Mixing
How do student loans swell after years of on-time payments?
Clash Royale CLAN TAG#URR8PPP
.everyoneloves__top-leaderboard:empty,.everyoneloves__mid-leaderboard:empty margin-bottom:0;
up vote
1
down vote
favorite
More often than not I read horror stories of people that acquire college debt, pay monthly for years, and end up owing the same or more than when they started.
What is the deal with these loans? How are they legal? What re-payment detail are people overlooking? How can someone get out of this vicious cycle?
For the record, I graduated with a sub $10,000 loan and paid it off in about a year with no troubles.
student-loan repayment
edited 41 mins ago
Bob Baerker
10.8k11542
asked 1 hour ago
MonkeyZeus
1,0171720
 |Â
show 2 more comments
up vote
1
down vote
favorite
More often than not I read horror stories of people that acquire college debt, pay monthly for years, and end up owing the same or more than when they started.
What is the deal with these loans? How are they legal? What re-payment detail are people overlooking? How can someone get out of this vicious cycle?
For the record, I graduated with a sub $10,000 loan and paid it off in about a year with no troubles.
student-loan repayment
edited 41 mins ago
Bob Baerker
10.8k11542
asked 1 hour ago
MonkeyZeus
1,0171720
1
Can you cite any specific examples you've seen?
– glibdud
1 hour ago
@glibdud This one comes to mind bustle.com/p/…
– MonkeyZeus
1 hour ago
1
@MonkeyZeus That link you provided tells a pretty straightforward story: a large loan, a variable high interest rate, missed payments, and only paying enough to cover the accumulating interest. This is the exact same trap people fall into when only paying the minimum on their credit cards only for much higher stakes, since the amount is so large and it can't be discharged in bankruptcy.
– Charles E. Grant
56 mins ago
@CharlesE.Grant Credit card balances generally go down (albeit minuscule) when paying the minimum amount assuming you do not add additional debt. Please see my other comment
– MonkeyZeus
53 mins ago
Regarding legality, these are large companies that employ lawyers to ensure they are within the law when offering products. Unfortunately for the mountains of late teens out there there is only so far that the law will go in protecting consumers from their own bad decisions.
– Myles
52 mins ago
 |Â
show 2 more comments
up vote
1
down vote
favorite
up vote
1
down vote
favorite
More often than not I read horror stories of people that acquire college debt, pay monthly for years, and end up owing the same or more than when they started.
What is the deal with these loans? How are they legal? What re-payment detail are people overlooking? How can someone get out of this vicious cycle?
For the record, I graduated with a sub $10,000 loan and paid it off in about a year with no troubles.
student-loan repayment
edited 41 mins ago
Bob Baerker
10.8k11542
asked 1 hour ago
MonkeyZeus
1,0171720
More often than not I read horror stories of people that acquire college debt, pay monthly for years, and end up owing the same or more than when they started.
What is the deal with these loans? How are they legal? What re-payment detail are people overlooking? How can someone get out of this vicious cycle?
For the record, I graduated with a sub $10,000 loan and paid it off in about a year with no troubles.
student-loan repayment
student-loan repayment
edited 41 mins ago
Bob Baerker
10.8k11542
asked 1 hour ago
MonkeyZeus
1,0171720
edited 41 mins ago
Bob Baerker
10.8k11542
asked 1 hour ago
MonkeyZeus
1,0171720
edited 41 mins ago
Bob Baerker
10.8k11542
edited 41 mins ago
Bob Baerker
10.8k11542
edited 41 mins ago
Bob Baerker
10.8k11542
10.8k11542
asked 1 hour ago
MonkeyZeus
1,0171720
asked 1 hour ago
MonkeyZeus
1,0171720
asked 1 hour ago
MonkeyZeus
1,0171720
1,0171720
1
Can you cite any specific examples you've seen?
– glibdud
1 hour ago
@glibdud This one comes to mind bustle.com/p/…
– MonkeyZeus
1 hour ago
1
@MonkeyZeus That link you provided tells a pretty straightforward story: a large loan, a variable high interest rate, missed payments, and only paying enough to cover the accumulating interest. This is the exact same trap people fall into when only paying the minimum on their credit cards only for much higher stakes, since the amount is so large and it can't be discharged in bankruptcy.
