Here’s What Your Average Student Loan Payment Would Be Under 6 Different Plans

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The average Class of 2016 graduate entered the workforce with $37,172 in student loan debt, but how much they actually end up paying back is something else entirely. The true cost of a student loan comes down to the interest.

The repayment plan a new grad chooses will ultimately decide their average student loan payment and total interest paid. So if you’re concerned about keeping costs down, take a look at how different repayment plans can affect the average student loan payment.

The average student loan payment on different repayment plans

The first thing to understand in this discussion is one simple concept:

Lower monthly payments = longer repayment period =
higher total costs

Of course, no two student loan borrowers are the same. One may need a lower monthly payment while they work their way up the career ladder. Another may be graduating into a six-figure salary and immediately have the cash for a larger monthly payment.

This is why different repayment plans exist.

So while federal loans are assigned a 10-year term under the Standard Repayment Plan, borrowers can change plans at any time and at no cost. However, changing your repayment plan can affect your monthly payment and total loan cost.

To better explain how a repayment plan affects monthly payments and your total cost for a loan, let’s walk through some examples.

Ex. 1: $37,172 in Direct Loans @ 3.80%

The Department of Education (DOE) currently offers eight different repayment plans. For this example, we’re going to look at three of them using the DOE’s repayment estimator.

A couple of common denominators: For each loan type, we’re assuming the borrower earns an adjusted gross income of $56,937 (the average in Michigan, according to 2014 tax returns). The federal government assumes a 5 percent annual growth in that salary over the life of the loan.

You can also use our payment calculator to enter in personal characteristics and find your average student loan payment per month.

1. Standard Repayment Plan

The most basic of all plans, this one has you making fixed monthly payments for a decade. The 10-year repayment period is the one of the shortest of all the plans we’ll review.

Monthly payment: $378

Total interest owed: $7,677

Total payout: $45,389

2. Graduated Repayment Plan

Monthly payments under this plan progressively increase, ticking up every two years. They start lower and end higher, making this a good option for entry-level professionals expecting to earn more money over the life of their loans.

Monthly payment: $211 (first) and $634 (last)

Total interest owed: $9,568

Total payout: $47,280

The benefit of a lower monthly payment at the beginning ends up costing the borrower almost $2,000 more than the Standard Repayment Plan.

3. Extended Repayment Plan

Whereas the Standard and Graduated plans assume a 10-year term, the Extended Repayment Plan does just that — extends your loan term. You can spread your payments out for up to 25 years.

Monthly payments: $195

Total interest owed: $20,763

Total payout: $58,475

The monthly payment is nearly half the amount you would pay under the Standard Repayment Plan. This gives young professionals much more breathing room on a month-to-month basis. However, the borrower would have to decide if that’s worth paying about $13,000 more over the life of the loan.

Ex. 2: $37,172 in Direct PLUS loans @ 6.31%

The Direct PLUS Loan is common among graduate and professional students and parents.

For this example, we’re going to use the same average Michiganian salary, but we’re going to assume a 3.5 percent pay increase year over year. That’s closer to the historical average.

The amount a borrower earns can significantly affect which repayment plan is the most cost-effective choice. According to the Bureau of Labor Statistics, the median pay for high school teachers is $58,030. For dentists, the median pay is $159,770. With very different salaries, a teacher and dentist are liable to make different decisions when choosing a repayment plan.

Below we cover three repayment plans that offer loan forgiveness after 20 or 25 years. With low monthly payments, these plans could be good options for those seeking eventual Public Service Loan Forgiveness.

1. Revised Pay As You Earn (REPAYE)

Under REPAYE, your monthly payments would be 10 percent of your discretionary income, which is recalculated annually to reflect your salary and family size.

Monthly payment: $324 (first) to $498 (last)

Total interest owed: $15,970

Total payout: $53,142

Compared to the Standard Repayment Plan, your monthly payments will be around $80 to $90 lower. However, you will pay an additional $2,674 in interest over the life of your loan.

2. Income-Based Repayment (IBR)

On the Income-Based Repayment plan, your monthly student loan payments are capped at 10 or 15 percent of your discretionary income, depending on when the loans were disbursed. Your student loans will also have a 20- or 25-year repayment term.

Monthly payment: $324 (first) to $419 (last)

Total interest owed: $16,156

Total payout: $53,328

With this plan, your monthly payment would be smaller than on the Standard Repayment Plan. However, a longer repayment period means you’ll pay $2,860 more in interest.

