How to pay off a student loan in 10 years

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Paying off student loans in 10 years could free up money for other goals. Here’s how. (Shutterstock)

Paying off student loan debt within 10 years is doable and can help you become debt-free sooner so you can achieve other financial goals.

Several accelerated repayment options exist, and if you qualify for student loan forgiveness, you can even eliminate debt without having to pay off the entire balance.

Refinancing is another option for paying off your student loans. By visiting Credible, you can learn more about refinancing student loans and compare rates from several private student lenders.

Here are four ways to pay off student loans in 10 years:

Stay on the Standard Refund Plan, if eligible

The Standard Repayment Plan is the default repayment plan for most federal student loans and has a repayment term of 10 years. Making payments under this repayment plan for the full term will pay off your student loans within the desired 10-year time frame.

For private student loans, there is no standard term. Instead, terms typically range from five to 20 years, depending on the lender and the loan term you chose when applying.

But if you have a longer private loan term, you don’t have to stay with that term forever. Private student loan refinancing could be a way to adjust your monthly payments and choose a term of less than 10 years.

What to know about income-contingent repayment plans

Income-contingent repayment (IDR) plans set your monthly payment amount based on your income and household size. After 20 to 25 years, your remaining balance may be canceled, depending on the IDR plan you are enrolled in.

Making payments under an IDR plan won’t pay off your loans within 10 years, but it could give you temporary payment relief if you’re struggling to keep up with the standard 10-year repayment plan. And you can always increase your payments once your financial situation improves.

The U.S. Department of Education offers four income-based reimbursement plans:

  • Revised Pay As You Earn Reimbursement Plan (REPAYE Plan) — Typically sets payments at 10% of your Discretionary Income. Direct subsidized, non-subsidized, PLUS loans taken out by the student and consolidation loans that do not include loans made to parents are eligible.
  • Pay As You Earn Reimbursement Plan (PAYE plan) — Typically sets payments at 10% of your Discretionary Income, and payments are never higher than they would be under the standard repayment plan. Direct subsidized, non-subsidized, PLUS loans taken out by the student and consolidation loans that do not include loans made to parents are eligible. To qualify, you must be a new borrower who took out your first student loan after October 1, 2007 and your first direct loan after October 1, 2011.
  • Income Based Reimbursement Scheme (IBR Scheme) — Generally sets payments at 10% of your discretionary income if you borrowed after July 1, 2014 and 15% of your income if you borrowed before July 1, 2014. Subsidized, unsubsidized, PLUS student-initiated direct loans and consolidation loans that did not include loans made to parents are eligible. In addition, subsidized and unsubsidized Federal Stafford Loans (FFEL), student-borrowed FFEL PLUS loans, and FFEL consolidation loans that do not include parent loans are eligible.
  • Income Contingent Repayment Plan (ICR Plan) — Generally sets payments at 20% of your Discretionary Income or what you would pay over a 12-year period, whichever is lower. Direct subsidized, non-subsidized, PLUS loans taken out by the student and consolidation loans that do not include loans made to parents are eligible.

If you want to refinance private student loans, you can easily compare prequalified rates from several lenders using Credible.

Find out if you qualify for student loan forgiveness

The federal government offers two popular loan forgiveness programs – the Civil Service Loan Forgiveness and the Teacher Loan Forgiveness. Here’s how both work:

Cancellation of civil service loans

Civil Service Loan Waiver (PSLF) is a program that forgives federal loans after you make 120 qualifying payments while working full-time at an eligible nonprofit or government organization.

Direct loan payments are generally the only ones that count for the PSLF. But the government currently accepts previous payments you made on other federal loans as long as you consolidate them into a direct consolidation loan. This PSLF waiver expires when the COVID-19 student loan relief measures end on October 31, 2022.

Teacher loan forgiveness

The Teacher Loan Forgiveness Program cancels your student loans if you work for five years in a low-income school or education agency.

The maximum loan amount forgiven is up to $17,500 on Direct Loans and Federal Stafford Loans. To be eligible, you must have a bachelor’s degree and a state teaching certificate.

Pay more than the minimum and increase payment frequency

Increase your student loan payments and making payments every two weeks or every additional month can help you reduce your debt faster.

Remember that every little bit counts, so even if you only have $100 more per month to spend, investing that extra money in debt could speed up the repayment process.

For example, if you owe $30,000 in student loans with an interest rate of 6.8% and a term of 15 years, increasing your payments from $266 to $366 per month extends your repayment date. from August 2037 to November 2031.

That extra $100 could get you out of debt six years faster.

Refinance your student loans

Refinance your student loans is the process of paying off your old loan or old loans with a new private loan with different terms. Refinancing could lower your interest rate, which could reduce your payments.

Plus, when you refinance, you can choose a shorter loan term that allows you to pay off the debt in 10 years or less. When applying for refinancing, lenders look at these factors to determine if you qualify and with what interest rate:

  • Credit – You usually need good credit to qualify for student loan refinancing, but great credit could help you get lower interest rates.
  • Revenue – You will need to prove that you have sufficient income to meet the payments. Some lenders also have minimum income requirements.
  • Debt-to-income ratio (DTI) — Your DTI ratio corresponds to the share of your gross monthly income devoted to paying off your debts. DTI ratio requirements may vary by lender, but you may need a DTI ratio of 50% or less to qualify.

If you have less than perfect credit, applying with a co-signer could help improve your chances of approval and get a better rate.

But before you refinance federal student loans, consider that turning them from federal loans to private student loans will wipe out the advantages you have with federal loans.

For example, IDR plans and rebate programs are not available with private loans. If you think you might qualify for loan forgiveness or are concerned about job security and your ability to make payments, sticking with federal loans may be a better choice.

Instead of refinancing your federal loans, you could consolidate student loans into a direct consolidation loan to combine several payments into one, then you could make additional payments to speed up the debt repayment period.

To start refinancing your student loans, visit Credible and compare prequalified rates from several lenders.

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