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A tough trip is always a little easier when you know exactly how long it’s going to take. That’s why it’s important to have a general idea of how long it will take to pay off your student loans.
But this answer has many variables and largely depends on how you choose to approach the loan repayment process. Here are the factors that determine your repayment schedule and how to calculate exactly how long it will take you to get rid of your debt.
How long does it take to pay off student debt
The time it takes to pay off your student loans depends on the type of loan you have, the repayment plan you choose, and how aggressively you want to pay off your debt. In a survey of over 60,000 respondents, it took the average person just over 20 years to pay off their student loans.
You can choose to pay off your student loans faster if you have the money to spend, but here are the basic repayment options available for federal and private student loans.
Federal student loans
Federal student loans come with several types of repayment plans, ranging from 10 to 30 years. Each payment plan has its own eligibility requirements and rules, so your debt may not qualify for all of the options listed.
Private student loans
Most private student loan companies offer terms of five, seven, 10, and 15 years, but some also offer terms of 20 or even 25 years. The exact plan you choose will depend on the lender, the amount you are borrowing, and the monthly payment you are comfortable with.
Usually, you pay less interest if you pay off your loan faster, but a shorter repayment period means your monthly payments will be higher. Lenders can also offer lower interest rates on shorter repayment terms because they will be able to get their money back faster.
Calculate how long it will take to pay off your debt
To determine how long it will take to pay off your existing loans, you can use a student loan repayment calculator. Plug in the balance, interest rate and term length to see the projections.
If you’re already making extra payments on your loans, add the extra amount you pay per month. If you don’t pay extra, you can try adding various amounts to see how quickly you could eliminate your debt. The sooner you pay off your student loans, the less interest you will pay over the life of the loan.
How to pay off your loans faster
Because there is no penalty for prepaying your student loans, borrowers can increase their monthly payments to pay off debt faster and save on interest. If you want to get rid of your debt as soon as possible, here are some strategies for freeing up extra money and increasing your payments.
Find a secondary job
Freelancing, starting a side business, or getting a second job can help you pay off debt faster, especially if you’ve already cut most of the discretionary spending from your budget.
If you work on an hourly basis, ask your boss if there are overtime opportunities. If you can be freelance or consult, let your network know that you are available for these opportunities. You might be surprised at how much work you can do with word of mouth referrals.
You can still try popular gigs like driving for Uber, delivering food for DoorDash, or shopping through Instacart, but those jobs often pay only minimum wage. If you want to make more money, try to use your unique skills and interests.
Graphic designers, copywriters, software engineers, photographers, and other service providers can find additional work on platforms like Upwork, TaskRabbit, Craigslist, and Fiverr, but the rates are often low. Use these sites to build a portfolio, then steadily increase the rates as you gain experience and rack up positive testimonials.
Budget more to save
You might assume that it isn’t possible to pay off your loans any faster, but have you really looked at how much money you have left each month? To find out how much more you can pay on your loans, start by tracking your spending with a monthly budget.
Tracking your spending will show any areas where your spending might be restricted, allowing you to spend more money on your loans. For example, you might find that you spend $ 100 a week on take out or delivery. Reducing this amount can free up more money with little effort required.
If you get a raise, move into a cheaper apartment, or find a roommate, take the difference in savings and add it to your student loan payments. When you get a random windfall like a tax refund or a work premium, apply most of it to your student loans if you can.
Talk to your lender about a new payment plan
If you have federal student loans and are currently on an income-based, phased, or extended repayment plan, you can switch to another plan to pay them off faster. The Standard 10 Year Plan is the fastest way to pay off your federal student loans. Ask your loan manager how to switch to this plan and what your new payments would be.
If you have multiple loan departments, be sure to change your repayment plan with each company. If you have private student loans, the only way to switch to a new term may be to refinance your student loans, but that depends on your lender. Contact them and ask if you can switch to another payment plan without refinancing.
Refinance your loans
If you have student loans with a high interest rate, you can refinance them for a lower rate and a potential faster repayment time. Here’s how it works: let’s say you owe $ 50,000 with an interest rate of 6% and a repayment term of 10 years. Your monthly payment is $ 555.
If you refinance at an interest rate of 4% and a term of seven years, your new monthly payment will be $ 683. You’ll pay a little more each month, but you’ll save over $ 9,000 in interest over the life of the loan.
When you refinance student loans, you can usually choose from several different terms, often between five and 15 years. Shorter-term refinancing can help you get the lowest interest rate possible, but will usually result in a higher monthly payment. Before choosing a shorter loan term, make sure that you can easily afford the minimum payments. You can use a refinance calculator to see how much you could save.
If you have federal student loans, think twice before you refinance. When you refinance federal student debt, it becomes a private student loan, which doesn’t come with federal benefits like loan cancellation programs, income-based repayment options, and longer deferment periods. long.
You can’t reverse the refinance, so make sure you understand the pros and cons first. Borrowers who have both federal and private loans can choose to refinance only their private loans and keep their federal loans intact.
Top Student Loan Refinance Lenders of 2021
Find the best student loan refinance lenders for your needs.