Wednesday, October 29, 2008

Not a Math major . . .

In an article about students hiding out overseas to avoid student loans they find they can't afford, a guy named Chris left college with $160,000 in student loans. He thought the most he'd have to pay would be $600 a month. Turns out his student loan payment came to $2400. He eventually went overseas looking for better work and when it didn't pan out, he's staying overseas and avoiding the loan.

Being a little brighter than Chris in basic math I could only shake my head. What sort of loan terms does Chris' $600 payment actually fit? Here's the numbers:

If the interest rate is 4-1/2 percent or higher Chris can pay off his student loan in. . . well, never. $600 is interest only at this point, he could never pay off his loan.

At 4.0 percent he'd be paying for 55 years. Chris is how old?

3.5 % = 42 years (longer than any home mortgage).
3.0% = 36 years
2.5% = 32 years

Even at 1.0% interest Chris will have to spend 25 years paying off his college kegger days.

Chris by the way has that most lucrative of degrees. . . a Masters in Music.

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