Question

YASHARI earns $27,000 per year, is single, and lives in Wyoming. She has $7000 in subsidized loans and another $19,000 in unsubsidized loans. She is trying to save up an emergency fund of at least 6 months’ take-home pay, so she’s torn about how much she should devote to her student loans and how much to the emergency fund every month.
Yashari’s monthly take-home pay is $1850. What percentage of her paycheck will go toward student loans if she chooses standard repayment? Does that payment amount seem reasonable? Why or why not?


Which plan has the longest repayment period? How long will Yashari be paying her student loans?


How do you think Yashari should prioritize between her emergency fund goal and her student loan payments?


Which repayment plan do you think Yashari should select? Why?

Answer 1

Answer:

a) 14.43% ,  The amount is reasonable

b) Pay as you go

c) Yashari should should prioritize paying the Loan instalment before saving for the emergency fund

d) Standard repayment plan

Explanation:

Yashari Monthly take-home pay = $1850

a) Determine the % of her paycheck goes toward student loans if she chooses standard repayment

Rate of interest = 4.30%

hence % of her paycheck that goes toward student loan = 14.43%

The repayment amount = $32035. which is very reasonable as well

b) what plan that has the longest repayment period  

PAYE ( pay as you earn ) has the longest repayment period

c)  prioritizing between her emergency fund goal and student loan

Yashari should should prioritize paying the Loan instalment before saving for the emergency fund because of the penalties that comes with loan defaulting

d) Yashari should select the Standard repayment plan because the final amount paid using this plan is lower