– Charles E. Grant
56 mins ago
@CharlesE.Grant Credit card balances generally go down (albeit minuscule) when paying the minimum amount assuming you do not add additional debt. Please see my other comment
– MonkeyZeus
53 mins ago
Regarding legality, these are large companies that employ lawyers to ensure they are within the law when offering products. Unfortunately for the mountains of late teens out there there is only so far that the law will go in protecting consumers from their own bad decisions.
– Myles
52 mins ago
 |Â
show 2 more comments
1
Can you cite any specific examples you've seen?
– glibdud
1 hour ago
@glibdud This one comes to mind bustle.com/p/…
– MonkeyZeus
1 hour ago
1
@MonkeyZeus That link you provided tells a pretty straightforward story: a large loan, a variable high interest rate, missed payments, and only paying enough to cover the accumulating interest. This is the exact same trap people fall into when only paying the minimum on their credit cards only for much higher stakes, since the amount is so large and it can't be discharged in bankruptcy.
– Charles E. Grant
56 mins ago
@CharlesE.Grant Credit card balances generally go down (albeit minuscule) when paying the minimum amount assuming you do not add additional debt. Please see my other comment
– MonkeyZeus
53 mins ago
Regarding legality, these are large companies that employ lawyers to ensure they are within the law when offering products. Unfortunately for the mountains of late teens out there there is only so far that the law will go in protecting consumers from their own bad decisions.
– Myles
52 mins ago
1
1
Can you cite any specific examples you've seen?
– glibdud
1 hour ago
Can you cite any specific examples you've seen?
– glibdud
1 hour ago
@glibdud This one comes to mind bustle.com/p/…
– MonkeyZeus
1 hour ago
@glibdud This one comes to mind bustle.com/p/…
– MonkeyZeus
1 hour ago
1
1
@MonkeyZeus That link you provided tells a pretty straightforward story: a large loan, a variable high interest rate, missed payments, and only paying enough to cover the accumulating interest. This is the exact same trap people fall into when only paying the minimum on their credit cards only for much higher stakes, since the amount is so large and it can't be discharged in bankruptcy.
– Charles E. Grant
56 mins ago
@MonkeyZeus That link you provided tells a pretty straightforward story: a large loan, a variable high interest rate, missed payments, and only paying enough to cover the accumulating interest. This is the exact same trap people fall into when only paying the minimum on their credit cards only for much higher stakes, since the amount is so large and it can't be discharged in bankruptcy.
– Charles E. Grant
56 mins ago
@CharlesE.Grant Credit card balances generally go down (albeit minuscule) when paying the minimum amount assuming you do not add additional debt. Please see my other comment
– MonkeyZeus
53 mins ago
@CharlesE.Grant Credit card balances generally go down (albeit minuscule) when paying the minimum amount assuming you do not add additional debt. Please see my other comment
– MonkeyZeus
53 mins ago
Regarding legality, these are large companies that employ lawyers to ensure they are within the law when offering products. Unfortunately for the mountains of late teens out there there is only so far that the law will go in protecting consumers from their own bad decisions.
– Myles
52 mins ago
Regarding legality, these are large companies that employ lawyers to ensure they are within the law when offering products. Unfortunately for the mountains of late teens out there there is only so far that the law will go in protecting consumers from their own bad decisions.
– Myles
52 mins ago
 |Â
show 2 more comments
3 Answers
3
active
oldest
votes
up vote
8
down vote
(This answer is based on the article you linked in the comment, but could probably apply in general as well)
What re-payment detail are people overlooking?
There's not many specifics in the article, but here are some possibilities:
- Some interest had accrued while in school, so the amount owed after graduation was significantly more than the original "principal amount"
- A payment was missed (indicated in the article), and the interest plus penalties was added to the balance owed
- She is on a deferment plan in which the monthly payment is less than the interest that is accruing. The payment amount in one image is $171 but she says the interest each month is $480.
How can someone get out of this vicious cycle?
Time and money. Work extra jobs, pay more than the monthly amount (and don't ever miss one), reduce expenses to bare minimums, and keep working until they're gone. There's no magic sauce (even bankruptcy) for student loans.
