Homework 4 - Financial Planning

Resources

• Credit Card Education
• Student Loan Accrued Interest Calculator
• Annual Direct Loan (Federal Student Loans) Limits
• Standard (10yr) and Extended Student Loan Repayment Calculator
• Income-Based Student Loan Repayment and Public Service Loan Forgiveness Calculator
• Simple Paycheck Withholding Calculator for California
• Wiki on Various Financial and Investing Topics

Assignment

• First year - Direct Loans: $3500 subsidized and $2000 unsubsidized @ 6.8%. Private Loans: $1500 @ 9.5%.
• Second year - Direct Loans: $4500 subsidized and $2000 unsubsidized @ 6.8%. Private Loans: $1000 @ 9.5%.
• Third year - Direct Loans: $5500 subsidized and $2000 unsubsidized @ 6.8%. Private Loans: $500 @ 9.5%.
• Fourth year - Direct Loans: $5500 subsidized and $2000 unsubsidized @ 6.8%. Private Loans: $1500 @ 9.5%.
• Fifth year - Direct Loans: $5500 subsidized and $2000 unsubsidized @ 6.8%. Private Loans: $2500 @ 9.5%.

1. What is the balance of each type of loan (subsidized, unsubsidized, private) when Alice and Bob graduate? Remember that unsubsidized and private loans accumulate interest while they were in school.
2. Assume Bob and Alice both land a job immediately after graduation that pays $64800 AGI per year. How much would their monthly payments be under the following repayment plans?
   1. Standard 10 year
   2. Extended
   3. Income-Based with a family size of 1. If not qualified, say that as the answer.
3. Alice and Bob each get paid monthly, $5400 per month. What would be Alice and Bob's take-home pay after federal income taxes, FICA (Medicare and SS), CA income taxes and CA SDI? Assume that each is single and has 2 allowances for both state and federal tax purposes.
4. Bob and Alice both land jobs in California. Alice works as a civilian contractor at Edwards Air Force Base. Bob works at Lockheed Martin in San Jose. Find the average rent, food and utility costs for a 1 bedroom apartment in those two areas by doing a few Internet searches. Using this information and the calculations you've done in the last two questions, what discretionary income would each have per month?
5. Develop a monthly budget for Bob and a monthly budget for Alice.
6. Alice would like to save for her retirement. She decides to contribute 5% into her retirement plan each month. How does this affect the answers to the previous three questions? Can she afford to contribute more? Can Bob afford to contribute towards his retirement?