Student Loans Lab

College is expensive, which means that many people will be unable to pay out of pocket for it. Because of the high sticker price, many students will opt to take out a student loan. Learn about student loans, their average interest rates, and the average student loan debt in North Carolina. You will use based on the average student loan debt, how much you would expect to pay each month to pay off a loan and compare that to your future monthly salary. Lastly, you will build an amortization table for the life of the loan and answers questions based on this information.

Part 1: Research

Usually the loans themselves are not that scary, but rather planning how to pay them off is what worries many. It is important to start thinking about a plan regarding how to pay off student loans before you even commit to a specific loan. In this part, you will continue the planning process and do some research to make this more tailored to you.

https://www.payscale.com/rcsearch.aspx?category=Job&str=accounting&CountryName=United+States&SourceId=Country

1.What is your job desired job upon completing college?

2.Where do you desire to work? You can be as specific as naming a city, but a state will also be fine.

3.Using your responses provided from Q1 and Q2 above, what is the average yearly salary for that job in the location you chose, according to the website? What is the monthly salary?

4.Using your response provided from Q3 above and estimating that you will pay about 25% in taxes, how much money do you expect to take homeevery month?

Part 2: Paying Off the Loan

The average debt per borrower for the class of 2017 in North Carolina was$26,164.Although everyone will realistically have different amounts of student loans, you will use this amount for the remainder of this lab. Your loan will be a 20-year loan at the interest rate4.53%.

On Sheet 2 set up an amortization table for the life of this loan.Be sure to include a table in the top left of the Sheet showing how you calculated the monthly payment amount. Then build in the textbox on the same sheet and answer the questions that follow.(Use the template provided on Blackboard)

1.What will your monthly payment be for the loan? What percentage of your monthly take-home pay (from Q4 in Part 1) will you be contributing toward your loan?

2.How much interest will you pay over the lifetime of the 20-year loan?

3.Based on your response from Q1 above and Q4 in Part 1, explain why your monthly payments towards your student loan will or will be not affordable based on your monthly salary from Q4 in Part 2. Be specific in your response.

4.How long would it take you to pay off this loan if you decided to contribute $50 more each month than what you determined your monthly payment to be in Q1 above? Based on your monthly take-home pay (from Q4 in Part 1), is contributing $50 more a month a realistic goal? Be specific in your response.

5.Since this is a 20-year loan, it is not surprising that you will pay a lot in interest over the lifetime of that loan. Remember, you can always pay your loans off more quickly than 20 years. If you want to pay off the loan in 10 years instead, what would your monthly payments have to be? Explain why this is or is not affordable based on your monthly salary from Q4 in Part 1. Be specific in your response.

6.How muchmorewould your monthly payment be if you paid off the loan in 10 years rather than 20 years?

7.If you opt to make the monthly payments to pay off the loan in 10 years (as you did in the previous question), how much interest would you pay over the lifetime of that loan?

8.How muchmoreinterest would you pay if you paid off the loan in 20 years than 10 years?

9.Reflection: Of course, everyone will have a different amount of student loans at the end of their college education. The number we found was just anaverage.If you are determined to have as few student loans as possible, what are different ways in which you could reduce the amount of money you would have to borrow?