On a side note, I wish the article had more of a "don't make the same mistake I made" tone, but it reads more like a sob story trying to get support for student debt forgiveness (obviously at the expense of those that aren't paying for student loans). Instead of taking responsibility for bad decisions (singing up for a loan without reading the "multi-page contract", going to private school with no way to pay for it other than borrowing, tacking on another 24K because heaven forbid she give up the "relationships I had cultivated with students and professors"), the whole article feel like another "No one can succeed except the rich" rant.
answered 1 hour ago
D Stanley
45.7k7138148
1
I was trying to avoid pointing to any specific references because I too felt that they are far too sob story-ish. I was hoping my question would garner answers which point to the specific pitfalls and traps of student loans and their re-payment programs from a numbers standpoint rather than entitlement. For the record I know someone who has been paying $400/month against their 20K student loan and after 10 years now they still owe 20K. I tried offering help by reading their loan terms but they never got around to showing me.
– MonkeyZeus
59 mins ago
@MonkeyZeus Yeah hopefully I gave a few reasons why one could not touch principal after months or repayment. I did add a few comments to try and address the more general questions.
– D Stanley
39 mins ago
@MonkeyZeus That example doesn't hold up to scrutiny, a $20,000 loan at 20% interest would be paid off in 10 years with payments of $386/month.
– Hart CO
38 mins ago
@HartCO Unfortunately I am not aware of the terms of their loan nor the accuracy of their story...
– MonkeyZeus
36 mins ago
add a comment |Â
up vote
1
down vote
The thing that comes to my mind here is that they are only making the minimum monthly payment. Doing this with any type of loan, not just a student loan will prolong the process of getting rid of debt. If you want to become debt free you always have to make more than the minimum monthly.
Take a credit card for example say you owe $100 on that card at 18% monthly. The minimum monthly payment is something like $15. It would take you about 7 months to pay this off just sticking to the min monthly because interest has accrued on the loan.
Example first payment is $10. Next month you owe 90 before interest, with interest you owe an additional $16.2. Now they owe $106.2 (90+16.2), more than the original amount because the didn't make the minimum. If you miss a few payments, or make less than the minimum monthly, you will owe them more money. Even if you make the minimum exactly it still leads to a longer loan, the longer the loan occurs, the more interest is paid instead of principal on the loan.
If you paid $50 it would take 3 months to pay off the loan. The same thing happens with student loans, just at a lower interest rate, and with a different payment schedule. You paid off more than your minimum monthly, that's why you didn't take so long to pay back the loan, and they did.
It is legal because they basically outline this in the contract you sign, or give you enough information to figure it out on your own. If you don't then the government sees it as your fault not the lenders.
answered 38 mins ago
billy-bob
67719
add a comment |Â
up vote
1
down vote
Many people borrow more than they can repay, then take advantage of loan forgiveness on an income-based repayment plan. From what I've seen this is the most common scenario by which people make so little progress on their student loan principal.
A federal student loan with a standard repayment plan will be paid back in 10-years barring any periods of forbearance/deferment, in those plans you do see principle decrease each month.
When it comes to loans with higher or adjustable rates, people who borrow too much will quickly be unable to keep up with the standard repayment schedule and will have to get into an alternative arrangement that drags on repayment or periods of forbearance where interest accrues.
Regarding breaking the cycle, the worst part of that linked article is that they seem to have learned little, each time they upgraded their living situation they dragged on repayment further. That much debt at those interest rates should be treated like an emergency, true bare-bones living is in order with that kind of debt-load.
Warning others not to make the same mistakes would be nice too, nothing will break the cycle faster than people refusing to play the game of going into massive debt for some college classes.
answered 28 mins ago
Hart CO
21.9k15267
add a comment |Â
3 Answers
3
active
oldest
votes
3 Answers
3
active
oldest
votes
active
oldest
votes
active
oldest
votes
up vote
8
down vote
(This answer is based on the article you linked in the comment, but could probably apply in general as well)
What re-payment detail are people overlooking?
There's not many specifics in the article, but here are some possibilities:
- Some interest had accrued while in school, so the amount owed after graduation was significantly more than the original "principal amount"
- A payment was missed (indicated in the article), and the interest plus penalties was added to the balance owed
- She is on a deferment plan in which the monthly payment is less than the interest that is accruing. The payment amount in one image is $171 but she says the interest each month is $480.
How can someone get out of this vicious cycle?
Time and money. Work extra jobs, pay more than the monthly amount (and don't ever miss one), reduce expenses to bare minimums, and keep working until they're gone. There's no magic sauce (even bankruptcy) for student loans.
