Paying Off a Student Loan: How Long Does It Take?

It’s getting harder to go to college without taking out a loan, and Americans have accumulated more than a trillion dollars in student debt. For those who end up in debt after completing their studies, the money they owe is more than just a number. It’s a financial burden that often takes more than a decade to resolve.    

That said, this article isn’t meant to dissuade you from pursuing higher education. Quite the contrary - we realize that anyone mulling over their academic future is asking that fundamental question: how long does it take to pay off student loans? The answer to this question depends on multiple factors. 

The most important of these is, of course, the amount borrowed. But the interest rate and repayment plan, which depend on the type of loan you choose, also play an important role. In addition, forbearances and deferments, if used, can affect the graduate’s journey to being debt-free.

Perhaps, equally important is making timely payments each month. This isn’t always easy, especially if you’re struggling to cover daily expenses, rent, or a mortgage. However, your ability to make regular or even extra payments will reduce the amount of time it takes to clear your debt. 

The average time that it takes to repay student loans ranges anywhere between 10 and 30 years. Of course, everything depends on your individual set of circumstances. Every situation is different, and so are the timetables.

Below we’ll delve deeper into some of those averages and cover the basics. We’ll even provide a couple of tips for those working on paying off student loans early.

Student Loans Summarized

Like any other type of loan, student loans consist of the amount borrowed and the origination fee, which later require interest and principal payments. As part of your monthly installments, these principal payments go toward paying back what you borrowed. Meanwhile, the interest is based on an agreed-upon percentage of the amount you owe. 

There are several different types of student loan programs. They aren’t all created equal, and the one you choose determines the student loan repayment process. In a broad sense, all student loans are either government-backed, federal loans, or private loans. 

Federal Student Loans

Most students opt for federal student loans that they don’t have to pay back while they are in school. These also come with low-interest rates - usually below 5% - and are either subsidized or unsubsidized. 

Undergraduate students with financial issues are eligible for direct subsidized loans where the US Department of Education pays the interest during at least half the time you’re in school. The government also covers the interest during the grace period (the first six months after graduation). This can help alleviate some of the financial burden associated with repayments of student loans.

Regardless of whether students end up with subsidized or unsubsidized loans, most are automatically enrolled in the Standard Repayment Plan. Through this plan, monthly payments are a fixed amount of at least $50 and made for up to 10 years. But there is some room for adjustments based on one’s income. Some of the other options include:

• Graduated Repayment Plan

This repayment plan can be stretched out over 30 years and is typically used by those who start out with a low income but expect it to increase over time. Monthly payments start just above interest and rise every two years. With this plan, the average monthly payments for student loans typically start at about $25. Additionally, most of the early payments go toward the interest, so the repayment is slower than usual. 

• Extended Repayment Plan

This plan reduces monthly payments by using longer repayment terms that range between 12 and 30 years. But the lower payments over an extended period of time mean that you’ll be in debt for longer. Moreover, you’re likely to end up paying back double the amount that you originally borrowed because of the student loan rates. 

• Income-Driven Repayment Plans

This repayment scheme allows your monthly amount to be modified based on your income and family size. The payments are typically somewhere around 10-20% of the borrower’s income. Following the repayment term, which is usually around 20 to 25 years, any remaining loan amount is forgiven by the lender. 

Private Loans

Federal student loans aren’t always enough to cover all of your college costs. As a result, many students have to explore alternative options. Most will be able to get good private student loans with decent interest rates. So, how long does it take to pay off student loans with private lenders? Bearing in mind that loan terms differ from lender to lender, the repayment period can range anywhere between five and 20 years.  

What Do the Statistics Say?

According to some of the latest research, the average student borrower needs 20 years to settle his debt. Meanwhile, 21% of borrowers experienced an increase in their total student loan debt balance in the first five years. 

In 2013, the average time it took to pay student loans off was 21.1 years. But in 2021, interest rates on federal student loans are at record lows and stand at 2.75%. As a result, Bachelor’s degree holders who graduate this year are expected to settle their student loan debt in 4 to 12+ years.

On the other hand, private student loan interest rates range from as low as 1.2% (reserved for those with excellent credit scores) and as high as 14.5%. Unfortunately, the financial and academic institutions that offer private loans don’t make a lot of data publicly available, which is why it’s challenging to offer estimates on the average time it takes to pay off student loans.

All in all, these statistics offer a glimmer of hope for future graduates at a time when the government is coming under growing pressure to help student loan borrowers. These calls are fuelled in no small part by the highly alarming student debt statistics. 

If you’re among the millions of people who borrowed money to pay for their education and are struggling to pay off your debt, here are a few tips that can help you out.

Tips on How to Pay Off Student Loans Quickly

Here are some of the most important tips on paying off your student loan quickly:

Make Higher Payments

This is the most common piece of advice you’ll get when dealing with any debt payments. But that’s only because it works. Every dollar on top of the minimum monthly payment will get you out of your student debt quicker, as part of your monthly payment covers the interest, while the remainder goes towards the amount you owe. So the less you owe, the shorter you’ll have to pay the interest. 

Budget Wisely

If you’d like to see the back of your student loan debt, then you should dig deep to find extra funds to pay off student loans. This isn’t easy, but it’ll save you a lot of money in the long run. If you end up with any excess income, at least 50% should go towards your savings, 30% should be spent on loan payments, and the remaining 20% can be used for other expenses.

Student Loan Refinancing as an Option

If you’re doing all you can do but still struggling with debt payments, you have the option to refinance student loans. Refinancing is an excellent option for anyone paying back a loan with high interest rates, which is often the case with student loans.

But bear in mind that securing a lower-cost loan through a private lender requires a decent credit score. Also, if you want to reduce your average student loan payment, you’ll need to have a steady income. Consider this option after you’ve built your credit and have a good salary. There are many ways to build your credit score, including making regular payments on your student credit card and paying all your other bills on time. 

Consider Tax Deductions

If you are legally required to pay interest on a student loan and are not married, you should take advantage of the tax deduction for student loan interest payments to help you with paying off college loans. This law applies to both federal and private loans. It allows you to deduct up to $2,500, but the total amount depends on your income. This will help you save on income taxes - money you can put toward getting rid of your student debt.

Check for Available Student Loan Forgiveness Options

If none of the above works for you, you should consider applying for one of the grants to pay off student loans after graduation or getting a job under the Public Service Loan Forgiveness program. Under this program, you are obliged to work for a designated government or nonprofit employer to get the remainder of your loan forgiven. Additionally, there are many grants you can apply for, but these are mostly tied to your profession.

The Bottom Line

When it comes to borrowing money for your education, it’s perfectly natural to ask yourself: how long does it take to pay off student loans? The answer depends on a broad range of factors such as the loan type, the amount you’re borrowing, and the interest rate. The standard repayment plan typically comes with a 10-year timeline. However, if you dedicate as much money as you can to paying off the loan, you might be off the hook sooner than planned.