It is estimated that the average amount owed for student loans in 2010 was $25,250 per student. If the interest rate for student loans increases to 6.8%, estimate how much more students will pay over a 10-year repayment period for this "average amount owed" as compared with 3.4%

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Mathematics

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15 August, 03:23

It is estimated that the average amount owed for student loans in 2010 was $25,250 per student. If the interest rate for student loans increases to 6.8%, estimate how much more students will pay over a 10-year repayment period for this "average amount owed" as compared with 3.4%

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Jermaine May · Answer 1

Given:

loan amount: 25,250

original interest rate: 3.4%

new interest rate: 6.8%

term: 10 years.

Assuming that simple interest formula is used.

I = P * r * t

I = interest

P = principal

r = interest rate

t = term/time

I = 25,250 * 3.4% * 10 years

I = 8,585

I = 25,250 * 6.8% * 10 years

I = 17,170

17,170 - 8,585 = 8,585 Additional interest paid using the new interest rate.

Using an online loan repayment calculator: Here are the following dа ta:

Loan Balance:$25,250.00

Adjusted Loan Balance:$25,250.00Loan

Interest Rate:6.80%

Loan Fees:0.00%

Loan Term:10 years

Minimum Payment:$0.00

Monthly Loan Payment:$290.58

Number of Payments:120

Cumulative Payments:$34,869.23

Total Interest Paid:$9,619.23

Loan Balance:$25,250.00

Adjusted Loan Balance:$25,250.00

Loan Interest Rate:3.40%

Loan Fees:0.00%

Loan Term:10 years

Minimum Payment:$0.00

Monthly Loan Payment:$248.51

Number of Payments:120

Cumulative Payments:$29,820.59

Total Interest Paid: $4,570.59