How to Pay Off $100,000+ in Student Loans

Use a tactic that saves money (forgiveness), lowers payments (income-driven repayment) or does both (refinancing).

Teddy Nykiel, Ryan LaneMay 19, 2020

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Six-figure student debt isn’t the norm. So when you’re facing a student loan balance of $100,000 or more, the standard, 10-year federal repayment plan may not be right for you.

Standard monthly payments will likely exceed $1,000 with that much debt. But you could save money in interest, decrease monthly payments or do both — even pay off your student debt faster — with a different repayment approach.

The best strategy is usually the one that costs the least overall, provided you can afford the monthly payments. Here are options for paying off $100,000+ in student loans, and how to decide which is right for you.

Pursue student loan forgiveness

Best for: Borrowers in low-earning public service careers.

Students with advanced degrees are often highly indebted. Specific loan forgiveness programs are in place for many of these professionals — including nurses, teachers, dentists, lawyers and doctors.

Public Service Loan Forgiveness cuts across all jobs. It forgives borrowers’ remaining federal student loan balance tax-free if they work for the government or a 501(c)(3) nonprofit while making 10 years’ worth of monthly payments.

PSLF is designed to encourage workers to pursue relatively low-paying jobs. But if your income is high enough, PSLF won’t help you.

To get PSLF, you must make at least some qualifying payments on an income-driven repayment plan, and those payments must be lower than what you would pay on the standard, 10-year plan. Otherwise, you’ll have paid off the debt by the time you’re eligible for forgiveness.

Refinance student loans

Best for: Borrowers who have a high income or anticipate one.

The higher your student loan balance, the more you can save by refinancing.

With $200,000 in student debt averaging a 7% interest rate, for example, you’d save $200 a month and more than $24,000 total by refinancing to a 5% rate — assuming you had 10 years remaining before refinancing and maintained the same repayment schedule.

If your income is relatively low but you expect it to increase substantially, make payments on an income-driven repayment plan until you can qualify for a lower rate. Once you refinance federal loans, they’re no longer eligible for income-driven repayment.

To qualify for refinancing, you typically need good credit and enough income to cover your expenses, other debts and full student loan payments.

How much can refinancing save?

Ride out income-driven repayment

Best for: Borrowers who can't afford payments, or who will pay the least overall under this option.

Making payments on a federal income-driven repayment (IDR) plan won’t make you debt-free fast. But if you’re strapped for cash, switching to one of the government’s four income-driven repayment plans will make payments more manageable.

Payments could be as low as $0, depending on your income. They’re often not large enough to cover all of the interest as it accrues, meaning your balance could increase.

Income-driven plans also extend your repayment schedule to 20 or 25 years, but forgive any balance remaining at the end of that period. Those amounts are taxed, though, creating a so-called "student loan forgiveness tax bomb."

Forgiveness isn’t certain. You could pay off your balance early, especially if your income increases.

But if you stick it out to the end of your repayment term, income-driven repayment may be the least expensive option — even with the additional taxes. That will likely only be the case if your income stays low or your debt is in the high six figures.

Monthly payments on $100,000+ student loan debt

Here's how monthly payments would initially stack up for different six-figure loan amounts. The income-driven payments are set at 10% of discretionary income for someone earning $100,000 with a family size of one.

Loan balance

Standard payment

Refinanced payment

Income-driven payment

$100,000

$1,161

$1,060

$677

$200,000

$2,322

$2,121

$677

$300,000

$3,483

$3,182

$677

$400,000

$4,644

$4,243

$677

$500,000

$5,805

$5,303

$677

Assumptions: The standard monthly payment interest rate is 7%; the refinanced interest rate is 5% interest rate.

And here's how much you would repay overall under each option:

Loan balance

Standard payment

Refinanced payment

Income-driven repayment

$100,000

$139,330

$127,279

$181,825

$200,000

$278,660

$254,557

$367,240

$300,000

$417,990

$381,836

$425,179

$400,000

$557,321

$509,114

$481,429

$500,000

$696,650

$636,394

$537,679

Assumptions: Standard and refinanced loan term, 10 years; IDR term 25 years. IDR totals account for forgiven amounts at a tax rate of 30%, and payments assume annual income increases of 3%.

In this example, qualifying for Public Service Loan Forgiveness would mean repaying $93,486 overall — no matter the amount borrowed.

Do the math to compare refinancing vs. income-driven repayment for your own situation. The government’s Loan Simulator details federal options, while a student loan refinance calculator can let you estimate potential refi savings.

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