Interests are realigning these days, but education is little reluctant to follow down the slide. With 30-year home loans averaging 5.38% (Freddie Mac), Federal Direct Stafford Loans and Federal Direct PLUS Loans stand a bit above their equity-backed counterparts at 6.80% and 7.90%, respectively.
For a student with $50,000.00 of Federal Direct PLUS loans, the Standard Repayment Plan requires a monthly payment of $604.00 for 10 years, totaling $72,480.00 over the course of the loan. With a career earning $60,000 per year, loan payments in this range would decrease pre-tax (gross) earnings by 12.08%.
An Extended Repayment Plan could substantially lower monthly payments to $382.60 while extending debt for 25 years, totaling $114,780.00. And, with the same $60,000 per year job, loan payments would decrease pre-tax earnings by 7.65%. But, of course, this assumes the student secures a job immediately upon graduating.
If a student should be so unlucky as to graduate into a recession, the Department of Education offers little solace. Every debtor is granted six months before repayment must begin…regardless of employment status.
So, before you make the choice to pursue graduate study, take a hard look at the costs, look at your personal finances, and give serious consideration to how debt will compromise your ability to do the things you love. Remember, I’m not saying it’s impossible. But no one is saying it’s easy.
You can calculate your potential debt here: http://www.ed.gov/offices/OSFAP/DirectLoan/RepayCalc/dlentry1.html
June 25th, 2009 | Category: Finance | Comments Off
