There are four possible ways to pay off your student loans faster if you have $200,000 in debt, such as refinancing or applying for loan forgiveness.
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It is possible to accumulate student loan debt while in school without realizing how serious the situation is.
The number of borrowers with student loan debt in the six figures (significantly higher than the average student loan debt) is increasing. For instance, according to StudentAid, approximately 900,000 borrowers of federal student loans had balances of $200,000 or more as of 2021. gov.
Although it can be challenging, it is not impossible to pay off such a large balance, which is good news.
Refinance your loans
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Going through the student loan refinance process makes a lot of sense if you have high-interest student loans. Refinancing entails working with a private lender to obtain a new loan in an amount equal to your old ones, paying them off, and receiving a new loan with a new interest rate.
The terms of the new loan are typically different, including the interest rate and term of repayment. Loans from law school, medical school, and other institutions can all be refinanced.
If your credit is good, you might be eligible for a loan with a lower interest rate, which would enable you to save money over the course of the loan. Alternately, you can lengthen your repayment period to obtain a more manageable monthly payment.
Just keep in mind that longer terms typically result in higher interest costs over the course of the loan.
Consider as many lenders as you can if you decide to refinance your student loans in order to find the best loan for your circumstances.
Credible makes this simple for you; in just two minutes, you can compare your prequalified rates from our partner lenders in the table below.
Learn More: Standard Repayment Plan
Add a cosigner to improve your interest rate
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To qualify for refinancing, you’ll typically need good to excellent credit; a good credit score is typically one of 700 or higher. There are numerous lenders who provide refinancing for those with bad credit, but the interest rates on these loans are typically higher than those on loans for those with good credit.
If you have bad credit and are having trouble getting approved, think about applying with a cosigner who has good credit to increase your chances. Even if you don’t require a cosigner to be approved, having one could result in a lower interest rate than you would otherwise pay.
Just keep in mind that your cosigner will be responsible for your debt if you are unable to make your payments.
Over the course of your loan, you may save money on interest fees if applying with a cosigner results in a lower interest rate. To determine how much money you can save by refinancing your student loans, use the calculator below.
Step 1. Enter your loan balance Loan balance
Step 2. Enter current loan information Interest rate
Step 3. Enter the details of your new loan to begin figuring out your savings interest rate.
You can save money by refinancing your student loan at% interest rate. You’ll pay an extra $ per month and have your loan paid off by The total cost of the new loan will be $.
Compare offers from the best lenders to see if refinancing makes sense for you and calculate your actual savings
Checking rates won’t affect your credit score.
Check Out: The Best Student Loan Refinance Companies
Sign up for an income-driven repayment plan
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Consider enrolling in an income-driven repayment (IDR) plan if you have federal student loans and can’t afford your current monthly payments.
The loan servicer extends the repayment period to 20 to 25 years under an IDR plan and determines your monthly payment as a percentage of your discretionary income. Some borrowers even qualify for $0 payments.
Your remaining balance is forgiven after 20 to 25 years of making payments. Even though the discharged amount is taxable as income, using this strategy can still provide you with significant relief.
Here is how a few different federal repayment plan choices stack up against the four main IDR plans:
| Repayment plan | Who’s eligible? | Monthly payment | Repayment terms | Eligible for loan forgiveness? |
|---|---|---|---|---|
| Standard repayment plan | Any borrower with Direct or FFEL Loans | Amount when payments are spread equally over 10 years (usually $50 minimum) | 10 years | No |
| Graduated repayment plan | Any borrower with Direct or FFEL Loans | Depends on loan amount (payments start low and increase every 2 years) | 10 years | No |
| Extended repayment plan | Any borrower with more than $30,000 in Direct or FFEL Loans | Fixed: Spread evenly over up to 25 years Graduated: Depends on loan amount (start low and increase every 2 years) | Up to 25 years | No |
| Income-Based Repayment (IBR) | Borrowers with partial financial hardship (no Parent PLUS Loans) | For borrowers who took out loans after July 1, 2014: 10% of discretionary income (never more than 10-year plan) For borrowers who took out loans before July 1, 2014: 15% of discretionary income (never more than 10-year plan) | For borrowers who took out loans after July 1, 2014: 20 years For borrowers who took out loans before July 1, 2014: 25 years | Yes |
| Pay As You Earn (PAYE) |
|
10% of discretionary income (never more than 10-year plan) | 20 years | Yes |
| Revised Pay As You Earn (REPAYE) | Any borrower (no Parent PLUS Loans) | 10% of discretionary income (no cap) | 20 years (25 years if repaying grad school debt) | Yes |
| Income Contingent Repayment (ICR) | Any borrower (Parent PLUS Loans must be consolidated) | 20% of discretionary income (or income-adjusted payment on 12-year plan) | 25 years | Yes |
Pursue student loan forgiveness
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If you have federal student loans, there are several loan forgiveness programs available to you. Most demand that you work in a specific industry and make eligible payments for a predetermined period of time.
