Exercises: Paying for College and Student Loans

List four sources of money that can help pay for college. Then classify each as money you do not have to repay (gift aid) or money you must repay: scholarship, Pell Grant, federal student loan, private student loan.

What does FAFSA stand for, and what is its purpose? Name two types of information a student typically needs to complete it, and say who may need to provide information if the student is a dependent.

A student borrows $\$10,000$ in a loan and agrees to repay it over 10 years with a total of $\$13,000$ paid back. How much of that total is interest? Is it correct to say the student paid 30% interest per year? Explain briefly.

Compare federal student loans and private student loans. In your answer, address at least four of the following: who lends the money, how the interest rate is set, whether a credit check is required, repayment options, and options if the borrower has trouble paying.

Camila takes out a student loan of $\$20,000$ and will repay it with fixed monthly payments of $\$212$ for 10 years (120 months).

(a) Find the total amount she will repay.

(b) Find the total interest she will pay.

(c) What percent of the original loan does the total interest represent?

Noah's first year at an in-state public university costs $\$11,000$ in tuition and $\$12,000$ for housing, food, books, and other expenses. He receives a $\$3,500$ scholarship, a $\$2,000$ Pell Grant, and expects to contribute $\$4,000$ from savings and summer work.

(a) Calculate the total cost of attendance.

(b) Calculate the gap that remains after all of these sources.

(c) Suggest which kind of borrowing he should consider first for this gap, and explain why.

Isabella must borrow $\$15,000$. Option A is a federal loan with a fixed payment of $\$160$ per month for 10 years. Option B is a private loan with a fixed payment of $\$135$ per month for 15 years, with a rate that depends on her cosigner's credit.

(a) Calculate the total repaid and total interest for each option.

(b) Which option costs less overall? Which has the lower monthly payment?

(c) Argue which option you would recommend, considering both cost and the flexibility to handle financial hardship.

Liam will borrow $\$8,000$ each year for 4 years of college. Interest is not paid while he is in school, and for simplicity assume it does not capitalize. After graduating, he will repay the total borrowed amount over 10 years at a total cost of 140% of the amount borrowed.

(a) Find the total amount borrowed.

(b) Find the total he will repay and the total interest.

(c) Find his approximate monthly payment.

(d) Liam's expected starting salary is $\$42,000$ per year. Compute the share of his gross monthly income that the payment represents and discuss whether it seems manageable.