump sum of your student debt and start calculating interest the right after you graduate. Someone that borrows 80k of subsidized loans will owe 80k right up until graduation then the interest starts.
vinteachesmath Thank you so much. They only gave me $3,000 dollars for the loan. I’m definitely going to pay it before graduation
Thank you so much for your help!
you look like John Green. That's a compliment
A student told me that a few years back, it must be true now that two people said it!
Please make another video how will the interest when it comes to be paid monthly thank you
kifle haile look up amortization formula
If I start making payments while I'm still in college would I owe less by the time I graduate?
Absolutely.. Student loan interest takes on a snowball effect.. More interest accrues the longer you wait to pay it. If you can reduce the amount of money that you owe, the 5% or 7% interest will not do as much damage.
So if I'm deciding whether to pay off my car or my student loans (Both are compound) just pay off which ever has a smaller interest rate?
yes, do car first
What if the student only borrows for the first year and receives scholarships for the rest? Will interest compound?
Yes. Interest is compounded. If it's unsubsidized, that interest starts the day you use the money. Don't do it!!
I have an unsubsidized loan I was rewarded for $1500. I just wanted to make sure I made the calculations right. If I multiple P (principle) x # days since last payment x interest rate factor, I get my month to month interest accrued on the loan. To find my interest rate factor I divide my loan's rate (4.29%) by # days in year (365.25). Just to confirm my loans interest rate will be determined by moving the decimal two places to the left (0.0429). I want to make sure I'm correct because I was diving 4.29 by days in year and then inputting it into the P x # days since last payment x interest rate factor formula and getting 500+ of monthly interest and that didn't seem right lol. So I'm hoping it was just thag I wasn't moving the decimal over two spaces initially to get the correct format of the interest rate.
Thanks duuuuude
I am glad the video helped.. Good luck with the student loans!
Can you please redo the video? I don't understand how to calculate the powers. You did not show that step. I was told that the interest accrues if the interest is not paid each period. The loan is also simple interest, according to the loan servicers.
It compounds daily. Not an integer.
and this does not count the interest that you pay AFTER you begin repaying the debt. Assuming you make a plan of repaying debt for 30 years, you will end up paying almost twice the amount that you own.
Having student loans is like have a nice car or house that you cant drive/live in.. I think the key is to pay them off as fast as possible..
I’m fucking crying watching this
Hang in there! There was a point when I thought I would never pay back my loans. The key is to focus on just today, and make the best financial decisions you can. Set up a payment plan based on what you can afford.
While I was in school, I thought of my debt as monopoly money until I had a job that paid enough for me to start paying the loans back.
@@vinteachesmath I’m debt free after getting my bachelors, and not going to put myself in debt to earn my masters at this point now that I know this 😭
Now do a calculation on how much money you would have if you choose not to go to college and work for those four years instead and save every dollar that you earn in those four years and invest it. How much money will you have in 4 years at the time that your friends are graduating college? Now continue the calculation with you adding to that investment for the next 20 years while your college graduate friends are making that same payment to pay off their student loans. At the end of the entire 24 years you will see that the 42 year old college graduate just finished paying off their debt and is now ready to start investing starting with $0 accumulated so far in their life. Meanwhile the 42 year old high school graduate is a very wealthy person.
Why did he add 1 to r
EzeeAnimations because 10000*1.5=15000, and 10000*.5=5000
Follow The Formula
fuckk lmao i should have worked harder in highschool for scholarships lol
Sounds like Matt Damon
Matt Damon?
unbelievable tattoos