Here’s Your Average Student Loan Payment Under 6 Different Plans

May 14, 2020 Loans & Finance

Note that the federal government has suspended payments for federally held student loans through the end of September, due to the impact of the coronavirus outbreak. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.

*          *          *

The average student loan borrower faces a monthly payment ranging between $200 and $299.

The repayment plan a new grad chooses will ultimately decide their unique student loan payment amount and total interest paid. So if you’re concerned about keeping costs down, take a look at how different federal repayment plans can affect the average student loan payment.

The average student loan payment on different repayment plans
Scenario 1: Average student loan term and payment for Direct Loans
Scenario 2: Average student loan term and payment for Direct PLUS loans
Pros and cons of changing federal loan repayment plans
Find the right repayment plan for you

The average student loan payment on different repayment plans

The first thing to understand in this discussion is one simple concept: Lowering monthly payments equates to a longer repayment period, which results in higher total costs.

Of course, no two student loan borrowers are the same. One may need a lower monthly payment while they work their way up the career ladder. Another may be graduating into a six-figure salary and immediately have the cash for a larger monthly payment.

This is why different repayment plans exist.

So while federal loans are assigned a 10-year term under the Standard Repayment Plan, borrowers can change plans at any time and at no cost. However, be aware that changing your repayment plan can affect your monthly payment and total loan cost.

To better explain how a repayment plan affects monthly payments and your total cost for a loan, let’s walk through some examples.

Scenario 1: Average student loan term and payment for Direct Loans

The Department of Education (DOE) currently offers eight different repayment plans. For this example, we’re going to look at three of them using the DOE’s Loan Simulator. We’re also going to imagine that our hypothetical borrower is repaying $29,900 (the average debt for the Class of 2019) at 5.05% (the current interest rate for federal loans).

A couple of common denominators: For each loan type, we’re assuming the borrower earns an average income of $64,041 (the reported average for Michigan residents, according to 2017 tax returns). The federal government assumes a 2% annual growth in that salary over the life of the loan.

You can also use our monthly payment calculator to enter in personal characteristics and estimate your average student loan payment per month.

Standard Plan
Graduated Plan
Extended Plan

Monthly payment $318 $181 (first) and $542 (last) $176
Typical student loan term 10 years 10 years 25 years

1. Standard Repayment Plan

The most basic of all plans, this one has you making fixed monthly payments for a decade. The 10-year repayment period is one of the shortest of all the plans we’ll review.

Monthly payment: $318
Total interest owed: $8,244
Total payout: $38,144

2. Graduated Repayment Plan

Monthly payments under the Graduated plan progressively increase, ticking up every two years. They start lower and end higher, making this a good option for entry-level professionals expecting to earn more money over the life of their loans.

Monthly payment: $180 (first) and $540 (last)
Total interest owed: $10,508
Total payout: $40,408

The benefit of a lower monthly payment at the beginning ends up costing the borrower $2,264 more than the Standard Repayment Plan. On the downside, the plan is not eligible for Public Service Loan Forgiveness.

3. Extended Repayment Plan

Whereas the Standard and Graduated plans assume a 10-year term, the Extended Repayment Plan does just that — extends your average student loan term. You can spread your payments out for up to 25 years and elect to set them as fixed amounts or graduating over time.

One catch is that you need to have at least $30,000 in combined federal student loan debt to be eligible for this plan. For the following numbers, we bumped up our hypothetical borrower’s debt from $29,900 to an even $30,000 — and assumed that they preferred fixed payments.

Monthly payments: $176
Total interest owed: $22,976
Total payout: $52,876

The monthly payment is nearly half the amount you would pay under the Standard Repayment Plan. This gives young professionals much more breathing room on a month-to-month basis.

However, the borrower would have to decide if that’s worth paying about $14,732 more over the life of the loan. On top of that, the Extended Plan is not compatible with pursuing PSLF.

