If your goal is to pay the loans off as fast as possible, you want to pay them off in the order from highest interest rate to lowest interest rate. This minimizes the amount you pay in interest, meaning more of your payments go to paying down the principal, and this you pay all of the loans off faster.
A subsidized loan is your best option. With these loans, the federal government pays the interest charges for you while you're in college.
A $30,000 private student loan can cost approximately $159.51 per month to $737.38 per month, depending on your interest rate and the term you choose. But, you may be able to cut your cost by comparing your options, improving your credit score or getting a cosigner.
Which loan should I accept? Given the option, you should accept a Direct Subsidized Loan first. Then, if you still need additional financial aid to pay for college or career school, accept the Direct Unsubsidized Loan.
Drawbacks of Unsubsidized Student Loans
You're responsible for paying the interest on that loan from day one. Unsubsidized loans are not the worst loans you can borrow in terms of pure cost and the interest rate that you'll receive. However, the interest accumulates even before you enter repayment.
Prioritizing debt by interest rate.
First, you'll pay off your balance with the highest interest rate, followed by your next-highest interest rate and so on. As you work your way down the list, be sure to continue making the required minimum payments on all accounts.
The monthly payment on a $70,000 student loan ranges from $742 to $6,285, depending on the APR and how long the loan lasts. For example, if you take out a $70,000 student loan and pay it back in 10 years at an APR of 5%, your monthly payment will be $742.
On average, it takes about 10–20 years to pay off a student loan.
For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount.
Federal student loans are the most common type of student loan. There are four main types of federal student loans: subsidized, unsubsidized, parent loans, and consolidation loans. There are also private student loans, which generally have higher interest rates and stricter requirements.
There are no income limits to apply, and many state and private colleges use the FAFSA to determine your financial aid eligibility. To qualify for aid, however, you'll also need to submit a FAFSA every year you're in school.
If you qualify for subsidized loans, use them first. They are your cheapest option, since the government pays the interest while you're in school.
Stick to the standard repayment plan
It splits up your total debt (plus interest) into 120 monthly installments spread over 10 years. The federal government also offers income-driven repayment (IDR) plans, which can lower your monthly payment based on your income.
Enroll in auto debit and you may save money on your loan
If your loan becomes past due while enrolled in this option, we'll withdraw both the Current Amount Due and the Past Due Amount if that amount is greater than your Designated Amount. There's no penalty for paying early or paying extra.
For example, if you have a $100,000 loan balance with a 7% interest rate and a 10-year repayment term, you'll owe $39,330 in interest payments over the life of the loan. So your $100,000 loan becomes $139,330, with monthly payments of $1,161.
Plan out your repayment
Let's assume you owe $30,000, and your blended average interest rate is 6%. If you pay $333 a month, you'll be done in 10 years. But you can do better than that. According to our student loan calculator, you'd need to pay $913 per month to put those loans out of your life in three years.
In the good debt versus bad debt debate, student loans fall into a gray area. They can be considered good debt because the money you're borrowing to attend school is your ticket to earning a degree and getting hired at a well-paying job. That debt should pay itself off over time with a lucrative career in place.
Data Summary. The average federal student loan payment is about $302 for bachelor's and $208 for associate degree-completers. The average monthly repayment for master's degree-holders is about $688.
For example, the interest on a $30,000, 36-month loan at 6% is $2,856. The same loan ($30,000 at 6%) paid back over 72 months would cost $5,797 in interest. Even small changes in your rate can impact how much total interest amount you pay overall.
Direct Subsidized Loans are available only to undergraduate students who have financial need. Direct Unsubsidized Loans are available to both undergraduates and graduate or professional degree students. You are not required to show financial need to receive a Direct Unsubsidized Loan.
It's a good idea to start paying back unsubsidized student loans first since you'll likely have a higher balance that accrues interest much faster. Once your grace period is over, even subsidized loans will start accruing interest.
Payment history is the most important factor in maintaining a higher credit score as it accounts for 35% of your FICO Score. FICO considers your payment history as the leading predictor of whether you'll pay future debt on time.
Key Takeaways. Paying off a loan may lower your credit score, but if you practice good credit habits the effect will be minimal. Paying off a loan early can reduce your debt-to-income ratio, which can benefit your credit. Your credit score is based on a number of factors, like payment history and credit utilization.