Recently, the state government of Michigan has begun discussing the idea of "paying forward" college tuition. The idea is this: the student will attend college for free with all tuition and some other expenses covered. After graduation, the student will then repay the loan with monthly payments over the next 20 years. For our purposes here, let's assume that the student will just make one payment per year.

Students at a University in the Michigan system will then owe 4% of their salary for the next 20 years. Let's assume that tuition is $40,000.00 over the 4 years of school.

For our purposes, let's assume that a typical college graduate will have three possible career paths:

Job TypeAverage Career SalaryEducation$55,000.00Business$95,000.00Professional Degree$135,000.00

What is the effective loan cost for an education major? (HINT: Find the IRR)

Answer Format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924))