Final answer:
Interest payments during school vary depending on the loan terms. For a $300,000 loan at 6% interest over 30 years, monthly payments can be calculated, and paying an additional one-twelfth of a payment each month shortens the loan term and reduces total interest.
Step-by-step explanation:
Whether or not interest payments should be made monthly by a student while they are enrolled in school depends on the terms of the loan and the personal financial situation of the student. Various loan programs have different requirements; for instance, some federal student loans do not require payments while you are enrolled at least half-time in school and offer a grace period after graduation. However, private loan repayment plans may vary, and some might require that you make interest payments while still in school. Making payments during this time can reduce the total amount of interest accrued over the life of the loan.
Now, considering the second question: if a student has a $300,000 loan with 6% annual interest, compounded monthly over 30 years, we would use the formula for calculating the fixed monthly mortgage payment, which is often represented as
, where PV is the present value of the loan, R is the monthly payment, i is the monthly interest rate (annual rate/12), and n is the total number of payments (years \times 12).
By making larger payments or an extra payment (equivalent to one-twelfth more every month), the student would effectively be making an equivalent of 13 payments a year. This can substantially decrease both the total interest paid over the life of the loan and the time it takes to pay off the loan completely.