Just like credit cards, once the paperwork is done student loans are out of sight, out of mind … until it comes time to repay them. It’s amazing how quickly $10,000 here and $15,000 adds up to a big, big total.

The bottom line is that when you owe a chunk of money, the payments can be substantial and repayment can go on for years and years. Generally student loans are amortized over a greater period than regular consumer loans for items such as cars and although this can give some relief in terms of the payment amounts, it is minor. The downside is that repaying debt over a longer period of time means that the interest is calculated on a higher balance for longer.

For example, the interest on a loan repaid over 10 years versus 5 years is more than double. See the next post for an example.

Because most of us get our first ‘career’ job at an entry level, the amount that ends up in your bank account after all the deductions can be a surprise, and not a pleasant one. It can be tough starting out, putting together a work wardrobe, acquiring some furniture and getting home to see family, it all adds up. Wouldn’t it be nice to have payments that are too large for too long? Make sure you know what debt you are taking on when you sign the papers and accept the funds and make sure you understand what payments you will be making when it comes time to repay the loans.

Next post…a case study on a typical graduate.