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 effects your financial future.

Omar is a single male student with 6 more semester to graduate. After thinking carefully about his finan
decided he needs to take out a student loan to finish school.
Omar estimated that he will need $4,160 per semester to pay for the essentials of housing, tuition, book
food, travel, and personal items. He earns $1,250 a semester, but will need to borrow the remaining am
each semester. Omar was approved to take out one loan for each his remaining six semester for up to $
per loan.

Omar must decide if he should (1) take out the full amount of student loans being offerred, which woul
life really nice right now, or (2) only take out exactly what is needed, which would be just enough to get
right now, but would make life easier after he graduates.

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

Variables:

Assumptions:

Omar found the APR 4.45% on the Federal Student Aid Website. To make calculations easier he assumes
the rate will stay the same for all 6 semester. Even though he realizes that prices and wages change, he
assumes that his essenntial expenses will stay close to $4160, and that he can earn about $1250 each
semester. He plans to use a 10-year loan term. These assumptions make it easier for Omar to apply
quantitative tools to his situation.
 What is the total amount of money Omar needs to finish school?

How much money will Omar earn on own?

What is the minimum amount of money that Omar needs to

borrow?

What is the maximum amount of money that Omar could borrow?

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

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

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

Monthly Payment Total Payment Total Interes

Comparison Comparison ison
$1.00 $1.00
$1.00
$0.90 $0.80 $0.90
$0.80 $0.60 $0.80
$0.70 $0.40 $0.70
$0.60 $0.20 $0.60
$0.50 $0.00 $0.50
ed

$0.40
de

$0.40
w

ee
lo
sn
al

$0.30 $0.30
nt

ti
ou

ha
am

$0.20 $0.20
st
ll

ju
fu

$0.10
g

$0.10
e

in
th

w
g

rro
in

$0.00 $0.00
w

Bo

Borrowing the
rro

Borrowing the Borrowing just

Bo

full amount al- what is needed full amount al

lowed lowed

Which loan option do you think would be best for Omar's situation?

Type your decision here

 Type your decision here

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

Type your decision here

Number Check: 7 years of paying down student loans. Month 84: Column O,
minimum loan, Omar still owes $6073.50. Month 84: Column U, the maximu
Omar still owes $10,418.86!!!

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

zero!!
 the loan as well as the

If you are interested in more information about student

loans, browse this website.

carefully about his finances, he

of housing, tuition, books,

orrow the remaining amout
six semester for up to $4,992

ng offerred, which would make

d be just enough to get by on

tions easier he assumes that

and wages change, he also
rn about $1250 each
r for Omar to apply

Omar's Minimum Loan Amount

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

Payment =
Month Beginning Balance To Interest
1

2
3
4
5

pare loans.
Hint

d decision.

Total Interest Compar-

ison
$1.00
$0.90
$0.80
$0.70
$0.60
$0.50
$0.40
$0.30
$0.20
$0.10
$0.00
Borrowing the Borrowing just
full amount al- what is needed
lowed

?
gs that Omar should
th 84: Column O, the
mn U, the maximum loan,

olumn U should be
Loan Amount Omar's Maximum Loan Amount
Loan Amount:
Loan Interest Rate:
Years to Repay Loan Amount:
Monthly Payment:
 Total Payments:
Total Interest:

$0.00
To Principal Ending Balance Month Beginning Balance
1

2
3
4
5
Omar's Maximum Loan Amount
Loan Amount:
Loan Interest Rate:
Years to Repay Loan Amount:
Monthly Payment:
Total Payments:
Total Interest:

Payment = $0.00
To Interest To Principal Ending Balance
Monthly Payment
Borrowing the full amount allowed
Borrowing just what is needed

Total Payment
Borrowing the full amount allowed

Borrowing just what is needed

Total Interest
Borrowing the full amount allowed

Borrowing just what is needed

10-Year
$0.00
$0.00

10-Year
$0.00

$0.00

10-Year
$0.00

$0.00