Question

Mitch completes the course and his boss promotes him. Mitch receives a 25% increase on his previous pay of $40 000 per year after tax.
However, Mitch took out a Study Assist loan from the government to pay his course fee. This means that 4% of his new after-tax salary goes towards repaying the loan.

How much extra pay does Mitch actually end up with for the year?

Answer 1

Before her promotion, Mitch was receiving $40,000 per year after tax. Since the loan payment is 4%, therefore the money that goes to the loan is:

Loan payment = $40,000 * 0.04

Loan payment = $1,600

 

After her promotion, Mitch is now receiving:

 New salary = $40,000 * 1.25

New salary = $50,000

Therefore the new loan payment becomes:

New loan payment = $50,000 * 0.04

New loan payment = $2,000

 

Therefore Mitch is paying an extra payment of:

$2,000 - $1,600 = $400

 

Answer: $400