How long should the term of your student loan be?


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

Students rely on state and private student loans to fill a void that state student aid does not fill. For many, it will take years – maybe even decades – to pay off their college debts.

Because of this, it is important to understand the terms of the student loan from the beginning, especially the term of your student loan. But what is the right length of study for you?

Here’s what you need to know.

How long should the term of your student loan be?

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

Credible can help you compare student loan terms and rates with just one click. Check today if you are eligible for a private student loan.

When applying for a student loan, determine whether you want a short-term or long-term loan. There are advantages and disadvantages for everyone.

Choose a short term loan

  • Professional: Choosing a shorter term will help borrowers settle debts faster so they can focus on saving or paying off other forms of debt such as credit cards.
  • Disadvantage: Shorter terms also mean higher payments, which can be a problem with tight budgets.
  • Professional: Debt settlement improves a borrower’s creditworthiness and makes them more attractive to future lenders, said Leslie Tayne, a Melville, NY, lawyer specializing in debt relief. “It can be beneficial to do this faster if you want to apply for things like auto loans or mortgages,” she said.

Choosing a Long Term Loan:

  • Professional: A longer term loan can help create a more balanced budget, where both savings and loan payments are possible.
  • Disadvantage: Extended terms can be a “small compromise,” said Bruce McClary, spokesman for the National Foundation for Credit Counseling, a Washington, DC-based not-for-profit organization. “On the one hand, you benefit from a cheaper monthly payment, but you are tied to the commitment for a long time.”
  • Professional: A longer term can help borrowers avoid late payments or default. “This can be a great option if you’re concerned about not having enough income to start your loan and don’t want to be stuck with a monthly payment that you can’t afford,” said Tayne.

In the case of federal loans, the first payment is due six months after graduation or after graduation. Interest will still accrue during your grace period, but you can still 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,” said McClary. “That’s why it’s important to look beyond the face value of the interest rate and calculate exactly how much you’ll be paying over the entire term.”

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

Credible can help you compare private lenders to ensure you are getting the best interest rates available without affecting your creditworthiness.


What are the student loan repayment programs?

Potential borrowers consider various student loan terms as the length and interest rates will affect the repayment time and hamper their ability to save, invest, or buy their first home. Various loan programs are available including:

  • Standard federal repayment plan: This plan gives borrowers 10 years to repay, but there are several different plans that can be obtained from the loan service provider, McClary said.
  • Graduated repayment: This plan is based on expected increases in earnings over time and can extend over 30 years for consolidated loans.
  • Extended repayment: This plan is an option for borrowers with debt greater than $ 30,000 for a period of 25 years.
  • Income-oriented repayment plans: There are four income-oriented repayment plans that allow lending to be granted after 10 to 25 years of qualifying payments.

To learn more about private student loans and get personalized rates from multiple private lenders at the same time without affecting your creditworthiness, enter 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 repay a student loan?

People who borrow between $ 20,000 and $ 40,000 in federal loans have a repayment period of 20 years, the Department of Education said in 2019.

The amount of interest a borrower pays over the course of their loan plays a big role in how long it will take to repay them. Getting a lower interest rate on both short term and longer term loans is important as it can save you thousands of dollars.

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

Use an online student loan refinance calculator to get a feel for your monthly payment amounts, which depend on the length of the loan term.

“In general, the better your credit, the better the price will be offered to you,” said Tayne.

The jobs taken after graduation will affect the gross income of borrowers and their ability to pay their loans. A higher salary means the ability to make additional payments or to pay more than the minimum amount. Some employers also pay a small portion of the student loan each year as a benefit to their employees.

While many things can happen over the course of 10 or 25 years, making student loan repayment a priority allows people to get out of debt faster.

Student loan refinancing can help borrowers get a lower interest rate when their credit scores improve. When looking for a student loan refinance, enter your estimated creditworthiness and current loan balance into Credible’s free online tools to see what interest rates you qualify for.



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