Are you intimidated? Don’t be.
Fifty thousand dollars in student loans may seem like a lifelong commitment. It’s significantly higher than the national average of $28,950 (based on data from 2014 graduates). And it’s higher than the median income for a 29-year-old in the US, which is about $35,000. So you won’t be paying it off overnight.
Good news: you can still find a payment plan which works for your lifestyle to pay off $50K in loans. Most federal repayment plans are geared towards small monthly percentages of your income, so you can still meet other financial goals.
The monthly repayment estimates below were calculated using the StudentLoan.gov Repayment Estimator. The estimates assume a family size of one and a 5.3 percent interest rate on the loan (the fixed rate for a Graduate PLUS loan).
Everybody’s situation is different. But here’s how to pay off $50,000 in student loans in seven different scenarios.
Table of contents
$50,000 or less—you can afford payments
Focus on paying off quickly. For federal loans, the Standard Repayment Plan may be your best bet. With this plan, you pay a fixed amount for up to 10 years (30 years for consolidation loans). The monthly amount, adjusted for the size of your loan, will be enough to pay the loan off completely in 10 years.
For instance, if you’re making $50,000 annually, and you have a $50,000 loan with a 5.3 percent interest rate, you’ll pay $538 a month consistently.
Loan holders on the Standard Repayment Plan accumulate less interest on their loans, so you’ll pay less overall. Good news!
$50,000 or less—you work in public service
A public service job is any job for a government or not-for-profit organization (tax exempt under section 501(c)(3) of the Internal Revenue code). If you think your job may qualify but you’re not sure, ask your employer or human resource representative.
If you work in public service for more than 30 hours a week—this can include two or more part-time jobs with combined hours—you have the option to apply for Public Service Loan Forgiveness. If you make consistent monthly payments for 10 years, the rest of your loan will be forgiven.
Choose one of the four federal repayment plans adjusted for income (income-based, income-contingent, pay-as-you-earn, or revised pay-as-you-earn). The majority of your payments should be from one of those plans, though you can make some payments on a Standard Repayment plan if you choose.
You don’t get credit towards forgiveness for paying more in a given month, so stick to a smaller monthly amount. The Revised Pay-As-You-Earn Repayment Plan caps the payments at 10 percent of your income—this might be your best bet.
If you’re making $25,000 a year on a loan with a 5.3 percent interest rate, your monthly payments under the Revised Pay-As-You-Earn Repayment Plan would start at $60 a month and increase as your income rises.
$50,000 or less—you’re struggling to make payments
Look into the four income-driven repayment options.
Since you have a modest amount of debt, consider larger payments if you can swing them. Larger payments mean a shorter repayment period and less interest for you to pay over time.
The two income-driven options with the largest monthly payments are:
The Income-Based Repayment Plan, which fixes monthly payments at 15 percent of your income if you borrowed on or before July 1, 2014 and 10 percent of your income if you borrowed after that date.
Assuming a $25,000 annual income and a $50,000 loan, new borrowers would pay $60 a month and borrowers who took out their first loans on or before July 1, 2014 would pay $90 a month.
The Income-Contingent Repayment Plan, which fixes monthly payments at either 20 percent of your discretionary income OR what you’d pay on a fixed repayment plan over the course of 12 years, adjusted for income (whichever is less). Monthly payments on a $50,000 loan at a $25,000 annual salary would be $219 under this plan.
Any remaining balance is forgiven after 25 years, but depending on your income, you may be paid off even sooner.
Over $50,000—you’ll be a high earner
Defer payments while you’re in school at least half-time. If you can afford it, however, it’s not a bad idea to get a head start on payments during school.
After graduation, you may want to pick the Graduated Repayment Plan while you look for work in your field. With this plan, payments start low and gradually increase over two years. Making payments right away allows you to keep interest from accumulating on the loan. (If the job search takes longer than expected, you can switch to an income-driven repayment plan temporarily.)
You also have the option to apply for a forbearance during a medical internship or residency. Though you won’t be making payments, your loan will still be accruing interest.
Once you find work, the Revised Pay As You Earn Plan will pay your loans off the fastest. Since monthly payments are adjusted for income, you’ll be paying a lot each month—but if you stay on track, you’ll be paid off in 10 years. Monthly payments for an annual salary of $100,000 and a $50,000 loan, for instance, will start at $685 a month on this plan and gradually rise as your salary rises. You could be paid off in 70 months (six years).
Over $50,000—you work in public service
Consider either the Pay-As-You-Earn or Revised Pay-As-You-Earn Repayment Plan.
Either way, you should take advantage of the Public Service Forgiveness Program for federal loans. The federal government recommends these plans for borrowers working in public service.
Outstanding debt is forgiven after 10 years of regular payments under the forgiveness program, regardless of the amount. What you’ll need to do is make monthly payments—at 10 percent of your discretionary income— consistently for 10 years. You’ll also need to be working in public service up to 30 hours a week for those years.
Monthly payments on a $25,000 salary for a $50,000 loan would start at $60 a month, with the potential for up to $65,000 in loan forgiveness (plus interest). You may want to consider consolidation or refinancing, if you have multiple loans. Check out Earnest – they provide some of the lowest rates available and specialize in student loan refinancing.
Over $50,000—you can afford payments
The Standard Repayment Plan will reduce the interest you end up paying overall.
You might want to consider the Extended Repayment Plan, which lowers monthly payments and increases the time you’ll have to repay. The downside: you’ll pay more interest.
On a $50,000 salary, your monthly payments on a $50,000 loan would be $301 for the life of an Extended Fixed Repayment Plan, and start at $221 (with gradual increases) for an Extended Graduated Repayment Plan.
The Extended Graduated plan will cost more in interest than the Extended Fixed plan. So if you can afford the higher payment to start off, go with the Extended Fixed plan.
Over $50,000—you’re struggling to make payments
Deferment could be a good option in the short term. During deferment, you don’t make payments and the government pays your interest. To qualify for deferment, you need to meet one of the following criteria:
- Prove unemployment or economic hardship
- Be enrolled in school at least half-time
- Be completing a period of public service which also qualifies for Perkins Loan discharge
- Be completing active duty military service
You can apply for deferment for up to three years.
Forbearance is more flexible. You don’t make payments during forbearance, but the interest will continue to accrue.
You can request a discretionary forbearance (given at the lender’s discretion) for economic hardship or illness. Mandatory forbearance can be granted in the following circumstances:
- You owe more than 20 percent of your monthly gross income
- You are completing a medical or dental residency
- You are performing teaching service in a low-income school
- You are in the National Guard but ineligible for military deferment
- You are in the US Department of Defense Student Loan Repayment Program
You’ll want to get on a repayment plan as soon as you’re able to make small payments. The more (and more at a time) you can repay, the less interest will climb.
The Pay-As-You-Earn Repayment Plan is one of the best options for low-income borrowers. Assuming a $25,000 annual salary, you could pay as little as $60 per month to start. And you could end up paying as little as $38,000 over the life of a $50,000 loan, since the remaining balance is forgiven after 20 years.
The Income-Based Repayment Plan for new borrowers—those who borrowed after October 1, 2007—is another good choice if you have a low income. Initial payments on a $25,000 salary would be $60, and you could pay $38,000 over the life of a $50,000 loan.
Paying back your student loans can seem like an insurmountable task—the amount seems so high, and the options available so numerous. But whether you’re a low-income worker in public service or a future doctor on track to make six figures, there’s a path for you.