Question

Stafford loans are the most popular form of student loan in the United States. The current interest rate on a Stafford loan is 4.67% per year. If you borrow $30,000 to help pay for your college education at the beginning of your freshman year, how much will you have to pay at the end of your freshman, sophomore, junior, and senior years for this loan? This is a total of four years over which the original loan will be repaid.

Answer 1

Here, P = 30,000, n = 4 yeas , i = 4.67% or 0.0467

A = P[{i(1 + i)ⁿ} / {(1 + i)ⁿ - 1}]

   = 30,000[{0.0467(1 + 0.0467)⁴} / {(1 + 0.0467)⁴ - 1}]

   = 30,000(0.0561 / 0.2003)

   = $8,402.4

So, you have to pay $8,402.4 per year