SLOPE stands for Student Loans Over Projected Earnings -- the ratio of your student loan debt to your first year income. In other words, the SLOPE calculator will determine what percentage of your anticipated income from a career choice will be used to pay off your student loans each year.
The SLOPE Calculator determines:
- How much interest you will have to repay if you choose to wait to pay interest on an unsubsidized Stafford Loan (FA Glossary) until after you are out of college;
- How much your monthly student loan payments will be (after adding in the interest);
- What percent of your income will go to paying off student loans based upon a career choice.
How much should I borrow in student loans?
Experts agree that your student loan payments should not exceed 8% of your annual income, or if you are married, 8% of your household income. The SLOPE calculator is a tool designed to help you decide how much you can afford to borrow based on how much you may earn from your intended career.
Start the SLOPE Calculator and do the following:
- Enter the estimated date you intend to (or did) start college;
- Enter the estimated date you plan to graduate;
- Choose a career category from the dropdown box;
- Choose the specific career based on your career category (entry-level annual salaries from the Colorado Department of Labor and Employment are displayed with each career);
- Click on "next" at the bottom of the screen (it is not necessary to update the loan interest rates and terms);
- Enter each loan you plan to borrow by academic year and grade level (there is a chart with loan limits to help you);
- Click on "next" at the bottom of the page to view your SLOPE.
Note: The calculator uses the maximum interest rate, standard loan term (10 years) and minimum payment requirements ($50) for federal loans. These amounts are estimated for private alternative loans. If you are attending college less than full-time it may take you longer than one academic year to complete a grade level. You can borrow money for each academic year you are at a grade level as long as you are attending at least half-time. Include PLUS loans only if you are the parent.
Analyzing and experimenting with your SLOPE results
After you run the calculator once, go back and see how much you can save on interest if you shorten the loan term, raise the minimum monthly payments or if the interest rate is less than expected. You can also see how much lower your payments would be if you pay interest on an unsubsidized Stafford Loan while you are in school and during your grace period rather than waiting until after you are out of school.
SLOPE Budget Worksheet
After you have experimented with the results of SLOPE, click on "next" one more time to view the Budget Worksheet. This worksheet calculates estimated take-home pay (gross salary, based upon the career choice you entered, minus estimated taxes and deductions), compared to your total loan debt plus normal monthly expenses.
Income
In addition to a field for your take-home pay, other income fields are provided if needed (always use the net amount after taxes for the income categories):
- Your take-home pay
- Other household member's take-home pay
- Child support/maintenance
- Other income
Monthly Expenses
This is where the Budget Worksheet gets interesting. It is amazing to see where all the money goes -- and realize just how much you actually spend on "small" items like eating out, cell phones charges and television.
There are two types of monthly expenses listed in two columns. Fixed expenses are those for which the same amount is due each month, while variable expenses are those for which the amount could change from month to month. For variable expenses it may be easier to estimate how much you may spend over the entire year and then divide by 12 to get the average monthly charge.
Your student loan payment is a fixed monthly expense. You will notice this amount is already filled in for you based on the information you submitted in the SLOPE Calculator.
Financial Summary
This final section of the worksheet summarizes everything you have entered. It takes your income minus the total of your fixed and variable monthly expenses to total how much money you may have left each month.
How did you do? Did you have money left over to spend on other things? Use these tools as many times as necessary, adjusting loan amounts, career choices or budget terms, until you’ve developed a plan that will work for you.
Have Fun! These tools, the SLOPE Calculator and Budget Worksheet, are here to help you understand how important it is to be a wise borrower while you are in college. Only borrow the amount you really need to help cover your educational expenses so that your student loan debt will not be a barrier to future lifestyle expectations.