Katrina has the option of an 8-year nonsubsidized student loan of $31,000 at an annual interest rate of 2.5% or an 8-year subsidized loan of $31,000 at an annual interest rate of 4.5%. Determine for which loan Katrina will pay less interest over the term of the loan if she starts making payments 2 years after obtaining the loan. (Assume Katrina makes monthly payments for each loan. Round your answers to the nearest cent, as appropriate.)

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.