Student Loan Repayment: Pay More Than Minimum

7 min read
student loan debt statistics

As a general rule of thumb, you should always pay more than the minimum when you’re in debt. This holds true whether it’s credit card debt or you’re talking about student loan repayment. The reason may interest you because, oddly enough, it has to do with student loan interest rates.

When it comes to paying off student loans, a lower monthly payment usually means more time spent paying it off. Take the average student loan debt of around $37,172. A significant portion of your monthly payment would go to paying off interest that applies to that principal balance of $37,172. As a result, interest can balloon the window of time you spend paying off your student loans. Especially, if you only pay the monthly minimum.

What you’re missing

You hear a lot of hyperbole and horror stories about paying off student loans all the way up to your golden years. It can take a while, especially with student loan interest rates and, especially, if you’re only paying the minimum. But, perhaps, the worst thing about student loan repayment is all of the meaningful investments you have to push back.

We’re talking about time and money you could be putting toward a home of your own or the car of your dreams. It’s missed time with your family on a vacation or not being able to save for your child’s educational future. These are the true costs of student loan debt.

Student loan interest rates

Using our student loan calculator, let’s take a look at student loan interest rates and how they would impact $37,172 worth of debt. For these calculations, we’ll use 5% interest rate (which is around the median interest rate for all types of student loans) and a loan term of 10 years (120 months). In that scenario, your minimum monthly payment would actually be $394.27.

student loan calculate payment

As you can see, we also added up the total interest you would pay within that loan term. That added sum of interest paid is what transforms what would otherwise be a monthly minimum of $310 and forces you to either extend your term or pay more each month.

Putting off homeownership

Not surprisingly, the burden of paying off student loans has had an adverse impact on homeownership. These college graduates are less interested or (in most cases) unable to afford homeownership. Since a home is a significant investment, it’s easy to see why people stuck with student loan repayment costs are putting off homeownership.

Key findings for homebuying timeline

  • A 23-year-old debt-free college graduate today will be ready to buy a home with a 20% down payment in 2021 at age 28. That’s five years earlier than the 33-year-old average home buyer today.
  • Graduates with $12,000 in student loan debt can expect to save until 2022 before they’re able to put a 20% down payment on a median price home.
  • A 23-year-old graduate with $28,950 in student loan debt today will be saving until 2026 before she can make a 20% down payment on a home, at age 33 – the current average age for home buying.
  • Graduates with $50,000 in student loans will be saving until age 36 in 2029 before they’ll have enough for a 20% home down payment.

Retiring in discomfort

Bankrate’s analysis finds that having $28,950 in student loans amounts to nearly half a million dollars in lost retirement savings for college graduates, compared to a debt-free graduate. College graduates that extend their loan repayment terms to 20 or 25 years will have even less retirement savings over time.

Saving up for retirement can also take a nasty hit when it comes to paying off student loans. With all the money and, most importantly, time you spend paying off student loans, that’s time and money you aren’t putting toward retirement. By the time you reach 65, you may not be able to retire as comfortably as you’d hoped depending on the amount of student loans.

Key findings for retirement savings

  • Having $28,950 in student loans costs nearly the same as having $50,000 in student loans when it comes to lost retirement savings, with graduates at both student debt levels having approximately half a million dollars less in retirement savings compared to debt-free graduates.
  • Saving at a higher rate, like 10% or 20% of income, significantly narrows the gap in retirement savings between graduates with student debt and those who are debt-free.
  • Extending loan repayment terms to 20 or 25 years on larger student debt loads has a more damaging impact on retirement savings. Compared to debt-free graduates, graduates with $50,000 in student loans on a 25-year repayment plan will have close to one million dollars less in retirement savings.

Lifestyle losses

Vacations with family, fancy cars, dinners with friends and family – we call these lifestyle costs, although you might know them as experiences. The truth is that all the time and money you spend paying off your student debt leave you little time to actually make the most of your life.

To gain a better view of what that looks like, here’s a visual aid of just how much money you spend on loan payments and what that translates to in dinners out, concerts, cruises, etc.

Key findings:

  • $28,950 in student loans will end up costing $39,978.78 – more than the cost of 55 dinners out for two, 24 concert tickets, 3 week-long Caribbean cruises for two, a family vacation to Disney World, plus a small car.
  • With the money used to repay the average student loan debt, graduates could have taken dozens of cruise vacations or even bought a luxury car.

