Question

Madeline Rollins is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now, Madeline is living at home and works in a shoe store, earning a gross income of $1,260 per month. Her employer deducts a total of $320 for taxes from her monthly pay. Madeline also pays $190 on several credit card debts each month. The loan she needs for chiropractic school will cost an additional $290 per month. Calculate her debt payments-to-income ratio with and without the college loan

Answer 1

Without loan:

Debt = Credit card debts = 190

Without loan:

Debt = Loan payments+credit card debt =190+290 = 480

Step-by-step explanation:

Gross Income = $1260

Income after tax = 1260-290 = 970

1st case(without loan)

Debt = Credit card debts = 190

Debt/income = 190/970 =0.1958 = 19.58%

2nd case (with loan)

Debt = Loan payments+credit card debt =190+290 = 480