How to pay off over $ 100,000 in student loans

Six-figure student debt is not the norm. So when you are facing a student loan balance of $ 100,000 or more, the standard 10-year federal repayment plan may not be right for you.

Standard monthly payments will likely exceed $ 1,000 with so much debt. But you can save money in interest, lower monthly payments, or even do both. pay off your student debt faster – with a different reimbursement approach.

The best strategy is usually the one that costs the least overall, as long as you can afford the monthly payments. Here are options for paying off over $ 100,000 in student loans and how to decide which one is right for you.

Continue to forgive student loans

Best for: Borrowers with low-income public service careers.

Students with graduate degrees are often heavily in debt. Specific loan forgiveness programs are in place for many of these professionals – including nurses, teachers, dentists, lawyers and doctors.

Public service loan forgiveness cut all jobs. It forgives the remaining federal student loan balance of tax-free borrowers if they work for the government or a 501 (c) (3) nonprofit while making 10 years of monthly payments.

The PSLF is designed to encourage workers to take relatively low-paying jobs. But if your income is high enough, PSLF won’t help you.

To get the PSLF, you must make at least some qualifying payments on an income-based repayment plan, and those payments must be less than what you would pay on the standard 10-year plan. Otherwise, you will have paid off the debt by the time you qualify for the remission.

Refinance student loans

Best for: Borrowers who have high income or are planning for one.

The higher your student loan balance, the more you can save by refinancing.

With student debt averaging $ 200,000 at an interest rate of 7%, for example, you would save $ 200 per month and over $ 24,000 in total by refinancing at a rate of 5% – assuming that you 10 years left before refinancing and you maintain the same repayment schedule.

If your income is relatively low but you expect it to increase significantly, make payments on an income-driven repayment plan until you qualify for a lower rate. Once you refinance federal loans, they are no longer eligible for income-tested repayment.

To be eligible for refinancing, you usually need good credit and enough income to cover your expenses, other debts, and full student loan payments.

How Much Can Refinancing Save?

Break income-based repayment

Best for: Borrowers who cannot afford to pay or who will pay the least overall under this option.

Making payments on a Federal Income-Based Repayment Plan (IDR) won’t get you debt-free quickly. But if you are strapped for cash, go to one of the four income-based repayment plans will make payments more manageable.

Payments can be as low as $ 0, depending on your income. They are often not large enough to cover all of the interest as they accrue, which means your balance could go up.

Income-driven plans also extend your repayment schedule to 20 or 25 years, but forgive any remaining balance at the end of that period. These amounts are however taxed, which creates a so-called “student loan forgiveness tax bomb. “

Forgiveness is not certain. You may be able to pay off your balance sooner, especially if your income increases.

But if you stick to the end of your repayment deadline, income-based repayment may be the cheapest option, even with the additional taxes. This will likely only be the case if your income remains low or your debt is in the high six figures.

Monthly payments on $ 100,000 + student loan debt

Here’s how the monthly payments would initially add up for different six-figure loan amounts. Income-based payments are set at 10% of discretionary income for a person earning $ 100,000 with a family of one.

Assumptions: The interest rate for standard monthly payments is 7%; the refinanced interest rate is 5%.

And here’s how much you would pay off overall for each option:

Assumptions: term of the standard and refinanced loan, 10 years; IDR term 25 years. IDR totals take into account waived amounts at a 30% tax rate, and payments assume annual income increases of 3%.

In this example, being eligible for the utility loan forgiveness would mean repaying a total of $ 93,486, regardless of the amount borrowed.

Average student debt by type

$ 19,928: Associate’s degree in Nursing (ADN)

$ 23,711: Bachelor of Science in Nursing (BSN)

$ 47,321: Master of Science in Nursing (MSN)

1. 2019 Institute for Access and Success in Colleges 2. National Center for Education Statistics 2015-2016 3. Urban Institute 2017-2018 4. National Center for Education Statistics 2015-2016 5. National Center Education Statistics 2015-2016 6. 2019 Association of American Medical Colleges 7. 2019 American Dental Education Association 8. 2020 American Association of Colleges of Pharmacy 9. December 2019 Federal Student Aid Data from the US Department of Education’s College Scorecard 10. 2019 American Veterinary Medical Association


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