How To Pay Off $200,000 in Student Loans

The majority of student loan borrowers owe less than $25,000. This can leave borrowers with six-figure education debt worried that typical student loan advice may not apply to their situation. And the number of borrowers with high education debt is growing. As of 2023, there are one million federal student loan borrowers who owe $200,000 or more, according to StudentAid.gov. 

The good news is that even though paying off such a large balance can be difficult, it’s not impossible. You can refinance your loans or add a cosigner to improve or lower your interest rate. Here are some strategies that can help.

1. Refinance your loans

Student loan refinancing is a tried-and-true method of reducing the total lifetime cost of your student loans. With refinancing, a borrower takes out a new loan to pay off their existing student loans. The new loan typically has different terms, including interest rate and length of repayment.

Borrowers carrying high-interest student loans can benefit from refinancing to a loan with a lower interest rate, since it will lower the cost of borrowing. With a lower interest rate, less interest accrues on your debt each month. Borrowers with $200,000 in student loans can benefit from even a small interest rate reduction, since large balances accrue interest so quickly.

Before you look into refinancing your $200,000 in student loans, make sure you understand exactly what this process will mean for your student debt.

Types of loans you can refinance

Both private and federal student loans are eligible for refinancing. However, it’s important to understand that refinancing federal student loans means losing out on guaranteed federal student loan protections. These protections include:

• Deferment and forbearance options
• Multiple repayment plans, including Income-Based Repayment
• Paths to loan forgiveness

Learn More: How to Consolidate Your Student Loans

Interest rates and terms

The interest rate of your loan is one of the biggest determinants in how much your student loans will cost you over time. 

If you have federal student loans, your interest rate is fixed and set by Congress for each academic year. You will have the same interest rate as every other borrower taking out federal loans at the same time. 

For private student loans, your interest rate is generally set based on your credit profile. Refinancing your student loans to reduce your interest rate can save you a lot of money over time. 

Check Out: Student Loan Refinance Calculator: Should I Refinance?

For example, let’s say you have $210,000 in student loans with an interest rate of 7.5% and a 10-year repayment term. Here’s how much you can save if you refinance the loan to one with a 4.25% interest rate and a 15-year repayment term:

In this case, the lower interest rate on the refinanced loan will save you money monthly and over the life of the loan, even with an extended repayment term.

If you decide to refinance your student loans, be sure to consider as many lenders as possible to find the right loan for your situation.

2. Add a cosigner to improve your interest rate

Refinancing can make a dramatic difference in how much you pay for your student loans — provided you can reduce your interest rate. But to qualify for refinancing, you typically need good to excellent credit — which means a score of 700 or higher. While some lenders offer refinancing for borrowers with bad credit, these loans typically come with higher interest rates.

If your credit is less-than-perfect, adding a creditworthy cosigner to your refinancing loan can help you qualify for a lower interest rate. A cosigner can be anyone with good credit. This might be a parent, another relative, or a trusted friend who is willing to share responsibility for the loan. But remember, if you can’t make your payments, the cosigner is on the hook for paying them.

Even if you don’t need a cosigner to qualify for the loan, having one might get you a lower interest rate than you’d get on your own. If applying with a cosigner helps you get a better interest rate, you could save money on interest charges over the life of your loan.

3. Sign up for an income-driven repayment plan

Federal student loan borrowers have the option of signing up for an income-driven repayment (IDR) plan. 

There are several different IDR plans available to federal student loan borrowers. Under an IDR plan, your repayment term is extended to 20 or 25 years (depending on the plan) and your monthly payment is set as a percentage of your discretionary income. This means some borrowers may have a $0 monthly payment requirement.

After making 20 or 25 years of qualifying monthly payments, any remaining balance on your loan is forgiven. While the amount forgiven is considered taxable income (which can affect your taxes in the year your remaining balance is forgiven), an IDR plan can provide substantial relief to borrowers struggling to repay their loans.

Here’s how the four main IDR plans compare to a few other federal repayment plan options:

Decide on a repayment strategy

Opting for an income-driven repayment plan can potentially save you money on your monthly payment and over the life of the loan. However, it’s helpful to compare how much you will pay using a standard repayment plan vs. the IDR plans.

Let’s assume you have $210,000 in federal student loan debt: $55,000 in federal Direct Unsubsidized Loans at a 4.99% interest rate, and $155,000 in federal graduate PLUS loans at a 7.54% interest rate. You are currently earning $85,000 per year, and you expect your income to increase by 5% each year.

According to the StudentAid.gov loan simulator, here’s how the standard repayment plan compares to the IDR plans for your $210,000 in debt:

4. Pursue student loan forgiveness

In addition to the loan forgiveness built into the federal income-driven repayment plans, there are other paths to federal student loan forgiveness. Unfortunately, private student loan forgiveness does not exist. So it’s important to carefully consider your option for federal loan forgiveness before refinancing your federal student loans into a private loan.

