For the Cress and Little problem we will gain an understanding of how student loans work. We will understand the difference between different types of loans. Figuring out this problem will help us be better prepared to make decisions regarding student loans for our college.
Apply Your Knowledge: Use the information you have found to determine how long it will take to pay back your college loans if you take out $5,000 every year for four years. How much would the total cost of the loans be (i.e. how much money total do you end up paying)?
Apply Your Knowledge: Use the information you have found to determine how long it will take to pay back your college loans if you take out $5,000 every year for four years. How much would the total cost of the loans be (i.e. how much money total do you end up paying)?
Three different types of loans offered to college students:
1. Subsidized Loans-
2. Plus Loans-
3. Bank Loans-
1. Subsidized Loans-
- Interest Rate for Subsidized Loans: 4.66%
- Eligibility: have financial needs determined by FAFSA & be an undergraduate.
- Subsidized Loans are compounded monthly.
2. Plus Loans-
- Interest Rate for Plus Loans: 7.21%
- Eligibility: be a graduate or professional degree student enrolled at least half-time at an eligible school in a program leading to a degree or certificate, or be the parent. Also you must meet the requirements for federal student aid.
- Plus Loans are compounded monthly.
3. Bank Loans-
- Interest Rate for Bank Loans: 4.50%
- Eligibility: be enrolled at an eligible school, be a US citizen, you may also need a co-signer.
- Bank Loans are compounded daily.
Solving for Subsidized Loans
Solving For Plus Loans
Solving For Bank Loans
By plugging the numbers into the equation for all four years, I found out how much total you would owe after four years plus interest. Then dividing that number by the monthly payments showed how many months it would take to pay off that loan.
My Sources
bankrate.com studentaid.ed.gov thecalculatorsite.com
bankrate.com studentaid.ed.gov thecalculatorsite.com