What will my balance be?

[dstebbins]

WARNING: LONG POST AHEAD!

 

I am about to transfer to a new college. Only two of my current classes will transfer, so, almost completely, I have to start all over.

 

The college is private. It is online, so living expenses are paid for myself. However, the tuition for the entire bachelor's degree is $54,000. Officially, it is 123 credit hours, with $439 per credit hour. However, as I said, two classes will transfer. Those are English Comp 1 and Finite math (because those classes are universal). This will knock my credit hours down to 117, and, therefore, knock my tuition down to $51,366.

 

However, I must also buy an expensive laptop to perform my classes on. This will cost $3,100. My entire cost for the school will become $54,466.

 

The course is a bachelor's degree, but, since it's online, it only takes 32 months to complete. Since I am transferring two classes, that will knock my time down to 30 months. An extra six months will be used as a grace period before I must start repaying my loans.

 

Here's the gist of my FAFSA situation: I get $2,600 in Pell Grants each year (since the income of my parents and myself are stagnant, I do not anticipate an increase in income in the next year). I also get the maximum in subsidized stafford loans, but I will also max-out my unsubsidized stafford loans. These loans are even greater than normal because my parents do not qualify for a PLUS loan, therefore, allowing me to get FAFSA income as if I were an independent student (normally reserved for age 24 or above, or for orphans).

 

This means that, for the first year (my first year is, effectively, both my freshman and sophomore year), I will have $2,600 in gifted funds, $4,500 in loans that have 0% interest while I'm in school (remember, it is also my sophomore year, so I can get sophomore funding), and $5,000 in loans that have 6.8% interest while I'm in school. However, these $9,500 in stafford loans have a 3% processing fee that will reduce the amount of financial aid that I actually get down to $9,215, but not reducing my debts. This means that my remaining outstanding balance for my first year is $11,831.40 (including the one-time charge for the laptop).

 

Since neither I, nor my parents, have the credit for a private loan, this college has a loan of their own. It is a last resort loan and has an interest rate of 15%, compounding monthly. I must take out a loan like that in the amount of $11,831.40 for the first year.

 

For the second year, it is much the same, except that I now have access to $5,500 in subsidized loans, and I don't have to buy the laptop again. I still have the $5,000 in unsubsidized stafford loans. Take out the 3% processing fees, and we have a remaining balance of:

 

$20,546.4 - $2,600 - $10,500*.97 = $7,671.40 in private loans at 15%.

 

Remember that, for the second year, the interest will compile for 24 months (including the six month grace period after I graduate).

 

For the third year, I only attend for half the year. This means I will only need $10,273.20. My Pell Grant will knock out $2,600 of that, leaving me with a relatively meager $7,673.20 that I must borrow. Divide that by 0.97 to accommodate for the processing fee, and we have a borrowing amount of 7,911 (rounded up).

 

The $5,500 in subsidized loans will reduce my unsubsidized (but still stafford) loans to $2,411.

 

Remember, the interest in my third year piles for 12 months.

 

Now, here's the kicker: My Pell Grants don't contribute to my balance after my degree is over at all. My subsidized loans will have the same outstanding balance. The unsubsidized loans will pile at a rate of 6.8% APR for as long as they are in deferment, and my school's loan will have 15% APR for as long as it is in deferment.

 

If this were all one giant loan, with one interest rate, and with one start date, it would be a LOT easier to compute!

 

But, since there is so many factors to consider, what would my outstanding balance be when repayment begins?

[cypress]

If we assume you finish in 30 months (and at these prices you should do your best to do so) and the tuition is due at the start of the year for the entire school year, then check my math......

 

Loans with 0% interest:

year 1: $4500 * (1+0)^36 = $4500

year 2: $5500 * (1+0)^24 = $5500

year 3: $5500 * (1+0)^12 = $5500

 

Loans with 6.8% interest

year 1: $5000 * (1+0.068/12)^36 = 6127.96

year 2: $5000 * (1+0.068/12)^24 = 5726.21

year 3: $2411 * (1+0.068/12)^12 = 2580.18

 

Loans with 15% interest

year 1: $11,831.40 * (1+0.15/12)^36 = 18503.65

year 2: $07,671.40 * (1+0.15/12)^24 = 10336.07

year 3: $0 yay!

 

Total is a whopping $58,774 in loan balance at the end of the grace period. It will be less if you can pay tuition by the quarter.

 

ps, get the laptop used from ebay with the software you need it will be cheaper.

[dstebbins]

ps, get the laptop used from ebay with the software you need it will be cheaper.

 

I can't do that. They won't let me.

[cypress]

That's too bad, good luck with the degree!

[dstebbins]

That's too bad, good luck with the degree!

 

Well, hopefully, in my final six months, when I won't need the maximum amount, I can take out the maximum amount, and use the excess to pay large amounts on my private loans, knocking my overall, average interest rate down, and knocking the balance that has 15% interest to only a couple of thousand dollars.

 

I'll have to correspond with them to see if they'll let me do that. Wish me luck on that.

 

But, in any case, with my stafford loans, I might qualify for income-based repayment.