Whether you’re planning for college or already in the thick of it, you might be wondering what the financial burden will look like on the other side. Most students end up taking out student loans, and you want to make sure you plan accordingly so you can pay them off in a timely manner after graduation.
The amount of loan burden students take on can vary by degree and by the institution attended. Earning an associate degree at the local community college, for example, incurs a very different cost than a four-year degree at a private institution. And if you attend graduate school, costs can diverge significantly depending on whether you’re shooting for a medical degree or attending a program funded through assistantships.
The total cost is also not simply the principal balance itself. You should be aware that some loans have additional fees associated with them and also incur interest. In fact, unsubsidized loans gather interest while you are in school leading to a larger loan balance than the amount you originally took out.
In this article, we will break down typical student loan amounts by degree and type of institution as well as total repayment costs incurred during the lifetime of the loan.
Types of Loans
When you attend college or a vocational school, there are several different types of loans you might take out. These loans fall primarily into the following categories:
- Subsidized Federal Student Loans: These are loans offered to students based on financial need in which the federal government pays all interest on the loans as long as you are in school at least half time and during a six month grace period after you leave school. This means the principal amount you borrowed doesn’t grow and doesn’t have interest added to it until you leave school and can begin paying.
- Unsubsidized Federal Student Loans: These loans are offered to all undergraduate and graduate students. These loans do accrue interest while you are in school, and if you do not pay the interest off as you go, it capitalizes (is added to the principal).
- Private Student Loans: There are many different loans offered by private lenders. The terms are generally not as favorable as federal student loans and there is less flexibility with how you can pay them off. While the majority of students take out federal student loans, a much smaller number take out private loans. Typically, private loans are only used to cover a gap between the cost of attendance and what the federal loans could pay for.
Understanding Loan Fees, Interest, and Repayment Terms
The total cost of a loan, and the total amount you end up repaying in the end, includes not only the principal amount that went toward your schooling but also interest and fees.
Federal student loans charge an origination fee, which is a percentage of your loan amount and is used for covering the cost of processing your loan. These fees for Federal Direct Subsidized and Unsubsidized Loans are currently hovering around 1% of the loan value and around 4% for Direct PLUS Loans.
Unless your loan is a subsidized federal loan, it will gain interest from the moment the funds are disbursed. If you do not pay off this interest as you go, it will be capitalized (added to the principal), which means your interest then incurs interest.
Interest rates vary depending on the loan, but when you begin repaying your loan, it is common for most of your payment to go toward interest rather than toward the principal balance. The total amount you end up paying in interest during the lifetime of your loan depends on the loan interest rate, the payment plan, and the length of the repayment term.
Generally, the sooner you pay off a loan, the less you pay in total. Some exceptions to this exist, however, like loan forgiveness programs which are discussed later in this article. In order to determine your total student loan cost, use the estimated total debt values from this article, and try entering them in a student loan calculator with different interest amounts or payment terms to compare results.
Loan Cost for Vocational School or Associate Degrees
The numbers used to determine average loan amounts come from a study by the CollegeBoard on student debt in 2015–2016. (As of the time this article was written, these were the most recent numbers available.) Keep in mind that total loan costs would also include origination fees and interest over the lifetime of the loan(s).
For those who earned an associate degree, the good news is that more than half graduated with no debt. Those who earned their degrees from public institutions had a total outstanding debt at graduation of approximately $6,850, on average. Those who earned their degrees from private for-profit institutions owed over three times more.
Those who earned vocational certificates had varying debt levels as well, with numbers totaling the following approximate average amounts:
- Public two-year: $7,300
- Public non-degree granting: $3,650
- Private nonprofit (two years or less): $12,250
- For-profit two-year or more: $11,950
- For-profit non-degree granting: $11,350
Loan Cost for Bachelor’s Degrees
The total loan cost for earning a bachelor’s degree depends primarily on the school attended and very little on your major. The schools fall into three different categories: public four-year institutions, such as state universities, private nonprofit schools, such as local liberal arts colleges, ivy league schools, and the like, and for-profit institutions such as CollegeAmerica or Independence University.
The estimated average total loan costs for students graduating with a bachelor’s degree from each type of institution are as follows:
- Public four-year: $17,900
- Private nonprofit four-year: $21,400
- For-profit: $33,550
Note that these averages include students who graduated without any debt at all. Also note that for certain majors, you may be able to hold a job after graduation that makes you eligible for a student loan forgiveness program.
The Public Service Loan Forgiveness program applies to those employed by a U.S. federal, state, local, or tribal government or nonprofit organization. To qualify, you must make the minimum income-based payments on student loans for 120 payments to have the remainder of your loan forgiven.
Similarly, the Teacher Loan Forgiveness Program applies to those employed as teachers for five complete and consecutive academic years at a school that serves low-income students. It is possible to receive loan forgiveness on your federal student loans to the tune of $17,500 through this program.
Loan Cost for Master’s Degrees
Graduate degrees are often much more expensive than undergraduate degrees, though the cost can vary significantly depending upon the program attended. The following are the average cumulative student loan balances of master’s degree recipients from a 2016 study on trends in student loan debt by the National Center for Education Statistics:
- Master of Business Administration: $66,300
- Master of Education: $55,200
- Master of Arts: $72,800
- Master of Science: $62,300
- Other master’s degrees: $75,100
It’s important to note that these are cumulative amounts, meaning that they include debt incurred for undergraduate education as well. These numbers also exclude anyone who graduated without debt. If the averages are weighted to include those who graduated without debt, the numbers become $33,813, $34,224, $42,952, $34,888, and $52,570, respectively.
It’s worth noting that the Public Service Loan Forgiveness program and the Teacher Loan Forgiveness program apply to debt incurred for master’s degrees and higher.
Loan Cost for Doctorate Degrees
Doctorate degrees come in many different types with many different price tags as well. The following are the total student debt numbers from the same study for different doctorate degrees:
- Ph.D. (except education): $98,800
- Ph.D. in education: $111,900
- Medicine (M.D. or D.O.): $246,000
- Other health sciences doctorates: $202,400
- Law (LL.B. or J.D.): $145,500
- Other doctorates (non-Ph.D.): $132,200
Again, these are total debt numbers and include undergraduate loans as well. If those who received doctorate degrees without incurring debt are weighted into these averages, the numbers instead become $44,460, $70,497, $199,260, $151,800, $100,395, and $87,252, respectively.
Note that certain Ph.D. programs, particularly those in STEM fields, often offer graduate students stipends and assistantships that fund all or most of their graduate school expenses.
Planning for College Expenses
The team at College Finance is here to help you plan for college intelligently. When determining what to study, and what degree to obtain, the total cost is only one factor to consider. Other factors include earning potential and career opportunities after graduation. There’s a reason, after all, that those studying to become medical doctors are willing to take on so much debt.
Check out the resources on collegefinance.com today to learn more about planning for your education and borrowing money in order to cover the costs. Our mission is to help you make informed choices about your financing options.