How Long Does it Take to Pay Off Student Loans?May 21, 2020
If you have student loan debt, do you know what your loan term is and how long your payments are expected to last? On average, college graduates think they will have their loans paid off in six years. Is this a realistic expectation to pay off loans that quickly? Here we will show you how long it actually takes people to pay off student loans. And if you are looking for ways to pay them off faster, we have some tips for that as well.
The loan term is how long it will take you to repay the loan if you only pay the amount owed each month and do not make any additional payments. For federal student loans, the average loan term on the standard repayment plan is 10 years. However, there are options to increase the loan term up to 30 years, depending on the amount of money owed and what payment plan you choose. Increasing the loan term will cause you to pay more interest over the lifetime of the loan, but may require a smaller payment compared to the standard repayment plan.
Average Time to Repay Undergraduate Loans
Although the standard loan term is ten years, many people take much longer than that to repay student loans. The average time it takes to repay student loans depends on what degree you obtained, mainly because of the amount of loans taken out. However, it also depends on the income you are earning. If you work in a job that is in your degree field, you may be earning the average income in the sector and be able to pay off your loans in the average amount of time. However, if you are not working in your degree field and your salary is lower than the average salary for that degree, it may take more time to pay off.
- The average amount of student loan debt for a person who finished some college, but did not obtain a degree is $10,000. The average amount of time it takes to repay the loans is just over 17 years.
- For a person who obtained an Associate degree, the average amount of debt is $19,600 and on average it will take just over 18 years to pay off the loans.
- For college graduates that earned a Bachelor’s degree they will repay an average of $29,900 in student loan debt and will take approximately 19 years and 7 months to repay the loans.
Average Time to Repay Graduate Loans
Earning a graduate degree takes more time and, of course, more money. The average amount of student loan debt for graduate degrees is $66,000. However, certain degrees require much more than the average amount of loans and, therefore, more time to pay.
- Medical school – The average student loan debt for medical graduates in 2019 was $223,700. Because of the high salaries doctors are able to earn after residency it can take an average of 13 years to repay the student loans.
- MBA – If you earn an MBA the average student loan debt is $52,600 and can take 22 years and 10 months to repay.
- Law degree – Obtaining a J.D. may cause you to rack up the average of $134,600 in student loans and it will take an average of 18 years to repay.
- Dentist – To become a dentist it will cost an average of $285,184 in student loans and may take 20-25 years to pay off the debt.
- Veterinarians – Attending veterinary school can cost an average of $183,014 in student loans. It may take veterinarians longer to repay their student loans than traditional medical colleagues because their average income is much lower at $93,830. It can take 20-25 years to repay the loans.
How to Pay Student Loans Off Early
If seeing these averages makes you panic, don’t worry! Use them as motivation to pay your loans off faster. Here are some ways to accomplish that:
Student Loan Refinancing
Refinancing student loans is extremely advantageous for many borrowers because it can save you money on monthly payments and in interest over the life of the loan. Refinancing can also be beneficial to shorten the length of time it takes to pay off your loans and save even more in interest costs. This can be done by obtaining a new loan with a shorter term than your current remaining loan length. Although refinancing to a shorter term length will increase your monthly payment, if you are able to afford the new payment it can be a great financial move for your future. You will be paying your loans off sooner and saving more in interest.
If you have $30,000 in student loans with a standard 10 year repayment plan and 7% interest rate, your payment would be $348 per month. If you refinance to a 7 year loan and qualify for a 6.48% interest rate, your payment would only increase by $62.00 per month and your loans would be paid off 3 years earlier. You would also save $4,403 in interest!
If you did not want to increase your monthly payment you could still utilize the benefits of refinancing by keeping the same loan term and qualifying for a lower interest rate than your current rate. With the same example as above, if you refinance to a 10 year term loan with a lower interest rate it would still save you $573.00 in interest. Qualifying for an even lower interest rate could save you up to $5,590 in interest.
To see your potential savings, use our student loan refinancing calculator.*
Make Extra Payments
No matter what payment plan you have for your student loans, making extra payments can be a beneficial way to shorten the amount of time it takes to pay off your loans, including saving you in interest costs.
Tackling student loan debt may seem daunting at times, but payments don’t last forever. If it’s your goal to pay your loans off as quickly as possible, hopefully using some of these tips will help you reach that goal. Knowing the average time it takes to pay off loans will allow you to set realistic expectations for your financial goals.
*Subject to credit approval. Terms and conditions apply.
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