I saw a post saying that two people left school 23 years ago with a combined debt of 70k. They paid 500 USD monthly for 23 years and still owe 60k.
I’m thoroughly confused. obligatory not from America.
In: Mathematics
It works like most other debt – you take out an amount and pay it off over time.
Every month (or whatever period you pay back on) you look at the outstanding principle (how much you still owe) and calculate how much interest you owe on that amount (the fee for borrowing the money). When you make your monthly payment, you pay the interest _first_ and whatever is left over goes to reducing the principle. Next month, you run the calculation _again_ on the lower principle amount to figure out how much interest you owe that period.
For _most_ loans, you figure out how long you want to take to pay back the total principle (say, 30 years) and use that to figure out what your monthly payment will be every month, so that every month you pay back a little more principle, which means less interest next month, which means you pay back a little more principle, etc. You can do the math to figure out _exactly_ how much you need to pay every month so that in 30 years, the principal balance is zero. If you want to learn more about that, google ‘amortization schedule’.
Folks that have been paying small amounts for years have been paying 100% interest, 0% principle. The amount they owe never goes down – all they are paying is the fee for borrowing the money. If you do _that_, you’ll never pay off the loan.
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