I’m 28, my wife is 25, and we’re both on the ‘Standard’ repayment plan for our student loans. We have about 10 years left, paying $445 combined every month. My balance is $18,500 at $228/month, and hers is $20,700 at $217/month. Interest rates range between 3% and 5.5%.If we switch to ‘Graduated,’ our payments could drop to around $150-$175 total for now, freeing up a good chunk of money each month. We make about $130K a year, but we live in an expensive area. We expect to make more in the next 5-10 years, but who knows?I’m just worried about interest piling up and ending up paying way more in the long run. Is it smarter to stick with the $445 monthly payment, or should we take the lower payment now and deal with higher payments later?
Standard saves you money on interest. Any other plan stretches things out, which means more interest in the long run.
Harmon said:
Standard saves you money on interest. Any other plan stretches things out, which means more interest in the long run.
Yeah, that’s what I figured. But should I worry too much about the extra interest? Since some of it is tax-deductible, wouldn’t it make sense to have more cash on hand every month?
@Skylar
It depends. If you invest that extra cash and earn more than your loan interest, it could work out. But if you’d just spend it, then you’re better off keeping the higher payments to avoid paying more interest over time. And the tax deduction is small—doesn’t make up for paying all that extra interest. If your loan rate is 6%, you’d need an investment return higher than that, which isn’t guaranteed unless you take a big risk.
I always suggest the lowest payment possible on paper, but pay extra like it’s a standard plan. That way, you have wiggle room if times get tough. If you make just the minimum, you’ll pay more interest, but it’s about flexibility. If money gets tight, you aren’t stuck with a high payment. When things are good, you can pay more and get ahead. It’s all about keeping your options open.
Have you tried the loan simulator on studentaid . gov? It’ll show you exactly how much you’ll pay over time with different plans. Might help you decide.
With those interest rates, graduated is absolutely the way to go. No question.
There are other repayment plans out there too, but people don’t talk about them much.
Breck said:
There are other repayment plans out there too, but people don’t talk about them much.
Like what? You mean SAVE? I don’t think our payment would drop with SAVE because of our income.