SARAH makes $43,000 per year, is single, and lives in Connecticut. She has $19,000 in subsidized loans and $8000 in unsubsidized loans. Which repayment plan will be the cheapest for her in total?

With the standard repayment plan, Sarah repays 120 fixed monthly installments, assuming a repayment term of 10 years. She will pay minimal interests since the standard repayment plan also offers the shortest repayment period. To minimize interest expense, Sarah should repay the unsubsidized loans before the subsidized loans. The reason is that the unsubsidized loans accrue more interest expense over their terms than the subsidized loans.

Baraq Baraq · Answer 2 · 2021-10-28T18:06:10+02:00

The repayment plan that will be the cheapest for Sarah in total is the Standard Repayment plan.

This is because of all the available types of repayment plans; standard repayment plans offer the borrower the least amount to repay within ten years compared to other plans.

Also, since she owes both subsidized and unsubsidized loans, it is recommended that she repays her unsubsidized loan first because it accrues more interest before repaying her subsidized loan.

Hence, in this case, it is concluded that the correct answer is "Standard repayment plan."

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