Whether you’ve just graduated from college or you’ve been making payments for years, your student loan debt can seem endless. When you take out a federal student loan, the Standard Repayment Plan is 10 years. But, the average student borrower takes 20 years to pay off their loans, according to the Education Data Initiative.
And not all loans are treated equally. Your major, amount borrowed, loan type, and chosen career path can all influence how much you could end up paying back. But before you panic, know that there are steps you can take to help reduce your student loan debt.
How Long Are Student Loan Terms
How long it takes to pay off student loans can vary based on a few different factors. There is a specific selection of student loan terms available for federal student loan borrowers. The Standard Repayment Plan spans 10 years but borrowers can change their repayment plan at any time, without incurring any fees.
The terms on private student loans are set by the individual lender. Terms are set at the time the loan is borrowed. To adjust the terms of a private student loan, the borrower will generally need to refinance the loan. Check in directly with the private student loan lender.
Federal Student Loan Terms
While most federal student loans use the standard, 10-year repayment plan, other loans have different options. (And both Direct Consolidation Loans and FFEL Consolidation Loans offer 10- to 30-year repayment terms.)
Here are the repayment plans that the U.S. The Department of Education has set up for federal loans.
- Standard Repayment Plan: up to 10 years
- Graduated Repayment Plan: up to 10 years
- Extended Repayment Plan: up to 25 years
- Income-Driven Repayment Plans, including:
- Pay As You Earn (PAYE) Plan: up to 20 years
- Revised Pay As You Earn (REPAYE) Plan: 20 or 25 years
- Income-Based Repayment (IBR) Plan: 20 or 25 years
- Income-Contingent Repayment (ICR) Plan: 25 years
Income-driven repayment plans — PAYE, REPAYE, IBR, and ICR — forgive any outstanding balances if they aren’t completed by the end of the term. (Though you may have to pay taxes on the forgiven balance.)
Private Student Loan Terms
For those who’ve taken out private student loans to pay for school, the payment plan may differ from those with federal loans. Some private lenders have terms that are 10 years like their federal counterparts. Other lenders cap terms at 20 or 25 years.
The repayment timeline for private loans varies — for some private loans, you might have to start paying it back while you’re still in school. And they might have fixed or variable interest rates. Because of this, it’s hard to specifically gauge how long it takes the average person to pay off their private student loans.
Paying Off Your Student Loans Sooner
There are plenty of smart ways to pay off student loans. Most important is that you make your payments on-time each month. But, strategies like making overpayments can help you accelerate your pay-off timeline. Regardless of the type of loan you have, there are steps you can take to help get rid of your student debt sooner than you originally thought.
Paying More Than the Minimum
Paying the minimum might be what you can afford right now. But if you come into some extra cash — whether through a bonus at work, a gift from a relative, or your tax refund — you can use this money toward your student loan balance.
Cutting away at your debt when possible may help shorten the length of your repayment.
Refinancing your Loans
While consolidating your federal student loans with a Direct Consolidation Loan is an option for some, those with private student loans may want to consider refinancing instead.
Refinancing your student loans means a private lender pays off your student loans for you and then you pay back your lender with a new loan, new interest rate, and new terms. Ideally, your interest rate would be lower, which could save you money on interest over the life of the loan.
Refinancing allows you to combine all your loans, private and federal, into one for more streamlined payments. But if the interest rate offered isn’t lower than what you’re currently paying, or there are more fees, you might want to keep your options open.
And keep in mind that when you refinance, you’ll lose your federal loan benefits like income-based repayment plans or forbearance. If you’d like to continue taking advantage of those benefits, refinancing might not be for you right now. Ultimately, refinancing should be helpful, not cause more stress or create more debt.
Choosing Another Payment Plan
As mentioned, federal student loan borrowers can change their repayment plan at any time. Calculating your student loan payment is easy with tools like SoFi’s student loan calculator. These calculators can help estimate how much you’ll be paying each month on your student loans. Once you get an estimate, you can more easily decide if you want to choose a new payment plan or stick with your current payment plan or switch to another.
Income-driven repayment plans are one option that allows borrowers to lower their monthly payments, though generally, this results in an extended loan term with increased interest costs. Continue reading for more details on the income-driven repayment plans available for federal student loans.
