8 answers
8
Updated 1150 views

How much time does it really take to pay off student debt?

Office Hours #4: AMA (Ask Me Anything) with Mark Eagle

This question was posed by a question during one of our most recent "CareerVillage Office Hours" sessions. During Office Hours sessions, we invite students to pose questions related to a specific topic. In this case, the topic was preparing for life after high school. If you answer this question, we will reach out to the students who attended this office hours session to inform them of your response, and all students on CareerVillage will benefit. If you would be interested in hosting an office hours session on a particular topic, please reach out to our staff!

#debt #loans #money #finances #student-loans #paying-for-college

money finance student-loans loans debt paying-for-college
Answer This

+25 Karma if successful
From: You
To: Friend
Subject: Career question for you
8

8 answers

1
Updated
Share a link to this answer
Share a link to this answer

Suzie’s Answer

It took me 5 years to pay off my undergrad college debt (~27K). This was also 20 years ago so I know things have changed. My financial aid was about half grants and half student loans in the late 90s. I studied mechanical engineering and had a job coming out of grad school. My loans were deferred while I was in grad school so they were not accruing interest. It took me 12 years to pay off my MBA tuition debt (~80K). It was mostly loans and very little grant. Depending on how disciplined you are in paying down your debt the faster you can get rid of it. Even if you pay a couple hundred over the principal every little bit helps. I always think of education has an investment in your future. There is no dollar amount you can put on the possibilities of your future. You are definitely worth it. !! I hope this helps.
1
0
Updated
Share a link to this answer
Share a link to this answer

Dan’s Answer

The answer will vary for everyone, but it can be answered (or at least estimated) before taking out any loans. You can shop for schools to find the best deal. Sometimes in-state schools may actually be more expensive if an out of state school will offer you a better scholarship. The major you choose will determine your salary after school, as well as, job demand in that field. There are ways to subsidize the expenses of school such as internships/co-op work during school.

My school had rotations starting the second year where every other semester we would go on co-op (internship) which allowed us to make money full time for 3-4 months. This would cover my upcoming semesters expenses.

In the end amount of time to pay off debt will be based on:

Debt = Tuition + Living - Scholarships/Grants
Time to pay off = Debt / (Salary - Living Expenses)

Example:
Debt ($40,000) = $10,000(4) + $6,000(4) - $6,000(4)
Time to pay off (10 years) = $40,000 / ($40,000(net salary) - $36,000)

*current average student loan debt is $33,000
*living expenses will vary widely on location and frugality
0
0
Updated
Share a link to this answer
Share a link to this answer

Betty’s Answer

The basic information you'll need to calculate how long it would take to pay off student debt depends on a number of factors:
1. how much is the debt
2. how big your monthly payment is
3. when does interest kick in
4. how much is the interest
5. your discipline in sticking with a budget and payment plan

Doing a very straightforward scenario, say you owe $10,000 at an interest rate of 2% per year on the remaining balance, but the payment period starts 1 year after graduation and it's interest free for the first 6 months after the first payment is due. Then, you could enter the information in an Excel spreadsheet. If you're able to pay off $200 per month and your first payment starts on January 2022, then it's possible that the loan could be paid off by March 2026, a little over 4 years. Of course unexpected surprises could come up and sometimes pausing payments or consolidating different loans would change the formula. Paying it off sooner by making bigger payments can be an option, but it's generally a smarter choice to invest your savings towards a higher interest bearing account or equities that can earn more than the interest rate of the loan so that you are really leveraging your money. If you can make a guaranteed 3% interest back on your money, then it makes sense to make minimum payments to pay off your loan at an interest rate of 2%, but continue to invest your money to get a return of 3%.
0
0
Updated
Share a link to this answer
Share a link to this answer

Chris’s Answer

to add on to what the other answers have said...just make sure you keep your head down and make your payments...remember this loan was betting on you succeeding! It also helps to pay more whenever you can to defeat interest.
0
0
Updated
Share a link to this answer
Share a link to this answer

Simeon’s Answer

It depends largely on how many years you stay in school and if you are able to get a good wage job for the degree that you earned. Each year that you spend getting your degree is another year you're also not pulling a living wage to help pay off that debt. The exchange can be worth it, but make sure don't take several years getting a degree that won't pay off the debt that you incur.
0
0
Updated
Share a link to this answer
Share a link to this answer

Leanne’s Answer

The answer to this question will partly depend on how big of a loan you take out and whether or not you pay the minimum or can pay more than the minimum. Before agreeing to a loan amount be realistic about how much money you can expect to make right out of college and over the following years. I took out a $17,000 loan that I was able to pay off in my mid-30s. When I went back for my MBA I was able to defer my loan to not accumulate interest, but continued making payments that went all towards principle and allowed me to pay down my loan faster. I also have a lot of friends in their 40s still paying off their loans.

Remember that a loan is not your only option. There are grants and scholarships. There are a lot of scholarships out there through many different organizations. Some are one time only, some may be for multiple years. Ask friends and ask family what organizations they belong to and whether or not there are scholarships available.
0
0
Updated
Share a link to this answer
Share a link to this answer

Jonathan’s Answer

Let's take a moment to understand the amount of debt you're potentially accumulating and how much of it can be sidestepped. For instance, by enrolling in a community college for your general education classes, you could save more than $30,000, based on personal experience. Similarly, commuting to a traditional four-year college could save you upwards of $20,000, again from personal experience. I emphasize this because incurring large amounts of debt isn't a prerequisite for earning your degree.

I attended a community college for two years where all my semesters were virtually free, thanks to state grants that were awarded based on household income limitations. Later, I spent two years at a university, living at home and commuting, while also working full-time. This only set me back about $20,000. I managed to pay off most of my student debt in cash, and the remainder was cleared within a few years after graduation.

It's worth noting that I earned my degree in Accounting and secured a full-time position at a major accounting firm. So, it's crucial to be mindful of the debt you're accumulating. Don't just blindly sign letters and tick off boxes for student aid. A small student debt, say around $25,000 or less, is manageable. But anything above $100,000 is not only avoidable but also unwise.

Explore ways to secure grants, scholarships, or even a part-time job that allows you to contribute $200 a month towards your student loans while you're still in school.
0
0
Updated
Share a link to this answer
Share a link to this answer

Gregg’s Answer

Hi there!

This is a really tricky question. Student debt can take the full term to pay off (as much 20 or 30 years) or you can make it a priority and pay it off sooner. It really will depend on your financial needs at the time as well as your future goals. Other things like interest rates come into play as well . For example, if interest is very low, maybe you hold off paying your loans since you can use the money for something else. If interest is high, you pay it off quicker if you can afford to.

Don't let debt or the thought deter you though. I fully financed my education and do not regret it. Education is always worth it!

Good Luck,

Gregg
0