Scenario 2: Average student loan term and payment for Direct PLUS loans

The Direct PLUS Loan is common among graduate and professional students and parents. Our hypothetical borrower in this scenario also has $29,900 to repay — but at the higher interest rate currently affixed to PLUS Loans, 7.08%.

Also, we’re going to use Florida’s 2018 average household income of $55,462, assuming a 3.5% pay increase year over year. That’s closer to the historical average.

The amount a borrower earns can significantly affect which repayment plan is the most cost-effective choice. According to the Bureau of Labor Statistics, the median pay for high school teachers is $60,320 in 2018. For dentists, the 2018 median pay is $156,240. With very different salaries, a teacher and dentist are liable to make different decisions when choosing a repayment plan.

As you’re considering income-driven plans, consider your earnings potential to make sure you can stomach the most expensive of these options.

Below we cover three repayment plans that offer loan forgiveness after 20 or 25 years. With low monthly payments, these plans could be good options for those borrowers who are seeking eventual Public Service Loan Forgiveness and want to keep their monthly payment low.

REPAYE
IBR
ICR

Monthly payment $311 (first) to $444 (last) $311 $309
Typical student loan term 20 or 25 years 20 or 25 years 25 years

1. Revised Pay As You Earn (REPAYE)

Under REPAYE, your monthly payments would be 10% of your discretionary income, which is recalculated annually to reflect your salary and family size. Here we assume a family size of one.

Monthly payment: $311 (first) to $444 (last)
Total interest owed: $12,026
Total payout: $41,926

Compared to the Standard Repayment Plan, your monthly payments will end up much higher, allowing you to pay less interest and zero your balance about six months early.

2. Income-Based Repayment (IBR)

On the Income-Based Repayment plan, your monthly student loan payments are capped at 10% or 15% of your discretionary income, depending on when the loans were disbursed. Your student loans will also have a 20- or 25-year repayment term.

Monthly payment: $311
Total interest owed: $12,689
Total payout: $42,589

With this plan, your monthly payment would be smaller than on the Standard Repayment Plan. However, a longer repayment period means you’ll pay $4,445 more in interest than you would on the standard plan.

3. Income-Contingent Repayment (ICR)

The payment for ICR would be either 20% of your discretionary income or the payment on a fixed, 12-year payment term — whichever is most cost-effective. In this example, the borrower has a $309 monthly payment.

Monthly payment: $309
Total interest owed: $14,563
Total payout: $44,463

While the borrower’s total payout is only a bit higher as it would be under the previous two income-driven repayment plans, the low, static payment could make it more attractive.

Pros and cons of changing federal loan repayment plans

If you’ve been inspired to switch your federal loan repayment plan because of the benefit of a faster payoff or lower monthly payment, you’ll have to weigh other factors into your decision. Like most measures you can take with your student debt, there are pros and cons to consider.

Pros
Cons
It’s free and relatively easy to make the switch: You just have to request it from your federal loan servicer Enrolling in IDR requires recertifying your income and family size annually
A new repayment plan could deliver a lower monthly payment Extending the average student loan term with a new repayment plan will allow more interest to accrue on your balance
You could use a Direct Consolidation Loan to qualify for your desired repayment plan Not all loan types are eligible for all repayment plans
Switching plans could make you eligible to pursue PSLF or other programs Any forgiven amount could be subject to income tax

Find the right repayment plan for you

Whether you have public or private loans, the same is true: What you owe after receiving your diploma is less than what you’ll actually pay by your 10-year reunion.

Want to see how your specific loans could be affected by different repayment plans? Use our suite of calculators to find out, or seek out repayment advice from the right sources.

Interested in refinancing student loans?
Here are the top 5 lenders of 2020!

LenderVariable APREligible Degrees 
Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Laurel Road.
Laurel Road Disclosures

Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

ANNUAL PERCENTAGE RATE (“APR”)
This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

FEE INFORMATION

There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.

LOAN AMOUNT

For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
For eligible Associates degrees in the healthcare field (see Eligibility & Eligible Loans section below), Lender will refinance up to $50,000 in loans for non-ParentPlus refinance loans. Note, parents who are refinancing loans taken out on behalf of a child who has obtained an associates degrees in an eligible healthcare field are not subject to the $50,000 loan maximum, refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for more information about refinancing ParentPlus loans.

