Student loan debt has been a well-known financial-health public crisis for years. Recent changes to rules for federal student loans stand to help millions of borrowers, but those with private student loans, or who don’t qualify for the new federal student loan relief, may still have significant student loan debt.
Nearly 4 million Americans have $40,000 to $60,000 in federal student loan debt, according to Department of Education data. If you’re wrestling with $50,000 in student loan debt — an amount many progressives and student advocacy groups have called on the federal government to forgive — you likely can’t afford to wait for broad student loan forgiveness.
Fortunately, you can take steps (like refinancing) to lower the costs of your student loans and pay them off sooner.
Credible makes it easy to compare student loan refinance rates without affecting your credit score.
- How to pay off $50K in student loans
- Is $50,000 in student loan debt a lot?
- How long will it take to pay off $50,000 in student loans?
- How much will it cost to pay off $50,000 in student loans?
Americans currently owe nearly $1.9 trillion in student loan debt, according to FinAid. Two million borrowers owe more than $100,000. That’s not surprising when National Center for Education Statistics data shows that attending a private, four-year college or university costs an average of $28,123 per year. This figure doesn’t take into account room and board, books, or other expenses.
That may sound like a lot, but it's a hurdle you can overcome. Here’s how.
Explore loan forgiveness options
Student loan forgiveness comes with strict eligibility requirements. But if you qualify, it’s possible to have some or all of your federal student loans forgiven. Several types of forgiveness, discharge, or cancellation are available for borrowers of Direct Loans, FFEL program loans, and federal Perkins loans. But you may have to continue making payments during the application period, which can take several months, and there’s no guarantee your application will be approved.
If your application is approved and you qualify for forbearance, cancellation, or discharge of only part of your loan, you must still repay any remaining balance. But if the full amount of your loan is forgiven, discharged, or canceled, you no longer need to make any loan payments.
Consolidate federal student loans
If you have multiple federal student loans, you may want to consider consolidating them into one fixed-rate loan at no cost to you. Consolidating into a Direct Consolidation Loan doesn’t guarantee you a lower rate. Your new interest rate will be an average of the rates on the loans you’re consolidating. But you may benefit from the simplification of having just one loan payment to keep track of.
If you have outstanding Perkins or FFEL loans, you may also want to consider a Direct Consolidation Loan, especially if you want to take advantage of the limited-time PSLF Waiver — where you receive credit for past payments on Direct Loans. But this only applies if you have Direct Loans, if you’ve already consolidated loans into the Direct Consolidation Loan program, or you want to consolidate your loans into this program by Oct. 31, 2022.
Consider income-driven student loan repayment plans
If your outstanding federal student loan balance is a substantial amount of your annual income or you simply need to make lower monthly payments on your student loans, you may qualify for an income-driven repayment (IDR) plan.
While in deferment (which is currently set to expire on Jan. 31, 2022), you won’t have to make a payment, but you also won’t be making any headway in paying back your loans. So, income-driven repayment plans can help. You can choose from four types of plans:
- Revised Pay As You Earn Repayment Plan (REPAYE)
- Pay As You Earn Repayment Plan (PAYE)
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
You may qualify if you’re not on an IDR plan but want to lower your monthly student loan payments, or you’re on an IDR plan but need to recertify or make a change to your plan. Keep in mind that if your student loans are in default, or you have Parent PLUS loans, you can’t apply for lower monthly payments through this program.
Refinance student loans
Refinancing your current student loans with a private lender — bank, credit union, or other financial institution — has both benefits and disadvantages. Refinancing could give you a lower interest rate and possibly better terms, which can help you save more on your monthly payments over time.
But if you refinance federal student loans into a private student loan, you give up the benefits of federal student loans, including access to IDR plans. Also, to get the very best interest rate on your new loan, you’ll likely need a good to excellent credit score. On the other hand, many lenders allow cosigners, which can help you qualify.
With Credible, you can easily compare student loan refinance rates from up to 13 lenders.
Make lifestyle changes
Making some spending and lifestyle compromises could help you pay off your student loans faster. Look at your budget and see where you can make some changes to save money. Then, put the reclaimed dollars toward your student loan debt. You might also consider taking on a side hustle to make some extra money to put toward your student loans.
