Research

A college student in today’s society obtains a high amount of debt from all the necessary loans taken out to pay for the expensive cost of a college education. For those who do have a high paying job after college or are in generally lower salary careers, these debts become lifelong companions because they are unable to pay them back with their incomes. It is proposed that income-contingent loans will help people paying back student loans to pay them back at a rate in which is based on how much money they are making. Then after 10-20 years they are forgiven of their debts, which allows them to put their incomes towards building their future rather than paying back their past. Kevin Carey is an American higher education writer, policy analyst and a Director of the Education Policy Program at New America. On October 23, 2011 he published an article, titled “The U.S. Should Adopt Income-Based Loans Now” which discusses the need for income-based loans here in America. An analysis of Kevin Carey’s essay will identify and detail the author’s project, two claims and evidence, and the refutation in order to determine its effectiveness.

A research work conducted by Williams (2008) claims that one of the detrimental impacts of student-loan debt is the liability encountered at the initial stage of an individual’s career especially the lower income individuals as a result of static reimbursement plan. Again, the research made by Ehlert, Wittstruck, Podgursky, Watson, & Monroe (2002) suggested that there is a higher failure to pay off loans on the side of students who attend a year or two proprietary or community colleges than their peers who attend a full four years or more selective institutions.

Amy is a recent New York University graduate with a Bachelor degree in biochemistry who works at a firm with a $50,000 in salary. She has over hundred thousand dollar in the loan due to high college tuition with low scholarships availability and now has to pay $800 dollar interest per month for next 15 years. However, she cannot afford the interest rate because she has no money left after her moderate living cost. As a result, she has no option other than to sacrifice her future plans of buying her own house, car and move in back with her parents or relatives. This scenario is not an anomaly but true for the majority of the students who pursue higher education in the United States.

One year ago, you took out a 10-year, $15,000, interest-only loan. The APR on the loan is 7% and payments are to be made annually. What is the mount of the loan payment that is due today? $1050

loan debt is accrued by those seeking a BA, and that thirty-five percent of BA grads

With an initial interest rate of 3.5%, a homebuyer’s monthly principal/interest payment during the first ten years is $772.36. The actual monthly payment will be, as with the 15-year fixed rate mortgage, increased by the monthly escrow payments of homeowner’s insurance and property taxes- making the actual monthly payment during the first ten years $1,246.36. Under the assumption that the interest rate would increase by 0.1% every year after the initial 10-year period, the homebuyer’s principal/interest payment increases from the aforementioned $772.36, to $850.15, with their total monthly payment increasing from $1,246.36 to $1,324.21. Again, the proportion of the principal/interest payment directed towards interest charges is the periodic interest rate of the period multiplied by the previous month’s ending principal balance. The remainder of the principal/interest payment is then applied to the principal balance. Under the given terms, the homebuyer will have paid an initial $43,000 down payment, $172,000 in principal payments and $118,539.50 in interest charges for a total expenditure on a $215,000 listed home of

Alice has finished school and her immediate focus will be on reducing her debt. This is a specific goal with a specific time period. This can easily be measured yearly with her financial statements. Based on her income she should be able to pay of her personal loan within 5 years. That is the plan of course.

Assuming Celia had attempted to pay her student loans the bankruptcy court must decide if these circumstances have been met through the means test (Twomey & Jennings, 2014, p. 749). Under the means test disposable income is determine by the formula as follows: debtor’s current monthly income

would result in full payoff in 25 years. To pay the loan off five years earlier, a monthly payment of $788.00(principal & interest) would be required. Total payment of $999.13"¦roughly $1,000.

17. If you borrow $150,000 for a house at 8% simple annual interest rate for 15 years, what is your monthly payment?

During the last few decades, a recent trend has been occurring: students are increasingly acquiring more student debt. According to the College Board and U.S. Census data, over the last few decades, the cost of a 4-year college degree has risen by 250 percent (Washington and Salmon 38). According to the same data, the average family income has only risen 16 percent during that time period (Washington and Salmon 38). This information proves that there is a serious problem going on, as there is clearly a shortage of income needed to pay for college. Therefore, students are having to take out larger educational loans. As a result, there has now been an intensive obligation to find out the factors contributing to this trend. Higher tuition is an obvious cause, but in order to understand the issue at hand, the unnoticeable causes need to be addressed. Students are obtaining large amounts of student debt because of a higher influx of qualified applicants, expectations of an ideal campus, and students being uneducated about the loans they are taking.

Out of a population of 900 students, 352 people participated in the survey. A total of 173 students or 51.8 percent of the participants had paid tuition fees. Of those who participated, 250 students had acquired monetary aid from their parents. Of those who borrowed money from their parents, 148 believed that the financial help caused unduly stress on their families (Ross, et al., 2006). A total of 34 student applied for financial hardships funds, with 15 receiving assistance. One hundred three students were employed, working a median of 11.5 hours per week. The number of hours worked did not affect debt or student performance (Ross, et al., 2006). The questionnaire included questions about basic demographics, debt, and income

Peter wanted to purchase a house at price $4m. He planed to borrow 50% of the total amount through mortgage loans provided by HSBC. HSBC charged him 6% interest rate and he had to pay off the loans in 20 years. The first payment was made one month after the purchase. 10 years later, HSBC adjusted the loan rate into 12%.

⎛ 0.10 ⎞ ⎟ = 1.008333 , 0.83% per month. ⎜1 + 12 ⎠ ⎝ We need to borrow, $5,000 at a 10.471% per year over 48 months. The monthly payment is obtained as follows: ⎡ ⎤ 1 ⎢1 − 48 ⎥ (1.008333) ⎦ , 5,000 = Payment × ⎣ 0.008333 hence 5,000 Payment = = 126.813 ⎡⎡ ⎤⎤ 1 ⎢ ⎢1 − 48 ⎥ ⎥ ⎢ ⎣ (1.008333) ⎦ ⎥ ⎥ ⎢ 0.008333 ⎥ ⎢ ⎥ ⎢ ⎦ ⎣ Tony wants $133.67, you are better off by $133.67-$126.81 = $6.85708, per month. The present value of the flow of payments is given by : ⎡ ⎤ 1 ⎢1 − 48 ⎥ (1.008333) ⎦ = $270.362. 6.85708 × ⎣ 0.008333

On the other hand, research indicates that most students with outstanding loans do not have a problem paying back what they owe. According to Dynarski (2015), a survey conducted in 1999 showed that medium debtors only spend up to 5% of their income in paying back the loan. The amount is almost the same to what families use for entertainment. Needless to say, the rate of defaulting has increased in the recent past (Gross, 2014, par. 6). However, the highest numbers of defaulters are those that attended for-profit colleges or dropped out. These types of students often have a lesser amount of debt as compared to other college students and are considered minority borrowers.