Struggling to Pay Off Student Loans? A New Report Highlights Why

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pay off student loans

With the cost of college higher than ever before, students are increasingly turning to student loans to pay for school. That approach leaves them with tremendous amounts of debt. And it can take them years or even decades to pay off student loans.

A new report on rising student debt from the Brookings Institution shows that the number of students carrying high levels of debt has significantly increased. Worse, student loan borrowers struggle to make progress on their loans, often making payments for years without reducing their loan balance.

Here’s what the Brookings Institution discovered about student loan debt.

Brookings Institution findings

The report identified two key trends:

1. Rising student loan balances

More borrowers are using student loans to finance their education. The amount of debt they take on dramatically increased between 1990 and 2015.

In 1990, fewer than 5% of borrowers had loan balances over $25,000. By 2015, the number of students with loan balances over $25,000 reached a staggering 40%. Those with high levels of debt — $50,000 or more — now account for the majority of outstanding student debt owed to the government.

With higher student loan balances, graduates can struggle to start their careers and get on their feet. Student loan payments eat up a significant portion of their entry-level salaries, causing them to struggle to afford necessities like rent or transportation.

2. Longer repayment terms

Because their student loan payments are so high, graduates with large amounts of debt are taking longer to repay their loans. In the past few years, the number of students enrolling in income-driven repayment (IDR) plans has skyrocketed.

With an IDR plan, the government extends your repayment term from 10 to 20 or 25 years and caps your monthly payment at a percentage of your discretionary income. Depending on your income, student loan balance, and family size, you could qualify for a payment as low as $0.

Although your payments are more affordable under an IDR plan, you’ll pay more in interest over the length of your repayment. If your payment is low enough, you might end up only paying the interest on student loans. That means your balance could grow over time even though you’re making payments each month.

For example, if you had $50,000 in student loans at 6.80% interest and earned $20,000 a year, your monthly payment under a Standard Repayment Plan would be $575 per month. If that was more than you could afford, you could qualify for several IDR plans.

If you opted for Income-Contingent Repayment, your monthly payment would be $132 per month at first. However, after 25 years of making payments, you’d repay $96,446.

By opting for a smaller payment but a longer repayment term, you’d pay approximately $27,000 more in interest. Worse, your balance will have grown so large that the government will forgive an additional $45,000, which you’d have to pay taxes on as income.

Standard Repayment Plan

Income-Contingent Repayment

Loan term

10 Years

25 Years

Student loan balance

$50,000

$50,000

First payment

$575

$132

Last payment

$575

$460

Total paid

$69,048

$96,446

Amount forgiven

$0

$44,770

How to pay off student loans

If the idea of paying your student loan bill each month but not making progress on your loan balance scares you, it’s important to research your options to take charge of your debt. Even on a small income, it’s possible to pay down your balance faster by using these strategies:

  1. Put windfalls toward your debt: If you receive unexpected money, such as from a bonus or birthday gift, use it to make an extra payment on your loan. Even small payments can add up and help you get rid of your debt faster.
  2. Compare repayment plans: Each IDR plan is different. You can use the Federal Student Aid Repayment Estimator to calculate what your monthly payment would be and how much you’d pay in interest under each plan. You might find another plan that’s affordable and allows you to pay less in interest.
  3. Pick up a side hustle: If your income isn’t high enough to keep up with payments, consider launching a side gig in your spare time. You can use your earnings to make extra payments on your loan balance.
  4. Consider refinancing: If your loans have high interest rates, you might want to consider student loan refinancing to get a more competitive rate. Although there are some drawbacks to refinancing, especially if you have federal loans, paying less interest on student loans could be worth it.

Student Loan Refinancing Calculator

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Understanding your options

The student debt report by the Brookings Institution highlights an alarming trend among student loan borrowers. With higher loan balances, students are taking longer to pay off their debt, and it costs them in the long run.

If you need help managing your debt, Student Loan Hero can help you identify strategies to pay off student loans.

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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.