You can significantly reduce your monthly payments if you extend the term of your student loans, but you'll pay far more interest. Here's what to know before you opt for a longer payment term.

Across the United States, it seems that everyone is talking about the trillions of dollars of collective educational debt plaguing Millennials. At the time of publishing this article, 45 million Americans are struggling to pay off a student loan balance.

Humbling, I know.

This is a good time to think about the nuts and bolts of refinancing your loan. Remember that refinancing your student loans means that a private lender is essentially buying your Federal student loans, paying them off, and creating a new loan with new, original terms.

The new terms of your refinanced loan will be based on your credit reports, credit score, and other requirements. The new private loan terms include, among other things, a new interest rate and, potentially, a new term (the length of time over which you have to repay your loan).

For example, you could take your Federal student loans that have a 10-year term and refinance them into one private loan scheduled to be paid off over 20 years.

If you have the option to extend the term of your student loan when you refinance, you should consider a number of factors before making your decision.

Pros of extending your student loan term

You’ll have lower monthly payments

By extending your loan term, you will be able to make lower monthly payments. If you’re having trouble making payments on your standard repayment plan, extending the loan term to a longer period, such as 20 years, will help.

You’ll have more career flexibility

I’m a trained corporate attorney with student loan debt, and I recently switched careers to financial planning. The only way I was able to do this was by extending the term of my loan from 10 years to 25 years. This lowered my monthly loan payments and gave me the flexibility I needed to make my career change (a change that came with a significant pay cut).

Example of extending your student loan term

Assume Amy has $45,000 in Federal student loan debt at 6 percent interest on a 10-year, standard repayment plan.

  • Amy’s term: 10 years
  • Amy’s monthly payments: $500
  • Total repaid: $59,951

Amy decides to refinance her loans to private loans to get a lower interest rate. Amy and her lender agree to a new loan with a principal balance of $45,000 at a 4 percent interest rate for a period of 25 years. Using a simple mortgage calculator, I came up with the following calculations:

  • Amy’s new term: 25 years
  • Amy’s new monthly payments: $238
  • New total repaid: $71,258

Amy’s payments are reduced by $262 per month! However, even though her interest rate is now lower, she will pay $11,307 more over the life of the loan than she would have on the original 10-year term. Which brings us to…

Cons of extending your student loan term

You’ll pay more money over time

Because you will be borrowing money for a longer period of time, you will pay more in interest over the life of the loan, even if you do get a lower interest rate.

You’ll be in debt longer

By extending the term of your loan, you are agreeing to be in debt for that much longer. While this may not seem like a big deal to you, it’s a point to consider if you’re thinking about your financial future.

Example of NOT extending your student loan term

Let’s look at Amy’s situation again: Amy has $45,000 in Federal student loan debt at a 6 percent interest rate on a 10-year, standard repayment plan. Amy decides to refinance her loans to private loans to get a lower interest rate, but this time she doesn’t extend the term.

  • Amy’s new term: 10 years
  • Amy’s new monthly payments: $456
  • New total repaid: $54,672

Amy’s monthly payments are lower than they were originally, but they are still $218 more than they would be on the longer 25-year term. However, her total amount repaid is $16,586 less than it would be on the longer term.

Student loan term extension - Money Under 30

Deciding which is best for you

As you decide whether to extend the terms of your loan, consider what you can afford to pay each month and compare this to what you will pay in interest over time. Lowering your monthly payments can open up big opportunities for you in the present (it did for me). But you’ll have to carry that debt farther into the future, and pay more in the long run.

Conversely, keeping your loan term shorter will put more burden on your budget now, but you’ll pay less in interest over time and be done with the loan much sooner.

Which decision is best for you?

You’ll have to decide that for yourself. If you extend the loan to save money each month, ask yourself where those saving will go. Will the extra money allow for new career opportunities, investments, or paying down more expensive debt?

If extending the terms of your loan frees up money to invest in your future, then it may be the right choice for you. If you can afford to make your monthly payments but just don’t want to, that may be the wrong reason to extend the terms of your loan.

Refinancing options


Earnest offers flexible loan refinancing. You can set your own monthly payment, skip one payment per year, swap between fixed and variable interest rates with no charge, and you’ll receive built-in unemployment protection

Here’s our full Earnest review


SoFi offers better than average rates and makes applying for student loan refinancing easier than ever.

Here’s our full SoFi review

Read more

Want more information about how and why to refinance your student loans? Use our resources to find everything you need to know:

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About the author

Total Articles: 13
Natalie Bacon is the blogger behind Financegirl, where she writes about finance and intentional living for young professional women. Natalie is a former corporate attorney who traded in her job to pursue a career in financial planning, freelance writing, and blogging.