How Long Does It Take to Pay Off Student Loans?

Should You Pay Off Your Student Loans Early?

For some people, paying off student loan debt as quickly as possible is their biggest financial goal. But there are times when you shouldn’t rush to eliminate your student loans.

For example, you may not want to sacrifice your future retirement for a faster student loan payoff. If your employer matches 401(k) contributions, for instance, it could be wise to contribute what’s needed to get the match in lieu of putting more money toward your student loan balance.

If you’re trying to buy a house, start a family or launch a business, you may want to beef up your savings instead of throwing extra money toward your loans. If you don’t have an emergency fund, then you should likely make that a priority instead of paying off your student loans.

Additionally, if you’re eligible for any kind of loan forgiveness program, you might want to reconsider paying off your loans faster. You may end up saving more by opting for loan forgiveness, even if you’re technically paying off your student loans for a longer period of time.

But if the above scenarios don’t apply to you, then paying off your student loans early may be the right financial decision.

How Do I Make Payments?

Once bills are due — again, only if they are due — you’ll be responsible for sending your monthly payments to the companies that hold your loans.

If you don’t know where to send a payment, check with your school’s financial aid office. The financial aid office will be able to tell you who your loan servicers are. You can then contact your loan servicers directly with specific questions.

You also can retrieve loan information via the National Student Loan Data System. Now more than ever, it’s vital you know your balance details.

Be aware that your payments are due even if you don’t receive the bills. If you move after graduation, or you have relocated during the CARES Act pause, tell your loan servicer your new address to ensure you receive bills and can stay on top of your payments when — if — they resume.

Consider changing your loan due date to make budgeting easier. The monthly payment might be due before you receive your paycheck. Contact your loan servicer to see if your payment date can be switched to a more convenient day.

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Pay More than Your Minimum Payment

Paying a little extra each month can reduce the interest you pay and reduce your total cost of your loan over time. Continue to make monthly payments even if you’ve satisfied future payments, and you’ll pay off your loan faster. Ask your servicer if the additional payment amount can be allocated to your higher interest loans first.

3. Use the Grace Period to Your Advantage

Whether you have a grace period and how long it lasts with private student loans depends on the lender. The grace period is the time frame in which you aren’t required to make payments on your loans.

With federal student loans, the grace period typically lasts for the first six months after you leave school. With private loans and unsubsidized federal loans, keep in mind that interest is still charged during your grace period and will be capitalized—added to the total amount you owe—after the grace period ends.

One way to make the grace period work for you is to make advance payments against your loans. Paying down some of the principal means less interest that accrues later. At the very least, try to make interest-only monthly payments in the grace period to cut down on what you owe.

Note that interest on student loans from federal agencies was temporarily suspended until Aug. 31, 2022, which should help reduce the total amount you owe when you graduate. This relief was also extended to loans in the Federal Family Education Loan (FFEL) program. Even with federal loans, it still makes sense to try to pay down federal loan principal during this period.

When Do You Start Paying On Your Loan

When you need to make payments varies based on the type of loans you have. Most federal loans have a six-month grace period after you graduate, leave school, or drop below half-time enrollment. You’re not required to make payments during the grace period, but in most cases, interest will accrue. You can choose to pay the interest that accrues during your grace period to avoid it being added to your principal balance. 

Grad PLUS and Parent PLUS Loans do not have a grace period, but borrowers can choose to defer payments until six months after graduation. 

For specific guidelines about repayment for Federal Perkins Loans, you should check with the school you received the loan from. 

With the Coronavirus Aid, Relief, and Economic Security (CARES) Act, all federal student loan payments were suspended, so your grace period may be longer than you initially expected. Currently, the federal student loan freeze is scheduled to end on January 31, 2022. 

Whether your private loans have a grace period is dependent on your lender and the options you selected when you took out the loan. Many private loans do not have a grace period, so you may have to make payments while in school or immediately after graduation. 

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Preparing for Student Loans Payments

Under normal circumstances, new graduates have six months before they have to begin making debt payments. That’s half a year to get the lay of the land.

There are several student loan repayment plans to choose from. Some are based on a percentage of discretionary income, run for 20-25 years, and may include loan forgiveness if all payments are made on time. Others start with low payments that increase over time as your income increases.

Regardless of which plan you choose, make sure you know who your loan-holder is, where to send payments, and how much to pay. You may also have questions about discharging your loans or the consequences of missed payments. Get answers to your concerns before you fall behind, and join the 7.5 million borrowers in default when the CARES Act provisions went into effect.

