How a Financial Calculator Can Help Teens Make Deci$ion$ about Student Loans

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Marsha A. Goetting Ph.D., CFP®, CFCSMarsha A. Goetting Ph.D., CFP®, CFCS

Professor & Extension Family Professor & Extension Family Economics SpecialistEconomics Specialist

Department of Agricultural Department of Agricultural Economics & EconomicsEconomics & Economics

Have you wondered? Have you wondered? • What the monthly What the monthly payments would be on payments would be on a student loan after a student loan after graduation?graduation?

Have you wondered? Have you wondered? • How much you would How much you would

save in interest charges if save in interest charges if you increased your you increased your payment?payment?

WorkshopWorkshop• You are going to learn how You are going to learn how

to solve these & similar to solve these & similar problems quickly & easily problems quickly & easily by using a by using a financial financial calculatorcalculator

Financial CalculatorFinancial Calculator

• Texas Instruments Texas Instruments BA-35 Solar Business BA-35 Solar Business AnalystAnalyst

• No longer availableNo longer available

IntroductionIntroduction• Getting Acquainted Getting Acquainted

with your Financial with your Financial CalculatorCalculator

Turn on Turn on

MODEMODE

CE/CCE/C

2nd2nd CPTCPT AC/ONAC/ON

NN

XX 12 12

% i% i PMTPMTPVPV FVFV

1212

FixFix

Financial Mode Financial Mode

FinFin 0. 0.

• If If FINFIN is not lower left is not lower left cornercorner

• PressPress MODEMODE AC/ONAC/ONCPTCPT

Decimal Function Decimal Function

FINFIN 0.00 0.00

• PressPress 2nd2nd

2nd2nd

FixFix

CPTCPT 22

Clearing Screen/DisplayClearing Screen/Display

• Press key oncePress key once Clears Display Clears Display Corrects Incorrect Corrects Incorrect

EntriesEntries Clears word “Error”Clears word “Error”

CE/CCE/C

Clearing Financial Registers Clearing Financial Registers • Press keyPress key Clears numbers in Clears numbers in

registers & displayregisters & display

NN %i%i PVPV PMTPMT FVFV

CE/C 2nd2nd

CMRCMR

CE/C

Finance KeysFinance KeysNN

% i% i

PMTPMT

Number of PeriodsNumber of Periods

Interest RateInterest Rate

Payment AmountPayment Amount

Finance KeysFinance KeysPVPV

FVFV

Present ValuePresent Value

Future ValueFuture Value

Compute keyCompute keyCPTCPT

Student LoansStudent Loans

Student LoansStudent Loans•CalculateCalculate

•PaymentsPayments

•Interest paidInterest paid

Student Loans Student Loans • Bernie’s Loan Bernie’s Loan $23,000$23,000

• APR APR 8.258.25%%

• 2020 years pay years pay

Student Loan $23,000 Student Loan $23,000 • Clear registers Clear registers 2nd CE/C CE/C2nd CE/C CE/C

• Loan amountLoan amount 23,000 PV23,000 PV

• Periods Periods 20 x 12 = 240 N20 x 12 = 240 N• % Rate% Rate 8.25 8.25 12 = 0.69 %i 12 = 0.69 %i

• CPT PMT 195.98 CPT PMT 195.98 (don’t clear)(don’t clear)

Interest Paid Interest Paid

• $195.98 payment$195.98 payment

• x 240 # monthsx 240 # months

$47,034.02 paid $47,034.02 paid

- 23,000.00 loan- 23,000.00 loan

Interest Paid Interest Paid

$24,034.02$24,034.02 interest paid interest paid by Bernie by Bernie over 20 yearsover 20 years

Student Loans Student Loans • John John $19,000 $19,000

• APR 8.25%APR 8.25%

• 15 year loan 15 year loan

Student Loans $19,000 Student Loans $19,000 • Clear registers Clear registers 2nd CE/C CE/C2nd CE/C CE/C• Loan AmountLoan Amount 19,000 PV19,000 PV

• Periods Periods 15 x 12 = 180 N15 x 12 = 180 N• % Rate % Rate 8.25 8.25 12 = 0.69 %i12 = 0.69 %i

• CPT PMT 184.33 CPT PMT 184.33 (don’t clear)(don’t clear)

Interest Paid Interest Paid

• $184.33 payment$184.33 payment

• x 180 # of periodsx 180 # of periods

$33,178.80 paid$33,178.80 paid

- 19,000.00 loan amount- 19,000.00 loan amount

Interest Paid Interest Paid • $14,178.80 interest $14,178.80 interest

paid by John over paid by John over 15 years15 years

SummarySummary

•CalculatedCalculated•PaymentsPayments

•Interest paidInterest paid

Student Loan Student Loan • Payment knownPayment known• How long to pay off How long to pay off

debt?debt?

