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Asked to picture the typical person struggling with student debt, you’d probably imagine a new-ish college graduate or working professional—maybe someone who’s trying to buy a home or who plans to start a family.

But according to recent college debt statistics , that person might just as likely be a parent or grandparent who’s trying to pay off a home or plan for retirement.

Turns out, student debt isn’t just for kids anymore. Even baby boomers, who are now in their mid-50s to early-70s are pressing pause on their dreams because they’re burdened with loans they haven’t paid off, a loan amount that has reached $16,100 for the typical Parent PLUS borrower .

Yes, millennials had their work cut out for them between high tuition rates and lower wages than they might have expected when they graduate.

But their parents and grandparents could be in it with them—sharing at least part of the financial burden. Even those who never borrowed a dime for their own education may have taken out loans or agreed to co-sign for their kids. Now they’re facing some of the same repayment problems—but with less time to bounce back financially.

Student Debt by Generation

According to the Consumer Financial Protection Bureau (CFPB), the number of consumers age 60 and older with student loan debt quadrupled between 2005 and 2015—from about 700,000 to 2.8 million. And the average amount they owe also dramatically increased—from $12,100 to $23,500.

Although most student loan borrowers are still young adults between the ages of 18 and 39, the CFPB says, older consumers are the fastest-growing age segment of the student loan market. In that same 10-year period, 2005 to 2015, the share of borrowers 60 and older increased from 2.7% to 6.4%.

When surveyed, the vast majority of older borrowers (73%) said their student debt was for a child or grandchild’s education. Twenty-seven percent said their loans were for their own education or for their spouse. And the CFPB estimates that 57% of all co-signers are age 55 and older.

Gen Xers, who are now in their late-30s and early-50s, are in a similar situation—except they often have more of their own student debt as well.

In the mid 1970s, boomers started using a combination of grants and student loans, which boosted college attendance, but cracks began to show as student loan debt skyrocketed. In 1986 , more than one quarter of student borrowers owed over $10,000; adjusting for inflation, that’s equivalent to over $21,000 today.

Now, they’re paying for their kids’ education—by taking out loans or contributing less to their retirement savings. Or both. The CFPB found that borrowers nearing retirement (ages 50 to 59) had a lower median amount in their retirement accounts than consumers without student loan debt.

Though financial advisors repeatedly warn parents not to short themselves while helping their kids, a report by the Association of Young Americans (AYA) and the AARP found student loan debt was holding up retirement savings for around a third of Gen X and boomer respondents.

About a quarter of Gen X parents and a third of boomer parents said college debt prevented or delayed them from buying a home. And about a quarter of Gen Xers and boomers said their debt burden was an obstacle in getting the health care they need.

Some overwhelmed borrowers put at least part of the blame on federal parent PLUS loans, which they say are too easy to get. (Parents with a qualified dependent undergraduate student need only prove they don’t have an “adverse credit history”) On average, parents now borrow nearly $15,880 per year in parent PLUS loans.

In March 2018, Federal Reserve Chairman Jerome Powell said that though he generally supports the idea of a vibrant education loan climate, borrowers need to be informed of the risks they’re taking. “You do stand to see longer-term negative effects on people who can’t pay off their student loans,” he said. “It hurts their credit rating, it impacts the entire half of their economic life.”

In general, a college degree is, of course, a worthwhile investment. The unemployment rate for those age 25 and older with a bachelor’s degree or more education was 2.1% in April 2018.

For workers age 25 and older who graduated from high school but did not attend college, the unemployment rate was 4.3%. And those workers are earning more, on average. According to the Pew Research Center , those ages 25 to 39 with at least a bachelor’s degree have, on average, higher family incomes—the individual’s income plus that of his or her spouse or partner—than those in that age range lacking a bachelor’s degree.

Next Steps Toward Tackling Debt

While policymakers look for broader solutions, borrowers are finding their own. For many, that means getting their payments under control with student loan refinancing.

