After graduation, you decide that you can pay $202.89 per month extra on your student loan...

After graduation, you decide that you can pay $202.89 per month extra on your student loan (standard monthly payment is 302.85), which has a balance of $60,000 and 20 years of monthly payments remaining. The annual interest rate on the loan is 4.4% How many years early will you be able to pay off the loan?

Expert Solution

- Current monthly loan payment = $302.85

Monthly loan payment after extra payment per month = $302.85 + $202.89 = $505.74

Current Loan balance = $60,000

Montly Interest rate = 4.4%/12 = 0.3667%

Calculating the No of months it will take to pay off the loan at this monthly payment using Excel "NPER" function:-

So, Number of months = 156

Number of years in which loan will be paid off = 156 months/12 months = 13 years

- So, years early will you be able to pay off the loan = 20 years - 13 years

= 7 years

If you need any clarification, you can ask in comments.

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jeff jeffy answered 2 years ago

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