If I were to finish college and I owed nearly $200,000 in College Loans, but i was earning over 100k, how long would it take me to pay all those loans off?

Uh, Rebecca:

It’s not a question of how long you’ll pay – it’s a question of how much you’ll pay. One of the terms of the loan agreement will tell you how long you have to repay the loan. For most loans, that’s 10 years, and at most, maybe 15. If you’ll need more time than that, you’re going to have to refinance the loans – perhaps through consolidation – but beware the decision to consolidate loans is a very costly option.

I can tell you this – the accepted rule of thumb is that student loan payments should never exceed 15% of the borrower’s first year salary – and that target is going to be a REAL stretch for you if you borrow $200,000. Let’s take a look…

We’re going to have to start out by guessing, because that $200,000 in loans is going to have to be a mix of government loans and private loans. The government loans are going to have a low interest rate that will remain fixed throughout the entire repayment period, but the private loans, unfortunately, are going to bear higher interest, and the rate will be variable, going up and down with the general activity of the world markets. For the sake of argument, let’s assume that the average interest rate on your $200,000 in debt will be 8.5%.

In order to pay $200,000 back in 10 years, your monthly loan payments would be $2479.71. Over the course of that 10 years, the loans would accrue $97,565 in interest, and your total payments would total $297,565.92.

If you were determined that $2479.71 should not be more than 15% of your salary, you’d have to earn $198,376 a year – starting in your first year out of college.

That’s pretty scary, so let’s assume you could arrange to repay the $200,000 in 15 years, rather than 10. That’ll cut your monthly payment a bit. Let’s look:

If you repay $200,000 at 8.5% interest over 15 years, you’ll only pay $1969.48 a month. The interest will be greater, of course, because you’re taking longer to pay – now you’ll wind up with $154,506 of interest – so right away, you can see that the decision to spread your payments to 15 years will cost you an additional $57,000. Ouch.

With a lower payment of just $1969.48 a month, you’ll only have to earn $157,558 in your first year’s salary to stay on top of that debt.

I’m going to be very honest with you – most people – even people with 6 figure salaries – will have a near impossible time managing $200,000 in student loan debt. Many people can’t afford a $200,000 mortgage, and that’s a 30-year loan, so the payments are a lot smaller. Unless you are very confident that you are guaranteed a $150-200,000 salary – straight out of college – that’s a very scary amount of borrowing that you are contemplating. If you borrow that kind of money, there is little or no chance that you’ll be able to afford a decent place to live, a decent car to drive, and decent food on your table for quite some time after you graduate.

Give that kind of borrowing some very careful thought.

Good luck to you. I hope these numbers help you with your analysis.