Few Student Loan Borrowers Pay Off Their Debt in ‘Standard’ 10 Years, Study Shows

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When you borrow a federal student loan, you’re automatically enrolled in a Standard Repayment Plan. Make all your monthly payments on time, according to the plan, and you’ll be debt-free after 10 years.

Unfortunately, most borrowers find that timetable is not realistic for them. About 70% of those in America’s 100 largest cities saw their student loan repayment grind on past the decade mark, our latest Student Loan Hero study finds.

Whether because of postponing payments via deferment or forbearance, enrolling in income-driven repayment (IDR) or choosing a longer-term private loan, borrowers are extending the life of their debt en masse. But based on our analysis of 165,000 anonymized credit reports, there are significant differences from city to city on how likely borrowers are to pay everything off in 10 years’ time. Here’s what the data showed:

Key findings

  • About 30% of federal and private loan borrowers in our sample closed their debt within, what we estimated to be, 10 years of active repayment.
  • Residents of Provo, Utah, were the most likely to retire their debt within 10 years, as 46% of borrowers there met this benchmark.
  • Consumers in Chattanooga, Tenn., and Allentown, Pa., rounded out the top three, with 38% and 37% of student loan borrowers clearing their debt within the decade, respectively.
  • At the other end of the spectrum, just 23% of borrowers in Tulsa, Okla. and New Orleans, paid off their education debt within the standard 10-year timeline.
  • Spokane, Wash., and Fresno, Calif., tied for the bottom third, with only 25% borrowers in these cities ending their debt before 10 years had passed.

Where student loan borrowers pay off debt within 10 years

Despite the unfavorable showings from Tulsa, Okla., Spokane, Wash. and Fresno Calif., the West seemed to have the fastest payoffs as a region overall. Looking at our top rankings, 7 of the 10 metropolitan areas are situated in Western states, from Utah and Colorado to California and Arizona.

Making monthly payments on time — perhaps because of enrolling in autopay or simply tracking repayment carefully — could be the secret to success for many borrowers in these states.

Many of the same metro areas ranking highly here also reported some of the fewest late payments in our separate study of where borrowers pay their dues on time. More than 85% of borrowers in Provo, Utah, for example, have never missed a payment deadline.

When deadlines are missed, late payment penalties and accruing interest make it difficult for borrowers to stay on track.

Where borrowers struggle to repay debt by the 10-year mark

The South came in at the other end of the spectrum. Louisiana, Florida, South Carolina, Georgia and Alabama all found themselves represented at or near the bottom of our 100 metro area rankings.

It was especially unsurprising to find that many borrowers in New Orleans; Charleston, S.C.; Atlanta and Birmingham, Ala., had trouble meeting the 10-year repayment schedule, as they also ranked poorly among the places with the most student loan debt.

If you live in New Orleans and carry a median loan balance of $26,182, for example, repaying it on time becomes more difficult than carrying a smaller load elsewhere. In fact, 22% of New Orleans-based borrowers have fallen into delinquency at least once, according to our research on where borrowers fall behind on payments.

Every borrower’s repayment cadence is unique

You might think that every student loan borrower should be able to complete repayment on the standard 10-year timeline. But the truth is that every borrower experiences loan repayment uniquely.

Borrowers who graduate with little debt and go on to earn a comfortable wage are more likely to repay debt on time. They might even opt for a measure like student loan refinancing and end their debt ahead of schedule.

Peers with some combination of weightier debt and lower income, however, might be better served by delaying repayment. If you’re having trouble affording your monthly payment, enrolling in an IDR plan or stepping away temporarily via deferment or forbearance could be your best bet.

With that said, it should be concerning to us all that just 3 out of 10 borrowers are debt-free after a decade of repayment. Those who fall behind might not be able to catch up. Plus, as debt lingers, other financial goals are inevitably put off too.

If you’re in the midst of federal or private loan repayment, take a moment to second-guess your approach. Decide whether to be extremely aggressive or strategically passive. Just don’t get stuck in the middle.

Published in News & Policy