College 101
How Long Will I Be Paying off These Shmooping Loans? Article Type: Quick and Dirty
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College and loans go together like Chinese takeout and boxed wine (for the over-21). They're unfortunate companions at best, and are usually brought together by cruel necessity.
We'd like to tell you that you should avoid student loans altogether. But the reality is, most incoming college students (and their families) just don't have the cash to pay for their education costs up front.
So if you have to live with student loan debt, then how long does it have to be a part of your life? Well, the answer is complicated. But you probably guessed that. You're a smart cookie.
The average length of student loan repayment is about twenty years (source). If you're thinking that's a long time to be saddled with debt, then you're right. It's also worth noting that 40% of Americans between twenty and twenty-nine have student loan debt (source). It can be nice to know you're not alone, right? Misery loves company, and all that jazz?
Repaying loans for two decades of your existence can really cramp your style. When you're 18 years old, you have no idea what your life will look like in twenty years. Unless you're a creepy fortune teller, the only thing you know for certain about the future is that there will always be more Terminator movies.
Don't worry. We're here to help you winnow down the time you'll spend in debt. Our first suggestion? Repay more than your minimum loan payment each month. Shocking, we know. But the average household devotes less than 7% of their income to loan repayment, even though that same household owes around $29,000 (source).
We're not suggesting you throw your whole paycheck into paying your loans. However, paying off your student loans more quickly does mean cutting out some luxuries. Pro tip: You're not breaking up with Starbucks. It's more like a breather.
Our second suggestion is to not shred your student loan repayment bills. Another shocker. But we are aware that not every graduate is able to make the minimum loan repayment each month. If that's the case, though, you need to be honest and communicate with your loan providers. You have options.
You may be able to transition to income-based repayment (IBR), which will reduce or eliminate those bills while you're undergoing financial difficulties (source). This kind of information—what exactly your repayment options are, should things go downhill—is crucial to know before you ever take out a private loan. In fact, this info should be central in your choice as to which loans you choose to take out.
Our final tip is to not neglect your savings. If you need another reason to cut back on those trips to the mall, then consider the fact that people who start saving for retirement ten years earlier can save nearly $400,000 more (with an income of $45,000 per year) (source). Now that's a huge difference.
Allow us to break it all down for you. Here are our handy takeaways:
- Beef up the size of your loan payments to get them out of the way quicker.
- Don't forget to communicate with your loan provider and choose the best repayment option for your current financial situation.
- Save money with an IRA or some other means...unless you want to be buying everything on clearance until forever.
Follow these simple steps, and eventually, those pesky loans will be a thing of the past. The same cannot be said of your family, who likely helped you take out those loans. Maybe even cosigned on some of them.
Final tip, then: call your grandmother. Seriously. She loves you.