Income-Driven Repayment Plans
Income-driven repayment plans use your discretionary income and family size to determine how much you pay on a monthly basis. This can be helpful for those in entry-level, lower-paying positions, as they could pay less monthly early on.
As your financial situation improves, your monthly payment minimum increases in turn (and vice versa). Remember that income-based repayment plans often have longer terms, which could mean you end up paying more interest over the life of your loans. Three types of income-driven repayments include PAYE, REPAYE, and ICR plans.
Pay As You Earn (PAYE) Plan
On the PAYE Plan, loan repayment takes place over 20 years. Payments are 10% of your discretionary income, but never more than what you would pay on the standard 10-year repayment plan.
Revised Pay As You Earn (REPAYE) Plan
Borrowers on the REPAYE Plan will pay 10% of their discretionary income toward student loan payments. Repayment terms are 20 years for students paying off loans exclusively from undergraduate studies. Borrowers with graduate degrees will repay over a period of 25 years.
Recommended: REPAYE vs PAYE
Income-Contingent Repayment (ICR) Plan
The loan repayment terms for the ICR Plans is 25 years. Loan payments can be either 20% of your discretionary income or the value of what you’d pay on a fixed payment repayment plan over 12 years — whichever is lesser in value.
Exploring Your Employee Benefits
Your job might be able to help you with your student loan debt. Some employers offer matching contributions on your student loans up to a certain amount, similar to a 401(k).
Negotiating a Raise
Between your minimum payments, monthly expenses, and other financial obligations, your budget may be stretched as thin as it can go. If your employee review is coming up, this might be an opportunity to talk to your supervisor about a raise.
While there are many strategies, and you’ll know your boss/employer best, examples of things to mention during your review include your recent accomplishments, your dedication and loyalty to the company, and your willingness to go above and beyond.
If you’re coming up short on achievements, you might start keeping tabs on them and prepare to bring them to your boss in a few months. Your first job out of college probably won’t be your last, so a new job with a higher salary, especially if the one you’re currently in lacks growth opportunities, might be better for you.
Refinance Your Student Loans
You can refinance student loans to (hopefully) secure a lower interest rate which could reduce the amount of money you’ll owe over the life of the loan. It’s also possible to adjust your repayment term — though keep in mind that extending your term may result in lower payments but may increase your interest costs over the life of the loan.
Learn More:
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoF. Equal Housing Lender.
SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended to December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since in doing so you will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave up to $10,000 and $20,000 for Pell Grant recipients unrefinanced to receive your federal benefit. CLICK HERE for more information.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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What we know about Biden’s plan to cancel student loan debt
Whether President Biden can unilaterally cancel student debt remains cloaked in secrecy for now. According to the Wall Street Journal, the reveal will likely happen in July or August.
This announcement will happen before September 1, when student loan payments are set to resume after the extended pause. Biden’s actions (and talk of his possible actions) have long since stirred a fierce debate on whether the president can actually cancel student loan debt. The following article breaks down the latest information. Keep reading to get all the details and context.
Related: The Advantages and Disadvantages of Student Loan Refinancing
Gage Skidmore
On the 2020 presidential campaign trail, Biden ran in part on a student loan reform platform. On top of suggesting potential changes to existing federal student loan forgiveness programs, he floated the possibility — both in Tweets and in campaign speeches — that he supported a proposal to forgive $10,000 in federal student loan debt.
And in April of last year, Biden asked the Department of Education if he had the authority to cancel student debt. He received a memo in response, but no public eyes have seen it so far. Thus, the cloak of secrecy.
For now.
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Biden recently erased $5.8 billion worth of educational debt for all former students of Corinthian College, the now-closed, for-profit school. This is the largest single student-debt cancellation ever by the United States government.
Another $6.8 billion in student loans were obliterated for 113,000 borrowers through amendments to the Public Service Loan Forgiveness Program. This allows non-profit and government employees to have their remaining debt forgiven after 10 years or 120 payments.
And more than $8.5 billion in student loans have been forgiven for 400,000 borrowers who have a total and permanent disability.