On a side note, I wish the article had more of a "don't make the same mistake I made" tone, but it reads more like a sob story trying to get support for student debt forgiveness (obviously at the expense of those that aren't paying for student loans). Instead of taking responsibility for bad decisions (singing up for a loan without reading the "multi-page contract", going to private school with no way to pay for it other than borrowing, tacking on another 24K because heaven forbid she give up the "relationships I had cultivated with students and professors"), the whole article feel like another "No one can succeed except the rich" rant.
answered 1 hour ago
D Stanley
45.7k7138148
1
I was trying to avoid pointing to any specific references because I too felt that they are far too sob story-ish. I was hoping my question would garner answers which point to the specific pitfalls and traps of student loans and their re-payment programs from a numbers standpoint rather than entitlement. For the record I know someone who has been paying $400/month against their 20K student loan and after 10 years now they still owe 20K. I tried offering help by reading their loan terms but they never got around to showing me.
– MonkeyZeus
59 mins ago
@MonkeyZeus Yeah hopefully I gave a few reasons why one could not touch principal after months or repayment. I did add a few comments to try and address the more general questions.
– D Stanley
39 mins ago
@MonkeyZeus That example doesn't hold up to scrutiny, a $20,000 loan at 20% interest would be paid off in 10 years with payments of $386/month.
– Hart CO
38 mins ago
@HartCO Unfortunately I am not aware of the terms of their loan nor the accuracy of their story...
– MonkeyZeus
36 mins ago
add a comment |Â
up vote
8
down vote
(This answer is based on the article you linked in the comment, but could probably apply in general as well)
What re-payment detail are people overlooking?
There's not many specifics in the article, but here are some possibilities:
- Some interest had accrued while in school, so the amount owed after graduation was significantly more than the original "principal amount"
- A payment was missed (indicated in the article), and the interest plus penalties was added to the balance owed
- She is on a deferment plan in which the monthly payment is less than the interest that is accruing. The payment amount in one image is $171 but she says the interest each month is $480.
How can someone get out of this vicious cycle?
Time and money. Work extra jobs, pay more than the monthly amount (and don't ever miss one), reduce expenses to bare minimums, and keep working until they're gone. There's no magic sauce (even bankruptcy) for student loans.
On a side note, I wish the article had more of a "don't make the same mistake I made" tone, but it reads more like a sob story trying to get support for student debt forgiveness (obviously at the expense of those that aren't paying for student loans). Instead of taking responsibility for bad decisions (singing up for a loan without reading the "multi-page contract", going to private school with no way to pay for it other than borrowing, tacking on another 24K because heaven forbid she give up the "relationships I had cultivated with students and professors"), the whole article feel like another "No one can succeed except the rich" rant.
answered 1 hour ago
D Stanley
45.7k7138148
1
I was trying to avoid pointing to any specific references because I too felt that they are far too sob story-ish. I was hoping my question would garner answers which point to the specific pitfalls and traps of student loans and their re-payment programs from a numbers standpoint rather than entitlement. For the record I know someone who has been paying $400/month against their 20K student loan and after 10 years now they still owe 20K. I tried offering help by reading their loan terms but they never got around to showing me.
– MonkeyZeus
59 mins ago
@MonkeyZeus Yeah hopefully I gave a few reasons why one could not touch principal after months or repayment. I did add a few comments to try and address the more general questions.
– D Stanley
39 mins ago
@MonkeyZeus That example doesn't hold up to scrutiny, a $20,000 loan at 20% interest would be paid off in 10 years with payments of $386/month.
– Hart CO
38 mins ago
@HartCO Unfortunately I am not aware of the terms of their loan nor the accuracy of their story...
– MonkeyZeus
36 mins ago
add a comment |Â
up vote
8
down vote
up vote
8
down vote
(This answer is based on the article you linked in the comment, but could probably apply in general as well)
What re-payment detail are people overlooking?
There's not many specifics in the article, but here are some possibilities:
- Some interest had accrued while in school, so the amount owed after graduation was significantly more than the original "principal amount"
- A payment was missed (indicated in the article), and the interest plus penalties was added to the balance owed
- She is on a deferment plan in which the monthly payment is less than the interest that is accruing. The payment amount in one image is $171 but she says the interest each month is $480.
