Lesson 3.4: Paying for College — Student Loans Compared
The Go Further companion to Lesson 3.4 in Money Decisions.
Federal Loan Simulator
The federal government's own simulator: enter a loan amount and compare real repayment plans side by side — monthly payment, total paid, and years to done. This is the Loan Truth Test with live ammunition.
Key ideas from the lesson
- Compare loans by total repayment cost, not by the monthly payment. A lower rate saves money every month of the loan; a longer term lowers the payment but adds months of interest.
- Federal student loans come first for a reason: everyone in a given year gets the same set rate, and the government offers protections in hard times — options to pause or reduce payments, and plans tied to your income.
- Private lenders set their own rates and look at your credit history — which at 18 means your co-signer's. Their protections are whatever the contract says.
- Two rules of thumb: borrow only after gift aid and work-study are used up, and keep your total borrowing below what you expect to earn in your first year of work.
Why this helps
The Loan Truth Test fails any loan that's sold on its monthly payment. The Simulator enforces the lesson's standard automatically: every plan it shows reports the total you'll actually pay, which makes the cheap-looking loan confess.
Try this
Run the Simulator twice on the same loan amount: once on the standard plan, once on the longest plan it offers. Write down both totals and the difference. That difference is the price of the smaller payment — the exact number Lesson 3.4 exists to make you compute.
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