How Much Should I Pay On My Student Loan Payment? Experts Weigh In

 November 25, 2020
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If you dutifully make your student loan payment every month, you may wonder whether you should be paying more than the minimum.

How much to pay on student loans — that’s a question that doesn’t have a one-size-fits-all answer. Still, there are ways to figure out how much you should pay on your student loan repayment.

You can do that by taking these three steps:

1. Examine your interest rate, forgiveness options
2. Assess everything — your debt, budget, savings
3. Find the right balance for you

1. Examine your interest rate, forgiveness options

Begin by scrutinizing your interest rate. This matters because it can help you decide whether you should pay down debt or save and invest.

If you have a low interest rate like I do on my undergraduate loan — 2.3% — it makes sense to spend your money on high-interest debt, such as credit cards and PLUS loans.

Look into refinancing for better rates

Borrowers who would benefit the most from student loan refinancing have a good credit score and a high student loan balance.

A lower interest rate is a big perk of refinancing, but it could also mean a lower monthly payment.

Say you have $70,000 in student loans at an interest rate of 7% on a 10-year term. You would pay $97,531 over the course of the loan. By refinancing at a rate of 6% and keeping your 10-year term, you would pay $93,257 total — a savings of $4,274. Plus, you’d save $36 a month on payments.

Don’t forget about forgiveness programs

Just remember, if you refinance federal loans, you permanently lose access to the various federal aid programs, such as income-driven repayment plans and Public Service Loan Forgiveness (PSLF).

“If refinancing to a good rate is not possible, we recommend clients put all their energy into knocking it out ASAP,” said Daniel Wrenne, a certified financial planner at Wrenne Financial Planning in Lexington, Ky.

However, Wrenne noted that an exception would be Public Service Loan Forgiveness — if you’re eligible for PSLF, Wrenne recommends making the minimum payments to qualify while putting any excess money toward investing or paying down debt.

Payoff VS Invest Calculator

  • Monthly payment

  • Interest paid

  • Time to repayment

OriginalWith PrepaymentSavings
Monthly payment
Interest paid
Time to repayment
By paying an extra $317 per month ( total per month), you could pay off your loan in and save .
On the other hand, if you decided to invest the extra $317 per month for , here are your results:
  • Interest Earned

  • Final amount

OriginalWith Extra InvestmentSavings
Interest Earned
Final amount
By increasing your contribution by $317 per month ( total per month) for years, you will increase the balance of your retirement fund by (including interest). The extra amount you contribute will continue to earn interest in your investment account for ~- yr years after you finish contributing. You can see the long term results below:

There are various student loan forgiveness programs that exist, but following this plan by just paying your minimum balance isn’t always a good idea. For example, to be eligible for PSLF, borrowers will have to be employed in public service and make 120 qualifying payments. Once you meet these requirements, the rest of your loans could be forgiven, though about 2% of applicants have had success, as of September 2020.

If you’re a teacher, Teacher Loan Forgiveness could be an option if you meet the requirements, including five years of qualifying employment, among other things. You could get up to $17,500 of your loans forgiven; it would ultimately save you money, though it won’t erase the remaining balance of your loans.

Maintain an emergency fund during loan repayment

If you have a low interest rate on your student loans, 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.

Borrowers in this situation should consider investing because a higher return is likely. Despite the average stock market rising year after year following the Great Recession in 2008, however, the coronavirus pandemic in 2020 reminded everyone that investing poses risks.

Making additional loan payments can sometimes be beneficial to borrowers. But when you have a student loan with a low interest rate or your loan could be forgiven, continuing to make the minimum payment while focusing on investing and saving might be best.

2. Assess everything — your debt, budget, savings

Everyone’s situation is different. To figure out how to pay on student loans in your situation, first answer these questions:

  • Do others 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 also have credit card 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?
  • Do you have other debt, such as an auto loan or outstanding medical bills?

All of the above affect how much you should pay on student loans and how much you should save.

You can use this information to calculate your debt-to-income (DTI) ratio, which breaks down what portion of a person’s income goes toward their debt.

Debt-to-Income (DTI) Calculator

Pay special attention to back-end debt, which includes all your monthly debt payments. Your back-end DTI should typically be 36% or lower.

Say a person has a monthly income of $3,500 and monthly debt payments of $1,260. Their back-end DTI would be 36% — if they had no monthly housing costs. If they had to pay $1,500 monthly for housing, that back-end DTI would rise to almost 80%.

Set savings goals for upcoming expenses

As you assess your finances, it’s important to build emergency savings, as emergencies are inevitable: car accidents, the death of loved ones or sudden illness, among other things. But there are other things that you may want to save up for as well, such as retirement or travel.

In fact, even as you plan out for your short-term and long-term goals, it couldn’t hurt to start putting money aside for your medium-term goals. For example, if you want to purchase a new home or car, or perhaps take your family on a vacation, you have to find a way to pay for the things you want with your current income.

Your ability to stash extra cash for medium-term goals could depend on your student loan repayment plan.

Reconsider your repayment plan

Don’t blindly let your assigned repayment plan decide for you how much to pay on student loans. You might benefit from switching plans.

Income-driven repayment plans, for example, allow federal loan borrowers to make payments that are more affordable because the monthly payment amount is based on the borrower’s monthly income. This can make it easier for people to have a bit of excess cash to use for other expenses.

However, with the expectation being that borrowers pay between 10% and 20% of their discretionary income when opting for an income-driven repayment plan, you’ll want to look at how much of your discretionary income you’re spending on your student loan payments to see if another repayment plan is a better option.

