Tag Archives: Interest Rates

Student Loan Debt

26 Oct
Image result for College loans

Picture Borrowed from GoCollege

So I’m here to ask all my fellow recent graduates and current students a student loan question and to address a large concern I have with Student Loan Debt.

 As a student riddled with impossible levels of loan debt ($250,000+) primarily from graduate school (I was an academic scholarship student in undergrad), I am highly interested in the recent debates about Student Loans. 

I of course support the side that argues that bad things went down in the student loan industry. For one thing, college students are a notoriously vulnerable group going into school. They aren’t educated on loans, interest, or the possible consequences of what is happening. Most of them have never heard of interest or credit scores – much less comprehend the true devastation that they are agreeing to.  Given the massive impact student loans have on these people’s lives, I feel like a lot more education and awareness is required.

Image result for College loans

Picture borrowed from CPA Practice Advisor

Some of these people are only just 18 – right out of high school. Maybe only just legal for sex and still not legal to drink. But we let them sign away tens of thousands of dollars without much education on the issue at all. You take the time to teach these people about condoms – have them practice with plastic baby dolls, but provide very little information about the practical consequences of having a student loan. 

Oh! We make them do entrance and exit counseling – seriously?!? Since when has a young kid/young adult paid attention to those sorts of forms? It’s all academic anyway – yes I know I have to pay this money back some day. “But don’t worry- there’s no payment necessary while you’re still in college!” And I’m sure you’ll have a great job as soon as you get out. 🙂

It just seems like deceitful practices to me – taking advantage of a known vulnerable group without giving them much needed, in-depth, real world advice on the consequences of what they are agreeing to. 

But all of that is neither here nor there for the moment. My real issue in this article is the STUDENT LOAN INTEREST RATES. Yep, I’m getting real sick of hearing people say “those students are just lazy.” “They borrowed the  money and now they don’t want to pay it back.” “If you didn’t want to pay the loan back, you shouldn’t have taken it.” “Students today just take, take, take but don’t want to do the work to give it back.” “They shouldn’t have gotten that worthless humanities or social science degree.”  I’ve heard it all and more. But for your information, it isn’t the principal I’m most upset about. It’s the stupidly high interest rates I’m facing.  

Think about it – 

Bank of America is offering Auto Loans at 2-3% interest. Other companies are maybe as high as 4%, but that’s still pretty low.  The current Mortgage Interest Rate is 3.64% and actually fell to record lows this year with some as low as 3%. 

But do you know the lowest Interest Rate I have on my student loans? – 4.5% and that’s on only ONE loan out of more than 20 that I accumulated throughout college. By far, the majority of my loans are between 6.8% and 8.5% with most falling at 7.9% interest.  And that does not include my Signature Student Loan with a 12.38% interest rate and the Bar Study Loan at 13.65%.  

Yep, that’s right. You’re asking grown adults with solid jobs and a steady  income to pay between half to a fourth as much interest as young students right out of college trying to establish their lives and futures.  Many of these students aren’t in the position to work with this! They are starting at the bottom end of the totem pole in regards to their jobs, with a minimum of 2-5 years of experience required before anything substantial comes along. But during that time, their debt has grown extensively. There is no way to get their heads above water! I’m paying more than $200 on one loan a month (the minimum payment) and it isn’t making a dent because of the interest I’m trying to cover. 

And people expect the economy to improve like this? Economic growth depends upon buying and selling. The less people buy, the less the sellers make. The less the seller make, the less they buy. The less they buy, the less the other sellers make. The less the businesses make, the less they pay their employees. The less they pay their employees, the less they buy and the cycle continues. But students saddled with this much debt and high interest rates are NOT BUYING. We can’t afford to buy. Sure, our loans are set a 20-30yr pay back plans. But because of the interest rates, we can’t put off payments. There isn’t any money left over to buy a house. No money to pay for a wedding. No extra cash for eating out or a nice dress or shopping at the mall. Christmas? Just give me cash for my loans.

And thanks to the current “education-focused” economy we have going here – there is an entire generation of 18-30 year olds who fall into this category with around 70% of all high school graduates enrolling in college. And 70% of students graduating with a  Bachelor’s degree are in debt with almost $1,300,000,000,000 owed among approximately 44 million young adults. Furthermore, each student is 6% more in debt this year than last year, and it just keeps going up.  According to reports, many of these students (as much as 40%) are delinquent or not paying their accounts at all. So all that interest is racking up at 6-13% a pop (a lot of people have the signature student loans, the worst). 40% of this debt comes from graduate students. GRADUATE STUDENTS! These are your doctors, lawyers, government officials, future professors, accountants, psychologists. And they can’t even open up shop because of their student loan payments. A large part of which isn’t the principal at all – it’s the interest.

Do you know who decides most of these rates? – It’s all in that nice print on my Navient page:

  “Interest rates on federal student loans are set by Congress.”

Good old Congress. Those people who keep voting themselves raises, who avoid taxes like the plague and bailed out major income-generating banks – but want to charge the youth outrageous, usurious fees for going to college. For educating themselves and trying to make their world a better place. Who actually studied in High School and wanted to make something of their lives. Who are going into jobs that contribute to a nation, government, and economy that won’t give them a fair shake.  I’m not asking that you let me skip out on my loans. I’m asking that you give me a chance to pay my loans without facing exorbitant additional interest that don’t even let me see the loan itself. 

