This is a guest article by Jon Haver. If you are interested in contributing to Debt RoundUp, please follow our guidelines.
By the time you graduate from college, you may have between $5,000 and $30,000 or more in student loan debt. With the average student loan debt now around $25,000 (for an undergraduate degree), today’s graduates can expect to spend 5 to 25 years or more paying off their student loans.
How old will you be when you finish paying off your student loans? The answer depends on a variety of factors such as the original amount of debt, your interest rate, the type of job you snag after graduation and other financial responsibilities that may arise, such as having a baby. (Congrats Grayson).
Interesting Stats About The Age People Are When They Pay Back Their Loans:
- President Obama was 43 years old when he finished paying off his student loans!
- More than 15% are still paying back student loans at age 50
- Senior Citizens owe 36 million in student loans
- According to this Study
To estimate how long it will take to pay off your student loan, use an online calculator such as this calculator from CNN Money. Enter the amount of your loan, your interest rate and your monthly payment amount to estimate how long it will take to pay off your student loans.
4 Factors That Will Impact How Old You Will Be When You Pay Your Last Dollar
One – Financial Responsibilities
Future financial responsibilities may affect your ability to quickly repay your student loans. Marriage, children, medical bills, car loans and mortgages are just a few things that you may run into in the years after graduation. With more financial responsibilities, you may have to lower your monthly payments – which will extend the life of your loan.
Two – Monthly Payments
The higher your monthly payment, the quicker you will repay. Lowering your monthly payments in times of economic hardship will extend the repayment time and only mean you will be older when you finally pay them off. A good rule of thumb is to pay no less than 8 percent of your monthly income. For example, if bring home $2,000 a month, your monthly payments should be at least $160. For a monthly salary of $5,000, set your monthly payments higher than $400.
Three – Repayment Plan
Your period of repayment also depends on the type of loan you received and the repayment plan you chose. For Direct Loans and Federal Family Education Loan (FFEL) Program Loans from the federal government, a standard repayment plan allows up to 10 years of monthly payments. An extended repayment plan, however, allows up to 25 years for repayment.
The images below show the difference between a 10 year repayment term and a 25 year repayment term.
Four – Amount of Debt
The more student debt you have the older you will be when you pay it off. The people with the most student debt, the “top” 1% have 150K+ in student loans and according to the Huffington Post they would need to earn $137,000 per year to pay off their student loans in 20 years!
So How Old Will You Be?
Many factors go in to determining how old you will be when you pay off you student loan. The original amount of the loan, interest charges, salary and financial obligations can have a huge impact on your ability to repay your loan. It could take 2 to 25 years to pay off our loans. To get started, use an online calculator to estimate the length of repayment and create a budget that will allow you to successfully pay off your debt in the time required by the terms of your loan.