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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).
Nov. 16, 2018
Loans, Student Loans
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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.

Roughly 6% of student loan borrowers — about 2.6 million people — had balances above $100,000 at the end of 2017, according to the Federal Reserve Bank of New York. In contrast, the average balance among class of 2017 bachelor’s-degree graduates with college debt was $28,650, according to The Institute for College Access and Success.

Six-figure student loan borrowers are likely facing monthly payments exceeding $1,000. With $100,000 in student loans averaging 7% interest, for example, you’d owe $1,161 per month on the standard plan.

Monthly payments on $100,000+ student loan debt

Loan balanceMonthly payment
Monthly payments assume a 7% average interest rate on the standard, 10-year federal repayment plan.

Alternatively, you could save money in interest, shave monthly payments or do both — even pay off your student debt faster — with a different repayment approach.

» MORE: 5 strategies for paying off medical school debt

3 ways to tackle 6-figure debt

The best strategy for you depends on your situation and future plans:

In a public service career? Pursue forgiveness

Public Service Loan Forgiveness 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. It’s designed to encourage workers to pursue relatively low-paying jobs like teaching and public interest law. It can also benefit medical professionals like doctors, who begin their careers with relatively low incomes.

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.

Use the government’s Loan Simulator to compare payments and forgiveness potential for all of the federal repayment plans based on your loan balance, income and family size. Then make sure you fully understand how Public Service Loan Forgiveness works before moving forward.

Have a high income or anticipate one? Refinance

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.

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

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

A few lenders offer refinancing for medical residents and dental residents and allow borrowers to make very low payments during residency.

Use a student loan refinance calculator to estimate how much refinancing could save you. Your savings potential ultimately depends on the interest rate you can qualify for based on your credit and financial situation.

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.

» MORE: Best student loan refinance companies

How much can refinancing save?

Can’t afford payments? Ride out repayment on IDR

Making payments on a federal income-driven repayment (IDR) plan won’t make you debt-free fast and likely won’t save you money. 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 and forgive any balance remaining at the end of that period. Keep in mind, though, that amounts forgiven through income-driven repayment are taxed as income.

Forgiveness isn’t certain. You could end up paying off your balance before you get forgiveness on an income-driven repayment plan, especially if your income increases.

If you reach a point where you can afford to make higher payments, remain on the income-driven plan but pay more than the minimum each month. Revisit refinancing to save on interest and become debt-free faster.

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