Repayment Options, Student Loan Calculators

How Long Does It Take to Pay off Student Loans?

While college may just last a brief four to seven years, paying off the loans from school can easily last from ten to thirty years beyond the date of your graduation. Loans can feel like they are holding you back from achieving the financial freedom you had planned to achieve when you graduated. Many people have the dream to graduate, get a great job, the house, the car, and live life to the fullest.

However, high monthly loan payments may make you feel like you are taking two steps forward and one step back each paycheck. Just like you might look for the best travel credit cards with no annual fees to help you build up your credit score all while not paying extra fees, you may want to seek ways to manage student loans.

Here are some tips on how long it takes to pay off student loans and what you can do now to help with this process.

Student Loan Statistics

Student loans are very common, so you are not alone in trying to find the best way to pay off your loans in the fastest amount of time. Here are some statistics about student loans taken from a 2018 article in Forbes about student loans.

  • The total student debt was over $1.5 trillion all over the US. This is the mass sum from over 44 million students nationwide. In 2016, the average student graduated with $37,172 in student loans. For that amount of money, you could buy a very nice, new car.
  • Out of all those students, just over 10% of them end up delinquent or in default. This can be due to financial issues, or simply not knowing their options in order to avoid falling into delinquency. Research on student loan assistance can help you avoid falling into that alarming statistic.

Taking out student loans is so much easier than paying them off. But, unfortunately, it is a necessity for many in order to complete their schooling. Most students have less than $100,000 in debt. But, a little over 2 million students have more than $100,000 in debt.

Most students have between $10,000 and $25,000 in debt. Those with higher debt usually are students who have attended specialty schools such as law school or medical school.

As a general rule, a student should not take more student debt out than they plan to make within one year at their target job. If they take out less than their predicted annual salary, then they have a much higher chance of being able to easily pay off their loan in ten years or less.

Types of Student Loans

Making an achievable repayment plans starts with knowing just how to tackle the student loans. There are several different types of student loans that you may have taken out. The type of loan will affect how you will repay the loan.

As a general rule, the higher the interest rate on a loan, the sooner you will want to pay it off. Interest rates can be the most damaging aspect of student loans as it can seep thousands of dollars away that you could have used to pay off the loans themselves.

Federal Loans

Federal loans are loans that government has funded. They tend to have a fixed interest rate, which the government has decided upon as a predetermined amount. It is an equal across the board for all students. This interest rate may vary from one federal loan to another, depending on the type of federal loan.

Within federal loans, there are two main types of loans: subsidized and unsubsidized. As a general rule, subsidized loans tend to be much more cost effective. Their interest rates tend to be lower and the government will usually not collect interest until after you graduate. Unsubsidized loans can have higher interest rates and usually begin collecting interest while you are still in school.

Federal loans do not require a credit check. Nearly anyone going for their undergraduate degree is eligible for a federal loan. Those going for a graduate degree or going into a specified field of study program, such as medical school, may have other programs that can assist them in paying for their schooling. They may not always qualify for regular federal loans. Graduate students often are required to go through a credit check before receiving further aid.

Private Loans

Private loans function a little differently than federal loans. These are loans given out by private lenders, not by the government. As a result, these loans tend to follow many of the requirements of other loans that a person make take out such as car loans and personal loans.

One positive side of private loans is that you will have the chance to shop around for the best deal. This means that you can compare interest rates and special student benefits with each loan. Most private loans tend to have higher interest rates than a federal loan, which is why financial advisors do not normally recommend this type of loan.

There have been a few times that the private loan market was doing well and their interest rates were temporarily lower than federal loans. Unfortunately, most private loans do not have fixed rates, so that rate could skyrocket within the next few years, leaving you with a much higher rate.

Private loans do provide more flexibility for the student. You do not have the restrictions from federal loans tying you down. Instead, you can consolidate, switch providers, and refinance your loans at any time.

Federal loans tend to be at a fixed rate with a fixed provider. If you were to refinance a federal loan, you would be taking the federal loan and turning it into a private loan.

When applying for a private loan, you will need good credit history. This makes private loans unattainable for many students. The average student does not have a long credit history that would give them a healthy enough score to be accepted.

On average, creditors are looking for at least a 640 or greater to be considered. If a student would still like to try the route of a private loan, having a cosigner can help make this possible.

