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Saving vs Borrowing Calculator

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It is cheaper to save than to borrow. When families contemplate college expenses, they can pay for it using a combination of past income (savings), current income and future income (loans). This calculator demonstrates the tradeoffs between the different ways of paying for college.

For example, if you save $200 a month for ten years at 6.8% interest, you will accumulate $34,432.58 to help pay for college. If instead of saving, you decide to borrow the same amount, you will pay $396.25 a month for ten years at 6.8% interest. The choice of whether to save in advance or pay afterward is your prerogative, but this example clearly demonstrates that paying afterward will cost twice as much. Varying the interest rates changes the multiplier slightly, but it is always less expensive to save than to borrow.

The savings interest rate listed below is the current average interest rate on six month certificates of deposit. The loan interest rate and fees are from the PLUS loan.


Amount Saved Per Period:
Years of Savings/Payments:
Savings Interest Rate:
Loan Interest Rate:
Loan Fees:
Are the interest earnings taxable? Yes No
Is the loan interest deductible? Yes No
Marginal Tax Rate:
Adjust for inflation (i.e., use constant dollars)? Yes No
Inflation Rate:
 

 
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