Here’s a list of the Interest Rates I have on my loans:

  1. 13.625% on the Bar Study Student Loan. 
  2. 12.385% on the Signature Student Loan. 
  3. 6.8% on the Stafford Unsubsidized Loans
  4. 5.6-6.8% (most at 6.8%) on the Stafford Subsidized Loans
  5. 4.5%-6.8% (most at 6.8%) Direct Loans – Subsidized
  6. 5.4%-6.8% (most at 6.8%) Direct Loans – Unsubsidized
  7. 8.5% Parent Plus Loan 
  8. 8.5% Graduate Plus Loan
  9. 7.9-8.5% Direct Grad Plus Loans

Now here’s my question for my fellow students and graduates – what’s your interest rate??? Share below!



Understanding Compound Interest

14 Jun

As always, this lesson is not intended to be professional advice. This is simply lesson material for ESL students in a Managerial Economics and Corporate Finance class. Posted here for their use or for helping other students.

Corporate Value (值)

Financial officers and Managers are extremely responsible for the monetary (货币) goings-on in their companies. As we said before, the Wealth Maximization Rule means that Financial and Corporate Managers are required to maximize (最大化) the profits (收益) for their investors (投资者). 

However, maximizing profits requires in-depth (深入)planning and micro-managing (微观) your funds today while considering (考虑) future profits as well.

There are two types of Value (值) that you should be aware of in Finance and Economics.

The first is called Present Value (现值) and is the value today of something that will increase in value in the future. ExampleWhen we loan someone $1,000 at 10% interest, we know that our $1,000 loan will increase in value in the future. Present Value = PV.

The second is called Future Value (未来价值) and is the value that the item will have in the future. Future Value = FV.

Interest (利)

I’ll make another post later discussing the many ways to use Present and Future value in your company, but today I just wanted to talk about using them to calculate (计算) “Compound Interest” (复利).  

Usually, when we loan money to someone or invest (投资) our money in something, we do so on the condition that we receive back more money than we put in.  Our corporation is not a charity (慈善机构), we don’t loan you things for free!  The original money we invest is called the Principal (本息).  The extra money we get on top is called the Interest (利).  

Example ~ Company A (a large global corporation) invests $100,000 in a small new business called Company B.  Company B has 10 years to pay it back. But Company A doesn’t do this for free ~ they want to maximize their profits too. That means they have to make some money on this contract (合同).  So they ask Company B to pay an additional 7% per year.   

$100,000 = Principal
7% = Interest


Problem! ~ 7% of what?  
Answer! ~ It depends:)   It depends on how Company A decides to count it.

There are two separate mathematical formulas (数学公式) you can use to figure out the Interest.  

The first one is called Simple Interest (单利) and I’ve already looked at it before.

The second method is called Compound Interest (复利). Compound Interest says that each payment period, Company B is going to pay an additional 7% of the currently owed principal! Lenders and Investors really like compound interest a lot better than simple interest.  

For example: I borrow $1000 due in two years.  My interest rate is 10%.  

If I use Simple Interest:  Year 1, I owe $1000 + 10% interest = $1100.  Year 2, I owe $1100 + (10% of $1000) = $1200. 🙂 

If I use Compound Interest: Year 1, I owe $1000 + 10% interest = $1100.  Year 2, I owe $1100 + (10% of $1100) = $1210

The formula for Compound Interest is:

I = Interest
P = Present Value
R = Interest Rate
T = Number of Years Involved
N = Number of Times a Year


Company A (a large global corporation) invests $100,000 in a small new business called Company B.  Company B has 10 years to pay it back. The interest rate is 7% compounded  bi-annually.   What is the Total Interest (利) you will pay over 10 Years?


The total interest is of course important to both Company A and Company B, there are two other important numbers that the financial managers of Company A want to know–the Present Value of their money and the Future Value of their money.  

Future Value

FV = Future Value (how much money you will make in total)
PV = Present Value

R = Interest Rate
T = Number of years involved
N = Times per Year

Using our example above with Company A & B, the Future Value is calculated like this:

That means Company A will make a total of $286,968.46 if they invest their $100,000 in Company B now. Over 10 years, their $100,000 will change into $386,968.46.:) We like this plan!

Present Value

Sometimes, for example with bonds (债券), we know the Future Value (how much money will be paid to us in the end). But we don’t know how much money has to be invested (Present Value) to get that future result.  So Present Value is calculated by the formula: 

PV = Present Value 
FV = Future Value

R = Interest Rate
T = Number of years involved
N = Number of Times per Year

Example: Mary Jane knows that in 4 years, she needs to have a total of $150,000 to pay her college tuition. She has an interest-generating account that gives her a 4% compound interest rate bi-annually on everything she puts in. How much money should she invest today (Present Value) in order to have $150,000 in 4 years?

That means that Mary Jane needs to put $101,336.67 in her bank account now in order to get $150,000 in the future. 



  1. Value (值)
  2. Present Value (现值)
  3. Future Value (未来价值)
  4. Interest (利)
  5. Simple Interest (单利)
  6. Compound Interest (复利)
  7. Principal (本息)
  8. Monthly (每月一次)
  9. Weekly (每周)
  10. Annually (每年)
  11. Bi-Annually (一年两次)
  12. Quarterly (季刊)


Compound Interest

Future Value

Present Value

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