Question

Emmett is graduating from college in six months, but he will need a loan in amount of 2350 for his last semester. He may either receive an unsubsidized staffers loan with an interest rate of 6.8%, compound monthly, or his parents get a PLUSE loan with an interest rate of 7.8%, compounded monthly. The Stafford Loan has a grace of six months from the time of graduation. Which loan will have a higher balance and by how much at the time of repayment?

Answer 1

$2,350 for his last semester. He may either receive an un-subsidized Stafford Loan with an interest rate of 6.8%, compounded monthly, or his parents may get a PLUS Loan with an interest rate of 7.8%,

2350∗(1+0.068/12)^12=2514.88 2350∗(1+0.078/12)^12=2540.00

And

2540.00−2514.88=25.12