How Long Does It Take to Pay Off Student Loans

One of the biggest questions most graduates’ ask is, ‘how long will it take me to pay off my student loan?’ It’s not surprising that this question would weigh heavily on a graduate’s mind. Most students take a few thousand dollars in student loans to fund their college education. Paying back this debt can take a decade or more.

There is no fixed time period for how long it takes to pay off student loans. Borrowers vary considerably in terms of how long they may take to clear their student loan debt completely. This is because the repayment term depends on a number of different factors such as the amount owed, interest rate, and the term of the loan.

A look at the average time taken by borrowers to pay off their student loans will give you some insight into what to expect. Seeing how long it could take you to repay your student loan debt may help prevent you from borrowing too much.  Keep in mind, that there are a few things you can do to lower or extend the time frame depending on your financial circumstances.

First, a look at how long it takes to pay off federal student loans, followed by how long it takes to pay off private student loans.

How Long Does It Take To Pay Off Federal Student Loans?

The U.S. Department of Education offers several types of federal student loans, which can be grouped broadly into two categories – subsidized loans and unsubsidized loans. The type of loan and the maximum amount you qualify for every academic year is based on the information you provide on the FAFSA (Free Application for Federal Student Aid).

Federal student loans come with these repayment plan options:

Standard Repayment Plan

All federal student loans, regardless of type or amount, start with a standard repayment plan of 10 years by default. That means you get up to 10 years to repay that loan. When the funds are disbursed, the principal amount and interest that accrues over the ten-year period are added and divided into 120 (10 years x 12 months) equal installments. If you adhere to this repayment plan, you should clear your student loan debt completely in 10 years.

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Extended Repayment Plan

If you choose the extended repayment plan instead of the default standard plan, you get up to 30 years to repay your federal student loans. In this case, the principal amount and interest that accrues over the thirty-year period are added and divided into 360 (30 years x 12 months) equal installments. While this lowers your monthly repayments, it keeps you in debt longer and also increases the cost of borrowing because of the higher interest accrual over the longer period.

Graduated Repayment PLAN

A graduated plan also gives you 30 years to repay your federal student loans. With this plan, the monthly payments start very low – you’ll pay only a little more than interest-only payments for a period of two years. Every two years, the payments increase until the debt is cleared completely after 30 years.

Income-Driven Repayment Plans – Income-driven repayment plans base your monthly loan payments on your monthly income and family size. In this regard, they are different from the standard, graduated, and extended repayment plans, which do not take these factors into account. Income-driven repayment plans offer three options that base your monthly payments on 10%, 15%, and 20% of your monthly income respectively. Your outstanding student loan debt is forgiven after you’ve completed the specified number of payments against each of the plans. The time it will take you to pay off your student loans will depend on which income-driven repayment plan you choose.

How Long Does It Take To Pay Off Private Student Loans?

Private student loans do not have set repayment plans for all borrowers. The repayment plans are set by individual private lenders and may be different for each borrower. This is unlike federal student loan repayment plans, which are set by the federal government at the start of the academic year and apply uniformly to all student borrowers.

Private lenders set their interest rates and loan terms according to the borrower’s financial credentials. Most private lenders offer 10-year repayment plans but that’s just the average. Private student loan repayment terms can be as short as 5 years or they can be as long as 25 years.

When taking a private student loan, it’s very important to read through the agreement thoroughly and understand the repayment terms and potential penalties should you miss a payment. Call the lender and clarify all doubts before signing any loan agreement.

Can You Change The Repayment Timeline?

Yes, you can. You do have some control over how long it takes you to pay off your student loans. Although both federal and private student loans come with specified loan terms at the time of disbursement, there are things you can do to change the timeline. Whether you choose to increase or reduce the repayment timeline will depend on your financial circumstances and your short and long-term financial goals.

Here are 3 things you can do to change your loan term to suit your personal circumstances:

1. Make Extra Payments.

If you have free cash, put it towards extra payments on your student loans. This is far better than leaving the money in a savings account. Making extra payments consistently will help you pay off your student loans faster. As an added bonus, you’ll pay less in accrued interest too.

2. Request Deferment Or Forbearance.

These options allow you to pause your student loan repayments temporarily and are worth considering if you’re struggling financially. Interest does continue to accrue during the pause period, increasing the cost of the loan, you will save on the late payment fees and your credit will be undamaged. You will take longer to pay off your student loans with either of these options.

3. Refinance Your Student Loans.

Refinancing involves exchanging your current student loans for a new loan with a new interest rate and different terms and conditions. If you’re earning a high monthly income, you can refinance to increase the monthly repayments to pay off your student loans faster. You’ll pay less in accrued interest too. If you’re experiencing financial difficulties, you can refinance to lower your monthly repayments. With this option, you’ll take longer to pay off your student loans and you’ll pay more in interest too but that’s still better than defaulting on your loan payments.

Which Is Better – A Longer Or Shorter Loan Term?

A shorter loan term is always the better option of the two for several reasons.

For one thing, the relief that comes from being debt-free is unparalleled. The sooner you clear your debt, the sooner you’ll be able to spend your money any way you want to, without worrying about what you owe.

Paying off your student loans faster comes with significant savings too. The shorter the loan term, the less time interest has to accrue on the principal. Depending on the amount you borrow, you could save a few thousand dollars in interest alone.

Sometimes, however, you may not have a choice. If finances are limited, then the best, and often the only solution, is to extend your loan term. This may mean taking longer to pay back your student loans. But it can help free up money to tide you over until your financial circumstances improve.

Use our Student Loan Calculator to estimate your monthly student loan payments and overall loan costs based on your anticipated loan terms.

Are you still looking for student loans? Use College Raptor’s free Student Loan Finder to compare lenders, interest rates, and loan repayment plans side by side!