Average Time to Repay Student Loans: 2023 Statistics & Data

by Imed Bouchrika, Phd
Chief Data Scientist & Head of Content

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For many students, pursuing a college education goes hand in hand with taking on a huge amount of student debt. Unfortunately, carrying student debt has been shown to have negative consequences on a person’s financial state. This is especially since the average time to repay student loans clocks in at 20 to 30 years.

Statistical data further indicates that the state of student debt impacts a nation’s economy to a certain extent. All these negative effects are even more unfortunate in light of the fourth industrial revolution, the advanced technologies of which may be easier to master for those who have a college degree.

Over 40 million Americans are affected by the student debt crisis. This article delves further into the details of the crisis: the average time to repay student loans, the history of the crisis, the people who are affected the most, and lastly, the proposed solutions.

Repaying Student Debt Table of Contents

1. How Long Does It Take to Repay Student Loans?
2. How Did U.S. Student Loans Become a $1.6 Trillion Crisis?
3. Who Owes the Debt?
4. Is Debt Forgiveness Possible?
   

How Long Does It Take to Repay Student Loans?

The issue of student loan debt in America, which is now widely recognized as a national crisis, is prompting many students to weigh college cost and benefits. One of the essential questions that come into their minds is “How long will it take to repay my student loans?”

A survey with 61,000 respondents revealed that it takes borrowers more than two decades to pay student loan debt, on average. Among individuals who count towards the college drop out rate and did not attain a degree, the average time to pay off student loans is 17 years.

In comparison, individuals with graduate degrees—master’s or PhD degrees—take longer to pay off their student debt. For these students, repayment usually lasts 23 years. The above averages are well within the terms of repayment plans, which range from 10 to 30 years. Below is the list of options for students, sourced from the website of the Federal Student Aid. So, the answer to the “how long does it take to pay off student loans” question really depends on many different factors, from financial aid terms and the ROI for a particular degree.

Standard Repayment Plans: 10-30 years

Graduate Repayment Plans: 10-30 years

Extended Repayment Plans: 25 years

Income-Sensitive Repayment Plan: 15 years

Income-Driven Repayment Plans: 20-25 years

• Revised Pay as You Earn (REPAYE) Repayment Plan: 20 years (for undergraduate study) or 25 years (for graduate study)
• Pay as You Earn (PAYE) Repayment Plan: 20 years
• Income-Based Repayment (IBR) Plan: 20 years (new borrowers on or before July 1, 2014) 25 years (not new borrowers on or after July 1, 2014)
• Income-Contingent Repayment (ICR) Plan: 25 years

According to the National Center for Education Statistics (NCES), non-completers are more likely to default or stop paying for 270 days than people who attained bachelor’s degrees. Of non-completers, only 18.7% were able to pay off without defaulting 12 years after they started college. Meanwhile, in the same amount of time, 50% of completers were able to pay off without defaulting.

Majority of the student debt literature point toward institutional-based rather than individual-based solutions. After all, if the burden is to fall on individuals, then student loan debt is no different from any other debt.

Nevertheless, there are calculators available online that help individual borrowers estimate the time it will take them to repay loans. Here are some tools that you can use to estimate the average student loan payment time:

• Loan Simulator by Federal Student Aid
• Student Loan Calculators by Warren Democrats
• Student Loan Payoff Calculator by Nerd Wallet

How Did U.S. Student Loans Become a $1.6 Trillion Crisis?

In 1958, the first student loan programs were instituted through the National Defense Education Act (NDEA). The U.S. Congress passed NDEA into law to aid the nation’s technological advancements. Russia’s launch of Sputnik a year prior especially prompted the decision.

In 1965, U.S. started offering need-based loans and grants to students through the Higher Education Act. This law authorized several student financial assistance programs, including Pell Grants, TEACH Grants, Federal Family Education Loan (FFEL) Program, and Direct Loan Program, among others.

Between 1980 and 1985, the Reagan administration cut the student aid budget by about 25%. With the decrease of state support, individuals needed to take on more of the burden of education costs. Many experts claim that the high cost of education in America today, and consequently the rise of student loans, can be traced back to this era.