While the money you bring in every month may already be accounted for, you don’t need to stop making extra student loan payments because of a family vacation or car purchase.

The key to saving is to balance meeting your financial needs so that you are prepared for an emergency. With this approach, you can avoid setting yourself up for more debt and make moves toward reaching your financial goals, whether you are planning for something years away or in a matter of months.

If you are singularly focused on paying off debt as soon as possible, be sure that you are prepared for what life will throw at you.

3. Find the right balance for you

Since personal finance is inherently personal, it’s important that you do a gut check: How do your student loans make you feel? You won’t make any progress toward meeting your financial goals without motivation.

For instance, you might be wondering how much to pay on student loans because the debt makes you feel physically ill, robs you of sleep at night or is a constant source of stress. In each case, I’ve been there. I’ve learned that one sure-fire 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, 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,” said Shannon McLay, founder and CEO of Financial Gym, on the question of how much to pay toward student loans. “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.”

Try to find a balance between paying off debt, saving for goals — short-term and long-term — 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 pay on your student loan payment, use these tips to devise a plan that works for you. Just be sure that you have cash saved up for emergencies.

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

And if you’re feeling stuck on how to get started, work out the math using our other student loan calculators.

Andrew Pentis and Kristina Byas contributed to this report.

Interested in refinancing student loans?

Here are the top 9 lenders of 2022!
LenderVariable APREligible Degrees 
1.74% – 8.70%1Undergrad
& Graduate

Visit Splash

1.74% – 7.99%2Undergrad
& Graduate

Visit Earnest

1.74% – 7.99%3Undergrad
& Graduate

Visit SoFi

1.89% – 5.90%4Undergrad
& Graduate

Visit Laurel Road

1.74% – 7.99%5Undergrad
& Graduate

Visit NaviRefi

2.05% – 5.25%6Undergrad
& Graduate

Visit Lendkey

1.86% – 6.01%Undergrad
& Graduate

Visit Elfi

N/A7Undergrad
& Graduate

Visit PenFed

1.99% – 8.38%8Undergrad
& Graduate

Visit Citizens

Check out the testimonials and our in-depth reviews!
1 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. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 4, 2022.


2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Student Loan Refinance Interest Rate Disclosure Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 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%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Let us know if you have any questions and feel free to reach out directly to our team.


3 Important Disclosures for SoFi.

SoFi Disclosures

Fixed rates range from 3.49% APR to 7.99% APR with a 0.25% autopay discount. Variable rates from 1.74% APR to 7.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR 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. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.


4 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. 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. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

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.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. 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. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

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.

Interest Rate: A simple annual rate that is applied to an unpaid balance.

Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.

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

This information is current as of April 29, 2021. Information and rates are subject to change without notice.
 


5 Important Disclosures for Navient.

Navient Disclosures

You can choose between fixed and variable rates. Fixed interest rates are 2.99% – 8.24% APR (2.74% – 7.99% APR with Auto Pay discount). Starting variable interest rates are 1.99% APR to 8.24% APR (1.74% – 7.99% APR with Auto Pay discount). Variable rates are based on an index, the 30-day Average Secured Overnight Financing Rate (SOFR) plus a margin. Variable rates are reset monthly based on the fluctuation of the index. We do not currently offer variable rate loans in AK, CO, CT, HI, IL, KY, MA, MN, MS, NH, OH, OK, SC, TN, TX, and VA.


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 5/17/2022 student loan refinancing rates range from 2.05% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.93% Fixed APR with AutoPay.


7 Important Disclosures for PenFed.

PenFed Disclosures

Fixed Rate Loan Terms: 5 years/60 monthly payments, 8 years/96 monthly payments, 12 years/144 monthly payments or 15 years/180 monthly payments. Annual Percentage Rate is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed rates range from 3.29% to 5.43% APR. Rates are subject to change without notice. Fixed APR: Fixed rates will not change during the term. This rate is expressed as an APR. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan. These rates are 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.


8 Important Disclosures for CitizensBank.

CitizensBank Disclosures

Education Refinance Loan Rate Disclosure:  Variable interest rates range from 1.99%-8.38% (1.99%-8.38% APR). Fixed  interest rates range from 2.99%-8.63% (2.99%-8.63% APR).

IS Variable Rate Disclosure:  Variable Rates advertised are 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 December 1, 2021, the one-month LIBOR rate is 0.09%.  Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will  vary based on applicable terms, level of degree and presence of a co-signer. Your final variable rate may  be based upon the 30-day average SOFR index, as published by the Federal Reserve Bank of New York.  The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%.

ERL Variable Rate Disclosure: Variable interest rates are based on the 30-day average Secured Overnight Financing Rate (“SOFR”) index, as published by the Federal Reserve Bank of New York. As of May 1, 2022, the 30-day average SOFR index is 0.29%. Variable interest rates will fluctuate over the term of the loan with changes in the SOFR index, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable interest rate is the greater of 21.00% or the prime rate plus 9.00%.

Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.

Lowest Rate Disclosure: Lowest rates are only available for the most creditworthy applicants, require a 5-year repayment term, immediate repayment, a graduate or medical degree (where applicable), and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.

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. Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, 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. 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 on our website 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.
 
Citizens Student Loan Eligibility: : Applicants must be enrolled at least half-time in a degree-granting program at an eligible institution.
 
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, DC, DE, FL, MA, MD, MI, NH, NJ, NY, OH, PA, RI, VA, 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.
 
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. 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.