HowMuch You’ll Really Pay for That Student Loan
BY RYAN LANE
Those who graduate college with student loans owe close to $30,000 on average, according to the most recent data from the Institute for College Access & Success. But they’ll likely repay thousands more than that because of interest. One key to limiting interest cost is choosing the right repayment plan. The bottom line? Opting for lower payments will cost you more overall. Using a tool like the Education Department’s Loan Simulator can help you better understand potential costs. Here’s how much $30,000 in unsubsidized federal student loans would cost under different plans at the 2019-2020 undergraduate rate of 4.53%.
STANDARD REPAYMENT
TOTAL REPAID: $37,311
MONTHLY PAYMENT: $311
REPAYMENT TERM: 120 months
The standard plan splits loans into 120 equal payments over 10 years. Federal borrowers automatically start repayment under this plan, unless they choose a different option. Standard repayment adds more than $7,000 to the loan’s balance in this example, but that’s less than most other options. Barry Coleman, vice president of counseling and education programs for the National Foundation for Credit Counseling, says to stick with the standard plan if payments aren’t more than 10% to 15% of your monthly income. “The monthly payment would be higher, but in the long run [you] would save more in interest charges,” Coleman says.
The monthly payment would be higher, but in the long run [you] would save more in interest charges.
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