Question

Consider a student loan of $17,500 at a fixed APR of 9% for 25 years. Calculate the monthly payment, determine the total amount paid over the term of the loan, and of the total amount paid, what percentage is paid towards the principal, and what percentage is paid for interest?

Answer 1

Monthly Payment: .09/12 months = .0075 monthly rate => $17,500 x .0075 = $131.25 monthly payment.

Total Amount Paid: n => 25 years x 12 months a year = 300 monthly total payments made => 300 months x $131.25 monthly payment = $39,375 Total Amount Paid over loan.

Percentage paid towards principle: $17,500/ $39,375 = .44 or 44%
Percentage paid towards interest: 100% - 44% = 56% or $39,375 - $17,500 = $21, 875 paid towards interest => $21,875 / $39,375 = .555 rounded to .56 => 56%