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. Open image in full-screen view 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 extended plan has no remaining balance.
B
The extended plan has a higher remaining balance.
C
Both plans have no remaining balance.
D
The standard plan has a higher remaining balance.
Explanation
The standard plan is designed to repay the loan in 15 years, so its remaining balance after 15 years is zero. The extended plan spreads repayment over 30 years, so after 15 years there is still time left to pay and a balance remains. Therefore, the extended plan has a higher remaining balance.
AI-written and checked against the verified answer.