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Your brother took out $80,000 in student loans to cover his college tuition. The original term of the loan is 15 years. The interest rate is 3.6% APR, compounded every month.

a. What is the required monthly payment on the loan?
b. After getting a great job immediately after college, your brother plans to pay $1,000 permonth for his student loan debt. At this pace, can he pay off the loan in 80 months? Explain. (No calculation needed).
c. At this pace, when can he pay off the loan?

1 Answer

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Final answer:

The required monthly payment for an $80,000 student loan over 15 years at 3.6% APR needs to be calculated and cannot be determined from the given information. Paying $1,000 monthly could potentially pay off the loan in less than 80 months, but this depends on various factors and requires a calculation to confirm. To find out the exact payoff timeline, calculations considering the loan details and payment amount are necessary.

Step-by-step explanation:

To answer the student's question regarding their brother's student loan of $80,000 with a 15-year term at an interest rate of 3.6% APR, compounded monthly:

Part A: Required Monthly Payment

The monthly payment can be calculated using an amortization formula or a financial calculator. As specific calculations are not provided in the scenario, the exact monthly payment amount cannot be determined without performing the actual calculation.

Part B: Paying Off Loan in 80 Months

Without performing calculations, it is impossible to say definitively whether a monthly payment of $1,000 will pay off the loan in 80 months. However, if the required monthly payment is less than $1,000, and the brother consistently pays $1,000 per month, it is possible that he could pay off the loan in less than the original loan term.

Part C: Loan Payoff Timeline

To determine when the brother can pay off the loan by paying $1,000 per month, we would need to perform calculations considering the principal, interest rate, and additional payments. The scenario provided does not include the result of the calculation, thus it requires performing the calculation to answer.

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