Many college students end up needing at least some loans. But the long-term burden of debt can be overwhelming, with the average Class of 2021 graduate leaving school with more than $29,000 in federal and private student loan obligations.
Few students manage to pay off these loans within the standard 10 years. And the longer it takes to pay off that debt, the longer you might need to postpone other life goals, such as buying a house.
Here’s a five-step plan for how to pay off $30K in student loans within three years:
Taking on student loans is often necessary to pay for higher education these days. However, student debt can become burdensome if you borrow too much. So is $30,000 in student loans considered high debt? How does this amount impact your finances and repayment options? Let’s take a closer look.
Understanding Average Student Loan Balances
To put $30,000 in context, the average student loan balance in the U.S. for 2023 graduates is $28,950. This translates into a monthly payment around $500 depending on the interest rate and repayment term.
The total U.S. student loan debt currently exceeds $1.75 trillion, spread over 45 million borrowers. The majority have balances under $30,000.
However 15% of borrowers owe over $100,000. So while $30,000 sits below the average it’s still a significant amount for most new graduates.
How Student Loan Debt Impacts Finances
A $30,000 loan balance can consume 10-20% of your take-home pay depending on your income and other debts This leaves less money available for essentials like rent, transportation, and groceries It also reduces your ability to save for emergencies and retirement.
High student loan payments make it harder to qualify for other loans, such as a mortgage. You’ll also pay more interest over the life of the loan compared to smaller balances.
For example, with $30,000 in debt at 6% interest and a 10-year term, you’ll pay around $9,000 in interest. This is in addition to the $30,000 principal you borrowed.
Income-Based Repayment Options
The standard student loan repayment term is 10 years. But if 10% or more of your income goes toward student loan payments, you can enroll in an income-driven repayment (IDR) plan.
IDR plans base your payment on your income and family size. This generally lowers your monthly payment to 10-20% of discretionary income. Any remaining balance is forgiven after 20-25 years of payments.
IDR plans provide a safety net if your income is low. However, you’ll pay more interest over the long run compared to the standard plan.
Ways to Pay Off Loans Faster
While $30,000 in student loans is manageable for most borrowers, you’ll want to pay it off quickly to save on interest. Here are some tips:
- Make extra payments when possible. Even small amounts like $20-50 per month make a difference over time.
- Pay off highest interest loans first using the debt avalanche method.
- Refinance for a lower rate if you have good credit. This can save thousands over the loan term.
- Find side income to put toward loans, like freelancing in your field of study.
- Pursue Public Service Loan Forgiveness if you work for a qualifying employer.
With discipline and a debt repayment strategy, you can erase $30,000 in student loans in less than 10 years. The key is sticking to your monthly payment plan and understanding all your options.
Should You Borrow Up to $30,000 for College?
When evaluating college options, aim to minimize loans as much as possible. Explore all grant and scholarship opportunities first. Consider starting at community college for two years to save on tuition. Attend an in-state public school and commute from home to lower costs further.
Before borrowing, have a plan to handle the monthly payments. Make sure your expected entry-level salary exceeds your total student loan balance. If possible, keep loans under $30,000 total to maintain flexibility in your future budget.
While $30,000 in loans may be unavoidable for some degrees, it pays to borrow conservatively whenever possible. Limiting student debt reduces financial stress and allows you to focus on building your career after graduation.
Balancing Student Loan Debt With Other Financial Goals
In addition to paying off student loans, you’ll have other financial priorities like saving for retirement, a house down payment, or starting a family. It takes careful planning to balance all of these goals.
Focus first on building a small emergency fund and contributing enough to your workplace retirement plan to earn any matching funds from your employer. Then aim to allocate any extra income toward student loans to pay them off quickly.
Be patient with other goals like buying a house or car. Wait until you’ve made a dent in your student loans first. And utilize a budget to allocate money toward different priorities and track your spending.
While $30,000 in student loans can require some lifestyle adjustments, it’s still possible to achieve other financial milestones. Maintaining diligent repayment habits and living within your means will help you progress toward all of your long-term goals.
Final Thoughts
A student loan balance of $30,000 is well below the six-figure debt levels some graduates face today. However, it still equates to several hundred dollars in monthly payments that can constrain your budget, especially in the early years of your career.
The key is entering repayment with a solid debt payoff plan. Take advantage of flexible repayment programs if needed, and find ways to make extra payments when possible. Limiting lifestyle inflation also helps direct more cash flow toward your loans.
With discipline and focus, you can erase $30,000 in student loans in less than 10 years. And you can still make progress toward other savings goals when you budget wisely. While not insignificant, this amount of student debt is very manageable over the long haul.
Pay extra when you can
You can earn money for debt repayment by spending less, earning more or doing a bit of each. While this step is more challenging than the previous four, it’s not impossible.
Go through your bank and credit card statements for the last three months. Circle each item you can live without for the next three years. If it’s an ongoing expense you don’t need, such as an entertainment subscription, cancel it immediately. Make more adjustments if you see a pattern of unnecessary spending, like dining out or expensive vacations.
If you’ve already trimmed your budget to the bone, think about ways to earn more money. One potential answer is to launch a side hustle, where you can make extra cash on your schedule.
Plan out your repayment
While picking a strategy and possibly lowering your interest rate are big steps forward, you might want to do some extra planning if you’re going to retire your debts in just three years.
Specifically, you should map out exactly how much you’ll need each month in order to stick to your timeline.
Let’s assume you owe $30,000, and your blended average interest rate is 6%. If you pay $333 a month, you’ll be done in 10 years. But you can do better than that.
According to our student loan calculator, you’d need to pay $913 per month to put those loans out of your life in three years. Doing the math is easy, but coming up with that extra cash is tough. That’s where our next step comes in.
How Do I Tackle My Student Loans?
FAQ
How long does it take to pay off 30k in student debt?
Let’s assume you owe $30,000, and your blended average interest rate is 6%. If you pay $333 a month, you’ll be done in 10 years. But you can do better than that. According to our student loan calculator, you’d need to pay $913 per month to put those loans out of your life in three years.
Is $30,000 in student loans a lot?
Nearly eight in ten students graduate with less than $30,000 in debt. Among those who do borrow, the average debt at graduation is $27,100 — or $6,775 for each year of a four-year degree at a public university.
How much would a $30,000 student loan be monthly?
What is considered a lot in student loans?
What is considered a lot of student loan debt? A lot of student loan debt is more than you can afford to repay after graduation. For many, this means having more than $70,000 – $100,000 in total student debt.