The principal of a loan is the original sum of money borrowed before any interest is added. In this case, if you take out a loan for college for $1000, the principal amount is simply $1000. The interest rate of 7% will apply to this amount, which means that over time, you will repay the original $1000, plus additional money based on that interest rate. For example, if you are charged 7% interest on the principal, this will affect the total amount you owe at repayment but does not change the principal itself.
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