How can someone get out of this vicious cycle?
Time and money. Work extra jobs, pay more than the monthly amount (and don't ever miss one), reduce expenses to bare minimums, and keep working until they're gone. There's no magic sauce (even bankruptcy) for student loans.
On a side note, I wish the article had more of a "don't make the same mistake I made" tone, but it reads more like a sob story trying to get support for student debt forgiveness (obviously at the expense of those that aren't paying for student loans). Instead of taking responsibility for bad decisions (singing up for a loan without reading the "multi-page contract", going to private school with no way to pay for it other than borrowing, tacking on another 24K because heaven forbid she give up the "relationships I had cultivated with students and professors"), the whole article feel like another "No one can succeed except the rich" rant.
answered 1 hour ago
D Stanley
45.7k7138148
(This answer is based on the article you linked in the comment, but could probably apply in general as well)
What re-payment detail are people overlooking?
There's not many specifics in the article, but here are some possibilities:
- Some interest had accrued while in school, so the amount owed after graduation was significantly more than the original "principal amount"
- A payment was missed (indicated in the article), and the interest plus penalties was added to the balance owed
- She is on a deferment plan in which the monthly payment is less than the interest that is accruing. The payment amount in one image is $171 but she says the interest each month is $480.
How can someone get out of this vicious cycle?
Time and money. Work extra jobs, pay more than the monthly amount (and don't ever miss one), reduce expenses to bare minimums, and keep working until they're gone. There's no magic sauce (even bankruptcy) for student loans.
On a side note, I wish the article had more of a "don't make the same mistake I made" tone, but it reads more like a sob story trying to get support for student debt forgiveness (obviously at the expense of those that aren't paying for student loans). Instead of taking responsibility for bad decisions (singing up for a loan without reading the "multi-page contract", going to private school with no way to pay for it other than borrowing, tacking on another 24K because heaven forbid she give up the "relationships I had cultivated with students and professors"), the whole article feel like another "No one can succeed except the rich" rant.
answered 1 hour ago
D Stanley
45.7k7138148
edited 29 mins ago
answered 1 hour ago
D Stanley
45.7k7138148
answered 1 hour ago
D Stanley
45.7k7138148
answered 1 hour ago
D Stanley
45.7k7138148
45.7k7138148
1
I was trying to avoid pointing to any specific references because I too felt that they are far too sob story-ish. I was hoping my question would garner answers which point to the specific pitfalls and traps of student loans and their re-payment programs from a numbers standpoint rather than entitlement. For the record I know someone who has been paying $400/month against their 20K student loan and after 10 years now they still owe 20K. I tried offering help by reading their loan terms but they never got around to showing me.
– MonkeyZeus
59 mins ago
@MonkeyZeus Yeah hopefully I gave a few reasons why one could not touch principal after months or repayment. I did add a few comments to try and address the more general questions.
– D Stanley
39 mins ago
@MonkeyZeus That example doesn't hold up to scrutiny, a $20,000 loan at 20% interest would be paid off in 10 years with payments of $386/month.
– Hart CO
38 mins ago
@HartCO Unfortunately I am not aware of the terms of their loan nor the accuracy of their story...
– MonkeyZeus
36 mins ago
add a comment |Â
1
I was trying to avoid pointing to any specific references because I too felt that they are far too sob story-ish. I was hoping my question would garner answers which point to the specific pitfalls and traps of student loans and their re-payment programs from a numbers standpoint rather than entitlement. For the record I know someone who has been paying $400/month against their 20K student loan and after 10 years now they still owe 20K. I tried offering help by reading their loan terms but they never got around to showing me.
– MonkeyZeus
59 mins ago
@MonkeyZeus Yeah hopefully I gave a few reasons why one could not touch principal after months or repayment. I did add a few comments to try and address the more general questions.
– D Stanley
39 mins ago
@MonkeyZeus That example doesn't hold up to scrutiny, a $20,000 loan at 20% interest would be paid off in 10 years with payments of $386/month.
– Hart CO
38 mins ago
@HartCO Unfortunately I am not aware of the terms of their loan nor the accuracy of their story...