If you have a good job and have maintained a solid credit history, refinancing your student loans may help in a few ways.

If you can get a lower interest rate, you’ll lower the total amount you’ll pay over time—depending on the loan term you choose, of course. And it can make paying off your debt much easier if you have only one payment to make every month.

If you’re a borrower who proudly supported your child or grandchild through college but ended up with more debt than expected, refinancing may be the answer. And if you’re a new-ish borrower who can’t meet your financial goals because your student loans are eating your income, a different payment plan may help you achieve those milestones. Just keep in mind that if you refinance federal student loans with a private lender, you lose some potential federal benefits, such as income-based repayment plans and forbearance options.

Either way, you don’t have to be stuck. And you don’t have to be a college loan statistic.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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SOSL18219

If you’ve ever asked yourself the question, “if you withdraw from college, can you go back?” the simple answer is yes. But whether you left due to financial problems, family responsibilities, or other reasons, returning to college can be challenging.

Here are some things to know about going back to college after dropping out and how to help make the process go smoothly.

Having Some Ideas About Your Major

Regardless of how long it’s been since you left school, you’ll have to make up for lost time. At the same time, you may have had experiences during your time away from school that helped you solidify what you want to do with your life and career.

As a result, it’s a good idea to think about choosing a major. Whether it’s a bachelor’s or master’s degree, or a certificate program, knowing what subject you want to study and to what extent will help you finish your schooling faster.

If you’re still not sure about what you want to pursue, you can take some time to explore your options. Consider auditing a course or two to get a better idea about what you enjoy, if your first day back is still months away. The key is to do your due diligence before you return to campus, so you don’t feel like you’re spinning your wheels when you get there.

Carefully Considering Which College to Attend

In some cases, it makes sense to return to the college you originally attended. But it may also be worth checking out other universities to see if you can save money on tuition, or have a better college experience.

There are a few things to consider when making this decision. For example, each college has its own criteria as to what’s considered a required course versus an elective course. If you attend a different college, you may have to retake certain required courses.

Also, in some situations, it may make sense to find a less expensive college. Comparing colleges in your area can help make sure you get a good education without overspending. This is especially important if you had to leave college due to financial difficulties.

Easing Into It

Returning to college after a hiatus is different than returning to school after summer vacation. It may take some time to adjust to your new schedule and study requirements, and it’s possible that you’ve forgotten even some basic knowledge that you’ll need to brush up on.

If you have a desire to make up for lost time, you may consider trying to finish your degree or certificate program as quickly as possible. But as with any other activity, you may end up burning out if you spread yourself too thin.

Maybe instead of taking on a full workload your first semester back, you can take the minimum number of credits you need to be a full-time student, or maybe just a class or two. It can’t hurt to give yourself some time to get back into the swing of things, both mentally and emotionally.

There’s no right way to do this, so do regular check-ins with yourself and your loved ones to make sure you have enough capacity to accomplish your goals.

Building a Support System

Figuring how to get back into school after dropping out can be a draining process, especially if you’ve been away for a while. Maybe you have a family now, or you’re quitting your job to focus on school full time.

Regardless of your situation, it’s good to have support in your decision to further your education. Consider looking into your college’s mental health and career centers for additional resources and support.

You can speak with your partner, friends or family members about your decision to return to college. Help them understand your reasons and goals, especially if returning to college affects them.

The sooner you start building a support system, the easier it will likely be to make returning to college a smooth process.

Securing Financing

Even if you pick a relatively inexpensive university, a college education isn’t cheap. In an ideal scenario, you’ll be able to avoid student loans altogether. Scholarships, grants, and a full-time job can help you get through school without needing to borrow money.

But, if you do need some help to bridge the gap, you can start by filling out the Free Application for Federal Student Aid (FAFSAⓇ) form to see what you qualify for federal student aid (which could include grants, loans, and work-study). If you have a solid credit history and a good income, among other financial factors, private student loans might score you a lower interest rate.

