It is estimated that the average amount owed for student loans in 2010 was $25,250 per student. If the interest rate for studen
t 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%
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 data: 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
