Student Loans — slides
Financial Literacy Club
Money After High School · Lesson 9
Student Loans
Federal vs. private loans, interest, and repayment options.
14-minute lesson · learnwithflc.org
Student Loans · 1 / 21
Financial Literacy Club
Money After High School · Lesson 9
Student Loans
Federal vs. private loans, interest, and repayment options.
14-minute lesson · learnwithflc.org
Today's goals
By the end of class, you'll be able to…
- Compare federal and private student loans
- Explain subsidized vs. unsubsidized interest and capitalization
- Estimate monthly payments and total interest on student loans
Warm-up
Is borrowing for college “good debt”? What would make it good or bad?
Think, then write your answer.
The big idea
Student Loans
Federal vs. private loans, interest, and repayment options.
Money After High School · Lesson 9
Federal student loans come from the U.S. Department of Education. They have fixed interest rates set by law, don't require a credit check for most undergraduates, and come with borrower protections and repayment options.
Money After High School · Lesson 9
- Subsidized loans: for students with financial need. The government pays the interest while you're in school at least half-time.
- Unsubsidized loans: interest starts building as soon as the money is paid out, even while you're in school.
Money After High School · Lesson 9
Private student loans come from banks and other lenders. They usually depend on credit (often needing a co-signer), may have variable rates, and typically offer fewer protections. Most experts suggest using federal loans first.
Vocabulary
Capitalization
When unpaid interest is added to your loan balance. After that, you pay interest on the interest.
Money After High School · Lesson 9
Rules change
Federal loan limits and repayment plans are set by law and have changed in recent years. Always check studentaid.gov for current rules before you borrow.
Money After High School · Lesson 9
A common guideline
Try to keep total student loan borrowing below what you expect to earn in your first year after graduating.
See it
$10,000 borrowed: about $114 a month and $3,626 in total interest. $30,000 borrowed: about $341 a month and $10,877 in total interest. $50,000 borrowed: about $568 a month and $18,129 in total interest.
$10,000 ($114/month)
$30,000 ($341/month)
$50,000 ($568/month)
Real example
Interest while you're in school
Caleb borrows $5,000 in unsubsidized federal loans his first year at a hypothetical 6% rate. He doesn't make payments during school.
- Interest builds at about $300 a year while he's in school.
- By the time repayment starts about 4½ years later, roughly $1,350 in interest has built up.
- If that interest is capitalized, he'll start repayment owing about $6,350 — on a $5,000 loan.
Paying even the interest during school — say $25 a month from a part-time job — keeps the balance from growing.
Try it together
Try it: student loan calculator
Try $30,000 at 6.5% for 10 years. Then see what borrowing $10,000 less would save.
Your numbers
Results
Monthly payment
$340.64
120 payments at 6.5% APR
Amount borrowed
$30,000
Total interest
$10,877
27% of what you pay
Total of payments
$40,877
- Principal (amount borrowed) $30,000
- Interest $10,877
Show year-by-year breakdownHide breakdown
| Year | Principal | Interest | Balance left |
|---|---|---|---|
| 1 | $2,203 | $1,885 | $27,797 |
| 2 | $2,350 | $1,738 | $25,447 |
| 3 | $2,507 | $1,580 | $22,940 |
| 4 | $2,675 | $1,412 | $20,264 |
| 5 | $2,855 | $1,233 | $17,410 |
| 6 | $3,046 | $1,042 | $14,364 |
| 7 | $3,250 | $838 | $11,114 |
| 8 | $3,467 | $620 | $7,647 |
| 9 | $3,700 | $388 | $3,947 |
| 10 | $3,947 | $140 | $0 |
Educational calculator, not financial advice. Results are hypothetical estimates based on the numbers you enter.
Activity · pairs · 10 min
Borrow Smart
- Using the loan calculator at a hypothetical 6.5% for 10 years, pairs find the monthly payment and total interest on $30,000 and on $20,000.
- Pairs compare each payment to a starting salary of $45,000 (about $3,750 a month before taxes).
- Pairs apply the guideline: borrow less in total than your expected first-year salary.
Check for understanding · 1 of 3
What's a key difference between subsidized and unsubsidized federal loans?
- AUnsubsidized loans don't charge interest.
- BWith subsidized loans, the government pays interest while you're in school at least half-time.
- CSubsidized loans must be repaid immediately.
- DThere's no difference.
B. With subsidized loans, the government pays interest while you're in school at least half-time.
Unsubsidized loans build interest from the start; subsidized loans don't while you're enrolled at least half-time.
Check for understanding · 2 of 3
You're choosing between a federal loan and a private loan for the same amount.
Why do many experts suggest federal loans first?
- AFederal loans offer fixed rates, borrower protections, and repayment options private loans often don't.
- BFederal loans never need to be repaid.
- CPrivate loans are illegal.
- DFederal loans always have higher rates.
A. Federal loans offer fixed rates, borrower protections, and repayment options private loans often don't.
Federal protections can matter a lot if your income is lower than expected after school.
Check for understanding · 3 of 3
Capitalized interest is added to your loan balance, so you then pay interest on it.
- True
- False
True
That's why paying interest during school can save money.
Remember
Key takeaways
- Federal first, private last.
- Subsidized: no interest in school. Unsubsidized: interest from day one.
- Capitalized interest grows your balance.
- Borrow less than your expected first-year salary.
- Rules change — check studentaid.gov.
Discuss
Talk it over
- How would you decide how much is too much to borrow for college?
- Should colleges be required to show expected graduate salaries next to their prices?
Exit ticket
What's the difference between subsidized and unsubsidized federal loans?
Answer on your exit ticket before you leave.
Nice work today.
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