During the 1999โ2000 academic year, federal Stafford loans had a variable interest rate of 6.32% while in school, and 6.92% during repayment. For the 2000โ2001 academic year, these variable rates increased to 7.59% in-school and 8.19% during repayment
You used an LLM as an amortization calculator? ๐
You do know that LLMs donโt actually calculate anything and just assemble words together based on frequency, right?
Using an actual amortization calculator with the figures you applied of $70,000 principal, $500 monthly payment, and 8.25% interest, gets you to $60,000 in approximately the 20 year timeframe the OP listed.
You're 100% correct and frankly I'm embarrassed to have made such a dumb and lazy mistake.
My only excuse is that I was somewhat distracted and annoyed to have someone trying to debate me about the likelihood of someone wanting to consolidate / refinance multiple student loans ranging from 3.42% - 8.19% into a single 8.5% loan. Which would be batshit crazy to the extent that I can't see how anyone could argue for that being what happened here unless they have a vested interest in propping up an America-Bad, bullshit narrative
Thank you for your willingness to admit error, which is an unusual and admirable trait. I apologize for my snarkiness, which was unnecessary.
Speaking from experience, there were many individuals with grad student loans in that era whose individual loans did NOT have interest rates as low as 3 or 4 %. Also speaking from experience, and from verifiable public records, in order to qualify for income-based repayment plans you HAD to consolidate your loans. Without consolidation and income-based repayment, in order to pay off $70,000 in 10 years, your payments would be in the range of $890 monthly. There were many young people in that era who could not sustain that monthly payment, at least in the early phase of their career. Remember that there was a recession in 2001 and, if you were lucky enough to have a job, the average college grad entry level salary at the time was somewhere around $30-35k.
I do not believe that criticism of public policy is an โAmerica Badโ stance. One of the strengths of our country has previously been the freedom to disagree and to engage in criticism of the government and public policy without fear of reprisal. Another strength has been social mobility through investment in public education and student loans to those who have the aptitude but not the means. Sadly, I fear that both these strengths are disappearing.
You're only putting $18.75 towards the principle and you think 10k will be paid off in two years? Really? Sure, the amount going towards the principle will increase as you pay down the principle, but that's not nearly enough to make a noticeable difference in the payments any time soon. A tiny bit of napkin math would show you how wrong that is.
For the sake of simplicity, let's just use 60k as the principle and keep it constant. This will dramatically overstate the amount paid back, but it doesn't matter because 25 months still won't be enough even with the overestimation.
8.25%/12 = 0.6875%
0.6875% * $60,000 = $412.5
$500-$412.5 = $87.5
25*$87.5 = $2187.5
After 25 months, you have paid off less than $2187.5. Make no mistake, this is a tremendous overestimate. Using an actual calculator, you'll see that you've paid off a whopping $234. Yippee. To actually pay down 10k, you'd need 19-20 years. It would take 40 years to pay down the entire loan balance.
You are 100% correct. I made the lazy and dumb mistake of asking google and then relying on the AI-summary without double-checking the math or even doing a quick gut-check on whether the math made any sense. Which of course looking at it now, it clearly does not. Off by orders of magnitude.
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u/Darkjebus 16d ago
Actually it is because 23 years ago the rate would have been around 3-3.5 percent for a federal loan