Published in: Student Loans | April 3, 2019

How Long Does It Take to Pay Off Student Loans?

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Most loans give you a long time to repay your debt in full, but that doesn't mean you have to wait that long.
A piggy bank wearing a graduation cap being squeezed by a vise labelled "Student Loans".
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The cost of college keeps going up, and that's forced millions of American students to resort to taking out student loans in order to finance their educations. With more than $1.5 trillion in outstanding student loan debt, many young graduates find themselves facing decades of having to make loan payments in order to repay what they borrowed as students. That can make it harder for them to get other personal loans to achieve financial goals.

It therefore makes sense to aim to get out from under student loan debt as quickly as possible. To do so, you'll typically have to make payments that are larger than what the financial institution that lent you the money requires -- because those monthly payments are based on schedules that give you a long time to repay the loans in full.

The base case for federal student loans

It matters what type of student loan you have in determining how long it'll take you to pay it off. Federal loans usually come with one of three repayment schedules. The standard repayment plan gives you up to 10 years to pay down your debt, with monthly payments calculated based on the total amount you've borrowed, the prevailing interest rate, and what minimum payment amount your lender imposes on student loans generally. For instance, you might have 10 full years to repay a $20,000 student loan because the monthly loan payments will be substantial, but repaying a $2,000 student loan will almost always be much faster because you'll have to pay at least a certain amount, such as $50 per month, on a regular basis.

Graduated repayment plans give you a longer period of up to 30 years to repay your student loans. These plans usually start with a period during which all you're paying is interest on the loans, giving you time to get your financial footing at the beginning of your career. From there, your payments will rise every couple of years or so, with the assumption that you'll slowly but surely be able to increase your income, which will make larger student loan payments more affordable.

Finally, extended repayment plans also give you a longer period of up to 30 years for eliminating your student loan debt. The repayment term varies according to the size of your outstanding student loan debt, with balances of less than $7,500 typically restricted to 10 years while large debts of $60,000 or more can qualify for the full 30-year term.

Payments based on income

More recently, government programs have responded to the difficulty that many student loan borrowers have had making repayments based on traditional schedules. New provisions have made it possible for borrowers to make payments based on their income.

These income-based repayment plans typically require you to pay a percentage of your discretionary income above certain amounts. However, they come in several different flavors:

  • Some consider only your income even if you're married, while others take your spouse's income into account as well.
  • Some have no cap to the amount you have to pay if your income skyrockets, while others cap your repayment amount at the normal monthly payment for a 10-year loan.

In addition, the period of time after which any remaining debt gets forgiven varies from loan to loan. Provisions are typically between 20 years and 25 years, with different programs offering different limits. For instance, the Pay-As-You-Earn, or PAYE, repayment schedule forgives remaining debt after 20 years. However, the Revised PAYE, or REPAYE, schedule has a 25-year repayment term for graduate students, keeping the 20-year forgiveness provision for undergraduate loan.

Another challenge for private student loan borrowers

Unlike federal student loans, private lenders have a lot of leeway in structuring whatever repayment terms they see fit to offer. As a result, it's essential to look closely at the particular terms of your lender's private student loans, because they won't necessarily be the same as a similar lender's student loan offerings.

One thing that does tend to be the case, however, is that lenders offer longer repayment periods for borrowers who choose to consolidate their student loan debt. Lenders hope to gather all past student loans into a single loan vehicle, offering the convenience of making a single payment. By giving you more time to repay your loan, you'll be able to get a lower monthly payment than you'd get under a standard repayment schedule. However, the price of that relief can be high interest rates that dramatically increase the total amount of interest you'll pay over the lifetime of your loan -- as well as the number of years you'll be on the hook for making payments.

How to repay your student loans faster

Paying down student loan debt early doesn't always make sense, especially if many of your loans have particularly favorable provisions. For instance, if you have subsidized federal student loan debt at a low interest rate that gives you features like deferment when you go back to school and forgiveness for work in a given career, then you'll often want to extend those loans out as long as possible.

However, with private loans, it often pays to get your student loans repaid as quickly as possible. To do so, you'll want to make payments that are larger than the monthly payments you're billed for.

If you go that route, here are some things to watch out for:

  • Make sure that your lender credits all of your extra payment toward paying down loan principal. Some lenders instead treat extra payments as advance payments on future-month obligations, which can end up charging you for interest that you shouldn't have to owe.
  • Conversely, even if you make an extra payment that matches a full month's normal loan payment, you typically won't get credit to extend your due date an extra month. So don't think that you can make a double payment one month and then skip the next month's payment until you clear it with your lender first.
  • If you get to the position at which you want to pay off your loan in full, contact your lender to get a full repayment amount. That way, you won't get left having forgotten half a month's worth of interest that'll require an extra payment before your loan goes away completely.

With student loans, lenders are typically working to give borrowers as long as they can to get their loans repaid. But that's not necessarily in your best interest. Financial flexibility can be useful, yet the feeling you'll get from having repaid your student loan debt in full is a whole lot nicer.

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