What is the monthly payment on a $50,000 student loan?

A college education helps you achieve your personal and professional goals, but the costs can be significant. Student loans are one option to fill in any funding gaps when paying for tuition, fees and housing. Some loans to students even provide a built-in grace period before repayments begin, giving you time to focus on your studies. No matter which type of student loan you choose, you should understand when the repayments begin and how much to factor into your budget. For example, if you have a $50,000 loan with a 10-year repayment schedule and a fixed interest rate between 4% and 8%, you should expect to pay around $500 to $600 per month. Let's dig into what impacts your monthly payment below.

What affects your monthly student loan payments?

The amount of your monthly payment is determined by several factors such as the type of loan you choose, the interest rate and the term, which could be five, 10 or 15 years. Both the federal government and financial institutions lend to college students. Federal student loans generally offer a lower, fixed interest rate, but the total amount you can borrow is limited. Federal student loans generally also include an origination fee, which is a processing fee charged as a percentage of the loan amount. You do not need a credit check to qualify for a federal loan.

In addition to the federal loan program, banks and other lenders offer private student loans. Private loans may offer alternative repayment schedules compared to federal loans, as well as fixed and variable interest rates options. However, the interest rate on a private loan often depends on your credit score, and the application process typically includes a credit check. A cosigner may also be required for your private loan.

When choosing a student loan, you'll want to consider the repayment term. Shorter terms, with a smaller number of monthly payments, allow you to pay off the loan faster. Longer terms offer a lower monthly payment, but you'll pay more interest over the life of the loan.

Similar to an auto loan or personal loan, the payback period for some student loans starts immediately. Other student loans offer flexible repayment options. You may only need to make interest-only payments while in school. Student loans may also include an income-driven repayment plan. For these types of loans, your monthly payment is determined by the amount of income you're currently earning.

How to calculate monthly payments on a $50,000 student loan

To calculate the projected payment on a student loan, use the stated interest rate and the number of payments you'll need to make. Insert these amounts into the following formula, where i = the monthly interest rate (annual rate / 12) and N = the number of payments:

Monthly Payment = Total Loan Amount * [(i * (1 + i)^N) / (1 + i)^N - 1]

If math isn't your forte, online student loan payment calculators are available. For a standard loan, the monthly payment remains the same, but the amount of principal and interest changes. Early payments include a greater amount of interest and less principal. As you continue to make payments, you'll gradually shift toward paying more of the principal balance. This process of paying off your loan over time is called amortization.

Using the formula above, for a $50,000 student loan with a 10-year repayment at 5% interest, you can expect to make monthly payments of around $530 per month. This calculation does not include the addition of an origination fee, which is calculated as a percentage of the loan amount. In comparison, lengthening the repayment term to 20 years, but paying 7% interest, requires an estimated payment of $387 per month.

In addition to the standard amortization calculation, student loan repayments may be subject to other considerations, such as your income or family size. If you qualify for an alternate repayment schedule, it's important to carefully weigh your alternatives before choosing a loan.

Comparing federal student loan repayment plans

Flexible repayment schedules are designed to allow students to find a job and establish their career without feeling overburdened by debt. When using a flexible repayment plan, your monthly payment may change over the life of the loan. Federal loan repayment options include:

• Standard repayment plan: Like a traditional loan, the repayment schedule is structured with fixed payments over a set number of years.
• Graduated repayment plan: Beginning with lower payments that gradually increase, these loans are a good fit for borrowers anticipating that their future income will rise as they enter the workforce and progress through their career.
• Income-driven repayment plans: Students carrying a larger amount of debt may qualify for alternate payment arrangements, based on their current income and the number of people in their family.
• Extended repayment plan: Lower monthly payments are spread out over a longer term. This repayment plan may be available to those with over $30,000 of student debt.

Those in pursuit of an academic degree may find it difficult to pinpoint exactly how much money they'll earn post-graduation. For this reason, a non-standard repayment plan may ease some of the stress associated with student debt. Even if you select a loan with a flexible repayment plan, you can still choose to make larger payments when possible and pay off your loan early.

Tips for managing student loan payments

Making smart decisions about student loans helps to avoid a future strain on your budget. Try to determine how much you can realistically pay each month before taking on additional debt. Review your finances and consider your future income-earning potential. Understand your repayment requirements and take advantage of flexible options when available. If you have room in your budget, consider making extra payments along the way. You'll pay off your loan faster and reduce the amount of interest paid.

Moving forward, keep an eye on interest rates. When they decrease, talk to your lender about refinancing your student loans and securing a lower rate. And finally, stay on top of current loan forgiveness programs to determine if you're eligible to participate.

Reach your loan repayment goals

Student loans allow you to finance a portion of your undergraduate or graduate degree program with manageable monthly payments. Before you select a loan, don't forget to compare repayment plans and decide which option works best for you.

Are you looking for help with college expenses? Explore the student loan options available from Citizens.