Figuring Out What to Do With Your Existing Student Loans

If you still have student loans from your first stint in college, you don’t necessarily need to continue paying them when you return. The U.S. Department of Education and many private student lenders may allow you to defer your student loan payments while you’re in school at least half-time.

Keep in mind, though, that deferring your payments won’t stop the interest from accruing. If you don’t make interest-only payments while you’re enrolled, the unpaid interest will capitalize when you leave school and increase your overall debt.

If you’re generally unhappy with your existing student loans, another action to consider might be refinancing your student loans, especially if you qualify for a lower interest rate than on your original loans. You could also potentially extend your repayment term, lowering your monthly payment amount if you need to free up some near-term cash (but you’d pay more in interest overall).

Alternatively, if you’re in a more stable financial position, you might qualify to secure a shorter loan term, which could help pay off your loan more quickly and, therefore, make fewer interest payments.

But it’s important to note here that refinancing with a private lender would render you ineligible for programs and repayment plans extended to federal student loan holders like deferment, forbearance, and income-driven repayment. So you may wish to weigh your options carefully before considering refinancing.

Going back to college after dropping out isn’t easy, but it can be a stepping stone to get to where you want to be in life. As you consider returning to college, create a plan and allow yourself time to adjust to college life.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

According to the American Association of University Women , using data from the Department of Education, women currently hold almost two-thirds of the country’s student loan debt, nearly $929 billion of the total outstanding amounts of nearly $1.5 trillion.

That’s a shocking disparity—and, when looking specifically at people who complete bachelor’s degrees, it’s black women, the Chronicle of Higher Education reports, who hold the greatest amount of debt of “any racial, ethnic, and gender group.”

To add to the challenging situation, women who hold more than one degree tend to earn as much as men who hold one educational degree less than they do.

Because of this gender-based gap in salaries, women may have less disposable income, which means they typically need more time to pay back their student loans—which in turn means they’re often paying significantly more in interest because of their longer loan terms.

This situation raises numerous questions, including how women can get themselves out of education-based debt more quickly. This post will take a deep dive on those subjects and offer some tips that could help anyone facing student loan debt.

Average Student Loan Debt: Crisis in America

Before we delve into gender-specific information, the reality is that the average amount of student loan debt is troublesome for more than just women. Average student loan debt hovers around $28,500, and the amount of debt continues to grow.

Student loan debt in the United States, in total, is greater than all of the credit card debt in our country. It’s greater than the sum total of our car loans. In fact, it’s the second highest form of debt in the United States today, only behind home mortgages.

And, not everyone can keep up with their student loans payments, so it’s not surprising that many people are delinquent on them, or even in default. Lenders can define “default” in somewhat different ways; borrowers in the Federal Direct Loan program or the Federal Family Education Loan program, for example, are considered in default after missing nine month’s worth of payments.

Multiple consequences can exist for people with loans in default, including suffering from substandard credit, having tax refunds garnished and more. Your lender can sue you and, in some cases, you would also be responsible for court fees.

Delinquency can also have a negative impact on your credit, which can make it difficult to get a mortgage, a car loan, a credit card and the like. It may even be challenging to get utilities in your name or to buy homeowners’ insurance.

Student Loan Disparity: Why Are Women in Debt?

As AAUW.org (the website for the American Association of University Women) reports, 57% of today’s college students are female, which would by itself mean that more women have the potential to need more in student loans. But their report, titled Deeper in Debt: Women and Student Loans, goes much further in their explanations about why women owe more.

The cost to attend college, according to AAUW, has increased by 148% since 1976, while the median household income since then has only gone up by 21%.

This explains why increasing numbers of students take out loans to fund their education, although these particular statistics apply to men and women alike.

More specific to women, in 2017, T. Rowe Price shared study results indicating how parents who have only sons “are going to greater lengths to support their kids’ college education than parents of all girls.”

