how long does it take to pay off student loans?

[LNinlove]

Just one quick question...

I was wondering if anyone knows how long it will take to pay off all the student loans after school. I am going to be attending dental school. Hopefully I wont have anymore than 150k with me and my wife's undergrad, plus dental school. High side could possibly be 200k, but hopefully not. If anyone has any idea as to how long it generally takes a dentist to pay off their debt and what the monthly payments average...I would really appreciate it!

Thanks!

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[mpp]

What types of loans are they? What are the terms and interest rate? How much would you be willing to pay each month over and above the required monthly payment amount (if you want to pay back early)?

If you are just paying the standard terms of the loans then just see what those terms are. Stafford loans are usually 10 year terms (although you can change this by consolidating the loans). Private loans might have different terms. You can usually pay back loans early without penalty (always true for Stafford loans, usually true for private loans).

The monthly payment will depend on the interest rate, which for student loans is generally variable and changes from year to year (or sometimes more often). You can consolidate loans to get a fixed rate but that rate is variable up until the time you fix it so nobody know what that rate will be.

 

[labangel]

Standard repayment plans for gov't loans are spread over 10 years. You can also do extended payment, to stretch it out over 25 years, but what your paying in interest goes way up. There's also the graduated payment plan where you start out paying a lower amount that increases over time, to take into account that your starting out with a lower salary that will later go up. If you consolidate your loans, plans will vary. Some places will even let you go out to 30 years to repay, but what you'll end up paying in interest on 160K will end up being around an EXTRA 200K. FYI, the monthly payment on 160K at the max Stafford interest rate of 8.25% for the 10 year repayment plan is about $2000/mo and $1300/mo if you do the 25 year repayment plan.

 

[dry dre]

Paying back loans early can be foolish depending on the rate at which you consolidate.

For students graduating from med/dental school right now who can consolidate right now at 2.77%, the loan will basically be "interest free."

Of course there will be interest on the loan, but so long as inflation occurs at its historical rate, the money you will be paying the loan back (eg over the next 25 years) will be worth less than the money you borrowed.

You can currently get a rate better than 4% on a CD. If you owe on 2.77% but can earn 4.07%, it is smarter to pay the minimum on the loan and invest your surplus cash in the CD (CD given for example as it offers a guaranteed return).

What it comes down to is that for someone graduating/consolidating this year, it likely will be foolish in the long-run to pay off the loan any sooner than 25 years.

 

[LNinlove]

Awesome guys, thanks a ton for all the info! If anyone else has more ideas please let me know.