Question

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Answer 1

Kind of a strange question, as the Parent PLUS Loan is due immediately. What does "time of repayment" mean?

Answer 2

The Stafford Loan will have a higher balance by $212.79

Formulas
New Total = Principal Balance(1 + Interest/12)^number of months

Stafford Loan:
New Total = $9,875(1+.068/12)^24 <-- 18 months in college + 6 month grade period
New Total = $9,875(1.005667)^24
New Total = $9,875(1.145251)
New Total = $11,309.27

PLUS Loan:
New Total = $9,875(1+.078/12)^18
New Total = $9,875(1.0065)^18
New Total = $9,875(1.123694)
New Total = $11,096.48

Difference = PLUS Loan - Stafford Loan
Difference = $11,096.48 - $11,309.27
Difference = $212.79


Or if you wanted to find out how to do it the long method:
Stafford Loan:
Principal Balance = $9,875
Interest = 6.8%
Interest per month = 6.8%/12 months = 0.005667

Month 1 = (Principal Balance * Interest Per Month) + Principal Balance
Month 1 = ($9,875 * .005667) + $9,875
Month 1 = ($55.96) + $9,875
Month 1 = $9,930.96

Month 2 = (Month 1 * Interest Per Month) + Month 1
Month 2 = $9,930.96 * .005667) + $9,930.96
Month 2 = ($56.28) + $9,930.96
Month 2 = $9,987.24

Month 24 = (Month 23 * Interest Per Month) + Month 23
Month 24 = $11,309.27

We use month 24 because Galvin will be graduating college in 18 months and there is a 6 month deferment period before the loan will enter repayment.

PLUS Loan:
Principal Balance = $9,875
Interest = 7.8%
Interest per month = 7.8%/12 months = 0.0065

Month 1 = (Principal Balance * Interest Per Month) + Principal Balance
Month 1 = ($9,875 * .0065) + $9,875
Month 1 = ($64.19) + $9,875
Month 1 = $9,939.19

Month 2 = (Month 1 * Interest Per Month) + Month 1
Month 2 = $9,939.19 * .0065) + $9,939.19
Month 2 = ($64.61) + $9,939.19
Month 2 = $10,003.80

Month 18 = (Month 17 * Interest Per Month) + Month 17
Month 18 = $11,096.48

We use 18 months because Galvin will be graduating from college in 18 months and there is no grace period for this loan.

Stafford Loan (24 months) - PLUS Loan (18 months)
$11,309.27 - $11,096.48
$212.79