How can people make payments for 20 years on school loans and barely make a dent in the principal? How are those loans different than a mortgage?
In: Economics
Not sure why nobody has answered this question yet, everyone just trying to explain interest. The ELI5 answer is mortgages are set for a period (15 years, 30 years, etc) where you make the same payment every month to pay it off in that period. Your minimum amount is literally what payment is needed to hit that period payoff. Student loans aren’t structured like this, you can pay a minimum amount that is very low (think $50 a month) that will never get you there in a reasonable time period.
And before anyone says it, yes I know this is a gross simplification and you could pay over on your mortgage amount if you’d like
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