However, there are several programs that will pay all or part of your outstanding student loans after doing work in a particular industry, even if your outstanding debt is from private loans. Here are some of the most common paths to loan forgiveness:

• Public Service Loan Forgiveness (PSLF): Under this program, federal student loan borrowers receive loan forgiveness after working 10 years at a qualifying organization and making 120 consecutive, on-time monthly payments. Qualifying organizations may include government or nonprofit organizations.
• Teacher Loan Forgiveness: Teachers who work full-time for five consecutive academic years at a low-income public school may be eligible for forgiveness of up to $17,500 for their Federal Direct Loan or FFEL Program loans.
• Nurse Corps Loan Repayment Program: This program, which is not part of the Department of Education, will pay for up to 85% of unpaid nursing education debt for qualifying nurses who work for at least two years in a critical shortage facility or at an eligible nursing school. Since this is not a federal student loan forgiveness plan, it’s possible for qualifying borrowers to have their private nursing education debt repaid via this program.

5. Use the debt avalanche or debt snowball method

Paying off debt, even a debt as high as $200,000, may simply require patience and commitment to a payoff strategy. 

Two of the most common debt payoff strategies are the debt avalanche, which prompts you to focus on paying off high-interest debt first to minimize the amount you pay in interest, and the debt snowball, which has you start by paying off your lowest balance debt first to give you the psychological boost of seeing your debts get paid off.

In each case, you need to start by listing out all of your debts. Make sure you know the balance, interest rate, and terms for each one.

Debt avalanche method

With the debt avalanche method, you’ll focus on paying off your loan with the highest interest rate first, while making the minimum payments on your other loans.

After this loan is paid off, move on to the loan with the next-highest interest rate — continuing until all of your loans are repaid.

Debt snowball method

The debt snowball asks you to start by listing your debts in order of smallest to largest balance. With the debt snowball method, you’ll focus on repaying your smallest loan first while making the minimum payments on your other loans.

Once the smallest loan is repaid, move on to the next-smallest loan. You continue until all of your loans are paid off.

How long will it take to pay off $200k?

Paying off $200k in student loans is a marathon, not a sprint. The exact amount of time it will take to get your balance to $0 will depend on how you approach your repayment. For example, paying off a refinanced loan might take a shorter time than pursuing forgiveness through an IDR plan.

Does student loan debt go away?

Unfortunately, your student loans won’t go away if you simply ignore them. But one of the options above could help you tackle your loans once and for all — or even have them forgiven.

There are also some circumstances where your federal student loans might be discharged, such as if:

• You’re totally and permanently disabled
• Your school closed while you were enrolled
• You have Perkins Loans and have served for a certain amount of time in an eligible career

Don’t be discouraged: There are 43 million student loan borrowers in the U.S., and 3.4 million borrowers owe $100,000 or more. So, if you have a high student loan balance, don’t worry — you’re definitely not alone.

Will student loans be forgiven in the future? 

On April 8, 2024, the Biden administration announced a new proposal that could lead to substantial student debt cancellation for over 30 million Americans as early as fall 2024. 

Key aspects of the proposal include automatically canceling up to $20,000 in accrued interest for every borrower and eliminating the need for applications for those qualified under existing forgiveness programs like Public Service Loan Forgiveness (PSLF).

Additionally, the plan offers debt relief after 20 or 25 years of repayment, regardless of the borrower's plan, and promises to forgive loans for students from schools penalized for deceptive practices. The proposal aims to reduce the financial strain on former students and correct systemic issues in college funding.

FAQ

How long will it take to pay off 200k in student loans?

The time it takes to pay off $200,000 in student loans depends heavily on your repayment plan. For federal student loans, the Standard Repayment Plan spans 10 years, but those who opt for an income-driven repayment (IDR) plan might extend their payment period up to 20 or 25 years. For those with Direct Consolidation Loans, terms can extend up to 30 years, depending on your loan balance.

What is the average age people pay off student loans?

The majority of borrowers with federal student debt are between 25 and 49 years old according to the latest federal student loan portfolio data. Approximately 33% of borrowers are between the ages of 25 to 34, while 32% are between the ages of 35 to 49. Only 14% of borrowers in debt are 50 - 61 years old.

How much is interest on a $200,000 student loan?

The amount of interest you’ll pay on a $200,000 student loan depends on whether you have federal or private loans and the rate you were assigned. Federal loan rates are fixed and determined the year you borrowed. Private loans may be fixed or variable and vary based on your credit at the time of borrowing.