Posted on 04/09/2016 2:40:40 PM PDT by hattend
Does anybody believe this is possible?
Good advice.
It may seem harsh but for parents to put their financial health at risk in this economy is not very smart.
There are alternative today to the expensive four year degree programs that are overpriced.
Two year community college and then perhaps an accredited on line degree program.
A good rule of thumb is to pay back any amount of debt in your lifetime, you must pay about 1 percent per month. So for a $26,000 debt, she would have to pay about $260 per month. She paid $105 per month, on average. Of course the principal would grow.
They tack on some outrageous amounts if you miss payments too.
“The Occupy Lie”
I saw this graphic on Facebook and was taken aback by how expensive this debt seems to be. However, doing the math reveals that the numbers are very misleading.
The graphic says, “Student loan paid faithfully for 23 years: Borrowed $26,400. Paid back to date: $32,700. Still OWE: $45,276.63. No Bankruptcy of Forgiveness Allowed. Only Death or Total Disability frees you. NO Social Security or Medicare till paid off.”
Let’s look at the numbers….
23 years of $32,700 total paid is equal to $118.48 per month.
($32,700/(23×12)=$118.48)
Present Value of the loan is $26,400 (borrowed amount).
Future Value of loan is $45,276.63 (balance after 23 years or 276 months).
Using my financial calculator (Texas Instruments BA-35) and DebtSmart 30-year Loan Worksheet. The APR (Annual Percentage Rate) for this loan turns out to be 6.699%. You can see the entire amortization of this loan here showing all the numbers that prove that rate to be accurate. (Page 8, payment month #276 is 23 years.)
The reason there is so much owed after 23 years is because the monthly payment didn’t cover the interest costs. The interest alone on month #1 is $147.37, however, payments of only $118.47 per month were made, and therefore, the loan will NEVER be paid off. The balance will continue to grow forever. To be more extreme, it’s like buying a car for $1,000 and only paying $1 per month and then complaining after 23 years that you now owe $10,000.
Then there is the matter of what the rates were back in 1990 when this loan was supposedly taken. According to FinAid.org, the interest rates on student loans were fixed at 8%. So how is it possible that the average rate of the claimed loan is 6.699%? In other words, how is it that they paid less than 8%?
Well, one answer is that the government reduced the rate. So not only did they lend this student the money, allow them to make payments far less than needed to pay off (probably to help the borrower out with cash flow), but they also reduced the rate over the 23 years.
The final analysis, as I see it, is that the graphic is either: (1) A complete lie; or (2) The result of getting too many breaks and not being responsible with the loan. Probably the former.
- See more at: https://www.debtsmart.com/2013/07/10/the-occupy-lie/#sthash.3AHkat8u.dpuf
Wow! Thanks for doing the work!
Say you have GraceG and LiberalLarry
Both took out a 10,000 dollar student loan 10 years ago.
GraceG was smart and scrimped and saved and drove a jalopy and ate generic food and wore clothing till it literally wore out to pay off her stende loans and payed about 12,500 over all as she paid off her loan as soon as she could.
LiberaLarry was a dumbass and kept deferring his loan and only paid the minimum and payed about 5,000 dollars, but since they were still accumulating debt they now owe, 30,000 dollars.
Along comes uncle Sugar and pays off the 30,000 that LiberalLarry owes.
Since the liberals SAY want to be “fair” shouldn’t they reimburse the 12,500 that GraceG paid? Hell I will even be nice and only demand back 2,500 since I am so nice.
Maybe at a Bernie rally someone should bring this up....
Well, I guess GraceG was the Dumbass....
At some point the hard working, scrimping, saving, jalopy driving by choice, people are gonna start cheating the system after seeing too many deadbeats get away with scamming it.
Crap like this makes me almost want to try to get an EBT card, I could buy a nicer car if i did..... But I have “morals” and I guess that is a liability these days in liberal land.
Sure! I just posted a private reply, I don’t know if I posted to “all” correctly.
Awesome work!
[ The final analysis, as I see it, is that the graphic is either: (1) A complete lie; or (2) The result of getting too many breaks and not being responsible with the loan. Probably the former. ]
So Probably the government “breaks” basically caused the problem, and these damn idiots want more government intervention,....... sheesh...
Great Job on the calculations!
“If your PhD isn’t fully funded by someone else, you’re not smart enough to earn a PhD in any meaningful subject.”
I think that puts it all in perspective. Good point.
It’s all about talent, drive and intellect. There are a
lot of lawyers and doctors that just don’t have what it
takes to be good at it. The only drive they have is greed.
When that fails then the next step is entitlement.
As far as music, I have my self as an example. I’m not that
talented but I’m mechanically inclined and I really want
to play real bad (drive). Rock Hard, Ride Free w/MESABoogie
NO! Emphatically NO!
The way liberals define fairness excludes consideration of merit, discipline, character, etc. It looks only at disparity.
Years ago, after I had just received my degree in business/finance, I could have calculated it on paper in a few seconds ( which is why I got a job that enabled me to actually pay my school loans back), but now I just use a calculator or find someone that has already calculated it, but at least I know when something isn’t right.
[ Since the liberals SAY want to be “fair” shouldn’t they reimburse the 12,500 that GraceG paid?
NO! Emphatically NO!
The way liberals define fairness excludes consideration of merit, discipline, character, etc. It looks only at disparity. ]
Communism motto: Those who fail succeed, those who succeed must be punished by forced failure
My wife and I have been working two jobs each, 7 days a week, for the past 3 years, to pay off our son’s college education.
Our son has also pitched in, working part time and full time summers as a bartender. After 5 long years he will graduate with his Civil Engineering degree this year, DEBT FREE.
I think his graduation will be the happiest moment of my life.
Congratulations to your son and his parents!
At current rates, the monthly payment on a $300,000 mortgage for a 15-year term is about $700 more than the monthly payment for a 30-year term. If your intention is to pay off the mortgage in 15 years, you might be better off getting a 30-year mortgage and then investing the "extra" $700 every month in some relatively safe, diversified investments. If you do it this way, you build in a margin of safety that gives you the flexibility to do something else with the $700/month you save (including paying the 30-year mortgage off ahead of time after the end of 15 years).
This is an important consideration because a home is a very illiquid asset, and it may not be a good idea to sink more money into it than you need to.
You are the first in a long time to articulate the condition accurately. Once the economic flywheel coasts down under socialism, where does the “capitol” come from to finance the scheme? It doesn’t come because now socialism has dis-incentivized the creation of “capitol”, thus the 100% failure rate of socialism. Simple as that, natural law.
Unless you plan on living in the same house/home a 30 year makes more sense.
A person who is good with investments will take the extra cash and make way more than the benefit of a 15 year loan.
That makes complete sense.
This woman COULDN'T have been paying even the interest on the loans.
If she did, the principle would be the same.
And just what has she been doing for the past 23 years?
The credit card example makes sense.
Pay the "minimum" and you'll take decades to pay it off.
Very foolish.
But at least you will eventually pay it off.
This dopey woman screwed herself over.
I have no sympathy.
Actually, it times out after 25 years and is forgiven.
She is two years away.
Should have attended a college where math was required ... but if the coveted Degree in Hispanic Lesbian, Gay and Transgender Studies was an exclusive must have ... then enjoy!
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