During the Great Recession in 2008, people looked at college education as a way to build marketable skills. Both enrollment and tuition cost reached a new high then.

Today, the nation is facing another recession, brought about by the COVID-19 pandemic. Only this time, college has become more unaffordable and, not surprisingly, many people are questioning the benefits of college education.

In 2019, more than six out of 10 college students graduated with debt. They owed an average of $28,950, 56% higher than the average student loan debt of graduates in 2004.

The collective student debt of $1.6 trillion continues to rise and is projected to reach $2 trillion by 2024 and $3 trillion by 2038 (SavingforCollege.com).

Who Owes the Debt?

Over 45 million or 20% of the American adult population carry student debt. Some argue that its being both a systemic failure and having negative consequences on the national level make it every American’s problem.

The discussion of indebtedness in relation to attaining a university education should not be financially abstracted; rather, it should be grounded on the social and economic realities from which it emerges (Feige & Yen, 2021).

Every systemic failure has its own intersectional impact. Here is a quick look:

• Student debt is a multigenerational problem. People who are aged 50-61 have the largest average student debt among all age groups, amounting to $43,333 per borrower; closely followed by people aged 62 and above, with an average debt of $43,182.
• Student debt is a civil rights issue. The numbers say it all: 95% of an average black borrowers’ total debt remain unpaid 20 years after starting college, 49% of black borrowers have defaulted, and 40% of black borrowers drop out of college and struggle to pay off their loans
• Student debt reinforces the gender wealth gap. Two-thirds of all outstanding student debt is owed by women.
• Student debt perpetuates wealth inequalities. First-generation college students are more likely to incur debt than students with parents who are college graduates.

Is Debt Forgiveness Possible?

The approval rate for debt forgiveness has been historically low. Only 26% has been approved for Borrower Defense to Repayment, 2.1% for Public Service Loan Forgiveness, and 0.0008% for Income-Driven Repayment Forgiveness.

Last March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was passed by the U.S. Congress. It halted the collection of payments for student loans from March 30, 2020 to September 31, 2021. A coalition of 128 organizations submitted a letter urging the Biden administration to extend the student loan payment pause.

There are a lot of ongoing discussions on student debt cancellation. It is one of the many proposals for solving the student debt crisis. The Aspen Institute’s Expanding Prosperity Impact Collaborative listed 16 proposals sorted into the following categories:

1. Income-Driven Repayment (IDR) reforms
2. Targeted cancellation
3. Cancellation capped at $10000-$50000 per borrower
4. Full cancellation.

Right now, the discussion is gearing toward the third option. Although many activists and supporters of borrowers are still pushing for the last one.

The Center for Law and Social Policy enumerated 10 reasons to cancel student debt. The list includes its significant intergenerational, anti-poverty effects and its potential to advance gender and racial equity.

The opposition contends that canceling student debt will benefit the wealthy and will not be fair to students who worked hard to pay their debts.

Now What?

Having to take decades to pay student loan speaks a lot about American education being a costly privilege. The American society is deciding to put students financially at risk just to be able to acquire an education. A commentary dubbed college as “the riskiest expenditure numerous households will make” (Popescu, 2017). There is a lot of evidence that student debt derails the life of borrowers and affects them and their families in a negative way, especially as average student loan length is longer than a decade and a half.

Clearly, society has to take a step toward solving the problem collectively, one that will be mutually beneficial to all parties. Meanwhile, students who don’t want to spend decades paying off student debt can also enroll in high-paying majors to maximize their earning potential.

References:

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• Statista. (2021, May 5). Tuition cost and student loan amounts, by institution type U.S. 2019/20. https://www.statista.com/statistics/237924/tuition-costs-vs-student-loans-in-the-us/
• The Higher Education Act of 1965 (HEA) Definition. (n.d.). Investopedia. Retrieved July 15, 2021, from https://www.investopedia.com/terms/h/higher-education-act-of-1965-hea.asp
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• U.S. Department of Education, Office of Federal Student Aid. “Choose the Federal Student Loan Repayment Plan That’s Best for You.” https://studentaid.gov/manage-loans/repayment/plans