Paying off student loans fast

As you can see, paying off student loans can cost you more than just a portion of your income – it can cost you valuable time and life experiences. You need to get out of debt as soon as possible and we’ve put together some student loan repayment tips to help you on your way:

Pay more than the minimum

When it comes to student loan repayment, we cannot emphasize enough the importance of paying more than the minimum. Referring back to our student loan calculator, let’s find out what would happen if you paid $100 extra each month.

student loan extra payment

As you can see, we kept the student loan interest rates the same as well as the principal balance. However, you’ll notice that the amount of interest paid in this loan term (with $100 extra each month) has gone down to $7,517.18 from the original $10,140.01 of total interest paid.

They say that time is money and you can easily see that if you click on the “Show amortization schedule” on our calculator. There, you’ll discover that the estimated payoff date moves up nearly two and a half years as a result of interest paid. By paying more than the monthly minimum, you can actually pay off your student loans a lot sooner.

Make an extra loan payment each month

Another trick to paying off student loans faster is to make extra loan payments each month. You can contact your lender to let them know how you want to proceed. In most cases, there are no prepayment penalties to worry about.

Make sure you tell the lender that the extra payments you plan on making are above the monthly minimum. Otherwise, this extra payment could be rolled over to next month’s bill.

Put down a lump-sum payment

If you have come into some money either through tax returns or, perhaps, you received a cash gift, consider dropping it into your student loan repayment. Dropping a significant, one-time lump sum into your principal balance could help you pay off your loans sooner rather than later.

The bottom line

We all live with debt in one form or another, but there’s a difference between living and surviving. You don’t want the cost of your education to prevent you from experiencing life to the fullest. Paying off student loans as quickly as possible is the key to unburdening yourself financially so you can focus on a home, vacation, retirement, etc. Pay more than the minimum when it comes to student loan repayment and don’t blow that tax return when it could be better spent on your debt.



  • Student loan repayment calculations are based on a 10-year repayment plan at an interest rate of 6.8%, unless otherwise noted for comparative purposes.
  • Age to homebuying calculations are based on a savings rate of 15% of annual income minus student loan payments, unless otherwise noted for comparative purposes.
  • Annual salaries are increased by 3% year-over-year to account for wage growth and inflation.
  • Savings totals are based on monthly deposits to high-yield savings account compounding monthly at a 1% annual interest rate.
  • Home prices start at the median US home sale price of $214,000 as of March 2016, and an annual price appreciation rate of 1.986% is applied each year.
  • Calculations for added monthly costs of putting 10% versus 20% down on a new home are based on a mortgage interest rate of 3.5%, private mortgage insurance 6.25% per year, 1.25% property taxes per year, and 0.35% home insurance per year.


  • Retirement savings calculations are based on a savings rate of 6% of annual income minus student loan payments, unless otherwise noted for comparative purposes.
  • Student loan payment calculations are based on a 10-year repayment plan at an interest rate of 6.8% unless otherwise noted.
  • Annual salaries are increased by 3% year-over-year to account for wage growth and inflation.
  • Retirement savings totals are based on bi-monthly contributions to a 401(k) account with a 3% employer contribution match and an annual yield of 6%, compounding bi-monthly.
  • Total retirement savings are calculated at age 65.


  • Costs for a seven-day Caribbean cruise for two are based on the base price of $535 per person for double occupancy, plus 15% in taxes.
  • Average car prices are based on Kelley Blue Book December 2015 estimates.
  • Price for dinners are based on Zagat’s 2015 national average price of $39.40 per person to eat out.
  • Costs for a Disney World vacation are based on 2015 Hipmunk estimates of $348.30 per night hotel stay at Disney World Resort and $1,272 in flights for a family of four, plus allowances for 7-day park tickets, gifts/souvenirs/shows/activities, and food.
  • Costs for concert tickets are based on average 2015 music tour ticket price of $78.77, according to Statista.
  • Child college savings are based on monthly contributions of 5% of total income to 529 college savings plan over 18 years, earning a conservative return of 1% annually.
  • Cost of college is based on 2015 estimate by The College Board of $24,061 per year to attend a public 4-year school, including tuition, books/supplies, room and board, transportation, and other expenses.