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Repaying student loans on a 10-year plan

A simple look at two ways to repay your student loans in a decade. The right one for you depends on your circumstances.

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Let’s take a look at repaying your student loans on a ten year schedule.

There are basically two approaches to achieving this: the standard ten-year repayment plan and the graduated repayment plan. With both of these plans, your payments are going to be established before you begin repaying your loan. The difference is, on the standard plan, your payments stay the same over the course of your repayment. With the graduated plan, your payments start out low and increase over time.

So, say you get a steady job with a good salary right after leaving school. You may also be living with your parents and keeping your expenses low so you can focus on paying off your loans.

In any case, let’s say you’ve got thirty thousand dollars in combined student loans… And the interest rate on all of your loans is four percent.

First let’s take a look at the standard ten-year repayment plan.

Using a loan calculator at, we find that your monthly payment in this situation is going to be about… three hundred five dollars for ten years.

Over the ten years on this plan, you’ll end up paying about… thirty six thousand four hundred fifty dollars total – that’s six thousand four hundred fifty dollars in interest after subtracting your original principal of thirty thousand dollars.

Now, let’s compare this to graduated repayment. With graduated repayment, your monthly payments will start out lower, and then increase over time. Looking at a loan calculator with our previous numbers, you might start with one hundred seventy dollars a month in this scenario, and then increase to about five hundred ten dollars toward the end. This could be a good option if you are in a career with a low salary to start that you expect to increase significantly in a few years. However, because you’re paying less for the first couple years, very little of your first monthly payments will go towards paying off your principal. And for the first few years you might just be paying the interest on your loans. As your principal stays larger, more interest will accrue throughout the beginning of your loan meaning you will end up spending more over the life of your loan than in a standard ten-year plan.

So looking again at our example…

in the end, you’ll pay around eight thousand fifty dollars in interest with a graduated repayment plan, compared to the standard ten-year plan, where you’re interest is six thousand four hundred fifty dollars. So you’re paying about sixteen hundred dollars more over the life of the loan.

So, you can see, there are trade-offs: being able to pay less at first means you'll end up paying more in the long run, but the additional expense may worth a lower initial payment. Either way, by doing a little bit of research, you can figure out which is the best choice for you.

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