How Much Should I Put Towards My Student Loan Payment? 3 Experts Weigh In

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Every month, you dutifully make your student loan payment. You know that you could be paying more than the minimum, but is that a smart thing to do?

How much should you put toward your student loan payment, anyway? It’s a question facing many of today’s borrowers.

Unfortunately, as with most things in life, there is no one-size-fits-all answer. What is right for you could be disastrous for me.

Why? Because it’s all about context and your personal situation.

For example, I don’t have any kids, a house, or a car. My financial situation and repayment strategy is necessarily different from someone with kids and a mortgage.

Though there isn’t any perfect answer, there are ways to figure out how much you should put toward your student loan repayment. Here are three steps to determining how much to pay with some help from financial experts.

1. Start with Your Interest Rate

When figuring out how much you should put toward paying back your student loans, start by examining your interest rate. Your interest rate matters because it can help you to decide whether you should pay down debt or save and invest.

If you have a low interest rate, as I do on my undergraduate loan (2.3%), then it makes sense to spend your money at high-interest debt, such as credit card debt and Graduate PLUS loans. Borrowers can also consider refinancing their loans to find out whether they qualify for better rates.

“If refinancing to a good rate is not possible, we recommend clients put all their energy into knocking it out ASAP,” says Daniel Wrenne, a Certified Financial Planner at Wrenne Financial Planning.

“The exception to both these options is if they are going for Public Service Loan Forgiveness. If that’s the case, we recommend paying minimum payments necessary to qualify (and of course investing, saving or paying down other debt with the remainder),” Wrenne adds.

Yet, what if you have a low interest rate on your student loans? In such a case, Wrenne recommends making minimum payments until you have established an emergency fund. At that point, borrowers should focus on paying off high-interest credit card debt and saving for long-term goals, such as retirement.

Once those financial goals are met, Wrenne encourages borrowers to devote the rest of their time and resources toward paying back student loans.

PJ Wallin, Founder and Lead Advisor at Atlas Financial, suggests another plan for borrowers facing low-interest rates: “If someone doesn’t mind having the debt and has low rates, a 10 year fixed payoff [on the Standard Repayment Plan], with a good 6–12 months of reserve payments in the emergency account is sufficient.”

2. Assess the Rest of Your Situation

Everyone’s situation is different, so it’s crucial that you assess your unique situation to determine how much you should put toward your student loan repayment. Consider the following:

  • Do others (e.g., a spouse, children) depend on you financially?
  • How much are your basic bills? That is, what is your bare-bones budget?
  • How much do you have in savings?
  • Do you have credit card debt in addition to student loan debt?
  • Do you have health insurance, rental, or any other types of insurance?
  • Do you live in an area with a high cost of living?
  • Is your employment situation stable—that is, as stable as any job can be?
  • Do you have other debt, such as an auto loan or outstanding medical bills?

All of the above affect how much you should put toward debt and how much you should save.

Dave Ramsey, who has helped many people climb out of debt, recommends using his Baby Steps method to save, pay off debt, and build wealth. He recommends starting out with $1,000 in an emergency fund and focusing exclusively on paying off debt by using the snowball method.

Though the advice is nice, it doesn’t take into account the uniqueness of each person’s situation. As a freelancer, I don’t feel comfortable with having only $1,000 in savings. Yet, if you have a secure full-time job that pays well, then perhaps Ramsey’s approach would make more sense.

In any case, it’s important to have some sort of emergency savings because emergencies are inevitable: car accidents, the death of loved ones, and sudden illness, among a host of others. But there are other things that you may want to save up for as well, such as retirement or travel.

The key to saving is to balance meeting your financial needs so that you are prepared for an emergency, to avoid setting yourself up for more debt, and to make moves toward reaching your financial goals.

If you are singularly focused on paying off debt as soon as possible, then be sure that you are prepared for what life will throw at you, as well as that you aren’t leaving money on the table.

Wallin adds, “If the goal is to pay [your loans] down quickly, one doesn’t want to lose sight of the need for an emergency fund and to not give up any freebies like 401k match.”

3. Do a Gut Check

Since personal finance is inherently personal, it’s important that you do a gut check: how do your student loans make you feel?

Why is doing a gut check so important? Because you won’t make any progress toward meeting any of your financial goals without motivation. You need to know what will inspire you at the end of the day.

For instance, do your student loans make you physically ill? Do you have trouble sleeping at night because of them? Are they a constant source of stress for you? In each case, I’ve been there. I’ve learned that one surefire way to cope is to use those emotions to fuel your debt repayment.

Yet, if you’re locked into a good plan with a nice interest rate and don’t mind your repayment term, then why not focus on building wealth through saving and investing?

“I am a big proponent of paying down student loan debt while building up your assets at the same time,” says Shannon L. McLay, Founder of Next-Gen Financial. “This has the same impact on your net worth compared to just paying down debt; however, you enjoy not only the financial benefit of cash to protect you from getting into further debt but also the psychological benefit of watching your bank account grow.”

The key is to try to find a balance between paying off debt, saving for short-term and long-term goals, and investing. It’s a delicate balance and one that is invariably personal. Everyone will form a different plan.

So, if you’re wondering how much you should put toward your student loan payment, then use these tips to devise a plan that works for you. Just be sure that you have cash saved up for emergencies. To play it safe, you could save 10% of your income, invest another 10% in a 401k with a match, and put the rest toward debt repayment.

Whatever you decide to do, make sure that your plan suits your goals and upholds your values. Make sure you feel comfortable with your plan and realize that it may change over time as your life and goals change as well.

Interested in refinancing student loans?

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1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with 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 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, 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. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
2.57% – 5.87%Undergrad
& Graduate
Visit Earnest
2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
& Graduate
Visit SoFi
2.47% – 7.99%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%3Undergrad
& Graduate
Visit CommonBond
2.72% – 8.17%4Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. 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 understand what you are buying, and consult 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. Please do your homework and let us know if you have any questions or concerns.