AnswersSEPHS - BUS 240 - Personal Finance SummerStudent Loans

Student Loans Answers

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1
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Viola took out a $8,470 Stafford loan at the beginning of her four-year college career. The loan has a duration of ten years and an interest rate of 7.5%, compounded monthly. How much more will Viola’s monthly payment be if the loan is unsubsidized than if the loan is subsidized? Round all dollar values to the nearest cent.

A
$35.05
B
$45.94
C
$96.96
D
$63.52
2
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Oliver is looking to go to college. His family does not have very much money, so he qualifies for need-based financial aid. Oliver needs to spend most of his time working at his full-time job, so he will only be able to take a few classes per semester. Oliver’s parents have poor credit scores and cannot afford to take on any more debt. Based on Oliver’s situation, recommend a federal loan which would be appropriate for him.

A
subsidized Stafford loan
B
unsubsidized Stafford loan
C
private student loan
D
PLUS loan
3

Gertrude takes out a $5,500 subsidized Stafford loan, which must be paid back in ten years. Gertrude will graduate four years after taking out the loan. If the loan has an interest rate of 6.8%, compounded monthly, and Gertrude makes monthly payments, how much interest will she pay by the time the loan is repaid? Round all dollar values to the nearest cent.

A
$4,462.40
B
$1,213.28
C
$1,713.69
D
$2,094.80
4

At the beginning of each of her four years in college, Miranda took out a new Stafford loan. Each loan had a principal of $5,500, an interest rate of 7.5% compounded monthly, and a duration of ten years. Miranda paid off each loan by making constant monthly payments, starting with when she graduated. All of the loans were subsidized. What is the total lifetime cost for Miranda to pay off her 4 loans? Round each loan's calculation to the nearest cent.

A
$23,650.00
B
$29,481.08
C
$7,834.32
D
$31,337.27
5

Maria took out an unsubsidized Stafford loan of $6,925 to pay for college. She plans to graduate in 4 years. The loan had a duration of ten years and an interest rate of 5.0%, compounded monthly. By the time Maria graduates, how much greater will the amount of interest capitalized be than the minimum amount that she could pay to prevent interest capitalization? Round all dollar values to the nearest cent.

A
$1529.70
B
$1,384.00
C
$384.00
D
$144.90
6

Why do most student loans involve a co-signer?

A
Most students won’t be able to afford paying for their loans, and leave that responsibility to their co-signers.
B
Co-signers were most likely college students themselves and understand what it is like to be a college student.
C
Most students aren’t responsible enough to know much about any type of loans, so a co-signer is there to make sure everything is secure.
D
Most students are young enough not to have much of a credit score or credit history, so a second party such as a parent or guardian can establish security of payment.
7

Hal has just graduated from four years of college. For the last two years, he took out a Stafford loan to pay for his tuition. Each loan had a duration of ten years and interest compounded monthly, and Hal will pay each of them back by making monthly payments, starting as he graduates. Hal’s loans are detailed in the table below.YearLoan Amount ($)Interest Rate (%)Subsidized?Junior4,0485.9NSenior5,2957.6YOnce all of his loans are paid off, what will Hal’s total lifetime cost be? Round all dollar values to the nearest cent.

A
$9,023.28
B
$8,467.20
C
$11,498.40
D
$13,615.20
8

Claudius took out an unsubsidized Stafford loan at the beginning of his six-year college career. The loan had a principal of $4,850, an interest rate of 6.5% compounded monthly, and a duration of ten years. If Claudius started paying off the loan when he graduated, what is his monthly payment? Round all dollar values to the nearest cent.

A
$71.37
B
$81.25
C
$55.07
D
$76.55
9

Olivia has taken out a $13,100 unsubsidized Stafford loan to pay for her college education. She plans to graduate in four years. The loan has a duration of ten years and an interest rate of 7.6%, compounded monthly. By the time Olivia graduates, how much greater will the amount of interest capitalized be than the minimum amount that Olivia could pay to prevent interest capitalization? Round all dollar values to the nearest cent.

