As indicated in the “All About You” feature in this chapter, a student loan is a loan that must be repaid. Many post-secondary students get a loan from the federal government’s Canada Student Loan program. You may start to repay your loan immediately after completing your studies, but you must start the loan payments no later than six months after finishing. You must pay off the loan in full no later than 10 years after completing your studies.

Assume that when you have completed your post-secondary studies you have a Canada Student Loan of $25,000 with a fixed rate of interest of 9.5%. 

Instructions

(a) What is the monthly loan repayment if you do not take advantage of the six-month grace period; that is, you start to repay your loan immediately after the end of your studies? 

(b) What is the monthly loan repayment if you do take advantage of the six-month grace period and include the grace period interest with your loan balance? 

(c) What is the monthly loan repayment if you take advantage of the six-month grace period but you pay off the grace period interest with a lump sum payment before you start to repay the loan? 

(d) Assume that you want to pay off the loan in five years. What would be your monthly payment?