How long should your student loan be?



Choosing the right student loan term can help a consumer pay off their loans faster. (iStock)

Students rely on federal and private student loans to fill an unmet gap in federal student assistance. For many, it will take years, if not decades, to pay off their student debt.

That’s why it’s important to understand the terms of student loans up front, especially the length of your student loan. But what is the right student term for you?

Here’s what you need to know.

How long should your student loan be?

For private loans, 10-year repayment schedules are the most common, while some plans may offer terms of up to 25 years. Before choosing a student loan term, consider whether it makes more financial sense to opt for a shorter or longer loan term.

Credible can help you compare student loan terms and rates with just one click. Find out if you qualify for a private student loan today.

As you navigate the student loan application process, determine if you want a short term or long term loan. There are advantages and disadvantages to each.

Choosing a short term loan

  • Pro: Choosing a shorter term helps borrowers pay off debt sooner, so they can focus on building savings or paying off other forms of debt, such as credit cards.
  • Inconvenience : Shorter terms also mean higher payouts, which can be a problem if budgets are tight.
  • Pro: Paying off debt improves a borrower’s credit rating and makes it more attractive to future lenders, said Leslie Tayne, a lawyer in Melville, NY specializing in debt relief. “Doing it faster can be beneficial if you are looking to apply for auto loans or mortgages,” she said.

Choosing a long-term loan:

  • Pro: A longer term loan can help ensure a more balanced budget, where there is room for savings as well as for loan repayments.
  • Inconvenience : Extended terms can be a “bit of a compromise,” said Bruce McClary, spokesperson for the National Foundation for Credit Counseling, a Washington, DC-based nonprofit. “On the one hand, you benefit from a more affordable monthly payment, but you are locked into the commitment for a long time.
  • Pro: A longer-term loan can help borrowers avoid becoming delinquent or defaulting. “This can be a good option if you’re worried that you won’t have enough income at the start of your loan and don’t want to end up with a monthly payment that you can’t afford,” Tayne said.

For federal loans, the first payment is due six months after graduation or when you leave school. Interest still accrues during your grace period, but you can choose to pay it during these months.

“Short-term loans can have a higher interest rate, but long-term loans can be more expensive because of the total interest paid over time,” McClary said. “That’s why it’s important to look beyond the face value of the interest rate and do the math to see exactly how much you’ll be paying over the term. “

Borrowers who need a longer term loan for lower monthly payments should seek competitive interest rates and make additional payments to shorten the duration and amount of interest paid, Tayne said.

Credible can help you compare private lenders and make sure you find the best rates available without impacting your credit score.


What student loan repayment programs are available?

Potential borrowers consider a variety of student loan terms as the duration and interest rates affect the time it takes to repay them, hampering their ability to save, invest, or buy their first home. There are a variety of loan programs available, including:

  • Standard Federal Reimbursement Plan: This plan gives loan borrowers 10 years to repay, but there are different plans that can be requested from the loan manager, McClary said.
  • Progressive reimbursement: This plan is structured around anticipated increases in income over time and can extend over 30 years for consolidated loans.
  • Extended refund: This plan is an option for borrowers with debt over $ 30,000 for a term of 25 years.
  • Income Based Repayment Plans: They are four Income-driven repayment plans that offer loan forgiveness after 10 to 25 years of qualifying payments.

To learn more about private student loans and get personalized rates from multiple private lenders at once without affecting your credit score, plug some simple personal information into Credible’s tools. The process is completely free and can save you money in the long run.


How long does it take to pay off a student loan?

People who borrow between $ 20,000 and $ 40,000 in federal loans have a 20-year repayment period, the The Ministry of Education said in 2019.

The amount of interest that a borrower pays over the course of their loans plays an important role in the time it takes to repay them. It is important to get a lower interest rate for both short and long term loans as it can save you thousands of dollars.

The average amount of student debt is $ 32,731 and borrowers who have a student loan with an interest rate of 6.5% and a 10-year repayment plan have a monthly payment amount of $ 372. Refinancing a new loan with an interest rate of 3.5% with the same term reduces the payment amounts to $ 324 and reduces the total interest to $ 5,759.

Use an online student loan refinance calculator to get an idea of ​​your monthly payment amount, based on the length of the loan.

“Generally, the better your credit, the better rate you will be offered,” Tayne said.

Jobs taken after graduation impact borrowers’ gross income and their ability to repay their loans. A higher salary means the ability to make additional payments or pay more than the minimum amount. Some employers also help pay a small portion of student loans each year as a benefit to their workers.

While a lot can happen over the course of 10 or 25 years, making paying off student loans a priority allows people to get out of debt faster.

Refinancing student loans can help borrowers qualify for a lower interest rate if their credit rating has improved. If you are looking for student loan refinance, enter your estimated credit score and current loan balance into Credible’s free online tools to see the rates you qualify for.




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