3. Income-Contingent Repayment (ICR)

The payment for ICR would be either: a) 20 percent of your discretionary income or b) the payment on a fixed, 12-year payment term — whichever is most cost-effective. In this example, the borrower has a $369 monthly payment.

Monthly payment: $369

Total interest owed: $15,926

Total payout: $53,098

While the borrower’s total payout is about the same as it would be under the previous two income-driven repayment plans, the sub-$400 monthly payment may make it more attractive.

Additional savings with a higher salary

But what if the borrower instead entered the ICR plan with the national average salary of $65,685, as reported by USA Today? They would start with a $369 monthly payment and end with a $397 payment.

As a result, they would pay $52,577 total, saving $521 more than the total payout of the lower salary-earner above. This goes to show you how salary drives the cost (or savings) of these income-driven plans.

As you can see, there’s very little variation in the total payouts for each of these three income-driven repayment plans. What sticks out like a sore thumb? The monthly payment. What’s even more glaring is the final monthly payment, when the borrower ostensibly is at their peak earning potential.

  • REPAYE: $498
  • IBR: $419
  • ICR: $369

As you’re considering income-driven plans, consider your earnings potential to make sure you can stomach the most expensive of these options.

Find the right repayment plan for you

Whether you have public or private loans, the same is true: What you owe after receiving your diploma is less than what you’ll actually pay by your 10-year reunion.

See how large of an average student loan payment you can make now and during the loan term. That, plus some toying with calculators, is the key to choosing the right student loan repayment plan.

Want to see how your specific loans could be affected by different repayment plans? Use our suite of calculators to find out.

Interested in refinancing student loans?

Here are the top 7 lenders of 2019!
LenderVariable APREligible Degrees 
Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.45% APR (with Auto Pay) to 6.99% APR (with Auto Pay). Variable rate loan rates range from 1.81% APR (with Auto Pay) to 6.49% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of November 6, 2019, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 11/06/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on our student loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.46% APR (with AutoPay) to 7.61% APR (without AutoPay). Variable rates currently from 2.31% APR (with AutoPay) to 7.61% (without AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.31% APR assumes current 1 month LIBOR rate of 2.31% plus 0.75% margin minus 0.25% for AutoPay. If approved for a loan, the fixed or variable interest rate offered will depend on your credit history and the term of the loan and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

3 Important Disclosures for Laurel Road.

Laurel Road Disclosures

Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

ANNUAL PERCENTAGE RATE (“APR”)
This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

FEE INFORMATION

There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.

LOAN AMOUNT

For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
For eligible Associates degrees in the healthcare field (see Eligibility & Eligible Loans section below), Lender will refinance up to $50,000 in loans for non-ParentPlus refinance loans. Note, parents who are refinancing loans taken out on behalf of a child who has obtained an associates degrees in an eligible healthcare field are not subject to the $50,000 loan maximum, refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for more information about refinancing ParentPlus loans.

ELIGIBILITY & ELIGIBLE LOANS

Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).

Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment.

All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.

For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.

INTEREST RATES

The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.

DISBURSEMENT OPTIONS

The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.

POSTPONING OR REDUCING PAYMENTS

After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.

We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.

We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.

If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of November 8, 2019 and is subject to change.


4 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 1.9299999999999997% effective October 10, 2019.


6 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 11/07/2019 student loan refinancing rates range from 1.90% to 8.65% Variable APR with AutoPay and 3.49% to 7.75% Fixed APR with AutoPay.

 


7 Important Disclosures for College Ave.

College Ave Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

1College Ave Refi Education loans are not currently available to residents of Maine.

2All rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

3$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.

4This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 09/23/2019. Variable interest rates may increase after consummation.

1.81% – 6.49%1Undergrad
& Graduate

Visit Earnest

2.31% – 7.36%2Undergrad
& Graduate

Visit SoFi

1.99% – 6.65%3Undergrad
& Graduate

Visit Laurel Road

2.43% – 7.60%4Undergrad
& Graduate

Visit Splash

2.02% – 6.30%5Undergrad
& Graduate

Visit CommonBond

1.90% – 8.65%6Undergrad
& Graduate

Visit Lendkey

2.74% – 6.24%7Undergrad
& Graduate

Visit College Ave

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

Published in Student Loan Repayment, Student Loans

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