There are three major types of loans given to students looking to further their education through college. The three types are subsidized, non-subsidized, and bank loans. Direct subsidized loans are available to undergraduate students who qualify for financial aid. Your school determines the amount you can borrow, and the amount may not exceed your financial need. The interest is paid for by the Department Of Education while in school and six months afterwards. If you defer your loans, the Department Of Education will pay your interest. If you receive a Direct subsidized loan that is first disbursed between July 1, 2012, and July 1, 2014, you will be responsible for paying any interest that accrues during your grace period. Non-subsidized loans are available to undergraduate and graduate students and there is no need to demonstrate financial aid. Your school determines the amount you can borrow based on your cost of attendance and other financial aid you receive. You are responsible for paying the interest during all periods. If you choose not to pay the interest while you are in school and during grace periods and deferment or "forbearance" periods, your interest will accrue (accumulate) and be capitalized (that is, your interest will be added to the principal amount of your loan). Bank loans can be acquired by any individual looking for monetary assistance with college payments including dorm, food, books, and more. Payment is not required until 6 months after leaving school. Having a cosigner will greatly increase your chances of receiving a loan and may help lower interest rates. Fixed interest rates for student bank loans range from 6.39% to 10.93%. Variable interest rates range from 3.17% to 8.60% for student bank loans. Subsidized loan interest rates average 4.66%, while non-subsidized loans average 4.66% also. All loans are compounded monthly unless told otherwise.
Subsidized loan: $5,000 for 4 years with 4.66 interest. 3.5 years of interest. (grace period)
P = principal amount (the initial amount you borrow or deposit)
r = annual rate of interest (as a decimal)
t = number of years the amount is deposited or borrowed for.
A = amount of money accumulated after n years, including interest.
n = number of times the interest is compounded per year
Example:
An amount of $5,000 has an annual interest rate of 4.66%, compounded monthly. What is the balance after 3.5 years?
Solution:
Using the compound interest formula, we have that
P = 5000, r = 4.66/100 = 0.0466, n = 12, t = 3.5, Therefore,
So, the balance after 1 years is approximately $5883.91.
$5883.91 * 2.5 = $36774.44 total amount owed after 4 years.
Subsidized loan: $5,000 for 4 years with 4.66 interest. 3.5 years of interest. (grace period)
P = principal amount (the initial amount you borrow or deposit)
r = annual rate of interest (as a decimal)
t = number of years the amount is deposited or borrowed for.
A = amount of money accumulated after n years, including interest.
n = number of times the interest is compounded per year
Example:
An amount of $5,000 has an annual interest rate of 4.66%, compounded monthly. What is the balance after 3.5 years?
Solution:
Using the compound interest formula, we have that
P = 5000, r = 4.66/100 = 0.0466, n = 12, t = 3.5, Therefore,
So, the balance after 1 years is approximately $5883.91.
$5883.91 * 2.5 = $36774.44 total amount owed after 4 years.