Stafford and Perkins Loans

Stafford and Perkins are two names that pop up quite regularly when the discussion of loans comes up. These are both types of federal student loans. The Stafford loan is the most popular type of loan, available in both subsidized and unsubsidized loans. Perkins loans are not as popular. They have stricter requirements and tend to be based on need and income.

School Loan Repayment Plans

The repayment plans available to you will depend on where you received your loan from. Each provider has a variety of options that can be customized to your income and ability. There are some general repayment plans that most providers offer.

Repayment plans can range anywhere from five year plans to thirty year plans. The sooner your repay your loan, the less interest you will be paying, so the shorter plans are more desirable.

Depending on how much you owe, shorter plans could translate to paying hundreds of dollars each month with money you may not be earning yet. That is why there are longer plans available, making it much more affordable to pay off loans that can get up to the hundreds of thousands of dollars.

In addition to the length of time, you can also often times choose the amount of each payment. Those with lower incomes can be approved for special repayment plans that base their monthly amount off of your income. If you make a regular income, there are generally two options to choose from.

Fixed Price Repayment Plan

The first option is a fixed price repayment plan. With this plan, you choose the length of the loan, then the amount you owe plus interest will be divided up equally into monthly or sometimes even biweekly payments. Your repayment amount will remain fixed for the entire length of the loan. This makes it easy to budget the amount and works well if you have the income to pay the required minimum fee each month.

Gradient Repayment Plan

The second option is a gradient repayment plan. With this repayment plan, your minimum will start out much lower than the fixed rate. It will then slowly increase each year or every two years. While the term you select may be the same as the fixed rate, the balance you are paying monthly will be greater than the fixed rate plan by the time you reach the end of the plan.

This plan works best for those who do not start out with a higher income. It makes the payments more affordable right after graduation when the student is still searching for a job. The repayment plan then increases as you rise in your job and receive more pay raises. In this way, you will be able to afford the higher payments.

Income-Based Repayment Plan

Income-based repayment plans are not available for everyone. You need to fill out a form to see if you qualify. With this option, your payments will be based on how much you make and will change with each pay change. These income driven repayment plans should not be a first choice. They should only be a last resort if no other options are affordable.

Income-based repayment plans tend to last much longer than regular repayment plans. These can extend to up to 30 years. This means that you may end up with more interest to repay than if you just used a regular repayment plan.

Repayment Calculators

A repayment calculator is a helpful tool to get you started on your way to repayment. The calculator can help you decide which repayment plan is your best option so that you pay the least amount of interest over the shortest period of time. You do not want to choose a repayment plan that is too long, even if you think you can pay it off early, because many lenders may penalize you for early repayment. 

The way a repayment calculator works is by taking in your total student loan amount, rate of interest, annual salary, and percentage of your annual salary that you can afford to put towards your student loan. The repayment calculator will then let you know how much you would end up paying monthly to stay within that budget, how many years it would take to repay your loan at that amount, and what portion of the amount you are paying would be interest.

Calculation Sample

To see how the calculator works, begin by taking a $30,000 student loan. Assume that the interest rate is about 4%. If you are just starting out with a minimum wage part-time job, you may only be able to afford to pay $300 a month on this loan.

According to the loan calculator, this will mean that at $300 a month. You will take 10 years and 2 months to fully pay off your loan. In that period of time, you would have paid about $6,552.69 in interest.

This is a surprising number when seen in the grand scale. After considering this amount, you may think it is worth picking up extra hours in order to decrease those numbers. By working some extra jobs, you may be able to make a few hundred extra dollars a month and pay $500 a month on your loan.

Suddenly, your loan jumps down to only taking 5 years and 8 months to repay. On top of that, you only end up paying $3,527.34 in interest. This is nearly half of what you were previously paying in interest.

Using the loan calculator helped save you just over $3,000 and showed you how you can be debt free in just over five years.

Where to Start

Typically, when you graduate, you will have a six to nine month grace period before you need to begin payments on your loans. Private loans do not always offer this grace period. You should use this time wisely as a time to find a job in which you will be able to make a stable income to pay off your loans.

While the grace period is a helpful way to allow students to begin making an income before having to make payments, you do not need to take advantage of the grace period. You may see interest already being collected on some loans the moment you take them out.

The longer you wait, the higher your interest payments will be. If you can, even start paying while you are in school, even a little bit. That will help with your overall cost. Once you graduate, if you have the money, start making payments before your grace period is over.

