The United States now holds $1.2 trillion in collective student loan debt, and college graduates from 2014 left school with an average debt of $33,000, according to Mark Kantrowitz, senior vice president and publisher of Edvisors.com, a paying for college resource. How does this impact you? Know the real cost of a student loan.

The Breakdown

If you have $25,000 in loans with a 4.5% interest rate, it will take over 10 years to pay off what will eventually amount to over $30,000. Think about what you can really contribute to payments over time given the cost of living in and around Boston. Use these tools to calculate your own personal financial picture:

boston cost of living

The More You Know

Student loan defaults are on the rise, mushrooming into the largest source of household debt and the outlook is frightening. Here are some little known facts that you need to know:

  1. You can lower you interest rate for most loans by scheduling automatic payments.
  2. The collateral for your student loan debt is your future earnings.
  3. By law, student loans cannot be discharged in bankruptcy.
  4. Your job, where you live, volunteering…there are many ways to loan forgiveness.
  5. Awards for tuition (e.g. AmeriCorps stipends) are taxable.
  6. Student loans and payments can have an impact on your credit score and home ownership.

Especially for mortgages, your debt-to-income ratio is vitally important. This number represents all your monthly payments compared to your monthly pretax income. For instance, let’s says you make $4,000 per month before taxes. You have $300 in minimum payments on your credit cards and $600 in student loans. You have total of $900 of debt payments each month. $900/$4,000 equals 22.5 percent. To meet the Federal Housing Administration loans (FHA) standards for home ownership, you’d have to have a debt to income ratio including your mortgage payment “(principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners’ dues, etc.)” of 43 percent or less. You’d have to stick to homes where your total mortgage payment would be $820 or less.

cost of student loans