Tips to prepare for student loan payments:

  • If you haven’t already — you were busy; we’ve been there — use the grace period (and watch for additional extensions) to research student loan repayment options.
  • Create a budget built around your student loans.
  • Prioritize paying off student loans.
  • Communicate with your loan servicer.
  • Set up automatic payments to avoid late fees.
  • Avoid student loan default at all costs.
  • Know the exact date when you expect to pay off the loan and shoot for that target.

Financial instability was the biggest barrier to repayment among off-track borrowers

Research indicates that the overall state of a family’s finances informs how the household manages its individual bills and transactions, and off-track borrowers generally agreed that their repayment challenges were the result of budgets that were already stretched to the breaking point.18 In addition to earning less money than they anticipated, many off-track borrowers reported experiencing income volatility and financial shocks—such as unemployment, major home or auto repairs, medical expenses, or deaths in the family—that rippled through their finances and hindered their ability to pay on their loans. In addition, borrowers who lived in high-cost metropolitan areas, such as Miami and Seattle, said the cost of living contributed to the unaffordability of their student loan payments.

If your car breaks down, and it needs repair, are you going to get your car repaired, or are you going to do your student loan? (Detroit general, off-track borrower)

We’ve had lots of medical issues that have come up with me and our little boy. You don’t have a choice when that happens. You have to take care of business. (Kansas City high-balance, off-track borrower)

I had a couple of really bad events. We had Hurricane Irma. We lost the roof on our house. (Miami high-balance, off-track borrower)

I was working as a delivery driver to get $5 an hour plus whatever if you get tipped. … We live paycheck to paycheck. (Miami high-balance, off-track borrower)

The payments stopped because I didn’t have work. … And so just trying to take care of myself in survival mode. (Seattle low-balance, off-track borrower)

Off-track borrowers, regardless of their balance size, reported paying other bills first

Across categories, off-track borrowers reported having limited resources and paying for transportation, housing, child care, and groceries before student loans, in part because, unlike rent, car, or utility payments, nothing was at risk of being repossessed or shut off when they missed a student loan payment.19 Further, several focus group participants noted that most other bills do not offer the option to pause payments that is available for student loans.

That borrowers missed student loan payments instead of other types of bills is consistent with findings from previous research. For instance, a 2017 survey found that, among respondents with student loans who said they would struggle to pay their monthly bills in full if faced with a $400 emergency expense, 46 percent said they would miss or make partial student loan payments in an effort to cover such an expense, compared with 13 percent who said they would skip a rent or mortgage payment and 22 percent who would skip a utility bill.20 (See Figure 2.)

These trade-offs were especially severe for low-balance, off-track borrowers, and far fewer people in this group reported making payments than other off-track borrowers.

Utility bills—those have to be paid. Otherwise, your electricity is going to be cut off. So it’s either do I pay my electricity bill, or do I pay my bill to a college loan? (Miami low-balance, off-track borrower)

I started repaying, but things will come up and I’ll be like, do I pay for my child’s day care or do I pay for student loans? Oh, I’m going to pay for day care because I have to get to work. So that’s the end of it. That’s how it is. (Kansas City high-balance, off-track borrower)

Am I buy[ing] groceries this month? And am I going to be able to pay my rent? … It’s not thinking in the long term. It’s dealing with the issue that’s right in front of you. (Portland general, off-track borrower)

We’re robbing Peter to pay to Paul. It’s a juggling act. Like you might delay this, and you might pay your cable a few days late so that you can pay your student loan. … It’s this constant battle of figuring things out to make sure that everybody is paid. (Portland general, off-track borrower)

If you don’t pay your electric bill, you lose your electricity. … But student loans, you don’t lose anything. You just try and schedule forbearance or deferment. (Seattle low-balance, off-track borrower)

Failing to repay a student loan can have serious long-term financial consequences. Borrowers can face collection fees; wage garnishment; money being withheld from income tax refunds, Social Security, and other federal payments; damage to their credit scores; and even ineligibility for other aid programs, such as help with homeownership.21 For some, fear of these consequences—predominantly damage to credit scores and wage garnishment—or previous experiences with delinquency and default drove them to continue repaying their loans even when they were facing other financial challenges.