After Graduation

Once you graduate, it is a good time to step back and take a good look at your loans. At this point, you have had time to build some credit while you were in college. If you began making payments on your student loans, that will reflect positively on your credit score. It may be time to consider consolidating or refinancing.

Consider your higher interest loans and shop around to see if you could find a better interest rate. This would mean going to a private loan, but this may be worth considering if the interest rate is much lower through a private loan and the options with the loan fit your lifestyle more.

Be sure that the consolidated amount truly does have a better rate of interest. With separate loans, you are able to pay off the higher interest loans first, and then focus on the lower interest loans later in order to cut down on the overall amount of interest that you will pay.

By consolidating your loans, you will no longer be able to do this. Instead, you will be making one lump sum payment each month to all loans equally as one loan. If you do not have any higher interest loans that should be paid off first, than consolidation may be the right avenue for you to pursue.

Otherwise, you can consolidate your higher interest loans together, but still keep them separate from your lower loans if you can find a better interest rate where you can still tackle the higher rates first.

Once you’ve consolidated the loans into one or two payments with the lowest interest, it is time to budget. Making a budget is crucial to paying off the loans as quickly as possible. It may mean pinching pennies the first few years, but you will be able to gather the reward later. Try and find a job that will allow you to make the payments. If your job does not pay much, consider finding a smaller side business where the income can be solely dedicated to loan repayment.

Ways to Save

If you are ready to take repayment seriously, there are some ways in which you can save money to help you pay off your loans even faster. While no one way will completely cut away thousands of dollars, each tip will chip away a little more of the loan and together can help pay it off.

Paying the Interest First

Each loan will have a different interest rates. We have discussed some of these rates earlier. Private loans can have much higher interest rates than federal loans. Even among federal loans, the unsubsidized usually have higher interest rates than subsidized.

To begin paying off your debt in a way that will make the most impact, you will want to attack the higher interest rates first. You will still be making your regular monthly payments on all your loans, but any time you have extra money, you will want to put all that money on the loans with the highest interest. The less money going towards interest means the more money you will have going directly to the actual loan amount.

Keeping a Budget

A budget is a planned payment schedule written up according to what you estimate you will make in the next months. Once you make a budget, stick with the budget. This serves two purposes. The first is that having a budget will guarantee you make your minimum payments and avoid going into default. The second purpose is to keep your spending in check to leave room to allow for extra money.

income can fluctuate month to month. This could be due to raises, bonuses, or extra income. By sticking to your budget, the extra money you receive you can put directly into paying off your loans versus adjusting your budget in order to spend more money on yourself.

Declaring your Loans

You can be paid for paying off loans. Technically you are not being paid, you are just receiving money back at tax time, but it can easily feel like an extra paycheck.

When you file your taxes, be sure to file your 1098-E IRS form. This is called the Student Loan Interest Statement. This statement will let you know how much interest you paid on your student loans throughout the year. You can declare this amount on your taxes and can help increase your tax return.

While you may be excited to receive this money back, try to treat the money as money that has already been spent. Instead of using it for a new vehicle or updated wardrobe, put that money back towards your student loans to help pay off more interest which will in turn increase your return the next year after that.

Tracking Your Spending

Even with your other saving options, you may not be ending each money with much left over to put towards loans. What you can do to help increase this amount is to cut out those extra costs each month. It helps to keep receipts of each item you purchase throughout the month.

You can also keep a checkbook in which you keep track of your purchases. Having a visual representation will allow you to go back over the checkbook. Each month, go back through your purchases and find one or two items you do not need. This way, you can slowly cut back on those extra costs which will leave more at the end of the month for your student loan payment.

Cutting out Extra Costs

Some items that can be counted as extra costs are entertainment items, new items, and splurge items. Entertainment items can include movie tickets, buying apps for your phone, or paying for music. These items are not necessary. There are cheaper and even free ways to be entertained. Cutting out $3 here and $5 there can easily add up over the weeks and months.

New items are items that you purchased at full retain value. These items may be necessary, but the amount you spend might not be necessary. Try shopping in thrift stores for a winter coat instead of paying full retail store price for a name brand winter coat. You could check out secondhand sites such as Letgo and Facebook Marketplace for used items with minimal wear instead of purchasing new furniture and household items.

The last category is the splurge category. These are items we buy to pamper ourselves. This includes going out to eat, getting nails done, and other items that are not necessary. There are many cheaper ways to pamper or splurge without spending the extra money.

