Monday Morning Fun with Amortization Schedules

In keeping with the Zero Hedge link about student loans, let’s post about Federal Plus loans this morning.

Parents and students alike enjoy kicking the can of higher education tuition costs down the road and Uncle (Shylock) Sam has no problem with enabling the behavior/desire of his (debt serfs) citizens of the Republic…so long as the borrowers jump through the appropriate hoops necessary for payment deferment.  Why?  Cui Bono.

You can take out a PLUS loan for education costs at 7.9% after paying 4% in up front fees AND take up to TEN years to repay AND not make your first payment for 4 years IF you jump through all the bureaucratic hoops.  What a DEAL!!!??

Within your own noggin’, does anyone else out there have the story of Tom Sawyer conning all his buddies into whitewashing his Aunt’s fence under the pretense that it is great fun to do so????

So, let’s see how that scenario looks on an amortization schedule, shall we?

If you borrow $10,000 at 7.5% for ten years on August 1, 2012 and you get your forms filled out correctly and do not have to make your first payment until June of 2016, you will repay $17,863 over ten years.  You will pay $148 per month starting June of 2016.  You will pay nothing but accrued interest through 2016, 2017, 2018 and January of 2019.  You will start to hit the original borrowed amount beginning February of 2019. 

Why are tuition costs skyrocketing (and the pay/perks of those working within the White Ivory Towers)?  Because of the seemingly endless supply of (lemmings) voters who are willing to sign up for debt servitude and an Uncle who likes giving the (lemmings) voters what they want – good and hard.

Best quote within the story: “I’m not an expert in finance, so I don’t know this stuff,” said Ruland, an electrical engineer who lives in Farmington Hills, Michigan.

http://www.stltoday.com/business/local/plus-student-loans-may-have-glitches-in-fine-print/article_eea59b72-0021-5f49-8551-84490dca3d27.html

7.9% AND an upfront 4% fee AND $7,863 interest on a 10k note…??? Uncle Sam calling free market lenders usurious in their lending practices is akin to a pot calling a kettle black.  He should become familiar with the Biblical phrase “Physician, heal thyself”.