Debt limit ratio based on the student loan payment

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Reference no: EM131868006

Your sister Mindy and her boyfriend Doug recently announced plans to be married after graduation in May. Although you are fond of them both and want their relationship to succeed, you are concerned about their financial future. Neither Mindy nor Doug completed a personal finance course while in college. Mindy is a spender who has known few limits on her wants since she was a teenager. Doug, on the other hand, has worked, saved, and invested since he was a teenager to help provide for college costs. He will complete college with approximately $12,600 in student loans. Their income in their first year out of college will total $90,000, due in large part to Doug's choice of major and practical work experience during college. Mindy, who admits having no financial skill or interest, is content to let Doug handle all those matters since he seems to be good at it and will likely earn more than she does.

If Mindy and Doug lose 30 percent of their gross salary to taxes and benefits, determine their debt limit ratio based on the student loan payment. How much additional debt repayment could they add and not exceed the 15 percent safety margin?

Reference no: EM131868006

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