Locator: 48761STUDENTLOANS.
I think I do this exercise every six months. My math is often wrong. It's for my curiosity only. This is not meant for anyone else.
Student loans, update, CNBC: link here.
Loans: interest rates currently run 7 - 8% and are fixed for the life of the loan.
Let's do the math:
- old system:
- a dozen different options, but most common:
- 120 fixed payments for all outstanding loans -- that's over the next ten years
- with 6% interest, amortized over the ten years: current system
- $50,000: $555 / month
- $100,000: $1,110 / month
- new system:
- two options, outstanding loan and time period for payback
- for $50,000 / 15 years (180 payments instead of 120 payments)
- for $100,000 / 25 years (300 payments instead of 120 payments)
- with 6% interest amortized over 15 years or 25 years as it applies:
- $50,000: $421 / month
- $100,000: $844 / month
Under the new system, the individual can pay off the loan early and pay less overall (as one can do with the current system).
Under the proposed new system, one would pay a lot more interest over time, but the monthly payment -- the cash flow required -- would be significantly less.
In the big scheme of things, it's the 6 - 7% interest rate that is the big "killer." I would have no problem with converting all these loans to interest-free loans.
The bigger problem: how realistic are these numbers for outstanding loans.
According to ChatGPT, as of 2025, the most reliable data suggests the average student loan balance per borrower in the US is approximately $40,000.
$40,000 amortized, fixed 6%, over 15 years = $337 / month.
$40,000 amoritzed, fixed interest free over 15 years = $222 / month.
