Long terms give you lower repayments, but are they worth the cost?
How do repayments work with a 20-year term?
A 20-year term on a student loan translates into 240 repayments on your student loan. While this allows more time for interest to add up, a 20-year term gives you some of the lowest repayments you can qualify for.
How it works depends on what type of repayment plan you have:
- Standard repayment. Private student loans and some federal loans come with a standard repayment plan, which gives you the same repayment every month.
- Graduated repayment. If you combine your federal loans with a Direct Consolidation Loan, you can choose a repayment plan with a 20-year term that starts lower and increases over time. It gives you lower repayments than the 10-year option, though not as low as the 30-year term available for consolidated loans.
- Income-driven repayment (IDR). With federal loans you can get a 20-year term with repayments based on your income. In this case, having a longer term doesn’t affect your monthly cost.
Am I eligible for forgiveness with a 20-year term?
You might be if you have federal loans, depending on your career and repayment plan. Generally, you need to be on an IDR plan to qualify, meaning you won’t be able to take advantage of lower repayments.
You might be eligible for the following types of forgiveness if you sign up for a 20-year loan term:
- Public Service Loan Forgiveness (PSLF). You’re eligible to have all of your federal student debt canceled after making 120 repayments while working at an eligible public service job and making repayments on an IDR plan.
- Teacher Loan Forgiveness. Teachers are eligible to get up to $17,500 of their loans forgiven after working for five years in a row at a low-income school.
- Income-Based Repayment (IBR) forgiveness. Anyone who signs up for the IBR plan for loans taken out after July 1, 2014 is automatically eligible for forgiveness after 20 years of repayments.
- Pay As You Earn (PAYE) forgiveness. Anyone who signs up for the PAYE income-driven repayment plan is automatically eligible for forgiveness after 20 years of repayments.
- Revised Pay As You Earn (REPAYE) forgiveness. Your undergraduate student debt is automatically eligible for forgiveness after 20 years of repayments on a REPAYE income-driven repayment plan.
- Perkins Loan forgiveness. Teachers, public servants and volunteers might be eligible to have up to 100% of their student loans canceled after four to seven years of eligible work.
Private loan holders could qualify for additional forgiveness or loan repayment assistance programs (LRAPs) depending on their careers, and often before a 20-year term is up.
Federal student loans with 20-year terms
Most types of federal loans are eligible for a 20-year repayment term — it generally depends on the repayment plan you choose. Let’s take a look at the repayment plans with a 20-year term available for different types of federal loans.
| Federal loan | Repayment plans | Maximum annual amount | Current interest rate |
|---|---|---|---|
| Direct Subsidized Loan |
| $3,500 to $5,500 — depending on your year in school | 5.05% |
| Direct Unsubsidized Loan |
| $9,500 to $20,500 — depending on your year in school and including subsidized loans |
|
| Graduate PLUS Loan |
| 100% of cost of attendance | 7.6% |
| Direct Consolidation Loan |
| None | Weighted average of your current interest rates |
As you can see, unless you consolidate your loans with a Direct Consolidation Loan, the only repayment plans that offer a 20-year term are based on your income. While this means your loans can be forgiven after 20 years of repayments, it also means you won’t be able to take advantage of lower repayments from a longer term.
Get the lowdown on federal student loan repayment plans
Private student loans with 20-year terms
A handful of private student lenders offer 20-year repayment terms — it’s often the longest loan term available, if at all. However, sometimes this term is only available for larger loan amounts. Let’s take a look at some top private providers that offer 20-year loan terms.
| Private student loan provider | Maximum annual amount | Interest rate | |
|---|---|---|---|
| EDvestinU | $200,000 | 4.58% to 7.25% | |
| iHelp | $150,000 | 5.18% to 9.63% | |
| U-fi | $90,000 | 5.25% | Read review |
| Prodigy Finance | Varies by school | 7.53% to 12.03% | Read review |
Compare private student loans
What to consider when choosing a 20-year term
Considering a 20-year term? You might want to take these factors into account first:
- Monthly repayments. Calculate how much your repayment might cost with a 20-year term. You might have to consolidate your student loans if you have federal debt and want to have a lower repayment than you’d get with an IDR plan.
- Total cost. With a 20-year term, you could end up paying as much as you borrowed in interest — or more. With private student loans, consider the shortest term that comes with repayments you can comfortably afford to pay each month.
- Available forgiveness programs. Thinking of applying for forgiveness? You might have to choose a different loan term to sign up for the right federal loan repayment plan.
- Eligibility. Most federal loans aren’t eligible for a 20-year term that isn’t income-based unless you consolidate them with a Direct Consolidation Loan. And most private student lenders don’t offer terms this long.
- Your future salary. Are you planning on going into a high-paying profession after school? Unless you have a large student debt load, you might not benefit as much from such a long loan term — you could end up paying more than necessary in interest.
Cost of a 20-year term vs. 10-year term
Let’s take a look at how a 20-year and 10-year loan term compare. Say you had $30,000 in student debt with an APR of 5.8% — the average rate for student loans in 2017. Here’s what you could expect with these two loan terms:
| Loan term | Monthly repayment | Total interest paid |
|---|---|---|
| 20 years | $211.48 | $20,755.75 |
| 10 years | $330.06 | $9,606.77 |
While a 20-year loan term shaves about $120 off your monthly cost, it more than doubles what you pay in interest in the long run. Unless you’re seriously struggling to make the 10-year term repayment, a 20-year term might not be worth it.
Bottom line
A 20-year student loan might cost less monthly. But total cost of the loan might not make the immediate savings worth it. On top of this, most federal loan holders won’t be able to take advantage of lower repayments unless they consolidate their debt.
You can learn more about paying off student debt by reading our guide to student loans.
