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I have an outstanding student loan(remember guys?) for $24,500. I have now graduated and landed a good-paying job. I pay $318.20 per month at a rate of 5% APR. If I want to bring it down to half of its current balance, or $12,250, in three years' time, by how much would I have to increase my monthly payments to reach my goal? Can anybody help? Thank you very much.

 Dec 4, 2018
 #1
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OK...I figured this out a few minutes ago ignore MOST of my previous gyrations.... I see someone has posted the answer below....BUT here is the SAME equal series payment formula that applies as I used before...   What you need to think of this as:   you are paying off the 12250 @ 5% in 36 months AND you have to continue paying the 5% interest on the OTHER 12250 per month as you go.....so

 

A = P (1+i)^n [ i/((1+i)^n  -1)]           n = 3 x12 = 36    i = 5%/12 = .0041667

 

A = P ( .029970897)

A =12250(.016104933) = $367.14349  

   PLUS the monthly interest on the OTHER 12250     

12250 (.05/12) = $ 51.0416

 

= 418.185 =~ 418.19   per month   for an increase in your monthly payment of

      418.19 - 318.20 = 99.99      essentially   100 more a month !    Ta Da!

 

 

Thanx Guest  for your agreement!      Whew!  Glad I finally figured out the errors of my ways.....

 Dec 4, 2018
edited by ElectricPavlov  Dec 4, 2018
edited by ElectricPavlov  Dec 4, 2018
edited by ElectricPavlov  Dec 4, 2018
 #2
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EP: Very good job. A couple of small quibbles: The original loan of $24,500 is NOT paid in six years, but, in fact, in 7 3/4 years. There is a rather complicated-looking formula to solve directly for the new payment: 

-P*[(1-(1+5/1200)^-36)/(5/1200)]-12250*(1+(5/1200))^-36+24500=0, solve for P or Payment. You will see that the new payment = $418.19 as you state in the amortization calculator.

 Dec 4, 2018

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