– MonkeyZeus
36 mins ago
1
1
I was trying to avoid pointing to any specific references because I too felt that they are far too sob story-ish. I was hoping my question would garner answers which point to the specific pitfalls and traps of student loans and their re-payment programs from a numbers standpoint rather than entitlement. For the record I know someone who has been paying $400/month against their 20K student loan and after 10 years now they still owe 20K. I tried offering help by reading their loan terms but they never got around to showing me.
– MonkeyZeus
59 mins ago
I was trying to avoid pointing to any specific references because I too felt that they are far too sob story-ish. I was hoping my question would garner answers which point to the specific pitfalls and traps of student loans and their re-payment programs from a numbers standpoint rather than entitlement. For the record I know someone who has been paying $400/month against their 20K student loan and after 10 years now they still owe 20K. I tried offering help by reading their loan terms but they never got around to showing me.
– MonkeyZeus
59 mins ago
@MonkeyZeus Yeah hopefully I gave a few reasons why one could not touch principal after months or repayment. I did add a few comments to try and address the more general questions.
– D Stanley
39 mins ago
@MonkeyZeus Yeah hopefully I gave a few reasons why one could not touch principal after months or repayment. I did add a few comments to try and address the more general questions.
– D Stanley
39 mins ago
@MonkeyZeus That example doesn't hold up to scrutiny, a $20,000 loan at 20% interest would be paid off in 10 years with payments of $386/month.
– Hart CO
38 mins ago
@MonkeyZeus That example doesn't hold up to scrutiny, a $20,000 loan at 20% interest would be paid off in 10 years with payments of $386/month.
– Hart CO
38 mins ago
@HartCO Unfortunately I am not aware of the terms of their loan nor the accuracy of their story...
– MonkeyZeus
36 mins ago
@HartCO Unfortunately I am not aware of the terms of their loan nor the accuracy of their story...
– MonkeyZeus
36 mins ago
add a comment |Â
up vote
1
down vote
The thing that comes to my mind here is that they are only making the minimum monthly payment. Doing this with any type of loan, not just a student loan will prolong the process of getting rid of debt. If you want to become debt free you always have to make more than the minimum monthly.
Take a credit card for example say you owe $100 on that card at 18% monthly. The minimum monthly payment is something like $15. It would take you about 7 months to pay this off just sticking to the min monthly because interest has accrued on the loan.
Example first payment is $10. Next month you owe 90 before interest, with interest you owe an additional $16.2. Now they owe $106.2 (90+16.2), more than the original amount because the didn't make the minimum. If you miss a few payments, or make less than the minimum monthly, you will owe them more money. Even if you make the minimum exactly it still leads to a longer loan, the longer the loan occurs, the more interest is paid instead of principal on the loan.
If you paid $50 it would take 3 months to pay off the loan. The same thing happens with student loans, just at a lower interest rate, and with a different payment schedule. You paid off more than your minimum monthly, that's why you didn't take so long to pay back the loan, and they did.
It is legal because they basically outline this in the contract you sign, or give you enough information to figure it out on your own. If you don't then the government sees it as your fault not the lenders.
answered 38 mins ago
billy-bob
67719
add a comment |Â
up vote
1
down vote
The thing that comes to my mind here is that they are only making the minimum monthly payment. Doing this with any type of loan, not just a student loan will prolong the process of getting rid of debt. If you want to become debt free you always have to make more than the minimum monthly.
Take a credit card for example say you owe $100 on that card at 18% monthly. The minimum monthly payment is something like $15. It would take you about 7 months to pay this off just sticking to the min monthly because interest has accrued on the loan.
Example first payment is $10. Next month you owe 90 before interest, with interest you owe an additional $16.2. Now they owe $106.2 (90+16.2), more than the original amount because the didn't make the minimum. If you miss a few payments, or make less than the minimum monthly, you will owe them more money. Even if you make the minimum exactly it still leads to a longer loan, the longer the loan occurs, the more interest is paid instead of principal on the loan.
If you paid $50 it would take 3 months to pay off the loan. The same thing happens with student loans, just at a lower interest rate, and with a different payment schedule. You paid off more than your minimum monthly, that's why you didn't take so long to pay back the loan, and they did.
It is legal because they basically outline this in the contract you sign, or give you enough information to figure it out on your own. If you don't then the government sees it as your fault not the lenders.
answered 38 mins ago
billy-bob
67719
add a comment |Â
up vote
1
down vote
up vote
1
down vote
The thing that comes to my mind here is that they are only making the minimum monthly payment. Doing this with any type of loan, not just a student loan will prolong the process of getting rid of debt. If you want to become debt free you always have to make more than the minimum monthly.