Parents of all boys were found to be more willing to save more, pay more, and borrow more funds to pay for their children’s education, suggesting that “antiquated expectations based on gender” may still be in existence more than we might realize.

Here are statistics from that report:

•  When it comes to money saved for their children’s education:

◦  50% of parents of all boys have saved some money

◦  39% of parents of all girls have saved some money

•  When it comes to contributing towards college:

◦  83% of parents of all boys give money at least monthly

◦  70% of parents of all girls give money at this regularity

•  17% of parents of all boys say they plan to cover all college expenses for their children, while only 7% of parents of all the girls say that.

•  When presented with this statement: “I would consider sending my kids to a less expensive college to avoid taking on student loans”:

◦  60% of parents of all boys agree

◦  72% of parents of all girls agree

•  When asked if they’d personally take on $75,000 or more in student loans to help children with college expenses:

◦  23% of parents of all boys would

◦  12% of parents of all girls would

This indicates that boys receive more familial help with college funding than girls. And, when women get jobs to help with college expenses, pay disparity can play a role in their overall ability to contribute.

Then, when it’s time for repayment, this gender pay disparity means that women often have less disposable income. Whether women have children or not, or take time off from work to be with them or not, a tighter financial situation can cause them to choose longer terms for their student loan repayments, which means they could be paying down their balances more slowly and pay more in interest, overall—neither of which is desirable for financial wellness, much less for growth of wealth.

Ideas for Solving the Problem of Higher Education Loan Debt for Women

AAUW shared a five-prong solution they believe will help facilitate college funding for women, which includes:

•  Congress should expand Pell Grant availability for students with low incomes to reduce how much they’ll need to take on debt to finance a degree.

•  Legislators, both state and federal, should boost funding for public colleges/universities and otherwise support ways to provide debt-free options for students.

•  Lawmakers, including the Department of Education, should make income-driven repayment options easier to obtain.

•  Institutions should provide services, including child care, and otherwise address academic and financial needs of female students.

•  Individuals should join organizations that support closing the gender pay gap.

There’s another way to pay down student loans more quickly: consolidating them and refinancing them into one low-interest loan. Not all lenders will consolidate private and federal loans together, but SoFi does. Here’s more!

Refinancing Your Student Loans

Refinancing your student loans into one at a lower interest rate can mean you could pay less, over the life of the loan. How much you pay overall depends largely on the length of your term. So, for example, if it would help with cash flow to have lower monthly payments, choosing a longer term can help—but that could mean you pay more in interest. If you’d like to pay off your debt sooner and pay back less, overall, you can select a shorter term.

And, since SoFi doesn’t have a prepayment penalty, if you choose a longer term and end up with extra cash through a raise or a bonus, for example, you can put that windfall toward your refinanced loan payment and help pay down your loan faster.

To find out how you could benefit from refinancing, you simply need to know your outstanding balances, plus the interest rates you’re being charged.
At SoFi, you’ll also have access to live customer support. There are no application fees. No origination fees. No prepayment penalties.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

SOSL18218

A semester abroad. The phrase conjures images of books discussed over a Parisian breakfast or Argentine Alfajores. As romantic as that sounds, before you pack your bags you’ll want to do some research in order to weigh the pros and cons of studying abroad.

There are many advantages of studying overseas. You may pick up a new language or become fluent in one you already know. You’ll be exposed to a different culture, and immersed in new-to-you art, music, literature, and food. Broaden your horizons now and who knows where you’ll end up in ten years.

But most of all—more than any cooking technique or phrase—you’ll learn how to take care of yourself. Even if you speak the language, your safety net abroad is much more limited than if you’re in school in the U.S. You’re likely navigating an entirely new social system. That kind of chutzpah may come in handy later on in life.

One factor to think about when considering the pros and cons of studying abroad is how connected the program is to your university. If none of your study abroad classes will qualify for credit, it might not make sense financially.