A
$654.45
B
$477.27
C
$995.60
D
$354.22
10

Which statement or statements accurately describe characteristics of subsidized Stafford loan? I. grace period during which payments are not due II. based on student need III. student is responsible for all interest for the lifetime of the loan.

A
I only
B
II only
C
I and II
D
I and III
11

Why is deferment an important aspect of student loans?

A
Most students are unable to make monthly payments while studying, so deferment allows them to focus on studying.
B
Even if students are able to pay for their loan, they don't need to take on the responsibilities of paying back the loan.
C
Deferment allows students to miss payments every so often, because being a college student is tough.
D
Deferment is only beneficial to a student if they are a full-time student.
12

Edgar has taken out a $6,250 unsubsidized Stafford loan to fund his four-year undergraduate degree. The loan has a duration of 10 years and an interest rate of 6.1%, compounded monthly. How much interest capitalization will have accrued by the time Edgar graduates? Round all dollar values to the nearest cent.

A
$1,670.30
B
$1,722.22
C
$664.35
D
$1,524.96
13

Hal has just graduated from four years of college. For the last two years, he took out a Stafford loan to pay for his tuition. Each loan had a duration of ten years and interest compounded monthly, and Hal will pay each of them back by making monthly payments, starting as he graduates. Hal’s loans are detailed in the table below.YearLoan Amount ($)Interest Rate (%)Subsidized?Junior4,0485.9NSenior5,2957.6YOnce all of his loans are paid off, what will Hal’s total lifetime cost be? Round all dollar values to the nearest cent.

A
$9,023.28
B
$8,467.20
C
$11,498.40
D
$13,615.20
14

Why is deferment an important aspect of student loans?

A
Most students are unable to make monthly payments while studying, so deferment allows them to focus on studying.
B
Even if students are able to pay for their loan, they don't need to take on the responsibilities of paying back the loan.
C
Deferment allows students to miss payments every so often, because being a college student is tough.
D
Deferment is only beneficial to a student if they are a full-time student.
15

Henry wants to avoid interest capitalization on his $7,800 unsubsidized Stafford loan. Henry will graduate in four years, and the loan has a duration of ten years. The loan has an interest rate of 5.6%, compounded monthly. How much must Henry pay every month to avoid interest capitalization?

A
$14.56
B
$43.68
C
$36.40
D
$31.20
16

Which loan or loans listed below are awarded based on the financial need of the student?I. Perkins loanII. subsidized Stafford loanIII. unsubsidized Stafford loan

A
I only
B
I and II
C
II and III
D
I, II, and III
17

Ursula took out an unsubsidized Stafford loan to help pay for her first of her four years at college. The loan had a principal of $6,400, an interest rate of 6.9% compounded monthly. After college, Ursula started making monthly payments over a 10 year period on her loan. What percentage of the total cost of the loan is the finance charge?

A
45.25%
B
27.91%
C
43.50%
D
82.66%
18

Kate took out a subsidized Stafford loan worth $9,710 to pay for college. The interest rate on the loan was 5.9%, compounded monthly. It took Kate 5 years to pay off the loan after graduation. What portion of the total amount she paid represented the interest?

A
$11,236.22
B
$9,710.00
C
$1,526.22
D
$2,942.37
19

Ursula took out an unsubsidized Stafford loan to help pay for her first of her four years at college. The loan had a principal of $6,400, an interest rate of 6.9% compounded monthly. After college, Ursula started making monthly payments over a 10 year period on her loan. What percentage of the total cost of the loan is the finance charge?

A
45.25%
B
27.91%
C
43.50%
D
82.66%
20

Henry wants to avoid interest capitalization on his $7,800 unsubsidized Stafford loan. Henry will graduate in four years, and the loan has a duration of ten years. The loan has an interest rate of 5.6%, compounded monthly. How much must Henry pay every month to avoid interest capitalization?

A
$14.56
B
$43.68
C
$36.40
D
$31.20

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