3) The government is proposing a new program to encourage college students to go into government jobs (teaching and service). The program will help cover the cost of college if you work in the government. With the new program, you would only need to pay back college loans for 12 years, regardless of what you owed. Unfortunately, government salaries are generally lower than those in private industry and pay does not grow as fast. . Base salary government job: $70,000/yr starting after graduation . Base salary private industry job: 895,000/yr starting after graduation Inflation: 3.8% annually . Government salary growth: 0.8% over inflation annually . Private salary growth: 1.2% over inflation annually . Living expenses: $27,500/yr starting after graduation (inflate after that) .Loan interest rate: 2.7% annually . Annual loan payments: 25% of (salary minus cost of living) Years before loan forgiveness, government job: 12 Years before loan forgiveness, private job: 15 Cost of college $55,000 per year for each of four years (no inflation) Discount rate: 5% Assume that you are a freshman entering college and that once you start in government or industry, you stay there for 35 years. Should you consider the new government program? (Advice: You'll need to build a model with a lot of pieces here. Proceed in small steps. First model the salaries for each job for all 35 years. Then model the living expenses. Then model the loan payments (which are different for each job). To model the loan payments, you'll also want to keep track of the loan balance (the amount remaining to be paid back) and the interest accrued each year. Then put salary, living expenses, and loan payments together to figure out yearly disposable income with each job.)