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

Answer 1

Let's fix 2010 as the present time. According to basic equations in engineering economy,

F = P (1+i)^n where F is the future worth, P is the present worth, i is the interest rate and n is the number of years. Substituting the appropriate values,

F = $25,250 (1 + 0.068)^10
F = $48,750

If the student has payed for the $25,250, then he needs to pay $48750 - $25250 = $23,500 more.

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