How Long Does It Take To Pay Off A Student Loan?

Upon graduation, a student leaves behind the books and starts looking at their future as well as the time frame of a student loan payoff. Some students manage to pay their way through school with parental assistance, grants and scholarships. Those who have loans have the additional burden of a student loan payoff. How long it takes to reach the student loan payoff date depends on different variables. However, there are certain components of the loans that do not change and can be used to figure out a student loan payoff date.
 

When does the student loan payoff start?

When the student loan payoff starts depends on how the funds were delivered. A federal student loan paid directly to a student will be deferred until after graduation. If the loan goes to the parents, repayments begin immediately. This shortens the overall time of the student loan payoff. Private loans to either students or parents have a grace period that starts counting down after graduation. Those who are concerned with the time frame of the student loan payoff need to pay attention to when the student loan payoff payments begin.

Payments on the loan start anywhere between six months and up to a year after graduation. A federal loan has a six month grace period whereas a private loan can be six months up to a year before the repayment of the loan starts. The grace period needs to be kept in mind when taking out the loan as this will impact when the student loan payoff period starts.

Student Loan Interest

Interest and fees will greatly affect the date of the final student loan payoff. The interest on the loan starts accruing the moment the loan is disbursed. This means is that even though there are no payments that have to be made now, a loan will have four years of interest added upfront to the principal balance. This makes it that much more difficult for a student to reach the student loan payoff date.

Interest on loans varies from lender to lender. A federal loan is anywhere from 4.5% to 7.9%. The amount is dependent on the type of loan that is taken out. A fixed rate of interest makes it easier to determine final student loan payoffs. Private student loans more often have teaser rates and variable interest rates that go up or down without notice. Some lenders also have origination fees, extending the date of the final student loan payoff.
 

Student Loan Deferment

A borrower may find that they are struggling to pay their loans and need to use the deferment option available to them. This is not a wise move as it can move the student loan payoff date up by years. Doing so creates a hardship that causes the loans to be around for much longer than they should have been. It is possible to use loan consolidation to keep the loans out of default and lower the payments. Again, this extends the final date of the student loan payoff, so be careful before taking this step.