If you work for a qualifying company for ten years and make 120 monthly payments, you can qualify for loan forgiveness under this program. The savings can be substantial because the remaining balance is discharged tax-free.
Typical occupations that may be eligible for student loan forgiveness include:
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Use the debt avalanche or debt snowball method
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When you have multiple loans and are ineligible for loan forgiveness, you may need to simply focus on paying them off as quickly as you can. Here are a couple of strategies that could help:
The debt avalanche method instructs you to make minimum payments on all of your other loans while concentrating on paying off the loan with the highest interest rate first.
Continue until all of your loans have been repaid, starting with the loan with the next-highest interest rate after this one is paid off.
Consider the debt snowball strategy if you’re more motivated by small victories.
The debt snowball approach encourages you to pay off your smallest loan first while only making the minimum payments on your other loans.
Move on to the next-smallest loan after the smallest is paid off, and so on until all of your loans have been repaid.
However, if you prefer to pay less interest and don’t mind waiting to see your results, you might think about using the debt avalanche method. Loading widget – embedded-prequal.
Learn More: Graduated Repayment Plan
How long will it take to pay off $200k?
This will depend on how you approach your repayment. For instance, repaying a loan through refinancing might be quicker than pursuing loan forgiveness through an IDR plan.
Here are some examples of the costs connected with the various repayment strategies and how long you can anticipate them to take:
| Repayment strategy | How long to pay off $200k | Example repayment costs |
|---|---|---|
| Federal standard repayment plan | 10 years | If you have a 6.22% interest rate:
|
| Refinancing | Typically 5 to 20 years (depending on the lender) | If you refinance a $200k loan with a 6.22% interest rate with a 10-year term to a 5% interest rate:
|
| Student loan forgiveness | Depends on forgiveness program (for example, PSLF takes 10 years) | If you have an average gross income of $50,000, an average weighted interest rate of 6.22%, are single, and qualify for PSLF:
|
| Income-driven repayment | 20 to 25 years (depending on the plan) | If you have an average gross income of $50,000, an average weighted interest rate of 6.22%, and are single: IBR:
PAYE:
REPAYE:
ICR:
|
Does student loan debt go away?
Unfortunately, there is no secret that will make your student loan debt magically disappear. However, one of the aforementioned options might help you pay off your debts permanently or even have them forgiven.
Your federal student loans could also be forgiven under certain conditions, such as if:
Therefore, if you have a large student loan balance, rest assured that you are most certainly not alone.
Consider as many lenders as you can if you decide to refinance your student loans in order to find the best loan for you. Credible makes this simple; in two minutes, you can compare your prequalified rates from several lenders. Loading widget – loan-score-tool.
Keep Reading: Private Student Loan Consolidation About the author
Eric Rosenberg is an expert on personal finance. Business Insider, Investopedia, The Balance, The Huffington Post, MSN Money, Yahoo Finance, and Mint have all featured his work. com and more.
FAQ
Is it possible to pay off 200k in student loans?
For instance, according to StudentAid, approximately 900,000 borrowers of federal student loans had balances of $200,000 or more as of 2021. gov. Although it can be challenging, it is not impossible to pay off such a large balance, which is good news.
What is the monthly payment on a 200k student loan?
Depending on the APR and term of a $200,000 student loan, the monthly payment can range from $2,121 to $17,957. For instance, if you borrow $200,000 and repay it over 10 years at a 5% APR, your monthly payment will be $2,121.
Is it worth buying a house when you have student loans?
The maximum debt-to-income ratio required to obtain a mortgage is 43% or less. Loans Can Increase Your Debt-to-Income Ratio If you have a lot of student loan debt, your minimum monthly payments might cause your DTI ratio to exceed 43%, which will make it challenging to get a loan approved.
Is it harder to buy a house with student loan debt?
Paying off student loans makes it more challenging to save for a down payment and manage mortgage payments once you become a homeowner. Your debt-to-income ratio may go up as a result of student loan debt, which could make it harder for you to get a mortgage or a better rate.