Need Help with inputting my Student Loan!

[John Edwards]

On Sat, Feb 6, 2010 at 6:00 PM, USFMD82 <mdavisusf82 at yahoo.com> wrote:

>
> Thank you in advance for helping me out!!
>
> Is there some way Ican make my interest automatically calculate every
> month,
> my Student loan is set up into a couple different loans. all with the same
> interest rate, I am really confused by all of this, and I jsut keep adding
> the opening balance of it every month. Any help is greatly appreciated
>
> I have included links to my statements to see if this would make any sense
> to anyone.
>
> here is my statement last month
> http://img.photobucket.com/albums/v66/Callsignbishop/StudentLoanBill.jpg
>
> Here is how I have it setup in GNUcash
> http://img.photobucket.com/albums/v66/Callsignbishop/GNUCash.jpg
>
> Any help is greatly appreciated, to this point I have got alot figured out
> but so much is still left. I know how to set up automatic payments with the
> interest, however how do  I account for all the stuff that has already
> capitalized to this point? I have not set this up yet either ( the
> automatic
> payment) because I don't even know if that is what I am supposed to do
>

Anything that is capitalized up to the date you decide is your opening
balance goes into Opening Balances. Assuming your start is January 1, 2010
(for example), then your balance on Dec. 31, 2009 is your Opening Balance.
You can split that into two entries, one to show the original amount of the
loan, and one to show the changes to the loan's balance up to the date you
start your books. That initial entry (or entries) is only time you're going
to touch the Opening Balance account. Everything else comes from somewhere
else.

I don't know how the American student loan system works, but if the four
loans can operate differently (i.e. the interest on A could change while B
stays the same), if you are making four separate payments each month, or if
you'd like to know the balance on each of the four loans you may wish to
have the loans as four separate liability accounts. That's up to you to
determine the level of detail you need. The later steps don't make a
difference whether you are working with one account or four.

As far as I know, GNUCash can't take a payment and automatically allocate it
to interest and principal.

Assuming that you are making a set payment each month, and that some of it
goes to interest with the remainder to principal, what you can do is set up
a scheduled monthly payment and adjust the interest and principal
allocations when you receive your statement. That is what I do with my
student loans.

If you do it that way, then the entry would look like this (assuming a $300
payment):
Expenses:Interest Expense    200
Liabilities:Student Loan          100
Assets:Chequing Account                300
(Debit the expense & liability accounts, credit the asset account)

That takes $300 out of your bank account, 200 is charged to the expense
account as an interest expense, while the loan's balance goes down by 100.

The other option is to treat each of the two components separately. If your
payments are irregular, this is probably the better way to proceed

In that case, the interest gets added to the amount of the loan.
Expenses:Interest Expense    200
Liabilities:Student Loan                     200
(Debit the expense account, credit the liability account)

This charges the $200 in interest to the expense account, and increases the
amount of the loan by that much.

Then your payment gets applied to the loan
Liabilities:Student Loan          300
Assets:Chequing Account                300
(Debit the liability account, credit the asset account)

This takes the $300 from your bank account, and decreases the balance on
your loan by that much.

The late fees get applied to the loan, with the other side being an expense
(much like the second entry I showed above). If you wish to separate it from
interest paid, then call it "Late Fees" or something similar. If not, you
can fold it into the interest expense.

John

-- 
John Edwards
"You can insure against the weather, but you can't insure against
incompetence, can you?" - Phil Tufnell