Let us all take a moment of silence to thank our student loans for getting us through college. How could we ever repay them?
Jokes on us, we have to repay them.
In all seriousness, understanding your student loan repayment plan options is incredibly important, especially with private student loans. When you take out a private loan, interest starts to accrue as soon as the amount is disbursed. So, if you’re using a private loan to pay for your education, it will accrue interest the entire time you’re in school.
While every private lender has its set of repayment plans, there are four main repayment plans that have become quite common across the industry.
- Immediate Repayment
- Interest-Only Repayment
- Partial Repayment
- Deferred Repayment
In this article, we’ll break down the four main repayment plans for private student loans, and provide some suggestions that could save you money in the long run by minimizing the interest that accrues.
Immediate Repayment
Opting for immediate repayment means you would make full payments as soon as the loan is disbursed, including while you’re still in school.
Pros
By making full payments right away, you will be able to minimize the interest you pay, resulting in the greatest savings.- You will be able to get a good head start on repaying your loan by the time you graduate as you would’ve already paid a decent chunk in both interest and principal.
Cons
For a majority of students, it just isn’t realistic to make full payments while still enrolled in college.
Interest-Only Repayment
Similar to immediate repayment, interest-only repayment requires you to make some payments while still in school. The difference is that you’re only paying interest rather than the full payment.
Pros
- The monthly payments may be more manageable as they’d be only for the interest.
- Your loan balance won’t grow while you’re still in school.
Cons
- You won’t actually be paying down your loan. Because the interest compounds, your payments would prevent you from owing more than you borrowed when it’s time to make full payments, but you won’t actually be paying off any of the initial loan amount.
Partial Repayment
Partial repayment is similar to immediate and interest-only repayment in that you make payments while in school, however, partial repayment may be more manageable depending on your overall loan amount.
Partial repayment requires you to pay a set amount, typically around $25, per month while still in school to reduce the accrued interest. (This could get confusing to differentiate partial repayment from interest-only repayments. Interest-only repayments would cover the entire monthly interest, as where partial repayment would only cover part of the monthly interest.)
Pros
- You can keep your loan balance in check and reduce the total amount repaid.
- Your loan balance won’t grow as quickly in comparison to not making any monthly payments while still in school.
Cons
- You would still owe more than you borrowed by the time you graduate.
Deferred Repayment
Deferred repayment is the only repayment plan that doesn’t require you to make payments while still in school. With this plan, payments would likely start after the grace period ends, typically 6 months after graduation.
Pros
- You won’t have to make any payments while you’re still in school.
Cons
- You will likely pay the highest overall cost. Unpaid interest will compound and add to your principal amount at the end of your grace period.
So What Should I Do?
Making full or partial loan payments while in school could save you thousands of dollars over time and is certainly recommended. But at the end of the day, the best private loan repayment plan is the one that works within your budget.
Check out the table below for a quick breakdown of the four main repayment plans offered by private student lenders.
Repayment Plan
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Student loan rates from our partners
Ascent
Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 11/1/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require full
principal and interest payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.
Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 11/1/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require full
principal and interest payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.
LendKey
1 – Terms and Conditions Apply
Loan products, terms, and benefits may be modified or discontinued by participating lenders at any time without notice. Rates displayed are reserved for the most creditworthy consumers who enroll to make automatic monthly payments. Your initial rate will be determined after a review of your application and credit profile. Variable rates may increase after consummation. You must be either a U.S. citizen or Permanent Resident in an eligible state and from an eligible school, and meet the lender’s credit and income requirements to qualify for a loan. Certain membership requirements (including the opening of a share account, a minimum share account deposit, and the payment of any applicable association fees in connection with membership) may apply in the event that an applicant wishes to apply with, and accept a loan offered from, a credit union lender. If you are not a member of the credit union lender, you may apply and become a member during the loan application process if you meet the lender’s eligibility criteria. Applying with a creditworthy cosigner may result in a better chance of loan approval and/or lower interest rate. Loans for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not available via LendKey.com.
2 – Cosigner Release
Some lenders participating on LendKey.com may offer the benefit of cosigner release. Cosigner release is subject to lender approval. In order to qualify, the borrower, alone, must meet the following requirements: (1) Make the required number of consecutive, on-time full principal and interest payments as indicated in the borrower’s credit agreement during the repayment period (excluding interest-only payments) immediately prior to the request. Any period of forbearance will reset the repayment clock; (2) The account cannot be in delinquent status; (3) The borrower must provide proof of income indicating that he/she meets the income requirements and pass a credit review demonstrating that he/she has a satisfactory credit history and the ability to assume full responsibility of loan repayment; (4) No bankruptcies or foreclosures in the last sixty months; and (5) No loan defaults.
3 – Autopay Rate Reduction
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments.
4 – AutoPay Discount & Lowest Interest Rate
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised APR is only available for loan terms of 10 years and is reserved for the highest qualified applicants, taking into consideration the applicant’s credit and other factors.
1 – Terms and Conditions Apply
Loan products, terms, and benefits may be modified or discontinued by participating lenders at any time without notice. Rates displayed are reserved for the most creditworthy consumers who enroll to make automatic monthly payments. Your initial rate will be determined after a review of your application and credit profile. Variable rates may increase after consummation. You must be either a U.S. citizen or Permanent Resident in an eligible state and from an eligible school, and meet the lender’s credit and income requirements to qualify for a loan. Certain membership requirements (including the opening of a share account, a minimum share account deposit, and the payment of any applicable association fees in connection with membership) may apply in the event that an applicant wishes to apply with, and accept a loan offered from, a credit union lender. If you are not a member of the credit union lender, you may apply and become a member during the loan application process if you meet the lender’s eligibility criteria. Applying with a creditworthy cosigner may result in a better chance of loan approval and/or lower interest rate. Loans for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not available via LendKey.com.
2 – Cosigner Release
Some lenders participating on LendKey.com may offer the benefit of cosigner release. Cosigner release is subject to lender approval. In order to qualify, the borrower, alone, must meet the following requirements: (1) Make the required number of consecutive, on-time full principal and interest payments as indicated in the borrower’s credit agreement during the repayment period (excluding interest-only payments) immediately prior to the request. Any period of forbearance will reset the repayment clock; (2) The account cannot be in delinquent status; (3) The borrower must provide proof of income indicating that he/she meets the income requirements and pass a credit review demonstrating that he/she has a satisfactory credit history and the ability to assume full responsibility of loan repayment; (4) No bankruptcies or foreclosures in the last sixty months; and (5) No loan defaults.
3 – Autopay Rate Reduction
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments.
4 – AutoPay Discount & Lowest Interest Rate
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised APR is only available for loan terms of 10 years and is reserved for the highest qualified applicants, taking into consideration the applicant’s credit and other factors.
Earnest
Student Loan Origination (Private Student Loan) Interest Rate Disclosure:
Student Loan Origination (Private Student Loan) Interest Rate Disclosure:
College Ave
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1) All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation.
(2) As certified by your school and less any other financial aid you might receive. Minimum $1,000.
(3) This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 11/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1) All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation.
(2) As certified by your school and less any other financial aid you might receive. Minimum $1,000.
(3) This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 11/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
Final Thoughts
Understanding the different repayment plans for private student loans is crucial in making informed decisions about how to manage your debt. While there are pros and cons to each plan, making full or partial payments while in school can help minimize the overall cost of your loan. Ultimately, the best repayment plan is the one that fits your budget and financial goals. By taking the time to research and compare your options, you can make a plan that works for you and help set yourself up for a financially stable future.