Why not graduate a semester early and create your own study abroad program somewhere? You could create a travel itinerary all on your own, which may cost less than going on the abroad program through your school.

However, if you’ve already weighed the pros and cons of studying abroad, here are some tips regarding countries to consider, based on the languages you speak—or want to learn.

Spanish

If you speak or want to improve your Spanish, Latin America or South America are great options. Many students look at Mexico, Argentina, and Uruguay. One thing to consider is which dialect of Spanish you want to speak.

If you’re planning on using your Spanish extensively, and want to live in the Americas, Mexico is a great option as over 100 million people live there. Additionally, a lot of Spanish language entertainment comes from Mexico, so the Mexican dialect is widely known.

On the other hand, Argentina and Uruguay can be a great place to study abroad, but they speak a different dialect of Spanish, Castellano. If you’re considering living in South America long term, it could be worth it to study in Argentina or Uruguay instead.

If you’re more interested in Europe, Spain boasts a great university network that hosts many Americans. Again, the dialect there is different from Latin American and some parts of Spain speak Castilian Spanish, so if you’re planning on living in the Americas, it might make more sense to study in Latin America.

French

For those studying French, France is the obvious choice. But if Europe is less your speed, consider African countries like the Senegal or Morocco. Both countries have great French language university systems and are study abroad destinations, so there will likely be other international students there.

Chinese

For Chinese speakers, China is also the obvious choice. If your school doesn’t have a program there, many American universities are opening up satellite campuses, so that could be a good way to get to Shanghai or Beijing.

Hong Kong is also a good option, although they speak Cantonese there, rather than Mandarin, which tends to be the Chinese dialect that most Americans study. In Singapore, however, they speak both Mandarin and English.

English Language-Based Study Abroad Programs

If you don’t speak any foreign languages, don’t despair. Many universities offer study abroad programs that are not language-based or don’t require knowledge of a language before you apply.

Some good destinations for only-English language speakers are Germany, Israel, and Hong Kong. There are also obviously programs in English-speaking countries like England, Ireland, New Zealand, and Australia.

Studying Abroad Pros and Cons

Studying abroad is ultimately a big decision—and every big decision calls for a good ol’ pro-con list (preferably on a yellow legal pad). So let’s talk through a high-level look at some of the pros and cons of studying abroad.

Some Pros of Studying Abroad

Starting off with the pros—what are the benefits of studying abroad?

Perhaps it’s cliché to point out that studying abroad will expand your horizons—but it really might. Immersing yourself in a completely new culture can be a life-changing experience, whether it proves that you’re actually a Francophile, or whether it ends up revealing that you’re a homebody at heart.

This is also a great opportunity to make new friends from around the world that you may have never had the chance to meet. Meeting new people in new places, while experiencing new things sounds like a great adventure!

On a more practical note, grad school admissions may look fondly upon those who have studied abroad. This might be an opportunity to gain valuable workplace skills and real-world experience stores, which may help during an interview process!

Beyond that, it might enable you to look at your coursework in a whole new light. Also, studying abroad could be one of the only times in your life that you get to spend an extended amount of time in another country, which is a compelling pro.

Some Cons of Studying Abroad

And for the rebuttal—what are the negatives of studying abroad?

Studying abroad has the glamour that staying on campus, to put it simply, doesn’t. A certain amount of FOMO over your friends study abroad adventures might be inevitable if you stay behind. However, what those friends might not be telling you is that studying abroad isn’t without its challenges.

Being in a new place—especially where you don’t speak the language—can feel isolating. It can also make it challenging to keep up with relationships back at school or with coursework necessary for graduation. Many degree programs require students to fulfill a certain number of credit hours, and studying abroad may make it more difficult to get everything done in the allotted time frame.

Of course, it might go without saying that the finances of studying abroad can also be a con. It could be costly to study abroad with certain programs. And it’s not just tuition dollars—cost-of-living could be higher in your chosen study abroad home than it is back at school. For example, off-campus housing in Pennsylvania could be significantly less expensive than off-campus housing in Paris.

