Please help me no one has helped

Question

Jeffery Wel received a 7-year non-subsidized student loan of $31,000 at an annual interest rate of 5.5%. What are Jeffery's monthly loan payments for this loan after he graduates in 4 years? (Round your answer to the nearest cent).

Answer 1

Let's assume that there's no interest added over the 4-year period that he's in school and the the amount of the loan is still $31,000, to be paid off over 7 years in monthly installments at an annual rate of 5.5%.

PMT = [P x (APR/n)] / [1 - (1 + APR/n)^(-nY)] where P = 31,000 APR = 0.055 Y = 7 yrs n = 12 for monthly payments

PMT = [31000 x (0.055/12)] / [1 - (1 + 0.055/12)^{(-12 x 7)}]

Make sure to follow the PEMDAS order of operations rules. I get $445.47/mo. to the nearest cent, but yours could vary slightly depending on the number of decimal places you used in your calculation.

Answer 2

There are a few assumptions that need to be worked out: 1) Does the loan accrue interest for the entire 7 years (I assume yes) 2) Does J have to pay the loan off for 7 years worth of interest in the 3 years after he graduates? 3) Does he lower his debt in the final 3 years as he is paying.

The simplest take is that he will pay off the loan that has a 7 year payment that he must meet in 3 years of paying.

The total cost of the loan is (1.055)⁷(31K) = $45,095

which we assume he has to pay in 12*3 = 36 payments of

$45095/36 = $1252.64 per month.

This can be more complicated based on assumptions.