The Department of Education reports that the typical repayment period for borrowers with between $20,000 and $40,000 in federal student loans is 20 years, and a 2013 study of 61,000 respondents conducted by One Wisconsin Institute found that the average length of repayment for student debt borrowers is 21.1 years.
College graduations are a time for inspirational words and optimism about the future. But the post-college world can also bring sobering realities. And loan repayment is not the only dimension of post-college life where new grads’ expectations may differ from reality.
Job site Monster recently surveyed 350 soon-to-be graduates and found that 59% expect to find a full-time job in less than two months and 28% expect it to take less than one month.
You might be worried that taking out student loans for college will leave you saddled with debt well into old age. Under the Department of Education’s standard repayment plan, it takes 10 years to pay off your student loans. Although many borrowers are able to pull that off by balancing their student loans with their earnings after graduation, the average time to repay student loans depends on many factors: like how much you borrow, where you go to school, whether you get your degree, and how much you earn after leaving school.
If you combine your government student loans into a federal direct consolidation loan, your repayment term will automatically be extended to as long as 30 years
Although IDR plans can make your monthly payments more affordable, the bad news is that you don’t get an interest rate reduction. So taking longer to pay off your loans can add thousands in interest costs. Another approach to lowering your monthly payment or to pay your loans off faster is to refinance into a loan with a lower interest rate.
Unfortunately, hard data on how long borrowers actually take to repay their student loans on average is scarce, according to researcher Colleen Campbell with the Center for American Progress. “Re-enrollment, default, postponements, delinquencies, and opting into other repayment plans can all cause borrowers to pay for a longer period of time, but it is unclear how long these occurrences prolong repayment, how often borrowers experience each of them, and how much more they pay in the long run,” according to Campbell.