How Long Does It Take To Pay Off Student Loans On Average
The average person is not a student. The average person is an adult with a job and a family, who has to balance the bills of everyday life with the need to pay off their student loans.
But even if you’re not a student, getting out from under your student loans can be a challenge. If you have thousands of dollars in student loan debt and no way to pay it off quickly, how long will it take you?
The answer depends on how much money you make and how much extra money you’re able to put toward paying off debt each month.
In this article, we’ll look at some of the factors that determine how fast your loans will be paid off—and what your options are if they seem insurmountable.
How Long Does It Take To Pay Off Student Loans On Average
Paying off student loans can take anywhere from 10 to 30 years, depending on the type of loan and repayment term you choose. Even though the Standard Repayment Plan for federal loans lasts 10 years, it takes most borrowers longer to finish paying off their balance.
When will my student loans be paid off?
Students who graduate with federal student loan debt are automatically enrolled in the Standard Repayment Plan, which lasts 10 years. But you can change the repayment plan if you need more flexibility in your budget.
The federal student loan repayment plans include:
- Standard Repayment Plan: Fixed monthly amount for 10 years (or between 10 and 30 years if you have a Direct Consolidation Loan).
- Graduated Repayment Plan: Payments start out low and gradually increase over time, usually every two years, with repayment completed within 10 years (or between 10 and 30 years if you have a Direct Consolidation Loan).
- Extended Repayment Plan: Fixed or graduated payments with a 25-year term.
There are five types of income-driven repayment plans you can apply for, depending on your loan type:
- Revised Pay As You Earn Repayment Plan (REPAYE Plan): Pay 10 percent of your discretionary income for 20 to 25 years for undergraduate or graduate school loans, respectively.
- Pay As You Earn Repayment Plan (PAYE Plan): Pay 10 percent of your discretionary income for 20 years.
- Income-Based Repayment Plan (IBR Plan): Pay 10 percent of your discretionary income for 20 years if you’re a new borrower (on or after July 1, 2014) or 15 percent of your discretionary income for 25 years if you’re not a new borrower.
- Income-Contingent Repayment Plan (ICR Plan): Pay 20 percent of your discretionary income for 25 years or what you would pay on a 12-year repayment plan adjusted to your income.
- Income-Sensitive Repayment Plan (ISR Plan): Make payments on FFEL Loans based on your income over a period of 10 years.
Private student loan lenders have their own repayment options. In general, you can expect to repay your private student loans within five to 20 years unless you choose to refinance.
When do you start paying back student loans?
Borrowers with federal student loans are required to make their first payment six months after they graduate, leave school or drop below half-time enrollment. If they can’t afford to make payments, they can apply for a deferment or forbearance or switch to a different repayment plan.
Most private lenders also provide a six-month grace period for borrowers, and some may extend this to nine or 12 months. Contact the lender to find out when your first payment is due. Many private lenders also offer a forbearance program.
Factors that could impact your student loan repayment
While a general goal is paying off your student loans within 10 years, there are several scenarios that could lengthen or shorten your student loan repayment.
Enrolling in deferment or forbearance
Both deferments and forbearances let you pause student loan payments when you’re unemployed, having health problems, serving in the U.S. Armed Forces or struggling financially. But enrolling in one of these programs will delay the final due date. It may also add the unpaid interest to your student loan balance, which will increase the total interest paid over the life of the loan.
Refinancing student loans
Refinancing is when you take out an entirely new loan to replace your current loans. You’ll have new loan terms, a new interest rate and often a new lender.
Because you get new terms when you refinance, refinancing could change the amount of time it takes to pay off your loans. You can select shorter terms if you can handle the larger monthly payments, or you can extend your repayment timeline to lower your monthly bill. Picking a longer term may also increase the total interest paid over the life of the loan.
Adjusting your payment schedule
You’re not beholden to making only one payment a month. If you make payments every three weeks or even biweekly, you’ll shorten the amount of time you spend paying your loans. On the other hand, missing payments or not paying in full could lengthen your loan term — while also putting you at risk of late fees and negative marks on your credit score.
How to pay back student loans faster
Depending on how much you owe, you could need decades to pay off your student loans — but there are some steps you can take to pay them off sooner.
1. Pay more than the minimum amount
If you have the means, pay more than what you owe each month. The more money you put toward your principal balance, the less you’ll pay in total interest over the life of the loan — and the faster you’ll pay off your loans. If you do choose to make more than the minimum payment, let your lender know that the money is an extra payment. Otherwise, that money might be applied toward your next payment instead.
You should also indicate which exact loan should get the extra payment, so you can target the loans with the highest interest rate or lowest loan balance, depending on your goals.
2. Pay more than once per month
Making an extra payment in addition to the minimum can go a long way toward reducing the principal of your student loan, since you’ll accrue less interest between payments.
If possible, try setting up payments for every two, three or four weeks instead of monthly. Even small tweaks to your schedule can add up.
3. Create and maintain your budget
Your budget is a spending plan for your finances. It should stand as a guideline for how you handle the money that comes in and the money that goes out. The student loan line item should say what you’ll pay every month. If your budget says that you’ll pay $300 when your minimum is $250, then you’ll pay a little extra with every payment.
If you come into a windfall or get a raise at work, consider adding that new money to your student loan payments.
4. Refinance to a shorter term
When you refinance your student loans, you can shorten the repayment term. For example, if you currently have a 10-year term, you can refinance to a seven or five-year term. If you have a good credit score, you might even be able to get a lower interest rate, saving you hundreds or even thousands in total interest.
Keep in mind that refinancing does have its drawbacks. Federal loans will be converted to private loans when you refinance, meaning you’ll no longer be able to sign up for income-driven repayment plans or loan forgiveness programs.
average student loan debt
Average student loan debt has been on the rise in the last decade as families try to keep up with soaring college costs. Though recent college graduates who borrowed to pay for school took out, on average, $135 less in loans compared with the prior year, the average total student debt continues to teeter around $30,000, according to U.S. News data.
College graduates from the class of 2020 who took out student loans borrowed $29,927 on average, according to data reported to U.S. News in its annual survey. That’s around $5,000 more than borrowers from the class of 2010 had to shoulder – representing a 20% increase in the amount students borrow.
The average debt of graduates varies based on institution type, per U.S. News data. Those who graduated in 2020 from a ranked private college borrowed more on average, at $32,029, than public college graduates, who took out $26,627.
Meanwhile, a smaller percentage of students are borrowing money to pay for college. In 2010, about 68% of college graduates took on student loan debt, while in 2020, 64% of graduates borrowed student loans.
The average total student loan debt, which includes both federal and private loans, jumped more than $1,000 in two of the earlier years of the last decade, but more recent years have seen a stabilization in the amount borrowed.
