# Simple Interest

Part III: Simple Interest (Applying Percentages, Decimals, and Fractions)

Student loans are a hot discussion when it comes to paying back not only the initial borrowed amount but interest on top of the loan. Typical student loans do not start accumulating interest until after the student has been out of school, usually one year. Base the following that the individual has been out of school and is starting to look at the interest on a student loan.

Give an example of an amount of a realistic student loan for an individual that attended a university for at least 2 years.

Research and find the current average interest rate for student loans. Be sure to reference the site(s) you chose your interest rate.

How much interest was charged at the end of the first day of the loan (assuming no payments have been made and interest accumulates at the end of the first day)? Do you find this number surprising?

How much interest has been accumulated after one year of the loan (again assuming no payments have been made and interest accumulates at the end of the first year)?

The loan agency has allowed you to defer the loan for one year if you pay 8% of the original loan today. What is the amount that you would send the loan agency? What is the new loan amount?

Find the interest on the new loan amount, after paying 8% off, for one day and then again for one year. Do you think paying the 8% was worth it when viewing the interest accumulated by day or by year? Discuss when this 8% might be beneficial for paying off part of the original loan.