Financing Your Study Abroad Experience

You may be able to receive federal aid for your study abroad program. There is eligibility criteria , of course, and you’ll need to fill out your annual FAFSA® form as per usual, but the government recommends filling it out as soon as possible, since you’ll need to make sure it applies for both your American school and your program abroad.

There are also a number of study abroad scholarships and grants available to American students. For more information, you can check out this list as a starting point of your research.

After exhausting all of those options, you may also consider taking out a loan with a private lender. Private student loans from SoFi offer flexible repayment options and absolutely no fees. Get a low-rate in-school loan that works for you, so you can focus on your studies—both at home and abroad.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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SOSL18230

Ever have a friend complain about how the payments they’re making towards their loans aren’t actually going to pay off…well, the freakin’ loans? Your friend is onto something.

At the beginning stages of a loan, a big proportion of the loan payments that a borrower makes are applied towards the loan’s interest as opposed to the principal balance. Especially if the loan is spread out over a long time-frame such as many years, most early payments are applied almost totally to interest.

Due to a method of calculation called amortization, loan payments are split between interest and principal, heavy on the interest in the beginning stages. Towards the end, the effect usually reverses. When an amortization calculation is displayed visually, it is called an amortization schedule and graph.

We’re going to get into some of the nitty-gritty amortization info, but before we go there, we just want to be straight with you: This is an incredibly complex topic. We’re going to try to break it down the best we can, but please understand that this info is general in nature and does not take into account your specific objectives, financial situation, and needs; it should not be considered advice. SoFi always recommends that you speak to a professional about your unique situation. Okay, and we’re back in.

Amortization is calculated on all installment loans, which are loans that have regular, predetermined monthly payments, such as mortgages and student loans. Below, we will discuss how amortization is calculated, take a closer look at student loan amortization and a student loan amortization schedule, and explore some ideas for borrowers who want to lessen the amount they’ll pay in interest over time.

Understanding Amortization

Before we dive into a student loan amortization calculation and schedule, it is helpful to first understand the basics of calculating the cost of a loan. You’ll need to know these three variables:

1. The value of the loan, also known as the principal
2. The interest rate on the loan (and whether it is fixed or variable)
3. The duration, or length, of the loan (usually given in months or years)

With this information, it is possible to determine both the monthly payment on the loan and the total interest paid during the life of the loan, assuming all payments are made. Although the math itself is difficult, it is easy to plug the information into an online student loan interest calculator.

The next step is to determine how much of each monthly payment is going towards both interest and principal. This is where the amortization calculation and the amortization schedule come in. As mentioned, amortization happens only on “installment” loans, and all student loans are installment loans.

There are two types of loans: installment loans and revolving credit. A mortgage, student loan, or car loan are all examples of installment loans. With an installment loan, the borrower is loaned an amount of money (called the principal) to be paid back over a designated amount of time, with interest.

Revolving credit, on the other hand, is not a loan disbursed in one lump sum, but is a certain amount of credit to be used as the borrower pleases, up to a designated limit. A credit card and a line of credit are forms of revolving credit.

A borrower’s monthly payment on revolving credit is determined by how much of the available credit they are using at any given time; therefore, minimum payments change from month to month.

Student Loan Amortization Examples

Because student loans are a form of installment loan—a specific amount of money is disbursed to the borrower—student loans are amortized. Parts of each payment are spent on both the loan’s principal and its interest.

At the front-end of the loan, a much larger proportion will be allocated to interest. Due to the way compounding returns work, the effect is more dramatic the longer the length of the loan.

Take, for example, a $30,000 loan at 7% fixed interest rate amortized over a 10-year repayment period. The borrower’s monthly payment is $348.33 total (rounded down to $348 for simplicity in the grid below). Each year, the hypothetical borrower will pay $4,180 total towards their loan.

