Math 201: Write the course

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Student Loans and the Repayment Planning
Introduction
Education these days is really expensive and students would pay for
their education in different ways, some take help from their family,
some work part time and pay off the education and some would take
student loans which they will have to repay after their graduation.
These days, students are finding it really hard to pay off the student
loans they are taking due to the lack of proper planning on how to do
their personal finance budgeting.
This project is for planning in early stage on how to repay the student
loans.
Hypothesis
Hypothesis is defined as the result one expects out of the project they are
doing. This is an intelligent guess on how or what one can expect out of the
project.
This helps us to know how the project is proceeding and if there are any
changes needed.
I feel that this monthly payment from my earnings towards the loan
repayment would help me and fit my budget.
Yeah, If I could pay off the monthly payments towards the loan repayment,
I would be able to pay back the loan faster than the standard 10-years
repayment plan.
I can pay a monthly repayment of my student loan at $ 250.
Expected Salary after Graduation:
Job title: Commissary Control Monitor
State: Newport News VA
Sources used to estimate salary (at least two):
Source 1: Indeed.com
Estimated starting salary 1: $ 33676.8
Source 2: Glassdoor.com
Estimated starting salary 2: $ 43795.2
Estimated starting annual salary (average): $ 38736
Estimated starting monthly salary: $ 3228
Estimated net monthly salary (after taxes): $ 2421
Budget
As of right now, I am working part-time job and I am making somewhere
near to $ 1200 a month.
I am maintain a google spread sheet to make sure how much is coming in
and how much is going out, which would give us the inflow and outflow of
the money.
This way I would make sure how much I am budgeting for food, for rent
and other expenses.
Apart from all of these I would be having a small amount from every
months earnings towards an emergency fund or savings which would be in
the range of $ 300-$ 350
So I would be able to pay a loan repayment of $ 250 monthly so that I can
still have something crediting for emergency funds. Also as the salary
would be nearly double to what I make now, it would be quite comfortable.
Student loan at Graduation
As I do not have a student loan, I have chosen option 2, where I had
been to website and other google search results to determine what
would be the average amount of loan students would have at
graduation. And it is $15,763.
I still have 9 more semesters to go and thus I would be having a loan
of 9*8745 = $ 78,705 @ 3% interest rate per year.
This way, I can look at this project in a realistic way by looking at my
monthly earnings, expenses and savings to see if I can make it to
repay the loan as quickly as possible.
Monthly Payments:
I do not have any loans including education loan, so I am assuming the
average which would be $8,745 per semester at an interest rate of 3%. And
I still have 9 semesters to go.
So my total loan amount would be $ 78,705 at an interest rate of 3%
annually and the duration of loan repayment would be 10 years.
Using excel (attached), it is determined that my total monthly payments
would be $760 (rounded to nearest dollar).
Net monthly salary after tax deductions would be $2,421.
When I look at the percentage of the net salary I receive after graduation, it
would be 31.4%.
I feel that this would be a bit higher than I expected it to be and it would be
manageable if that is around 20%. Also we assumed 25% flat for tax, which
is not same in everyone case, so I think it can be manageable practically
but need a well thought plan.
Future Value and Total Interest
We determined that total monthly payments would be $ 760, and this
is done for 120 months.
So total repayment done would be 760*120 = $91,200
For a loan of $78,705, I would be paying $91,200 which would be the
future value of the loan amount.
Also as I would be paying 91200-78705 = $12,495 additionally, that
would be the interest I would end up paying for the loan if I do the
repayment for 10 years.
I feel that the interest amount which I end up paying is on higher end
and I think if we could repay the loan a little earlier by paying off
more monthly payments when I could have money.
Interest for loan periods less than 10 years:
Years EMI Future Value Total Interest

10 759.9813 91200 12495

8 923.176 88624.89204 9919.892042

5 1414.226 84853.54792 6148.547923

3 2288.837 82398.11774 3693.117743

To determine ways of reducing the interest I pay by the end of 10 years, I tried to check how
that would change when the loan period is reduced.
So I tried with three different loan periods lesser than 10 years, 8,5 and 3 years.
Even through the interest has reduced, the Monthly payments have increased to near to
impossible for me to commit every month.
So What I feel is, if there is an option to pay off loan in few months, when I have some extra
money, more principal would be taken off and that way I can save a little bit towards the end.
So I feel, the only option for me to pay off the loan and to reduce the total interest would be to
pay off the monthly payments variably, i.e., when I have extra money, I would be allowed to
pay more money in particular month so that the principal would be reduced for coming
months payments.