What is the Monthly Payment on a $20,000 Student Loan?

Graduation mortar board cap on one hundred dollar bills concept for the cost of a college and university education.
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Federal student loan borrowers who qualify for up to $20,000 in canceled debt under the Biden administration’s loan forgiveness plan stand to get a huge financial boost each month when those payments disappear.

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The money you save each month depends on a variety of factors, including the amount of student loan debt you hold, the type of loan, the loan originator, when you got the loan, and the terms of your loan. For example, master’s degree loans tend to carry bigger payments than undergrad loans, and private loans tend to be more expensive than government loans.

According to the U.S. Department of Education’s Student Aid website, interest rates on federal loans might range from less than 3% to more than 7%, depending on the type of loan and when it was disbursed.

The average federal student loan debt balance is just shy of $38,000, according to EducationData.org. The average monthly payment on all student loans — including private loans — is estimated at $460. The average borrower takes 20 years to repay their student loan debt and accrues $26,000 in interest over 20 years at the rounded average interest rate of 6%.

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But average monthly payments tend to be lower for federal student loan borrowers. BestColleges.com estimates that the average undergraduate borrower owes $234 a month in federal student loan payments. Broken down further, the average federal student loan payment is $267 for bachelor’s degree holders, $196 for associate degree holders, and $567 for master’s degree holders.

The median payment — which represents the middle value between the larger and smaller halves – is even lower at $222 a month, according to The College Investor, which cited survey data from the Federal Reserve. But that figure is skewed by the fact that 38% of respondents said that at least one of their loans were in deferment, meaning they aren’t making any payments at all.

The College Investor did an analysis of what $20,000 in student loans looks like after graduation, based on an interest rate of 6.8% and a loan term of 10 years. It calculated a monthly loan payment of $230.16. Over the duration of the loan, the total cumulative payments equal $27,619, including $7,619 in interest.

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The financial benefit of not having to pay that loan every month goes beyond just the money you save. As The College Investors noted, if you put the $230.16 into a savings account at an annual percentage yield of 6%, your savings after 10 years would be $37,396.68.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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