Exit ticket Student & Predatory Loans

1. How do the Annual Percentage Rates (APRs) on payday loans get to be so high?

1. 
   

• 1. The loans go to affluent banking customers, so they charge a lot for the exclusivity

  
  

• 1. The loan amounts are small, but the fees charged are relatively high and are renewed on a very short time-scale

  
  

• 1. They make most of their money through ATM withdrawal fees as well as overdraft fees on checking accounts

  
  

• 1. The amount of money people borrow using payday loans is typically quite high – $10,000 or more – so the fees are also high

  
  

2. Three of these statements reflect payday loans. Choose the other statement, which is aligned with a traditional bank loan instead.

1. 
   

• 1. Easy to obtain without a lot of paperwork

  
  

• 1. Requires a credit check and suitably high credit score

  
  

• 1. Requires payment in full in less than a month

  
  

• 1. APR can easily be over 200%

  
  

3. Why are payday loans so popular?

1. 
   

• 1. They are a fast, easy way to save money and budget effectively

  
  

• 1. They meet the need for quick cash for very large purchases such as cars and homes

  
  

• 1. They are a terrific way to build your credit history and improve your credit score

  
  

• 1. They are accessible to people who need to borrow small amounts of money and don’t have any better options

  
  

1. All of the following are benefits of federal student loans compared to private student loans, EXCEPT…

1. 
   

• 1. Federal student loans generally have lower interest rates

  
  

• 1. Federal student loans can be forgiven under specific circumstances

  
  

• 1. Federal student loans provide more options for repayment

  
  

• 1. Federal student loans have no limit to how much you can borrow

  
  

2. Christine owes $23,000 in student loans and has a minimum payment of $230 per month. She decides to make an additional $100 payment towards the loan principal every month. What impact will the additional payment have?

1. 
   

• 1. The additional payment will increase the total cost of her loan

  
  

• 1. The additional payment will decrease the total cost of her loan

  
  

• 1. The additional payment will increase the time it takes to repay her loan

  
  

• 1. The additional payment will decrease the interest rate charged on her loan

  
  

3. Which of the following student loan repayment plans would result in the same monthly payment over the course of the loan?

1. 
   

• 1. Standard Repayment Plan

  
  

• 1. Graduated Repayment Plan

  
  

• 1. Income-Based Repayment Plan

  
  

• 1. Pay As You Earn (PAYE) Repayment Plan