Calculating College Debt

(MoneyWatch) 
For many high school seniors and their parents, the next 12 days are going to be a-g-o-n-i-z-i-n-g.

Why? Tuition deposits for thousands of colleges and universities are due on May 1.

That's the day that families have to decide if they can handle a financial commitment that could cost them more than a fleet of Honda Accords.

If you're stressing over this decision, here's my suggestion: Leave your heart out of the equation. Reach for a calculator instead.

That's the advice I gave a high school guidance counselor last week when she was telling me about one of her students, who must decide whether to attend the University of Oregon or a private school in Southern California. Oregon is handing the girl a full-ride scholarship while the private school has offered a financial aid package that will leave her short by $80,000.

The girl is stuck on the private school, which enjoys a stunning view of the Pacific Ocean. And it's the whole beach thing that seems to be strongly influencing her decision.

The teenager, who comes from a low-income household, doesn't appreciate what $80,000 in debt would mean to her. And that's why she needs a calculator. I used a student loan calculator at FinAid.org to get an idea of what she faced. I plugged in $80,000 at 6.8% interest rate (the current rate for a student Stafford loan) and used 10 years as the loan length, which is standard.

Here are the ugly results:

Her monthly payments would be $921. She would pay close to $30,500 in interest over the life of the loan for a grand total of $110,477.

What should the teenager do? Take the University of Oregon's free ride. After she graduates from college debt-free, she'll be able to afford a vacation on the beach.

Abacus image by Ansik, CC 2.0.