Final answer:
Shawna's aim to limit her post-graduation monthly payments to $390 over 25 years with a 10.4% interest rate can allow her to afford approximately $37,077.32 for college. This amount, determined using the loan payment formula, ensures she stays within her budget while repaying the federal student loan under these terms.
Step-by-step explanation:
To determine how much Shawna can afford to pay for college with a limit of $390 per month on her student loan repayments at an interest rate of 10.4% over 25 years, we need to use a financial formula or a loan calculator to compute the present value of an annuity (the total loan amount she can afford).
The formula for the present value of an annuity is PV = PMT × [(1 - (1 + r)^{-n}) / r], where PMT is the monthly payment, r is the monthly interest rate, and n is the total number of payments.
The monthly interest rate is the annual rate divided by 12, which in Shawna's case is 10.4% per annum or 0.104/12 per month. The total number of payments is 25 years times 12 months per year.
Plugging these values and Shawna's monthly payment amount into the formula, we can calculate the total loan amount she can afford.
It is important to be mindful of the growing college tuition rates and the debt burden on students, which can impact their future financial circumstances and life decisions, as observed over recent years.