Question

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%

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 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

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