I don’t want to ruin my credit or [have them] garnish my wages … so I just pay. (Miami high-balance, off-track borrower)

They tried to garnish. And they’ll suspend my license. They send me a whole list of threats, so I finally said, OK. I got to pay this. (Miami low-balance, off-track borrower)

My credit is very important to me. And bringing the score up is very important to me. … I have paid my bills late, but it’s still my bill, and I’m going to get to it eventually. (Phoenix low-balance, off-track borrower)

I just can’t afford to have my credit be hit, because everything’s tied into credit, from getting a job to, you know, if I needed to get a car someday, even to being able to rent an apartment, let alone buy a place. … So, for me, as long as I’m able to, I feel obligated, like forced to pay, even though I might not be putting as much food on my plate in any one given month because of the credit issue. (Seattle high-balance, off-track borrower)

It feels good to pay your bills. … But ultimately, I don’t want to get garnished. … My credit is bad anyway, so I just don’t want to get garnished. (Seattle low-balance, off-track borrower)

Some off-track borrowers reported that when they did have a bit of slack in their budgets, they did things to maintain and support their and their families’ economic security and quality of life, such as paying for activities for their children, visiting or sending money to family members, and saving for the future. One Memphis general, off-track borrower indicated that she was “not going to take my [financial] cushion money and pay off my student loans. … If my refrigerator was to go out, I’ve got to be able to buy food to feed my family.”

Across categories, off-track borrowers reported wanting to make payments

In many cases, off-track borrowers who had missed or paused student loan payments or who reported needing to pay other bills first said they nevertheless wanted to make their student loan payments.22 Some even took a second or third job to make up the difference.

I don’t think any of us enter into this thinking, oh, I’m going to go to school, and I’m not going to pay this money. I don’t think that was any of our intent. But I definitely thought that I was going to make a substantial amount of money, and this wasn’t going to be an issue. (Detroit general, off-track borrower)

It’s my responsibility to pay it. I racked the bill up getting the degree, so I want to pay it off, but it’s like, can I at this price, you know? (Memphis general, off-track borrower)

I don’t think anybody just doesn’t pay on purpose. … We’re responsible society members. If we’re not paying something, it’s because there’s something else that’s priority. (Miami high-balance, off-track borrower)

I work a full-time, like 9-to-5, corporate job I went to college for, and I also drive Uber. And my Uber money helps pay the student loans. (Miami high-balance, off-track borrower)

I have a sense of obligation about my school loans. I didn’t take them out just to walk away from them. And they serve a purpose, and I’m driven to repay that. But I also have children and obligations in life. You know, so there’s a line there. (Portland general, off-track borrower)

Unlike many off-track borrowers, those who were on track were able to maintain steady incomes and receive help from family and social networks

On-track borrowers also said that their balance sheets strongly influenced their repayment decisions, although their comments generally indicated that they were delaying major purchases instead of making trade-offs among household expenses. Some said the payments were not a burden, while others noted that paying their loans sometimes meant cutting back on discretionary expenses. Several mentioned that they saved less for retirement or put off major expenses, such as purchasing a home or pursuing additional education, in order to pay their student loans.

Many on-track borrowers reported previous repayment struggles and still felt some anxiety about repayment and their financial situations. However, this group generally had less financial stress and fewer shocks than off-track borrowers, and many cited having a stable job and income as well as receiving financial help from family and social networks as reasons they no longer had difficulty repaying their student loans.

My savings is virtually nil because I’ve been dumping all my money in the student loans. I just want to get them done. (Alexandria on-track borrower)

The route that I chose is a very aggressive route. It means no new cars, no new clothes, living low, really low. I have a wife, and we constantly have to talk to each other, like we’re doing this today, this sacrifice today for tomorrow. Down the road, we’re going to have no debt, be able to have the house we want, etc., pay for the kids. So it’s just sacrifices. But you have to constantly have that conversation to boost yourself up. (Detroit on-track borrower)

I struggled earlier, but I have a network, a wife, parents, people who could lend me money to get me by for a short period. (Detroit on-track borrower)

Nobody could afford to pay for me to … go to school. But there was this understanding that it won’t purely be your burden even though these are your loans. So if I can’t make payments, my family will help me a little bit. (Memphis on-track borrower)

I have a great job right now. It’s paying me a great amount of money, and I’m good. (Memphis on-track borrower)

The Bottom Line

Tackling your student loans proactively is key to paying them off sooner rather than later. There are plenty of ways to manage your debt more effectively, but the worst thing you can do is nothing.

"If you find you're having difficulty affording your federal or private student loan payments, don't ignore the problem or assume there are no options," DePaulo says. "Reach out to your loan servicers to discuss your situation and try to create a plan to get back on track."

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