PLUS Loans: As with other education loans, PLUS loans are funded directly by the federal government. But unlike traditional student loans, they have no maximum amounts and can be used to cover any education costs not covered by other financial aid. They have a fixed interest rate of 7.9 percent compounded monthly. Private Education Loans: As the name suggests, these loans are provided by private lenders and do not use government funding. Because of this, private education loans more closely resemble personal loans than student and parent loans.Your eligibility and interest rate depend on your credit history. Your interest rate is typically higher than with federally guaranteed education loans but lower than with other debts like credit card debt. Specific borrowing terms vary by lender. For the sake of this problem, let's say my loans have an interest rate of 9 percent compounded Payments are $150.06.
Perkins Loans: Perkins Loans have a fixed interest rate of 5 percent. They are all subsidized, so the government pays any interest accrued while you’re in school and for a short period after you graduate. Because of their favorable terms, Perkins Loans are reserved for students who show exceptional financial need.These loans are funded by the government but disbursed by each individual college or university. The federal government distributes a limited amount of funds to each school, and the school determines which students to lend to. As with Stafford Loans, students can only borrow a certain amount through Perkins Loans. Eligible undergraduates may borrow up to $5,500 in Perkins Loans annually, for a total of $27,500.Graduates students may borrow up to $8,000 annually. The total cap is $60,000 and is based on both undergraduate and graduate Perkins Loans.
I was able to calculate how long it would take to pay these loans off by using the equation A=p(1+(r/n)^nt. A represents how much the total cost is, p represents the initial loan taken out before interest, r represents the interest rate, n represents the number of times it compounds annually, and t represents the times the loan is taken out. You then divide what you get for A by the payment amount, and you have the amount of payments you need, which is equal to the months it takes. All of these are monthly payments,
After doing calculations, I came up with these results PEL: Payments: 168 payments of $150.06 which gives a total of $25151.36. That means it would take 16 years to pay off.
Perkins Loans: Payments: 107 payments of $212.13, which adds up to a total of $22,692,36. That means it would take around 9 years to pay off.
PLUS loans: Payments: 185.2 payments of $120.22 dollars, which adds up to $22,261.57. That means it would take around 16 years to pay off.