Reference no: EM13992621

As we all know, as an undergraduate, paying for college can be tricky. Suppose there is an individual - we'll call him Sam. Sam is a junior at GRU and has decided to apply for FAFSA (the Free Application for Federal Student Aid) in order to help cover tuition and some of the other costs associated with college. As Sam was filling out the FAFSA form, he noticed that the government offered some choices; specifically, it offered either a direct subsidized or a direct unsubsidized loan. The direct subsidized loan is only available to students with a financial need. In addition, there is no interest charged on the loan as long as Sam is enrolled at least half time. The direct unsubsidized loan, on the other hand, has no requirement for financial need, but interest accumulates during all periods.

Sam is an out-of-state student. He also decided to enroll in the MBA program at GRU after earning his bachelor degree. When Sam graduates, he expects to get a job that pays $50,000 - $60,000 a year. The interest rate for the direct subsidized loan is 3.4% while the interest rate for the direct unsubsidized loan is 6.8%. Further, the government will give Sam the choice of repaying the loan either within a 10 or 25 year period. Given all this information, help Sam to decide 1) the maximum amount he should borrow 2) which loan he should choose and 3) which payback period/repayment plan he should choose. State your reasons for these choices.