Take a credit card for example say you owe $100 on that card at 18% monthly. The minimum monthly payment is something like $15. It would take you about 7 months to pay this off just sticking to the min monthly because interest has accrued on the loan.
Example first payment is $10. Next month you owe 90 before interest, with interest you owe an additional $16.2. Now they owe $106.2 (90+16.2), more than the original amount because the didn't make the minimum. If you miss a few payments, or make less than the minimum monthly, you will owe them more money. Even if you make the minimum exactly it still leads to a longer loan, the longer the loan occurs, the more interest is paid instead of principal on the loan.
If you paid $50 it would take 3 months to pay off the loan. The same thing happens with student loans, just at a lower interest rate, and with a different payment schedule. You paid off more than your minimum monthly, that's why you didn't take so long to pay back the loan, and they did.
It is legal because they basically outline this in the contract you sign, or give you enough information to figure it out on your own. If you don't then the government sees it as your fault not the lenders.
answered 38 mins ago
billy-bob
67719
The thing that comes to my mind here is that they are only making the minimum monthly payment. Doing this with any type of loan, not just a student loan will prolong the process of getting rid of debt. If you want to become debt free you always have to make more than the minimum monthly.
Take a credit card for example say you owe $100 on that card at 18% monthly. The minimum monthly payment is something like $15. It would take you about 7 months to pay this off just sticking to the min monthly because interest has accrued on the loan.
Example first payment is $10. Next month you owe 90 before interest, with interest you owe an additional $16.2. Now they owe $106.2 (90+16.2), more than the original amount because the didn't make the minimum. If you miss a few payments, or make less than the minimum monthly, you will owe them more money. Even if you make the minimum exactly it still leads to a longer loan, the longer the loan occurs, the more interest is paid instead of principal on the loan.
If you paid $50 it would take 3 months to pay off the loan. The same thing happens with student loans, just at a lower interest rate, and with a different payment schedule. You paid off more than your minimum monthly, that's why you didn't take so long to pay back the loan, and they did.
It is legal because they basically outline this in the contract you sign, or give you enough information to figure it out on your own. If you don't then the government sees it as your fault not the lenders.
answered 38 mins ago
billy-bob
67719
edited 32 mins ago
answered 38 mins ago
billy-bob
67719
answered 38 mins ago
billy-bob
67719
answered 38 mins ago
billy-bob
67719
67719
add a comment |Â
add a comment |Â
up vote
1
down vote
Many people borrow more than they can repay, then take advantage of loan forgiveness on an income-based repayment plan. From what I've seen this is the most common scenario by which people make so little progress on their student loan principal.
A federal student loan with a standard repayment plan will be paid back in 10-years barring any periods of forbearance/deferment, in those plans you do see principle decrease each month.
When it comes to loans with higher or adjustable rates, people who borrow too much will quickly be unable to keep up with the standard repayment schedule and will have to get into an alternative arrangement that drags on repayment or periods of forbearance where interest accrues.
Regarding breaking the cycle, the worst part of that linked article is that they seem to have learned little, each time they upgraded their living situation they dragged on repayment further. That much debt at those interest rates should be treated like an emergency, true bare-bones living is in order with that kind of debt-load.
Warning others not to make the same mistakes would be nice too, nothing will break the cycle faster than people refusing to play the game of going into massive debt for some college classes.
answered 28 mins ago
Hart CO
21.9k15267
add a comment |Â
up vote
1
down vote
Many people borrow more than they can repay, then take advantage of loan forgiveness on an income-based repayment plan. From what I've seen this is the most common scenario by which people make so little progress on their student loan principal.
A federal student loan with a standard repayment plan will be paid back in 10-years barring any periods of forbearance/deferment, in those plans you do see principle decrease each month.
When it comes to loans with higher or adjustable rates, people who borrow too much will quickly be unable to keep up with the standard repayment schedule and will have to get into an alternative arrangement that drags on repayment or periods of forbearance where interest accrues.
Regarding breaking the cycle, the worst part of that linked article is that they seem to have learned little, each time they upgraded their living situation they dragged on repayment further. That much debt at those interest rates should be treated like an emergency, true bare-bones living is in order with that kind of debt-load.