Additionally, let’s not forget the $2.1 billion for 132,000 borrowers through borrower defense to repayment. People can apply for borrower defense if their education provider deceived them “or engaged in other misconduct in violation of certain state laws,” according to the ED’s Federal Student Aid office.
fizkes / istockphoto
As many borrowers keep their eyes peeled for Biden’s summer announcement, speculation is growing about what is happening behind the scenes.
Many believe a debate continues in the Biden administration over the political and financial ramifications of wiping out billions in student loans. On one hand, the November midterm elections would be a good reason to come through on a campaign promise. On the other hand, inflation, which the Federal Reserve is fighting by raising its interest rates, could be exacerbated by the sudden cancellation of billions of debt.
While the political environment is evolving quickly, here’s an overview of some ways Biden might tackle the issue…
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So, can the president unilaterally forgive student debt? Senate Majority Leader Chuck Schumer and Senator Elizabeth Warren, among others, are pressuring Biden to take this controversial step, with the former repeatedly saying, “You just need the flick of a pen.”
Now that Biden has frozen repayments until Aug. 31, 2022, people are waiting for what happens next. Will it include a student loan forgiveness executive order? If not Biden, which president will forgive student loans in the future?
The coming announcement could impact how things unfold in the years to come.
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The president reportedly plans to cancel $10,000 in student loan debt per borrower. According to the Washington Post, the latest plan is for limiting debt forgiveness to Americans who earned less than $150,000 (or possibly $125,000) in the previous year or less than $300,000 (or possibly $250,000) for married couples filing jointly.
But Biden is hesitant to cancel the debt with the stroke of a pen. So despite the mystery surrounding the memo from the Department of Education to Biden, he continues to act through them to avoid Congressional challenges to an executive order.
Youngoldman / istockphoto
Some want to see all student loan debt canceled. But reports about forgiving $10,000 are saying it would be for federal loans only. If you’re looking for private student loan relief, namely to lower your payments, you may want to consider refinancing.
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Borrowers have been in limbo, waiting to know if and how much student loan debt the Biden administration will cancel. But with interest rates climbing, it could be a good idea to focus on the aspects of your educational debt that you can control.
One place federal borrowers can start is to determine if they qualify for existing federal student loan repayment programs — including income-driven repayment, deferment, and public service student loan forgiveness.
Another place, as mentioned earlier, is to look into student loan refinancing, it’s important to understand the refinancing process. When federal student loans are refinanced through a private lender, the borrower forfeits eligibility for federal repayment programs as well as federal protections like forbearance and deferment. (With private loan refinancing, a new private loan replaces the borrower’s existing educational debt — generally including new loan terms and rates).
Certain private lenders offer hardship programs to provide a cushion for the unexpected — like being laid off for no fault of your own. (Not all lenders offer these programs, so it’s key to read the lender’s terms and fine print).
When weighing whether to pursue student loan refinancing, some borrowers find it useful to research the rates and terms offered by lenders, including any fees or penalties.
Michael Krinke
When will student loans be forgiven?
There is no single answer to this. It depends on the type of loan you take out and your specific circumstances. The Student Loan Forgiveness page from the Department of Education has all the current details to help you understand more.
Do student loans go away after seven years?
Sorry, there is no program currently in place for that. This belief stems from the fact people see student loans disappear from their credit report after this amount of time. Seven years after the first missed payment that led to a loan either defaulting or being charged off, the main three credit bureaus (Equifax, Experian, and TransUnion) erase the default status and late payments from reports.
Are student loans forgiven after 25 years?
The answer to this is a “yes but.” Yes, you can have your student loans forgiven after 25 years, but only if you pay them under an income-driven repayment plan, and this only applies to federal loans. The U.S. government offers four income-driven repayment plans.
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Major news outlets reported in late May that the president plans on forgiving $10,000 of federal student loans for each person who makes less than $150,000 (or $125,000) annually. He’s expected to make an announcement this summer, no later than when the Cares Act payment freeze is scheduled to end (August 31).
But if you are thinking of refinancing, it may not pay to wait for an official word. After all, interest rates are on the rise from their historic lows. Instead, you could refinance all but $10,000 (or whatever amount you think will be forgiven) and lock in today’s low rate.
Learn More:
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 Opens A New Window.(Member FDIC), and by SoFi Lending Corp. NMLS #1121636 Opens A New Window., a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL SEPTEMBER 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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