Published in: Student Loans | May 16, 2019

How Long Do You Have to Pay Off Your Student Loans?

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Old-style student loans have set periods in which you have to get your loan repaid, but newer loans have specific time limits after which any remaining balance is forgiven.
Piggy bank in grad cap sitting next to a glass jar full of money labeled Student Loan Debt.

Image source: Getty Images.

Student loans have become a fact of life for those seeking to go to college, as the high cost of education makes it difficult for families to save enough money to pay for tuition and other school expenses. With an estimated 45 million students owing more than $1.5 trillion in student loan debt, it often takes years for borrowers to get their loans paid back and to start making progress toward other financial goals.

When student loans first became popular, they typically looked like any other fixed loan, coming with an interest rate and a specified amount of time over which the borrower had to repay the loan. However, with new initiatives designed to make it easier for students to get the education they need, some student loans now come with maximum periods after which any remaining balance on the loan gets forgiven. A lot depends on which types of student loans you have, and as you'll see below, the exact time you have to get your loans paid off can vary greatly depending on your particular situation.

Standard repayment plan

Until recently, the standard repayment plan governed nearly all federal student loans, including direct loans, PLUS loans, and federal consolidation loans. Under this repayment plan, borrowers typically had up to 10 years to get their loans repaid, although consolidation loans sometimes offered options that would allow for a longer repayment period if the borrower chose.

In particular, the federal government would look at the amount that you borrowed. It would then calculate a monthly payment amount that would ensure that the loan balance was paid off in full within a 10-year period. If the borrower made payments that were larger than what the repayment plan called for, then the period of repayment could be shorter.

Bear in mind that for loans that include provisions for deferment, the 10-year period would generally stop during deferment periods. So for the periods when you're in school, on active duty military service, or doing other eligible work such as enrolling in the Peace Corps, the clock stops ticking, but it then starts back up again when the qualifying deferment ends.

Graduated repayment plan

The graduated repayment plan looks a lot like the standard repayment plan, with the federal government setting up payments so that the loan will be entirely repaid within 10 years. However, the graduated repayment plan begins with lower monthly payments than the standard plan, rising every two years to make up for the lower early payments. Those changing payments over time are what distinguish graduated repayment plans from others, but they don't typically make a difference in the amount of time you'll have to pay off your student loans.

Extended repayment plan

The federal government realized that as student loan balances skyrocketed, not everyone could afford payments based on a 10-year repayment plan. The extended repayment plan gives borrowers up to 25 years to repay, and those payments can be either fixed as in the standard plan or graduated depending on the borrower's needs.

Typically, only borrowers with significant loan balances could qualify for the extended repayment plan. For instance, direct loan borrowers had to have at least $30,000 in borrowings in loans in order to qualify.

Income-based repayment plans

More recently, the federal government made greater steps toward recognizing the needs of student borrowers. Several categories of new repayment plans give borrowers more time and favorable terms with which to repay their loans:

  •  The Pay As You Earn repayment plan offers monthly payments equal to 10% of your discretionary income, with annual reassessments of your income level and subsequent changes to your payment. Any outstanding balance on the loan after 20 years will be forgiven.
  • The Revised Pay As You Earn repayment plan has similar provisions to the original Pay As You Earn plan, except that the handling of marital assets and debt is slightly different. Moreover, although a 20-year repayment period applies to undergraduate borrowers, those who took out student loans for graduate school have to wait 25 years before any remaining balance is forgiven.
  • The Income-Based Repayment plan requires monthly payments of 10% to 15% of your discretionary income, with forgiveness after 20 or 25 years depending on the time at which you got your first loan.
  • The Income-Contingent Repayment plan sets monthly payments at 20% of discretionary income, with outstanding balances forgiven after 25 years.
  • The Income-Sensitive Repayment plan has a shorter 15-year payoff, but it's available only for those who obtain their federal loans indirectly through private financial institutions, rather than directly from the Department of Education.

Loan forgiveness programs

In some cases, all or part of your federal loan balances will be forgiven if you work in certain occupations for a period of time. For instance, Peace Corps volunteers can get 15% of loan balances per year of service forgiven, up to a 70% maximum. Volunteers in AmeriCorps and the VISTA program can get $4,725 stipends toward repaying loans. Others include the Army National Guard's student loan repayment program, various programs for loan forgiveness for teaching, public interest or non-profit legal work for law school loan borrowers, repayment programs for various types of work in the healthcare industry, and certain federal government agency employees.

All of these programs have different specific requirements and terms. But for those looking to get their student loan debt under control, they can make the job a lot easier.

Private loans

All of those provisions above might sound complicated, but by contrast, the way that private student loans work is a lot simpler. With a private student loan, the lender sets the terms, and the borrower has to repay the loan according to those terms. For the most part, private lenders won't offer alternatives to allow your loans to be forgiven after certain periods of time or for specific types of work.

Unfortunately, repaying student loans is a long, drawn-out process for many students these days. Even with the promise of forgiveness in some cases at the end of a set time, you'll still find yourself on the hook to make monthly payments toward your student loans well into your career. Only by paying more than you have to can you make a big dent in getting your loans paid off faster.

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