Question

Complete the following questions.For all of these questions assume a 10-year loan with an APR of 7% and 33% reduction of income due to federal, state and local taxes.

1. Bill estimates he will earn $45,000 a year after graduating from college. What is the recommended max he should consider borrowing in student loans?






2.Jillian estimates she will earn $58,000 a year after graduating from college. What is the recommended max she should consider borrowing in student loans?





3.Gabby plans to pursue a job that pays an average salary of $60,000 a year. She wants to graduate with a manageable amount of student debt. What is the maximum amount of loans she should consider?






4. What income should someone with $100,000 in student loan debt be earning a year to keep their loan payments 10% or less of their net income?

Answer 1

To answer these questions, we need to calculate the maximum amount that can be borrowed based on the recommended maximum payment per year and the loan details.

For Bill: Maximum loan repayment per year = 30,150×0.10=3,01530,150×0.10=3,015Using a loan calculator or the formula for loan payments, Bill's maximum recommended student loan amount is approximately $27,927.

For Jillian: Maximum loan repayment per year = 38,860×0.10=3,88638,860×0.10=3,886Jillian's maximum recommended student loan amount is approximately $35,929.

For Gabby: Maximum loan repayment per year = 40,200×0.10=4,02040,200×0.10=4,020Gabby's maximum recommended student loan amount is approximately $37,135.

For a $100,000 student loan debt: The required income to keep loan payments 10% or less of net income would be approximately $111,111 before taxes.