Understanding Student Loans: Options, Interest Calculation, Daily Interest Formula
Explore the various options available for student loans, learn how to calculate interest in different loan scenarios, and apply the simplified daily interest formula. Discover key terms like FAFSA, EFC, federal loans, private loans, and more. Dive into examples of interest accrual during school and grace periods, as well as total interest calculation on a deferred loan. Equip yourself with essential knowledge for managing student loans effectively.
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Presentation Transcript
3-3 Student Loans OBJECTIVES Explain the options available for student loans. Calculate the interest due in various student loan situations. Apply the simplified daily interest formula. Slide 1
Key Terms-1 Free Application for Federal Student AID (FAFSA) Student Aid Report (SAR) expected family contribution (EFC) federal loan private loan Federal Direct Subsidized defer Slide2
Key Terms-2 Federal Direct Unsubsidized Loan (Stafford) accrues Federal PLUS Loan Federal Perkins Loan Interest capitalization Simplified daily interest formula Slide3
How Can You Pay for a PostHigh School Education? How much will college cost? What types of loans are available to pay for tuition? Slide 4
Example 1 As an incoming college freshman, Ariana received a 10-year, $9,100 Federal Direct Unsubsidized Loan with an interest rate of 4.29%. She knows that she can begin making loan payments 6 months after graduation, but interest will accrue from the moment the funds are credited to her account. How much interest will accrue while she is still in school and over the 6-month grace period for this freshman-year loan? Slide 5
Example 1 As an incoming college freshman, Ariana received a 10-year, $9,100 Federal Direct Unsubsidized Loan with an interest rate of 4.29%. She knows that she can begin making loan payments 6 months after graduation, but interest will accrue from the moment the funds are credited to her account. How much interest will accrue while she is still in school and over the 6-month grace period for this freshman-year loan? Slide 6
Example 2 After Ariana deferred all payments during the 4.5-year period, she now owes $10,856.76, since her loan balance is the sum of the amount borrowed and the interest accrued over the 4.5-year nonpayment period. Determine the total interest she would pay on this 10-year loan. Slide 7
Example 2 After Ariana deferred all payments during the 4.5-year period, she now owes $10,856.76, since her loan balance is the sum of the amount borrowed and the interest accrued over the 4.5-year nonpayment period. Determine the total amount of money she would pay on this 10-year loan. Slide 8
Example 2 After Ariana deferred all payments during the 4.5-year period, she now owes $10,856.76, since her loan balance is the sum of the amount borrowed and the interest accrued over the 4.5-year nonpayment period. Determine the total amount of money she would pay on this 10-year loan. Slide 9
Example 3 Suppose that Ariana only paid the interest during her 4 years in school and the 6-month grace period. What will Ariana now pay in interest over the term of her loan? Slide 10
Example 3 Suppose that Ariana only paid the interest during her 4 years in school and the 6-month grace period. What will Ariana now pay in interest over the term of her loan? Slide 11
Example 3 Suppose that Ariana only paid the interest during her 4 years in school and the 6-month grace period. What will Ariana now pay in interest over the term of her loan? Slide 12
Example 3 Suppose that Ariana only paid the interest during her 4 years in school and the 6-month grace period. What will Ariana now pay in interest over the term of her loan? Slide 13
Example 4 In Example 3, Ariana chose to pay only her interest each month. It is due on the first of the month. How did Ariana calculate the interest she needed to pay? Slide 14
Example 4 In Example 3, Ariana chose to pay only her interest each month. It is due on the first of the month. How did Ariana calculate the interest she needed to pay? Slide 15
Example 5 Instead of a federal loan, suppose that Ariana had been able to get a private loan at a slightly higher interest rate of 6.4% for the same period of time with immediate repayment. That is, as soon as the funds are deposited in her account, she must begin making the monthly payments. What would her monthly payment be? What would her total payment be? How much would she have paid in interest? Slide 16
Example 5 Instead of a federal loan, suppose that Ariana had been able to get a private loan at a slightly higher interest rate of 6.4% for the same period of time with immediate repayment. That is, as soon as the funds are deposited in her account, she must begin making the monthly payments. What would her monthly payment be? What would her total payment be? How much would she have paid in interest? Slide 17
Example 5 Instead of a federal loan, suppose that Ariana had been able to get a private loan at a slightly higher interest rate of 6.4% for the same period of time with immediate repayment. That is, as soon as the funds are deposited in her account, she must begin making the monthly payments. What would her monthly payment be? What would her total payment be? How much would she have paid in interest? Slide 18
Example 5 Instead of a federal loan, suppose that Ariana had been able to get a private loan at a slightly higher interest rate of 6.4% for the same period of time with immediate repayment. That is, as soon as the funds are deposited in her account, she must begin making the monthly payments. What would her monthly payment be? What would her total payment be? How much would she have paid in interest? Slide 19
