Student Loan Forgiveness Probably Isn’t Coming. Here’s How Long It’ll Take You to Pay Off Your Loans

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Universal student loan forgiveness probably isn’t coming, so it’s time to prepare for what comes next. 

Even as progressive legislators call on President Biden to follow through on his campaign promise to wipe away at least $10,000 of student debt per individual borrower, some 43 million people still carry a student loan balance. White House Press Secretary Jen Psaki indicated in a Dec. 10 press conference that the student loan freeze set to expire at the end of January 2022 will not be extended, so those with outstanding student loans should expect their payments to return in February. 

Depending on the type of loans you have and your repayment plan, you could be in debt for a long time. A survey from Intelligent found that one in 10 student loan borrowers are still in debt 20 years after graduation. And as long as you’re required to make monthly payments toward your loans, it can be difficult to save for other goals or plan for the future

While two decades sounds like a long time, it helps to map out a timeline of your loan repayment schedule. Continue reading to learn about the typical student loan repayment time and what you can do to pay off student loans faster. 

When Will Your Student Loans Be Paid Off?

The length of time you’re paying off student loans will vary based on the type of loans you have and your repayment plan. If you aren’t sure what plan you’re on or what your loan term is, contact your loan servicer.  

Pro Tip

The first step in paying off your student loans is finding out what type of loans you have. You can find out if you have federal loans by using the National Student Loan Data System. If you think you might have private loans, they’ll show up on your credit report, which you can check for free at AnnualCreditReport.com.

Federal loans

Federal loan borrowers typically take 16 to 19 years to repay their loans, according to an analysis of government data performed by Savingforcollege.com. Those numbers can come as a shock for borrowers who expect to be debt-free in 10 years or less with a Standard Repayment Plan. However these default Standard Repayment Plans are often based on 10% of a borrower’s discretionary income, which is too high for most to pay comfortably.

“Very few borrowers pay off their debt before the 10-year mark,” says Michele Streeter, associate director of policy and advocacy with The Institute for College Access & Success (TICAS). 

To reduce their payments, many borrowers opt for income-driven repayment plans that base payments on a lower percentage of their discretionary income. These plans lower the monthly payment, but extend the loan term. Depending on the plan, repayment terms can be 20 or 25 years. 

“It’s an affordability issue,” Streeter says. “We can see that from the growth in income-driven repayment plan enrollment in just the past five to 10 years. The payments under a standard repayment plan are just not affordable.”

For borrowers that take advantage of Direct Consolidation, graduated repayment or extended repayment plans, the repayment term can be as long as 30 years.

Private student loans

Private loans have less variation in repayment periods since there are fewer repayment options. 

“With private loans, the length of time in repayment tends to be the term offered by the lender,” says Streeter. You choose the loan term when you take out the loan, and unless you refinance to a new loan, your loan term should be exactly what you signed up for.

In general, it takes 10 to 25 years to repay private student loans, according to the Consumer Financial Protection Bureau (CFPB). If you enter into deferment or forbearance or fall behind on your payments, it could take even longer. 

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. 

How to Pay Back Student Loans Faster

Your student loans can be a source of a substantial amount of stress and keep you from putting money towards other financial goals. If you want to pay off student loans faster, use these five tips to accelerate your repayment. 

1. Stick to a Standard Repayment Plan 

While it may be tempting to switch repayment plans to get a lower monthly payment, try to stick to a Standard Repayment Plan if you can. Income-driven repayment or extended repayment plans can add to your overall loan cost. 

“By lowering the payment, we’re extending the term and adding to interest,” says Streeter. 

Stick to a budget and look for expenses that you can eliminate to make your student loan payments more manageable so you can stay on schedule with a 10-year repayment term. 

2. Use Unexpected Windfalls to Make Lump Sum Payments

Over time, you may receive unexpected windfalls. Whether it’s a tax refund, a bonus from work or a gift from a family member, you can use those windfalls to pay down your loans faster. 

For example, let’s say you have $30,000 in student loans with a 5% interest rate, a 10-year repayment term, and monthly payments of $318. If you received a $1,000 tax refund and made a one-time lump sum payment toward the principal, you’d pay off your student loans five months earlier. And, you’d save $635 in interest charges.

