Alyssa may apply for an unsubsidized Stafford Loan with an interest rate of 6.8%, compounded monthly and a grace period of six months from the time of graduation. Or, Alyssa may have her parents apply for a PLUS Loan with an interest rate of 7.8%, compounded monthly. She will be graduating from college in a year and a half and needs a loan in the amount of $11,895. Which loan is the better choice and why?

Question

anonymous · Answer

The Stafford Loan is the better choice because it is $197.81 cheaper than the PLUS Loan.

 The PLUS Loan is the better choice because it is $256.32 cheaper than the Stafford Loan.

 The PLUS Loan is the better choice because it is $454.13 cheaper than the Stafford Loan.

 The Stafford Loan is the better choice because it is $273.5 cheaper than the PLUS Loan.

anonymous · Answer

@jim_thompson5910 Do you know how to do this one?

anonymous · Answer

Stanford
11,895(1+0.068/12)^12* ???


PLUS 
11,895(1+0.078/12)^12* ???

jim_thompson5910 · Answer

1 year and half = 1 year, 6 months = 1.5 years

jim_thompson5910 · Answer

the Stafford Loan has a grace period of 6 months, so this means that the t value for this loan is t = 1.5 + 0.5 = 2

jim_thompson5910 · Answer

the PLUS loan has a t value of t = 1.5

anonymous · Answer

So 11,895(1+0.068/12)^12* 2 for Stanfford and

11,895(1+0.078/12)^12*1.5 for PLUS

jim_thompson5910 · Answer

yep, tell me what you get for each

anonymous · Answer

$13,622.66 For Stanfford

$13,366.34 for PLUS

anonymous · Answer

So the answer would be  The PLUS Loan is the better choice because it is $256.32 cheaper than the Stafford Loan.

jim_thompson5910 · Answer

you got it