Accredited Financial Counselor Practice Exam 2025 – Complete Test Prep

Question: 1 / 400

Eduardo's AGI is $32,000 and the poverty level for his family size is $14,000. What will be his monthly payment under the Pay As You Earn student loan repayment plan?

$50

$73.33

$91.67

To determine Eduardo's monthly payment under the Pay As You Earn (PAYE) student loan repayment plan, we need to understand how the payment amount is computed. The PAYE plan requires the borrower to pay 10% of their discretionary income. Discretionary income is calculated as the borrower's adjusted gross income (AGI) minus 150% of the poverty guideline for their family size.

1. First, calculate 150% of the poverty level for Eduardo's family size:

- Poverty level is $14,000.

- 150% of the poverty level: $14,000 × 1.5 = $21,000.

2. Next, calculate Eduardo's discretionary income:

- Discretionary income = AGI - 150% of the poverty level = $32,000 - $21,000 = $11,000.

3. Now, calculate the annual payment based on 10% of the discretionary income:

- Annual payment = 10% of discretionary income = 0.10 × $11,000 = $1,100.

4. Finally, to find the monthly payment, divide the annual payment by 12:

- Monthly payment = $1,

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