3. Pay More Than the Minimum

When it comes to student loans, “There is no magic trick to paying them off faster,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors (TISLA). “The more you pay and the quicker you pay, the less interest you pay over the long run and the faster you get rid of them.”

Some ways to increase your payments include: 

  • Slashing expenses: To make larger payments, cut your expenses by getting a roommate, downsizing, or meal planning to save on food costs. 
  • Increase your income: Think about side hustles to boost your income so you can make additional payments. You could walk dogs, tutor students online, deliver packages, or do household chores for others. 
  • Use your spare change: There are also some creative strategies you can use to pay off your loans faster, such as using tools like ChangEd.  “There are apps that round up your purchases and use your spare change to make extra payments toward your loans,” says Mayotte. These apps sync to your debit card or bank account and round up each transaction to the nearest whole dollar. The difference in change is held in a separate account and, once you reach a specific amount, the app will make a payment toward your loans. 

When making extra payments, make sure you talk to your loan servicer to discuss how the payments should be applied. 

“By default, payments must be applied first to interest and then to principal,” says Streeter. “But you can request they apply it to the principal or to a higher interest loan instead.”

4. Take Advantage of Interest Rate Discounts

An easy way to accelerate your student loan timeline is to utilize interest rate discounts that your loan servicer offers. 

Federal loan servicers and some private lenders have automatic payment discounts, reducing your rate — typically by around 0.25%. Some lenders offer additional loyalty discounts, further lowering your rate. These discounts help you save money and pay off your debt faster. 

5. Ask Your Employer for Help

You may not realize it, but your employer could be a valuable resource in your student loan repayment journey. 

“Taking advantage of any employer repayment plans or matching plans is also a good strategy,” says Mayotte.

Approximately 8% of employers offered student loan repayment assistance in 2020, according to the Society for Human Resource Management, and that number has steadily increased over the years. These programs typically will match your student loan payments up to a monthly or lifetime maximum, helping you pay off your loans more quickly.  If you aren’t sure if your employer offers student loan repayment assistance — or if you think it would be a useful benefit to add to the company — talk to your company’s human resources department. 

Refinancing Student Loans

When you’re researching ways to pay off student loans faster, student loan refinancing is a commonly mentioned strategy. The goal of refinancing is to get a lower rate so that you reduce the amount of interest you need to pay, allowing you to pay off your debt months or years sooner. 

However, student loan refinancing isn’t for everyone. 

“Within the federal program, you can’t refinance your loans,” says Mayotte. Instead, you have to work with a private lender. When you refinance federal loans, they become private ones, so you lose federal benefits like income-driven repayment plans. Because of these drawbacks, refinancing tends to be best for borrowers with high-interest private loans. 

“If you have private loans and good credit, refinancing may not be a bad idea,” says Mayotte. “If you have federal loans, I tend to be very conservative, so I usually strongly encourage you not to do it.”

Government Intervention

For borrowers hoping for government intervention with their loans, there are some ways to pursue loan forgiveness

  • Public Service Loan Forgiveness (PSLF): Federal Direct loan borrowers that work for non-profit organizations or the government can enroll in an income-driven repayment plan. After 10 years of working full-time for an eligible employer and making 120 monthly payments, the government will forgive the remaining balance. The PSLF program has been notoriously inconsistent, and, so far, only 2.1% of processed applications have been approved since the program’s inception. The U.S. Department of Education plans on overhauling the PSLF program over the next year to make it easier for qualifying borrowers to access forgiveness. 
  • Income-Driven Repayment Discharge: If you’re enrolled in an income-driven repayment plan and still have a balance at the end of your repayment term, the government will discharge the remaining balance. With this approach, you’ll be in debt for 20 or 25 years.
  • Forbearance and Deferment: If you enter into forbearance or defer your payments, your loan term may be extended, and interest may accrue while your payments are suspended. Keep in mind that forbearance and deferment is not the same as loan forgiveness; although you won’t have to make payments for a certain amount of time, you’re still responsible for repaying the loan principal and any accrued interest.
  • The CARES Act: Under the CARES Act, payments were suspended and interest was set at 0% for federal loans. For borrowers pursuing loan forgiveness, the months that payments were suspended still qualify toward your required number of payments. Keep in mind that, from the looks of it, student loan repayment will resume in February 2022 at your normal monthly payment and interest rate.