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MoneyWatch: Managing Your Money
By Joshua Rodriguez
Edited By Matt Richardson
/ CBS News
Seeking a higher education is typically a smart idea. Those with college degrees earn tens of thousands of dollars more per year on average than those who completed high school, according to the National Center for Education Statistics. And, with the average college student graduating with about $29,400 in student loan debt, a college education can be a good investment for most when you compare the cost to the potential reward.
But, unless you earn a full-ride scholarship (or a third party is otherwise paying for your schooling), you'll need to pay for at least a portion of your college education. And, in many cases, those who want to go to college won't qualify for federal student aid. The good news is that there are also private student loan options available.
As with any loan however, you'll have to make monthly payments if you choose the private student loan option. So, how much would the monthly payment be on a $30,000 private student loan?
See what interest rate you could secure on a $30,000 private student loan here.
How much would a $30,000 private student loan cost monthly?
The monthly cost of your private student loan will depend on your interest rate, your balance and your loan term. According to Money.com, the average interest rate on a fixed-rate private student loan ranges from 4.07% to 16.49%. And, student loan terms typically range from five years to 25 years (but can be longer or shorter in some cases). Here's what you can expect to pay based on these figures:
$30,000 student loans with a 4.07% interest rate:
- 5-year term: You would pay $553.44 per month and your total interest expense would be $3,206.63.
- 10-year term: You would pay $304.73 per month and your total interest expense would be $6,568.14.
- 15-year term: You would pay $222.96 per month and your total interest expense would be $10,132.84.
- 20-year term: You would pay $182.90 per month and your total interest expense would be $13,896.61.
- 25-year term: You would pay $159.51 per month and your total interest expense would be $17,853.86.
$30,000 student loans with a 16.49% interest rate:
- 5-year term: You would pay $737.38 per month and your total interest expense would be $14,242.52.
- 10-year term: You would pay $511.74 per month and your total interest expense would be $31,408.60.
- 15-year term: You would pay $450.90 per month and your total interest expense would be $51,162.30.
- 20-year term: You would pay $428.44 per month and your total interest expense would be $72,826.45.
- 25-year term: You would pay $419.24 per month and your total interest expense would be $95,771.00.
Keep in mind that no matter what your interest rate is, it's important to carefully consider your loan's term. Shorter terms may cost more per month, but they typically lead to significant long-run savings. So, if you need a low monthly payment, a longer term may be fitting. But, if you can afford to pay more, a shorter-term may be preferable.
There are variable-rate student loans to choose from, too. However, if you choose a variable rate loan, your rate and payment may change from time to time, which can make budgeting difficult.
Find out how affordable your student loan can be now.
How to cut the cost of private student loans
Here are a few ways you may be able to reduce the cost of your private student loan:
- Compare your options: There are several financial institutions that offer private student loans. And, these institutions are all in competition with one another. So, it's important to compare your options in order to find the best interest rate possible.
- Improve your credit score: Interest rates and credit scores typically go hand in hand. Those with the best scores tend to enjoy the lowest rates. So, consider taking steps to improve your credit score before you apply for a student loan.
- Get a cosigner: If you have someone who's willing to cosign the loan for you and has a solid credit score, you could enjoy savings.
The bottom line
A $30,000 private student loan can cost approximately $159.51 per month to $737.38 per month, depending on your interest rate and the term you choose. But, you may be able to cut your cost by comparing your options, improving your credit score or getting a cosigner.
