This graph compares the standard repayment plan (15 years) and the extended repayment plan (30 years) for a $40,000 student loan with a 5% annual interest rate. Expand Image For a $40,000 loan, what is the difference in the remaining loan balance after 15 years between the standard and extended repayment plans?
Answer
A
The standard plan has a higher remaining balance.
B
Both plans have no remaining balance.
C
The extended plan has no remaining balance.
D
The extended plan has a higher remaining balance.
Explanation
The standard plan is designed to repay the $40,000 loan in 15 years, so its remaining balance after 15 years is $0. The extended plan spreads payments over 30 years, so after 15 years it still has 15 years of payments left and a balance remains. Therefore, the extended plan has a higher remaining balance.
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