MATH 108X - Student Loans Project

Project Goal: To learn about student loans and how the length of time to pay off the loan as well as
the amount borrowed affects your financial future.

Jordan is a single male student with 6 more semester to graduate. After thinking carefully about his
finances, he decided he needs to take out a student loan to finish school.
Jordan estimated that he will need $4,985 per semester to pay for the essentials of housing, tuition,
books, food, travel, and personal items. He earns $2,140 a semester, but will need to borrow the
remaining amout each semester. Jordan was approved to take out one loan for each his remaining six
semester for up to $5,250 per loan.

Jordan must decide if he should (1) take out the full amount of student loans being offerred, which
would make life really nice right now, or (2) only take out exactly what he needs, which would be just
enough money to live on right now so his budget would be tight, but would make life easier after he
graduates.

Identify at least 2 variables and at least 2 assumptions in Jordan's situation.

Variables:

Assumptions:

Jordan found the APR 2.75% on the Federal Student Aid Website. To make calculations easier he
assumes that the rate will stay the same for all 6 semester. Even though he realizes that prices and
wages change, he also assumes that his essenntial expenses will stay close to $4,985, and that he can
earn about $2,140 each semester. He plans to use a 10-year loan term. These assumptions make it
easier for Jordan to apply quantitative tools to his situation.
 What is the total amount of money Jordan needs to finish
school?

How much money will Jordan earn on own?

What is the minimum amount of money that Jordan needs to

borrow?

What is the maximum amount of money that Jordan could

borrow?

Complete the 2 Amortization Schedules to the right to compare loans.

If Jordan takes the maximum amount how much extra money
could he have each of his remaining 6 semesters?

Jordan created these charts to help him make a good decision.

Monthly Payment Total Payment Compar- Total Interest Com

Comparison ison ison
$40,000.00
$450.00 $8,000.00

$400.00 $35,000.00
$7,000.00

$350.00 $30,000.00
$6,000.00
$300.00 $25,000.00
$5,000.00
$250.00 $20,000.00 $4,000.00
$200.00 $15,000.00 $3,000.00
$150.00 $10,000.00 $2,000.00
$100.00
$5,000.00 $1,000.00
$50.00
$0.00 $0.00
$0.00 Borrowing the Bo
Borrowing the full Borrowing just full amount al- wh
amount allowed what is needed lowed
Which loan option do you think would be best for Jordan's situation?

Type your decision here.

Explain why you chose this loan option for Jordan. Include other things that Jordan
should consider when making a decision about student loans.

Type your response here.

Number Check: 7 years of paying down student loans. Month 84: Column O, t
minimum loan, Jordan still owes $5,621.68. Month 84: Column U, the maxim
loan, Jordan still owes $10,373.93!!!

Number Check: For month 120 Column O and Column U shoul

be zero!!
Number Check: For month 120 Column O and Column U shoul
be zero!!
s Project
pay off the loan as well as

If you are interested in more information about

student loans, browse this website.

hinking carefully about his

sentials of housing, tuition,

will need to borrow the
an for each his remaining six

oans being offerred, which

e needs, which would be just
ld make life easier after he

n.

e calculations easier he
he realizes that prices and
e to $4,985, and that he can
hese assumptions make it

Jordan's Minimum Loan Amount

Loan Amount:
Loan Interest Rate:
 Years to Repay Loan Amount:
Monthly Payment:
Total Amount Paid:
Total Interest:

Payment =
Month Beginning Balance To Interest
1

2
3
4
5

o compare loans.
Hint

ood decision.

Total Interest Compar-

ison
$8,000.00

$7,000.00

$6,000.00

$5,000.00

$4,000.00

$3,000.00

$2,000.00

$1,000.00

$0.00
Borrowing the Borrowing just
full amount al- what is needed
lowed
uation?

her things that Jordan

.
. Month 84: Column O, the
4: Column U, the maximum

nd Column U should
nd Column U should
m Loan Amount Jordan's Maximum Loan Amount
Loan Amount:
Loan Interest Rate:
 Years to Repay Loan Amount:
Monthly Payment:
Total Amount Paid:
Total Interest:

$0.00 Payment =
To Principal Ending Balance Month Beginning Balance To Interest
1

2
3
4
5
m Loan Amount
$0.00
To Principal Ending Balance
Monthly Payment 10-Year
Borrowing the full amount allowed $0.00
Borrowing just what is needed $0.00
Total Payment 10-Year
Borrowing the full amount allowed $0.00

Borrowing just what is needed $0.00

Total Interest 10-Year

Borrowing the full amount allowed $0.00

Borrowing just what is needed $0.00