ELIGIBILITY & ELIGIBLE LOANS

Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).

Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment.

All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.

For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.

INTEREST RATES

The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.

DISBURSEMENT OPTIONS

The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.

POSTPONING OR REDUCING PAYMENTS

After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.

We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.

We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.

If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of March 4, 2020 and is subject to change.

2 Important Disclosures for Splash Financial.
Splash Financial Disclosures

Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.

The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.

You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.

Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
The Rate will not change during the term. Repayment examples are for illustrative purposes only. The following Fixed Rate examples are based on a $10,000 loan amount using the lowest APR for each application term listed above. All student loan rates used in calculating the examples are shown without the autopay discount (.25%). There are no application or origination fees, and no prepayment penalties. The monthly payment for a sample $10,000 loan with an APR of 2.88% per year for a 5-year term would be $179.15. The monthly payment for a sample $10,000 loan with an APR of 3.40% for a 7-year term would be $134.17. The monthly payment for a sample $10,000 loan with an APR of 3.45% for a 8-year term would be $119.35. The monthly payment for a sample $10,000 with an APR of 3.89% for a 10-year term would be $100.72. The monthly payment for a sample $10,000 with an APR of 4.18% for a 12-year term would be $88.43. The monthly payment for a sample $10,000 loan with an APR of 4.20% for a 15-year term would be $74.98. The monthly payment for a sample $10,000 loan with an APR of 4.51% for a 20-year term would be from $63.32.

Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
Variable APRs and amounts subject to increase or decrease. Variable rates are indexed to the one-month LIBOR rate. The following Variable Rate examples are based on a $10,000 loan amount. Repayment examples are for illustrative purposes only. All student loan rates below are shown without the autopay discount (.25%). There are no application or origination fees, and no prepayment penalties. The monthly payment for a sample $10,000 loan with an APR of 2.01% per year for a 5-year term would be $175.32. The monthly payment for a sample $10,000 loan with an APR of 4.00% for a 7-year term would be $136.69. The monthly payment for a sample $10,000 loan with an APR of 2.09% for a 8-year term would be $113.21. The monthly payment for a sample $10,000 with an APR of 4.25% for a 10-year term would be $102.44. The monthly payment for a sample $10,000 with an APR of 2.67% for a 12-year term would be $81.24. The monthly payment for a sample $10,000 loan with an APR of 3.44% for a 15-year term would be $71.19. The monthly payment for a sample $10,000 loan with an APR of 4.75% for a 20-year term would be from $64.62. The monthly payment for a sample $10,000 loan with an APR of 5.14% for a 25-year term would be from $59.28.

 

3 Important Disclosures for SoFi.
SoFi Disclosures
Student loan Refinance: Fixed rates from 3.75% APR to 6.57% APR (with AutoPay). Variable rates from 3.50% APR to 6.57% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 3.50% APR assumes current 1 month LIBOR rate of 0.93% plus 3.07% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

4 Important Disclosures for Earnest.
Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.21% APR (with Auto Pay) to 8.77% APR (with Auto Pay). Variable rate loan rates range from 3.21% APR (with Auto Pay) to 8.72% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of May 8, 2020, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 5/08/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on our student loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.

5 Important Disclosures for CommonBond.
CommonBond Disclosures

Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.8100000000000002% effective April 10, 2020.

1.99% – 6.65%1 Undergrad & Graduate

Visit Laurel Road

1.99% – 7.10%2 Undergrad & Graduate

Visit Splash

3.50% – 6.67%3 Undergrad & Graduate

Visit SoFi

3.21% – 8.72%4 Undergrad & Graduate

Visit Earnest

3.22% – 6.05%5 Undergrad & Graduate

Visit CommonBond

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

The post Here’s Your Average Student Loan Payment Under 6 Different Plans appeared first on Student Loan Hero.