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CalculatorsNSLA has developed and provides free access to several important calculators and related tools. These are uniquely valuable for loan borrowers because they allow borrowers to see ways to save money, by reducing the interest they pay or by optimizing the relationship between their future income and present borrowing decisions. How Much Borrowing Can You Afford?It is well documented that students under-estimate the amount of their borrowing and over-estimate the amount of their future income. In an effort to bridge this gap before the student is legally bound to the loan, NSLA offers affordability calculators. Basic Affordability CalculatorThe Basic Affordability Calculator gives a very rough, order-of-magnitude calculation. It starts with the amount you expect to earn and are willing to pay toward student loans. From these, it calculates the size of the loan principal you would borrow to achieve this result. In this analysis, you control the variables of expected interest rate, years of repayment, and choice of repayment plan. The Basic Affordability Calculator can be used from earliest stages of college planning, to get a sense of the distance between education cost and the ability to repay. Detailed Affordability CalculatorWe are currently in the process of developing a Detailed Affordability Calculator which is an intensive exercise to reach a very clear understanding of the relationship between your education cost and ability to repay. Opt in to our NSLA Database to receive updates on new information as we add it to our web site. Are We There Yet?They used to say only two things is life are certain: death and taxes. It turns out that the IRS will negotiate a reduced settlement for your back taxes. Banks do not do that for your student loans and they stick even after bankruptcy. In the 21st century, the only two things certain in life are death and student loans. If your student loan is on the 30 year plan, it might not seem like much of a difference. If you've signed on the bottom line and 50% of the certain-things hasn't happened yet, then you're in repayment. If you borrowed an amount larger than 8% of what is now your gross income, the industry calls you "excessively indebted". Even if you borrowed less, it's unlikely that you much enjoy being in debt. We don't have any magic wands (and have the sense to run from someone who said they did), but there are a few things that will help you pass through repayment with less damage and greater speed. Elsewhere, we float ideas for some elaborate, foxy efforts that one might try to lighten the repayment load. As the Greek poet Archilochus wrote, "the fox knows many things, but the hedgehog knows one big thing." That thing is: interest. Repayment Savings CalculatorBanks make money on a loan in the form of interest. This is very important but easy to forget. Interest = profit. Say it with me: interest equals profit. Yes, it's annoying, but one more time: interest equals profit. At a conceptual level, interest is a proxy for opportunities and risk. We just care that interest is what we pay on top of what we borrowed. Nobody likes paying bills. We all would like more money in our pocket right now. Can you hear the voice on the TV? It's that annoying car dealership. "We'll help you lower your monthly payment". What's not to like? Lots. If you pay less, it takes longer to pay off the original loan. More time means more interest on the loan. And interest = profit. So they are kindly offering to help us, by giving us the chance to give them more of our money. Banks want profit. You want to get out of debt fast and cheap, so you can spend your money on other things. Pay a little extra every month; it makes a big difference. You have probably heard this before. But it's hard to get motivated to scrimp unless you have a really good, tangible feel for the benefits, something you can hang your hat on. Voila! The Repayment Savings Calculator didn't already exist, so it was necessary for us to invent it. Its sole purpose is to show you how big you save from paying that little-extra. After entering your basic repayment terms (principal, interest, term, repayment plan), you can specify an extra amount to pay - right down to $10 increments. Then the calculator shows you how much you save, the percent by which you cut the bank's profit (interest), and how much faster that little-extra gets you out of debt. Is anyone else going to give you this stuff without a court order? We think not. |
