How a Financial Calculator Can Help Teens Make Deci$ion$ about Student Loans
2002
Marsha A. Goetting ®, CFCS Ph.D., CFP
Professor & Extension Family Economics Specialist Department of Agricultural Economics & Economics
Have you wondered? • What the monthly payments would be on a student loan after graduation?
Have you wondered?
• How much you would save in interest charges if you increased your payment?
Workshop
• You are going to learn how to solve these & similar problems quickly & easily by using a financial calculator
Financial Calculator
• Texas Instruments BA-35 Solar Business Analyst • No longer available
Introduction
• Getting Acquainted with your Financial Calculator
Turn on
Fix 2nd
X
CE/C
CPT
MODE AC/ON
12 N
12
%i
PV
PMT
FV
Financial Mode
• If FIN is not lower left corner • CPT Press AC/ON MODE
Fin
0.
Decimal Function
Fix
• Press 2nd
2nd
CPT
2
FIN
0.00
Clearing Screen/Display
• Press CE/C key once Clears Display Corrects Incorrect Entries Clears word “Error”
Clearing Financial Registers CMR
• Press 2nd CE/C CE/C key Clears numbers in registers & display
N %i PV PMT FV
Finance Keys
N
%i PMT
Number of Periods
Interest Rate Payment Amount
Finance Keys
PV
FV CPT
Present Value Future Value Compute key
Student Loans
Student Loans
•Calculate
•Payments •Interest paid
Student Loans
•Bernie’s Loan $23,000 •APR 8.25% •20 years pay
Student Loan $23,000
• Clear registers 2nd CE/C CE/C • Loan amount 23,000 PV • Periods 20 x 12 = 240 N • % Rate 8.25 12 = 0.69 %i • CPT PMT 195.98 (don’t clear)
Interest Paid
• $195.98 payment • x 240 # months $47,034.02 paid - 23,000.00 loan
Interest Paid
$24,034.02
interest paid by Bernie over 20 years
Student Loans
•John $19,000 •APR 8.25% •15 year loan
Student Loans $19,000
• Clear registers 2nd CE/C CE/C • Loan Amount 19,000 PV • Periods 15 x 12 = 180 N • % Rate 8.25 12 = 0.69 %i • CPT PMT 184.33 (don’t clear)
Interest Paid
• $184.33 payment • x 180 # of periods $33,178.80 paid - 19,000.00 loan amount
Interest Paid
• $14,178.80 interest paid by John over 15 years
Summary
•Calculated
•Payments •Interest paid
Student Loan
• Payment known • How long to pay off debt?
Student Loans
•Red’s Loan $23,965 •APR 8.25% •$250 payments
Student Loan
• Clear registers 2nd CE/C CE/C • Loan Amount 23,965 PV • Payment 250 PMT • % Rate 8.25 12 = 0.69 %i
• CPT N (months) 157.04 • 12 = 13.09 years (don’t clear)
Compute interest paid
•Press again: •CPT N 157.04 • # of monthly payments
Interest Paid
157.04 months x $250 payments $ 39,260.99 paid back - 23,965.00 loan amount
Interest Paid
•$15,295.99 interest paid by Red over 13.09 years
What if ???
• Increase payment from $250 to $350 ….just change the payment amount
PMT
Student Loan
• Clear registers 2nd CE/C CE/C • Loan Amount 23,965 PV • Payment 350 PMT • % Rate 8.25 12 = 0.69 %i
• CPT N (months) 92.87 • 12 = 7.74 years (don’t clear)
Interest Paid
92.87 months x $350 payments $ 32,503.53 paid back - 23,965.00 loan amount
Interest Paid
• $8,538.53 interest paid by Red over 7.74 years
The difference
• $250 13.09 yrs = $15,295.99 • $350 7.74 yrs = $ 8,538.53
$6,757.46
Central Idea
• By increasing the amount of payment
• A loan can be paid off sooner • You pay less INTERE$T
Student Loans
•Troy’s Loan $34,000 •APR 8.25% •$300 payments
Student Loan
• Clear registers 2nd CE/C CE/C • Loan Amount 34,000 PV • Payment 300 PMT • % Rate 8.25 12 = 0.69 %i • CPT N (months) 220.44 12 = 18.37 years (don’t clear)
Compute interest paid
• Press again: • CPT N 220.44 • # of monthly payments
Interest Paid
220.44 months x $300 payments $ 66,132.34 paid back - 34,000.00 loan
Interest Paid
• $32,132.34 interest paid by Troy over 18.37 years
Summary
• Student Loan Payment known
• Computed how long to pay off debt • Interest paid
How a Financial Calculator Can Help Teens Make Deci$ion$ about Student Loans
2002