While still attending a community college or a four-year university, you may want to set a goal to pay the interest on your loans. It may not seem like much, but paying interest early on can really add up by the time you graduate.
Try the debt avalanche method
The debt avalanche method is a strategy for paying down and paying off debt. Start by determining the debt with the highest interest rate and paying it off first. Then you’ll pay off the debt with the second-highest interest rate, and so on.
This approach helps you pay less total interest in the long run. And completely paying off a debt can give you a psychological boost.
Use the debt snowball method
If you’re motivated by seeing balances disappear quickly, you may instead choose to use the debt snowball method. With this method, you pay off the smallest balances first. You’ll likely pay more in interest over time, but you’ll see balances disappear sooner, which can make the most significant impact on your perception of paying down your debt.
The resounding answer is yes, $50,000 is a lot of student loan debt. But when you consider the cost to attend college and that most students take four to five years to graduate, that figure isn’t a surprise.
That said, most undergraduates (30%) complete college with no debt, and about 25% of students graduate with less than $20,000, according to the Brookings Institution. Only 6% of all student borrowers actually owe more than $100,000 upon graduation. For many borrowers, the high cost can seem worth it — Brookings also notes that the typical 25-year-old full-time worker with a bachelor’s degree can expect to earn nearly $1 million more over their lifetime than a peer with just a high school diploma.
Although student loans now account for the second-largest share of debt next to a mortgage, a college education can open doors to new careers and offer a better chance for professional growth in the future.
How long it takes to pay off your student loans will depend on multiple factors, including the initial repayment term, whether you consolidate or refinance, if you defer payments, or choose an income-driven repayment plan.
Things that can extend how long it takes to pay off your loans include:
- Opting for an income-driven repayment plan on federal loans.
- Putting federal student loans into deferment or forbearance.
- Consolidating federal student loans.
- Refinancing multiple student loans into a single loan with a longer repayment term.
Your interest rate and repayment term will affect how much it will cost you to ultimately pay off student loans.
Generally, a lower interest rate and/or shorter repayment terms can reduce the total interest costs of a loan — but a shorter term may mean higher monthly payments. Conversely, a higher interest rate and/or longer repayment term can mean you’ll pay more in total interest over the life of the loan. But a longer repayment term can mean a smaller monthly payment.
Repayment terms on federal student loans can range anywhere from 10 to 30 years. Private student loans can come with 5-, 7-, 10-, and 15-year terms. Some lenders may offer 20- or even 25-year terms. How much you pay for $50,000 in student loans depends on several factors.
The interest rate plays a big part in the total payoff amount. For example:
The total cost of a $50,000 loan at a 6% interest rate will be about $66,612 at the end of 10 years — $50,000 principal and $16,612 in interest. The total cost of a $50,000 loan at an 8.5% interest rate will be around $74,391 at the end of 10 years, including $24,391 in interest. You’ll pay an additional $7,779 in interest because of the higher interest rate.
Finding a refinance loan with a lower interest rate can help reduce total interest costs. Credible makes it easy to see actual student loan refinance rates based on your credit profile.
Like the interest rate on your student loan, your loan term also plays a big part in how much it’ll cost to pay off your $50,000 loan. Let’s look at the same loans with 20-year repayment terms instead of 10 years.
- On a $50,000 loan at 6% interest and a 20-year repayment term, your total interest cost will be $35,972 — $19,360 more than the 10-year term.
- On a $50,000 loan at 8.5% interest with a 20-year repayment term, total interest costs would be $54,139 — $29,748 more than the 10-year term.
A student loan calculator can help you get a better idea of how interest rate and repayment terms affect the total cost of a student loan.
Making interest-only or partial payments
If you make interest-only payments on your student loans while still in school, the total you’ll owe upon graduation will be much less. Likewise, if you make even partial payments while in school, you’ll pay a lot less when you graduate.
Making an additional payment each month
Although the option to make an additional payment on your student loans each month can be challenging, over time it really can reduce the total amount you’ll pay on your loan.