How much might you have to borrow, and how much will it cost?

Based on budget exercises completed in prior modules, and the portfolio of non-repayable sources developed in Module Four, determine how much you may need to borrow for one year, two years, or the length of your program.

  • Review budgets.
  • Review non-repayable sources of funding.
  • Calculate actual amounts to be borrowed.
  • Use the formula on the next page to calculate monthly payments.

Review the concept of amortization and the effect of interest rates on repayment based on the charts on worksheet 5-1. Based on the loan amount required, calculate monthly payment on graduation based on the amount you will need to pay back. What is the total amount you will be paying back? You may be surprised at how much student loans really cost. Now is the time to consider alternatives, including studying part-time and working part-time, and the grants that might be available to part-time students.

You should also have alternate plans in case you do not find work within six months of finishing your program, or leaving post-secondary studies.

Consult with the financial aid office regarding repayment alternatives and develop a "Plan B" should things not go the way you expect. Read the testimonials beginning on the next page for some ideas used by other students.

How to calculate the total cost of a loan:

Amount of loan x annual percentage rate (APR) x number of years*

Example: for a $10,000 loan at 10% to be paid back over five years

$10,000 x 0.10 x 5 years = $5,000

To estimate the amount of monthly payments:

Total to be paid divided by the number of months of the loan*

Example: $15,000/60 months = $250/month

* These formulas produce estimates that are slightly higher then your actual costs and payments, because they do not account for the reduction in interest payments as you repay the loan.

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