What budget should I plan for paying a student loan based on my income?
Although many borrowers are still cheering on Biden’s student loan forgiveness initiative, federal student loan debt is far from erased and millions of Americans are still facing hefty monthly payments. In addition, the student loan moratorium ends on December 31.
See: 30% of Americans say this is how they will use student loan forgiveness payments
Find: What is the monthly payment for a $20,000 student loan?
These details all lead to a burning question, which is especially burning for those new to the job market or fresh out of college: “How much will my student loan be based on my income?”
Know your loan inside out
It is imperative that borrowers understand exactly how much their loan weighs each month. It’s pretty straightforward if you only have one loan, but if you have multiple loans, you’ll need to use the calculator (most likely) to figure out the total amount you owe.
Calculate your budget (with debt taken into account)
To figure out what your student loan payment should be based on your income, you first need to sit down and sort through your budget. To do this, enter your total monthly net income (that is, after federal and, if applicable, state taxes), then use a budgeting method such as the 50/30/20 rule. With this particular rule, you will divide your monthly net income into three spending categories: 50% for essentials, 30% for needs, and 20% for savings and debt repayment.
Consider income-based reimbursement for peace of mind
Income-based repayment is a solid option for borrowers who struggle (even with fierce budgeting) to make payments on the typical student loan repayment plan. Once you have your budget allocated for the debt, choose a repayment over 20 or 25 years. This makes the process or refund easier and more efficient.
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Use a student loan repayment calculator
Remember that there are many resources online to help you develop strategies to reduce your student debt. It’s worth checking out a student loan debt calculator like the one offered by Student Loan Hero.
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