Emma took out student loans with a 4% interest rate. She pays them off in 8 years and paid $5,000 in interest. How much did she originally borrow to pay for school?

1 answer

Let x be the original amount Emma borrowed.

The total amount paid back after 8 years is x + 5000.

The total interest paid over 8 years is 5000.

The total amount paid back after 8 years with interest is x + 5000.

The formula for calculating the total amount paid back after paying off a loan is:

Total amount = Principal + Interest

x + 5000 = x + 0.04x

5000 = 0.04x

x = 5000 / 0.04

x = $125,000

Emma originally borrowed $125,000 to pay for school.