We have all heard stories about someone whose student loans are higher now than when they first got them. Let's look at how that can happen.

Sumayya took out $10,000 in student loans with an interest rate of 4.5% for her final year of college. Payments were deferred for four months and then she was able to set up a payment plan.

Calculate the interest added to her balance every month for the first four months before she starts making payments. and submit them in the first four blank rows in the table to the left. Watch what happens to her loan balance. (Hint: Make sure you always use her current balance to calculate the interest)

By the time Sumayya needs to start repaying her loan, she doesn't yet have a good enough job to afford the full monthly payment. They will let her pay $25 per month for the next year until she gets a better job.

Enter the interest and payment for month five to see what happens to the balance. Make sure you enter the payment with a minus sign, since it subtracts from the balance. Think about it: how does the balance at the end of month 5 compare to the balance at the end of month 4?