Instead of going out to get your nails done at a salon, try watching some free online tutorials and practice doing your own nails. Instead of going out to eat, purchase the ingredients and make a nice meal for yourself. There are ways to still splurge and pamper yourself while saving.

These savings will go directly towards your student loans. In the end, you will save hundreds of dollars each month which you can then use for even bigger splurges down the road.

Making Extra Cash

You live in the age of the internet. There are thousands of ways to earn an extra dollar on the internet without ever even having to leave your home. You may not be getting rich fast, but every little bit adds up over time. You can find easy money options on your schedule. It is just a matter of putting in the time to research out the opportunities.

Online Surveys

One of the easiest money options are online surveys. There are dozens of companies that will pay a few dollars for you to simply fill out surveys. These help manufacturers better create products focused around a specific demographic. All that is required of you is to fill out a demographics report on yourself and wait for the surveys.

These can be filled out on the subway while you head into work, on your lunch break, or right before you head to bed at night. This can easily earn you a few dollars a month that can add up to a hundred or two a year. Over the course of your loan, those few minutes a day could pay off thousands ultimately.

Online Business

Another option would be to start your own website or online business. This is becoming increasingly more popular. You are able to use your unique skill set to market a product or information through informative blog posts and online marketplaces.

Through this, you can gain an income through people purchasing your product, advertisers paying for advertising space, or affiliate marketing that gives you a commission off of selling other people’s products. In addition, you may even choose to sell your own skills through freelance work such as a freelance writing or freelance photography.

Teaching Online

Online teaching is another side job that is a little more difficult to fit in a busy schedule, but is one of the more profitable options available. You can practically tutor or teach anyone around the world through a Skype-type platform. You just need to find the right platform that hires online teachers for your skills. There are places you can teach adults work skills, tutor student for their SATs, or teach English to children around the world.

Other Loan Help

Paying off your student loan may not be your only option. There are certain jobs that will qualify you for a special repayment option or even loan forgiveness. Most of these jobs are community service, military, and teaching jobs.

Military Programs

Those who join the military have many options for paying off their loans. These options range from better repayment plans with lower interest rates to complete loan forgiveness. The plans you may qualify for will depend on your branch, whether you are active or reserve, and how many years you have signed on with the military.

Here are a few of the common loan deferment and forgiveness programs:

  • Department of Defense Student Loan Repayment Program
  • HEAL Loan Deferment
  • HEROES Act Extensions
  • HEROES Act Waiver
  • Military Private Loan Postponement
  • Veterans Total and Permanent Disability Discharge
  • No Interest Accrual Benefit

The military works with students in order to help them achieve their education with minimal to no student debt.

Public Service Loan Forgiveness

Public Service Loan Forgiveness, or PSLF, works with those who work under a qualifying PSLF employer. The program takes loans that have been under income-driven repayment plans and forgive the remaining balance.

To qualify, you must have already made 120 qualifying monthly payments. This equals ten years of loan repayment using an income-driven repayment plan. These payments must be using a qualifying repayment plan. They must also be the full minimum amount due and cannot have been later than 15 days after they were due.

There are many jobs that fall under PSLF. These include working for government organizations as well as joining the military. Those who work for nonprofit organizations that qualify under tax-exempt may also try applying. Those nonprofits that are not tax-exempt may still qualify depending on what types of public services they offer. Full-time volunteers with corporations like AmeriCorps and Peace Corps may also qualify.

To be considered full-time, you usually must work at least 30 hours a week unless the corporation has a specific definition of what qualifies as full-time. The nonprofits that do not usually qualify are those working for religious organizations, worship services, and other similar employment.

Most loans are eligible for PSLF, but some loans are not. These include Perkins Loans and defaulted student loans. Federal Family Education Loans also do not qualify for PSLF. While you need to have completed the 120 monthly payments, you can apply immediately using the Employment Certification Form to begin building up your required hours.

On Your Way to Being Debt Free

Information is the key ingredient to paying off your student loans as fast as possible while spending the least amount as possible. Research and knowledge help you make smart decisions when choosing the right repayment plans. Just remember that hard work now will pay you back tenfold down the road.

Do not be afraid to put in the extra effort, cut those unnecessary costs, and invest those few leftover dollars. These methods will save you thousands of dollars and help you achieve freedom from your loans. That way, you can start enjoying your life to the fullest.

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