Return on education, student loan interest and repayment periods

Education remains the best investment around.  One economic question that always comes up is: are student loans worth it?  That is, should I take out a loan (if that is the only way I can attend college)?

The quick answer is usually yes for attendance at a reputable institution.  So how do you calculate the return on education investment?  Generally, the calculation subtracts the explicit cost of attendance (tuition, fees, books, and student loan costs both current and future) and the opportunity cost of attendance (that is the job you could have gotten) from the added income that the person will make over their working life due to the education investment.

See: https://studentaid.ed.gov/repay-loans/understand/plans

Student loans come in two forms: subsidized and unsubsidized.  Subsidized loans are usually financial need based; unsubsidized loans are not.  Both types of loans have requirements regarding school attendance (usually at least half time).

The type of loan also impacts the interest rate; higher the interest rate the lower the return on education.

Student loan repayment periods also vary. Nowadays, student loan time periods range from 10 to 25 years.  There are programs that allow the repayment to increase over time, change with income, and ones that are fixed over time.

Generally, the shorter the repayment time period, the higher the return on the education investment.  In short, less loan interest is paid on a shorter loan period.