Costing It Out
The Way You Repay Student Loans Really Matters
You have a lot of options when it comes to repaying your student debt. The path you choose can mean the difference between an affordable payment and a debt that balloons out of control. Consumer Reports designed this special interactive feature to show how the standard pay-back plan compared with other scenarios—including what happens if you don't pay at all.
One Loan, 8 Ways to Pay
The way you repay makes a big financial difference. Click on the circles to compare various repayment options against the standard 10-year repayment plan for a $37,173 loan.
Pay extra on your loan each month and save substantially on interest.
Data based on the National Postsecondary Student Aid Study of 100,000 graduates. Includes federal and private loans. Analysis by Mark Kantrowitz, publisher and vice president of strategy for Cappex.com.
If you pursue a career in a nonprofit field or in public service, such as teaching or government work, and make 120 payments on time and in full, the balance of your loan is forgiven after 10 years. You can combine the public loan forgiveness option with an income-driven payment plan that reduces the size of your monthly payment.
Data based on the National Postsecondary Student Aid Study of 100,000 graduates. Includes federal and private loans. Analysis by Mark Kantrowitz, publisher and vice president of strategy for Cappex.com.
When you follow the standard plan, you make same-sized monthly payments for 10 years (120 payments total). You pay interest and principle, so you owe about one-third more than you borrowed.
Data based on the National Postsecondary Student Aid Study of 100,000 graduates. Includes federal and private loans. Analysis by Mark Kantrowitz, publisher and vice president of strategy for Cappex.com.
If you have financial hardship, lose your job or return to school at least half time, you can defer loan payments. The deferment lasts between six months and three years, depending on the situation. You can also defer as long as you're on active duty in the military. If you have a subsidized loan, the federal government may pay the interest on your loan during the time your loan is on hold.
Data based on the National Postsecondary Student Aid Study of 100,000 graduates. Includes federal and private loans. Analysis by Mark Kantrowitz, publisher and vice president of strategy for Cappex.com.
If you're struggling to make payments under the standard plan, you can opt for a plan that ties your payment to your income. Payments can be as small as 10 percent of what you earn a month. While this may reduce your monthly payment dramatically, it can take 20 to 25 years to pay off your debt and you rack up a lot more in interest along the way. If you don't pay off your loan in 20 to 25 years, the balance may be forgiven, but the amount forgiven is considered income by the IRS and you can get hit with a hefty tax bill.
Data based on the National Postsecondary Student Aid Study of 100,000 graduates. Includes federal and private loans. Analysis by Mark Kantrowitz, publisher and vice president of strategy for Cappex.com.
You can start with a lower payment, but every two years, as your income grows, it will be reset higher. As with the standard plan, under a graduated repayment plan, the loan must be paid off in 10 years, but you end up paying more in interest overall.
Data based on the National Postsecondary Student Aid Study of 100,000 graduates. Includes federal and private loans. Analysis by Mark Kantrowitz, publisher and vice president of strategy for Cappex.com.
If you stop paying your loan, you're in default. That means you rack up penalties and fees from collection agencies in addition to the interest on the debt. This is the worst-case scenario because you can end up owing more than double the amount you borrowed.
Data based on the National Postsecondary Student Aid Study of 100,000 graduates. Includes federal and private loans. Analysis by Mark Kantrowitz, publisher and vice president of strategy for Cappex.com.
An extended plan allows you to stretch out your loan term up to 25 years, so your monthly payments are smaller. The payments can be fixed or gradually increase. But you also owe a lot more in interest.
Data based on the National Postsecondary Student Aid Study of 100,000 graduates. Includes federal and private loans. Analysis by Mark Kantrowitz, publisher and vice president of strategy for Cappex.com.
