Under the standard 10-year repayment plan, a 22-year-old graduate could be done paying off student loans by 32. But more than 40% of borrowers are in repayment plans with timelines of longer than 10 years, according to government data analyzed by SavingforCollege.com. A growing number of borrowers are even taking student loan debt into retirement.
There are lots of good reasons it can be difficult to pay off your student loans in around 10 years: You may struggle to find a well-paying job, or you may decide to go to grad school, or you could have to deal with unforeseen expenses like medical bills.
Still, doing as much as you can to chip away at your debt in your 20s can help you focus on different goals later on in your 30s, experts say. "Having debt does reduce your ability to do other things," says Thomas E. Murphy, certified financial planner and chief executive officer at Murphy & Sylvest in Dallas, Texas. "That loan does count against your ability to get financing to buy a house, or to buy a car."
Here are three money moves to make in your 20s that can help you stay on track to pay off student loan debt in your 30s.
"First thing you need to do when you graduate is to make certain you're living within the money you make," says Carolyn McClanahan, a certified financial planner and the director of financial planning for Life Planning Partners in Jacksonville, Florida. This is particularly important if you're juggling student loan debt and other financial responsibilities.
Try creating a personal budget. It doesn't have to be extremely specific: You could start with the 50/30/20 rule, for example, which suggests that 50% of your income goes towards needs like housing, 30% towards wants like entertainment, and 20% towards saving and paying down debt.
Having a system in place can help you avoid spending more than you earn and make sure you're paying attention to all of your priorities.
Then, McClanahan says, put additional income, like a raise or a bonus that might come your way, towards your student loan debt. That money "can be put into savings, used towards paying off student debt, and rewarding yourself. Don't reward yourself with the entire bonus or raise," like by using it to go on a shopping spree, she says.
Video by Stephen Parkhurst
Your student loan repayment plan gives you a minimum payment required each month, "and ideally you want to pay more than what you have to," says McClanahan. "If you can, at least throw $10 extra because you won't miss it."
Loan rates vary, depending on the kind of loan you have and when you borrowed the money. But let's say you graduated with $25,000 in student loan debt, with a rate of about 5% on the combined balance over four years. If you stick with a standard 10-year repayment plan for federal loans, you'll end up paying about $265 each month for 120 months and a bit more than $6,800 in interest. That means your overall loan repayment will total about $31,800.
You can make a significant dent in the overall life of the loan if you start putting more toward the principal early. If you add an extra $25 a week to your payments and pay about $365 a month instead of $265, you could cut down your repayment time by more than three years.
Adding that extra $25 per week will also lower the amount of interest you owe: You'll pay roughly $4,500 in interest and save some $2,300.
As your salary increases, so should your loan payments. McClanahan says adding even 1% each year towards your student loan debt can go a long way towards paying it off in your 30s.
In some cases, you can find a job that helps you pay off debt or enroll in a state-run program that will forgive your student loans. As of 2019, 8% of companies offer some kind of student loan help, up from the 4% that did so in 2018, according to the Society for Human Resource Management.
Depending on your occupation and where you live, you might also look into federal programs for loan forgiveness and cancellation, and state and local programs to help with loan repayment. For example, teachers in Texas may be eligible to receive $2,500 in annual loan repayment assistance for up to five years.
If you're conscious about your spending and saving habits in your 20s, and especially if you find ways to bring in extra money, too, you could be well on your way to paying off student loan debt by your mid-30s, says Murphy. "Paying off student loans is not significantly different from paying off any other loan. The most important thing is you need to have more income than expenses — otherwise you don't have money to pay off loans."
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