Jessica took out a Stafford loan worth $7,175 at the beginning of her six-year college career. The loan has a duration of ten years and an interest rate of 6.3%, compounded monthly. How much greater will Jessica’s monthly payment be if the loan is unsubsidized than if the loan is subsidized? Round all dollar values to the nearest cent.

During the six years in college, an unsubsidized loan accrues interest for 72 months, while a subsidized loan does not. At 6.3% compounded monthly, the unsubsidized balance grows to about $10,468.79, so the extra amount owed is about $3,293.79. Repaying that difference over 120 months at a monthly rate of 0.063 ÷ 12 gives about $36.98 more per month, matching choice A, $36.98.

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