Which Federal Student Loan Repayment Term Is Right For Me?

Three different sized books - there are different sized student loan repayment term options too

Flickr user Ginny

The student loan repayment term that you choose directly impacts the amount that you have to pay back every month. It also affects the total amount of interest you will end up paying over the life of the loan.

The standard repayment term on federal student loans is 10 years. That means you are expected to pay back the loan in 120 equal monthly installments. You may choose to extend this term or choose a shorter term depending on your immediate financial circumstances and your long term financial goals.

Let’s take a closer look at both scenarios and the pros and cons of each:

Extending Your Student Loan Repayment Terms

Extending your loan repayment term beyond 10 years may be the solution for you if you are struggling to meet the monthly payments.

Pro: This will lower your monthly payments and also reduces your risk of default.

Con: A longer loan repayment term means you pay much more by way of accrued interest by the time you finish paying off your loan.

You should choose this option only if you absolutely cannot meet your monthly loan obligations.

Choosing a Shorter Student Loan Repayment Term

If your monthly income allows you to meet all your monthly debts and still have some left over, you may want to consider choosing to pay off your loan in less than the standard 10 years.

Con: It will mean making higher monthly payments.

Pro: You will end up saving a substantial amount of money by way of lower accrued interest because of the shorter loan period.

You should choose this option only if you have the funds to make higher payments every month.

There’s no one-size-fits-all decision here. It will depend on your financial preferences and circumstances. There are pros and cons to each option, so be sure to plan well and think ahead!

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College Raptor Staff

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