Sarah looks at these results and realizes her monthly payment would be lower with most of the income-based repayment plans. But then, she looks at the Total Amount Paid and realizes that the loan price increases when she chooses these plans. How is this possible -- that her monthly payment is lower but her total payments are higher?

Income-based repayment plans are usually for those who don't make a lot of money and so would like to pay smaller instalments towards debt repayments. These plans will cap the monthly instalments to between 10% - 20% of her income.

The problem with these however is that with lower monthly/periodic payments, the debt will take longer to be paid off. This will give interest more time to accrue on the debt and will ultimately result in her paying more than she would have if she doesn't use income-based repayment plans.

bratislava bratislava · Answer 2 · 2021-11-17T04:51:32+01:00

Sarah looks at a monthly payment that is lower than the base repayment plans. After she looks at the total amount paid she realizes that the increase in the loans process.

The payment system depends on the short and long-term money you save. If you are having higher monthly payments you are borrowing money and paying the interests in a short amount of time.

The interest rate will be lower, hence the interest takes time to generate, and it's possible that her monthly payments may be lower than total payments.

Learn more about these results and realizes her monthly payment.

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