Warning others not to make the same mistakes would be nice too, nothing will break the cycle faster than people refusing to play the game of going into massive debt for some college classes.
answered 28 mins ago
Hart CO
21.9k15267
add a comment |Â
up vote
1
down vote
up vote
1
down vote
Many people borrow more than they can repay, then take advantage of loan forgiveness on an income-based repayment plan. From what I've seen this is the most common scenario by which people make so little progress on their student loan principal.
A federal student loan with a standard repayment plan will be paid back in 10-years barring any periods of forbearance/deferment, in those plans you do see principle decrease each month.
When it comes to loans with higher or adjustable rates, people who borrow too much will quickly be unable to keep up with the standard repayment schedule and will have to get into an alternative arrangement that drags on repayment or periods of forbearance where interest accrues.
Regarding breaking the cycle, the worst part of that linked article is that they seem to have learned little, each time they upgraded their living situation they dragged on repayment further. That much debt at those interest rates should be treated like an emergency, true bare-bones living is in order with that kind of debt-load.
Warning others not to make the same mistakes would be nice too, nothing will break the cycle faster than people refusing to play the game of going into massive debt for some college classes.
answered 28 mins ago
Hart CO
21.9k15267
Many people borrow more than they can repay, then take advantage of loan forgiveness on an income-based repayment plan. From what I've seen this is the most common scenario by which people make so little progress on their student loan principal.
A federal student loan with a standard repayment plan will be paid back in 10-years barring any periods of forbearance/deferment, in those plans you do see principle decrease each month.
When it comes to loans with higher or adjustable rates, people who borrow too much will quickly be unable to keep up with the standard repayment schedule and will have to get into an alternative arrangement that drags on repayment or periods of forbearance where interest accrues.
Regarding breaking the cycle, the worst part of that linked article is that they seem to have learned little, each time they upgraded their living situation they dragged on repayment further. That much debt at those interest rates should be treated like an emergency, true bare-bones living is in order with that kind of debt-load.
Warning others not to make the same mistakes would be nice too, nothing will break the cycle faster than people refusing to play the game of going into massive debt for some college classes.
answered 28 mins ago
Hart CO
21.9k15267
edited 21 mins ago
answered 28 mins ago
Hart CO
21.9k15267
answered 28 mins ago
Hart CO
21.9k15267
answered 28 mins ago
Hart CO
21.9k15267
21.9k15267
add a comment |Â
add a comment |Â
Sign up or log in
StackExchange.ready(function ()
StackExchange.helpers.onClickDraftSave('#login-link');
);
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Post as a guest
StackExchange.ready(
function ()
StackExchange.openid.initPostLogin('.new-post-login', 'https%3a%2f%2fmoney.stackexchange.com%2fquestions%2f100233%2fhow-do-student-loans-swell-after-years-of-on-time-payments%23new-answer', 'question_page');
);
Post as a guest
Sign up or log in
StackExchange.ready(function ()
StackExchange.helpers.onClickDraftSave('#login-link');
);
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Post as a guest
Sign up or log in
StackExchange.ready(function ()
StackExchange.helpers.onClickDraftSave('#login-link');
);
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Post as a guest
Sign up or log in
StackExchange.ready(function ()
StackExchange.helpers.onClickDraftSave('#login-link');
);
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
1
Can you cite any specific examples you've seen?
– glibdud
1 hour ago
@glibdud This one comes to mind bustle.com/p/…
– MonkeyZeus
1 hour ago
1
@MonkeyZeus That link you provided tells a pretty straightforward story: a large loan, a variable high interest rate, missed payments, and only paying enough to cover the accumulating interest. This is the exact same trap people fall into when only paying the minimum on their credit cards only for much higher stakes, since the amount is so large and it can't be discharged in bankruptcy.
– Charles E. Grant
56 mins ago
@CharlesE.Grant Credit card balances generally go down (albeit minuscule) when paying the minimum amount assuming you do not add additional debt. Please see my other comment
– MonkeyZeus
53 mins ago
Regarding legality, these are large companies that employ lawyers to ensure they are within the law when offering products. Unfortunately for the mountains of late teens out there there is only so far that the law will go in protecting consumers from their own bad decisions.
– Myles
52 mins ago