Once you complete your student loan repayment term, the loan is considered paid in full. This can be important because it impacts your ability to get more federal student loans if you need them. It also impacts how much money you’ll have to pay back if you don’t qualify for Public Service Loan Forgiveness (PSLF).
A student loan repayment term is the length of time it takes to pay off a loan. The amount of time you have to pay back a loan depends on what type of student loan you have and when your payments start.
For example, take out a 10-year private student loan with a fixed interest rate. Your monthly payment will be higher than if you took out an unsubsidized Stafford Student Loan with an adjustable interest rate and graduated at the same time as your friends who took out subsidized Stafford Student Loans.
The length of the term is based on the type of loan. For example, a subsidized loan is one in which you do not have to pay interest while you are in school. An unsubsidized loan is one where a government program has paid some or all of your interest, so you must begin paying it once you graduate and begin working full-time.
The length of time for which you will have to repay your student loans varies depending on how much debt you have, how much money those debts are costing you each month, and what kind of income tax bracket you fall into (if any). You may be able to change your repayment term if certain circumstances arise during repayment that would make it difficult for you to make monthly payments as planned.
According to Lantern by SoFi experts, “There are downsides to 30-year repayment plans. Also, there’s no direct way to secure a 30-year student loan refinance, which can be financially very challenging for some students.”
The amount of money you pay each month, year, quarter, semester, trimester or term is your payment amount. The loan servicer will calculate this amount based on the total balance of your student loans and other factors like your income.
If you have multiple loans with different interest rates and repayment terms (such as extended or graduated), the lender may also need to know how much time has passed since you started making payments. For example: if a borrower has paid $100 toward her $200 monthly student loan bill ($10 per month) over two years (24 months), then she’ll be paying off 72 cents per day ($2 divided by 24).
Paying More Than the Required Amount
While paying more than the required amount on your student loans is a good idea, you should only spend what you can afford.
You can save money by paying off your loan early, but only if the interest rate is lower than what you would earn by investing the money elsewhere. If this is the case, it is recommended using an online calculator to help you determine how much extra each month would need to be paid in order for you to pay off the loan sooner without losing money in interest costs (this assumes that no prepayment penalties apply).
Hopefully, this article has given you a better understanding of student loan repayment terms. If you have any questions about your own student loan debt, consult an expert!