Question

A chiropractic student receives a 10-year PLUS Loan for $70,000 to complete the last 2 years of the program. If the interest rate of the loan is 5.48% and the student begins repaying the loan 2 years after graduation, what will the student's monthly payments be (in dollars)? (Assume the loan has a deferred payment plan. Round your answer to the nearest cent.)

Answer 1

The student's monthly payments for the PLUS loan will be $1,037.25.

Step-by-step explanation:

To calculate the student's monthly payments for the PLUS loan, we need to use the formula for calculating the monthly payment on a loan.

The formula is:

Monthly Payment = (Loan Amount * Interest Rate) / (1 - (1 + Interest Rate)^(Number of Payments))

Plugging in the given values:

Loan Amount = $70,000

Interest Rate = 5.48% = 0.0548 (converted to decimal)

Number of Payments = 10 years * 12 months/year = 120 months

Using the formula and calculating the payment:

Monthly Payment = (70000 * 0.0548) / (1 - (1 + 0.0548)^(120))

Monthly Payment = $1,037.25 (rounded to the nearest cent)