On your student loans, if possible, try to make interest-only payments while you are still in school. If interest is not repaid, it folds into principal after graduation and can cost you hundreds (or thousands) of extra dollars in finance charges.
For example, Sara borrowed $5,000 at the beginning of her freshman year and another $5,000 at the beginning of her junior year. The interest rate (APR) is 9% per year, compounded monthly, so Sara's interest accumulates at 0.75% per month. Sara will repay what she owes as an ordinary annuity over 60 months, starting one month after she graduates in the summer term of her fourth full year of college.
a. How much money does Sara owe upon graduation if she pays off monthly interest during school?
b. How much money does Sara owe if she pays no interest at all during her school years?
c. After graduation, what is the amount of the monthly loan repayment in Parts (a) and (b)?
d. How much interest does Sara repay without interest payments during school and with interest payments while in college?