This never changes, although the proportion that is paid both towards principal and interest will. Here’s how that hypothetical borrower’s hypothetical loan amortization might look. (All examples calculated using this student loan interest calculator, by Bankrate .)

Amortization Schedule Student Loan $30,000, 7% interest over 10 years starting January 2019

So, during the first year, the example borrower’s monthly payments are made up of about half interest and half principal. At the end of that first year, the borrower has paid $4,180 total towards their student loan. $2,032 of that went to interest, while $2,148 went to paying down the principal.

At the end of the first year, the loan is not reduced by the total amount the borrower had paid, but only the amount paid towards the principal—the $2,148. The $30,000 loan is therefore valued at $27,852 at the end of the year.

That’s the whole thing with amortization—because only a small proportion of payments is applied to the loan’s principal at the early stages, the interest rate charges continue to be calculated off a relatively high loan balance figure. Eventually, this swings in the other direction as the loan’s principal is reduced.

With each passing month and year paying down debt, more of each payment is allocated towards the principal. By the ninth and final year, the borrower pays only $154 to interest and $4,026 to principal.

Let’s look at another example of a hypothetical student loan amortization schedule, but along a longer timeline, such as twenty years. It should be noted that a twenty-year payback period isn’t “standard” for federal student loans, but the important takeaway here is the impact of time on amortization calculations.

Here’s a table with the results of a hypothetical $60,000 student loan at a 7% fixed rate, paid back over 20 years.

Amortization Schedule Student Loan $60,000, 7% interest over 20 years:

In this example, each monthly payment for the 20-year duration is $465.18 (again, rounded down to $465 for simplicity’s sake above). In January 2019, the first month of the first year of the loan, $350 is paid towards interest, and just $115 is paid towards the principal. That’s less than 25% of the total payment, compared to 50% in the previous example.

By the end of the hypothetical loan, hardly any of the payment is allocated towards interest, and the majority is applied to the principal. In the very last monthly payment in the last year, only $3 goes towards interest and $462 to principal. In the last year, only $206 total goes towards interest versus $4,155 in the first year.

To calculate your student loan amortization schedule, you too can use an online calculator . It can also be really helpful to see the numbers in graph form, and to see each amortized payment listed out—so you know how much of your money is going to both interest and principal in each monthly payment.

Can You Pay Less Interest on Your Loans?

If amortized payments are frustrating to you, you’re not alone. One way to possibly alleviate the pain is to pay your loan back faster than the stated term. Especially at the beginning of the loan’s repayment term, making additional payments towards the principal might lower what you’ll owe in interest.

If you go this route, consider letting your lender know that the additional payment is to be applied to the principal of the loan, not the interest. If you are mailing a check, you could include a note. If you’re making a payment online, you may want to call your loan servicer to make sure that they apply the money correctly.

For borrowers with multiple loans that want to expedite their debt payment, it’s hard to know where to start. If your goal is really to nip loan amortization in the bud, you might want to consider the “debt avalanche” method of debt repayment.

Using this method, you would choose the source of debt with the highest interest rate and work on “attacking” it first, while making the minimum payment on all other loans. After the highest interest rate loan is paid off, you would move to the next highest interest rate loan, and so on.

Graduates can also consider refinancing their student loans. When you refinance, you’re essentially paying off your old loan or loans with a new loan from a private lender, like SoFi. Ideally, you refinance in order to get a lower rate on your loans than you currently have.

No matter your current financial standing, it’s usually worth checking to see if you qualify for a lower rate than you’re currently paying. With refinancing, you’re also usually able to adjust other terms to your loans, such as the repayment schedule. You can extend it, if you’re looking for lower monthly payments, or shorten it, if you want to pay less in interest—and outsmart amortization—on your loan.

Borrowers shouldn’t refinance their loans if they’re currently using one of the special federal loan repayment plans such as income-driven repayment or Public Service Loan Forgiveness. When you refinance, you will lose access to these programs. Otherwise, it’s usually worth looking into.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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