Student Loans Student Loans • Red’s Loan Red’s Loan $23,965$23,965

• APR APR 8.258.25%%

• $250$250 payments payments

Student Loan Student Loan • Clear registers Clear registers 2nd CE/C CE/C2nd CE/C CE/C• Loan AmountLoan Amount 23,965 23,965 PVPV

• Payment Payment 250 PMT 250 PMT• % Rate% Rate 8.25 8.25 12 = 0.69 %i 12 = 0.69 %i • CPT NCPT N (months) (months) 157.04157.04

• 12 = 13.09 years 12 = 13.09 years ((don’t clear)don’t clear)

Compute interest paidCompute interest paid

• Press again: Press again:

• CPT N 157.04CPT N 157.04

• # of monthly # of monthly paymentspayments

Interest Paid Interest Paid

157.04 months157.04 months

x $250 paymentsx $250 payments

$ 39,260.99 paid back$ 39,260.99 paid back

- 23,965.00 - 23,965.00 loan amountloan amount

Interest Paid Interest Paid

• $15,295.99 interest $15,295.99 interest paid by Red over paid by Red over 13.09 years13.09 years

What if ??? What if ???

• Increase payment from Increase payment from $250$250 to to $350$350 ….just change ….just change the payment amount the payment amount

PMTPMT

Student Loan Student Loan • Clear registers Clear registers 2nd CE/C CE/C2nd CE/C CE/C• Loan AmountLoan Amount 23,965 23,965 PVPV

• Payment 350 PMTPayment 350 PMT• % Rate% Rate 8.25 8.25 12 = 0.69 %i 12 = 0.69 %i • CPT N (months) 92.87CPT N (months) 92.87

• 12 = 7.74 years 12 = 7.74 years (don’t clear)(don’t clear)

Interest Paid Interest Paid 92.87 months92.87 months

x $350 paymentsx $350 payments

$ 32,503.53 paid back$ 32,503.53 paid back

- 23,965.00 - 23,965.00 loan amountloan amount

Interest Paid Interest Paid

• $8,538.53 interest $8,538.53 interest paid paid by Red over by Red over 7.74 years7.74 years

The differenceThe difference• $250 13.09 yrs = $15,295.99$250 13.09 yrs = $15,295.99

• $350 7.74 yrs = $ 8,538.53$350 7.74 yrs = $ 8,538.53

$6,757.46$6,757.46

Central IdeaCentral Idea• By increasing the amount of By increasing the amount of

paymentpayment• A loan can be paid A loan can be paid

off sooner off sooner

• You pay less INTERE$TYou pay less INTERE$T

Student Loans Student Loans • Troy’s Loan Troy’s Loan $34,000$34,000

• APR APR 8.258.25%%

• $300$300 payments payments

Student Loan Student Loan • Clear registers Clear registers 2nd CE/C CE/C2nd CE/C CE/C• Loan AmountLoan Amount 34,000 34,000 PVPV

• Payment Payment 300 PMT 300 PMT• % Rate% Rate 8.25 8.25 12 = 0.69 %i 12 = 0.69 %i • CPT NCPT N (months) (months) 220.44220.4412 = 18.37 years 12 = 18.37 years (don’t clear)(don’t clear)

Compute interest paidCompute interest paid

• Press again: Press again:

• CPT N 220.44CPT N 220.44

• # of monthly # of monthly paymentspayments

Interest Paid Interest Paid 220.44 months220.44 months

x $300 paymentsx $300 payments

$ 66,132.34 paid back$ 66,132.34 paid back

- 34,000.00 loan - 34,000.00 loan

Interest Paid Interest Paid • $32,132.34 interest $32,132.34 interest paid by Troy over paid by Troy over 18.37 years18.37 years

Summary Summary • Student Loan Student Loan

Payment knownPayment known• Computed how long to Computed how long to

pay off debtpay off debt

• Interest paidInterest paid

How a Financial Calculator Can Help Teens Make Deci$ion$ about Student Loans

20022002