Loan Management

Running Head: Student Loan Interest Rate

Title

Student’s Name

Institutional Affiliation

Running Head: Student Loan Interest Rate

Loan refers to amount borrowed with an intention of paying back with an interest. Loans are

normally given out by commercial bank and other cooperative society that are large enough to

give loan to their members. Moreover developing countries are also given loan by developed

country to enable them fund a development projects in their own countries.

As said earlier that loans normally are interest and there are sets of interest that are attracted by

various loan depending on the set agreements between the lender and the loaned which is

normally noted down to for future reference. Loan interest can be simple interest or compound

also the loaned can decided to pay back the money through installment of a given duration.

In looking into individual type of loan interest with the correlation to the data given we found the

simple interest attract the less return of interest as compared with the compound interest.

Looking into the student’s loan context we are find that it’s a financial help that aid students

toward achieving their higher academic level. Of recent year the statistical bureau both from

Central government and federal government show a huge increase in the usage of student loan

hence increasing collage cost.

When the student enter the loan repayment system they automatically enrolled in the standard

repayment program, in this the student have ten years to repay the loan and depending on the

amount and the loan servicer repayment policy the loan may take less than ten years to repay.

In close look at these three scenario based calculation we can be able to tell which scenario is

actually economical to student who took a loan of $80000 and is supposed to repay it in the next

ten years.

Solution in the first scenario

Running Head: Student Loan Interest Rate

A = P (1+r/m) ^mt

A = $80000(1+0.0625/12) ^12*10

A = $149,217.5

I= A-P = 149,217.5 – 80000 = 69,217.50

Solution to the second scenario

PMT = L ((r/m)/ (1-(1+r/m) ^ (-mt))

PMT = $80000* ((0.0625/12)/ (1-(1+0.0625/12) ^ (-12*10))

PMT =$ 898.2407692

Interest I= PMT*m*t-L

I=$898.24*12*10-80000

I = $27,788.90

Payment

Number

Total

PMT

Interest

Paid

Principal

paid

Balance

Remaining

$80000.00

$898.20

$231.60

$666.60

$79333.40

$898.20

$229.60

$668.60

$78664.80

…..

……

…..

……

…..

120

$898.20

$4.60

$893.6

$0.00

Running Head: Student Loan Interest Rate

Solution to the third scenario

A = P (1+rt)

A = $80000 (1+0.085*10)

A = $148,000.0

I = $ 68000

From the mathematical analysis above we can deduce that using amortization calculation to

determine the rate of student loan repayment is more compared to other two system. The first

and third scenario have high interest rate and their monthly interest and principal repayment is

also higher as opposed to the second scenario which is more appealing in terms of monthly

repayment.

If we look at the total repayment we found that the second scenario gives us lower value because

the interest rate is much lower as compared to other first and third scenario this make the second

scenario even more appealing to the students in terms of the mode repayment

To conclude both the federal and central government need to come up with more efficient way

that student can easily make their repayment recommending amortization that is more appealing

to student to make their loan repayment and encourage more students to take up higher loan as it

has the best repayment mode.

Running Head: Student Loan Interest Rate

Reference

Paramasivan, C., & Subramanian, T. (2009). Financial management. New Delhi: New Age

International (P) Ltd., Publishers.

Credit outstanding by type of bank and loan. (2013)

Creative Educational Video, Inc. (2005). Online advertising. Lubbock, Tex.: CEV Multimedia.

Kloza, B., Fabian, R., Baber, J., Orlow, R., Orlow, M., Cambridge Educational (Firm), Films

Media Group. (2011). Recognizing online propaganda, bias and advertising.

Loan interest.

Loeb, L. A. (1994). Consuming angels: Advertising and Victorian women. New York: Oxford

University Press.

United States. (2002). Student loan interest rates. Washington, D.C.: U.S. G.P.O.

United States. (2015). Student loan servicing: The borrower's experience: hearing before the

Subcommittee on Financial Institutions and Consumer Protection of the Committee on

Banking, Housing, and Urban Affairs, United States Senate, One Hundred Thirteenth

Congress, second session, on exploring borrowers' interactions with student loan

servicers before and during repayment and whether and how the actions of student loan

servicers may affect borrowers' ability to make timely payments, June 4, 2014.

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