How much are student loan repayments?
Our goal at Credible Operations, Inc., NMLS Number 1681276, hereafter referred to as “Credible”, is to give you the tools and confidence you need to improve your finances. Although we promote the products of our partner lenders who pay us for our services, all opinions are our own.
Whether you’re a new student or a recent graduate, you might want to get an idea of how much your student loan payments will be when you need to. start paying off your student loans. It can be difficult to calculate your monthly student loan payments, even when you know the interest rate and loan principal.
Fees, the type of loan you have, and many other factors can influence the payment amount, adding hundreds or even thousands of dollars to your loan total.
Let’s see what the average student loan payment is, how to calculate yours, and how you could reduce your student loans. If you have personal student loans, refinancing them at a lower interest rate or longer repayment term can help lower your monthly payments. Credible, it’s easy to see current student loan interest rates.
What is the average student loan payment?
The average monthly student loan payment is about $460, according to the Education Data Initiative’s analysis of information from federal education and other sources. Monthly payments range from $354 to $541 for a bachelor’s degree and $350 to $1,039 for a master’s degree.
Your monthly payment can be within this range, or more or less depending on your personal circumstances.
It takes most borrowers 20 years to pay off their student loans, during which time they will accrue $26,000 in interest, according to analysis by Education Data.
What factors determine student loan repayment amounts?
Monthly student loan repayment amounts may be different for each borrower, even for two borrowers who took out the same amount of loans at the same time. A number of factors influence your payments, some of which you can’t control and some that won’t be apparent until you receive your first refund notice.
Your average monthly student loan payment will depend on these five factors:
- Type of loan — Your student loans can be federal, private, or a combination of both. Credit unions, banks, and other financial institutions offer private student loans. The US Department of Education offers federal student loans, including subsidized direct loans, unsubsidized direct loans, and PLUS loans.
- Loan balance – The loan amount is the principal amount you receive from a single loan. You can receive this disbursement in a lump sum or in installments per semester or term. Lenders often disburse funds directly to your school.
- Interest rate – The interest rate is fixed when taking out an individual loan. Since rates are adjusted annually, an additional student loan you take out later in your college career may have a higher or lower rate.
- Repayment period – Your repayment term is the length of time it will take you to repay the entire loan, plus interest and fees, in equal monthly installments. For example, the 10-year term of the Standard Repayment Plan will require 120 equal monthly payments.
- Repayment plan — The standard repayment plan isn’t your only option for federal or private loans. Private student lenders typically offer multiple loan repayment terms. And for Federal Loans, other repayment plans include the Gradual Repayment Plan (up to 30 years), Extended Repayment Plan (up to 25 years), and Income-Based Repayment Plans, which can qualify for loan forgiveness after 10 to 25 years.
How to estimate your student loan repayment
Once you have taken out a federal or private loan, your loan officer will be able to provide you with estimated loan repayment amounts.
Before taking out a student loan, it’s a good idea to use a student loan calculator to get an estimate of your monthly payment. Simply enter the estimated amount you plan to borrow, enter an interest rate, and select a loan term.
For example, you may see that a loan of $10,000 with an interest rate of 5% and a standard repayment term of 10 years will result in an estimated monthly payment of $106. However, an interest rate of 6% for the same loan will increase this amount to $111 per month. That extra $5 a month might not seem like a drastic difference, but over 10 years it will add nearly $600 in extra interest. That’s why it’s important to always look for the best student loan rates.
Ways to Lower Your Federal Student Loan Payment
If you are having trouble with your student loan debt or are concerned about future financial difficulties, you are not alone. More than 11% of mature student borrowers reported missing at least one payment between January and July 2020, according to the Education Data Initiative.
Fortunately, borrowers struggling to repay their federal student loans have several options to make them more manageable on a variety of budgets. Income-driven repayment plans, student loan consolidation, and civil service loan forgiveness can reduce your federal student loan repayments.
Income Oriented Repayment Plans
An income contingent repayment (IDR) plan is an option for most federal student loans. Four types of IDR plans are available, all aimed at fixing your monthly student loan payment at an affordable level based on your income and family size.
Student loan consolidation
If you have multiple federal student loans at varying interest rates, you can consolidate them into one direct consolidation loan. The interest rate on the new loan will be an average of the rates on the loans you are consolidating, so you may end up with a lower rate and more manageable payments. Although the new interest rate may be low, the term of your loan will be extended, which could increase your overall repayment costs.
Cancellation of civil service loans
The Public Service Loan Forgiveness Program (PSLF) is designed to benefit borrowers who work for a qualified employer, such as a government office or non-profit organization. Several factors influence a borrower’s eligibility for this student loan forgiveness program, including their qualified payment history and the type of federal loans they have selected. You can learn more about the PSLF program at StudentAid.gov.
How to reduce private student loan repayments
Some borrowers must take out private student loans if their federal student loans, grants, and scholarships don’t cover all of their expenses. Unfortunately, private students who borrow less have fewer options to reduce loan repayments. This encourages many borrowers to consider refinancing their private student loans.
Private student loan refinancing is similar to loan consolidation. It allows you to combine multiple student loans into a single new loan. Ideally, you’ll qualify for a lower interest rate on the new loan, which could lower your monthly payment. Although this may extend the repayment period, a lower monthly payment can make it easier to manage your repayment plan.
Student Loan Refinance has other advantages. You can refinance federal student loans and private student loans into one refinanced loan, although you lose the benefits of federal student loans, such as access to IDR plans. Refinancing is also an opportunity to release an original co-signer from the loan.
Before refinancing your student loans, it’s important to consider the long-term financial impact. You may pay less per month, but a longer repayment period will cause you to pay more interest over the life of the loan, even if the new interest rate is lower.
You can easily search for lenders, compare rates and apply for student loan refinance using Credible.