Repayment Plans for Private Student Loans

The most common repayment plan on private student loans involves a level payment for a fixed number of years, typically 7-15 years.

Some lenders offer extended repayment terms of up to 30 years, with the length of the repayment term depending on the amount of debt.

Loans with fixed interest rates generally have shorter repayment terms.

Interest continues to accrue during the grace period after graduation.

Some lenders offer the option of interest-only payments during the first year or two of repayment, with full principal and interest payments commencing after the interest-only payment period.

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Have you been employed for at least 2 years?
Do you currently have a credit score of at least 680?
Have you defaulted on your current loans?*

* Default = 270 days late/missed payment on a federal loan and typically 90 days late/missed payment on a private loan (contact your lender for exact definition of default).

Note that while lenders may refer to their repayment plans as standard repayment, extended repayment and graduated repayment, these repayment plans do not necessarily have the same terms and conditions as the repayment plans for federal education loans, despite the use of similar names for the repayment plans. Lenders may allow borrowers who are experiencing financial difficulty to switch repayment plans.

Some lenders offer auto-debit discounts, such as a 0.25% or 0.50% interest rate reduction, to borrowers who agree to have the monthly payments automatically transferred from the borrower’s bank account. Some lenders offer other discounts to borrowers who make consecutive on-time loan payments.

There are no prepayment penalties on private student loans.

Most private student loans are eligible for the student loan interest deduction, which allows the borrower to deduct up to $2,500 in interest on federal and private student loans each year on the borrower’s federal income tax return.

Since repayment plans vary by lender, some borrowers may wish to refinance their private student loans to switch to a lender with more flexible repayment plan options. Private consolidation loans may also save the borrower money if the borrower qualifies for a lower interest rate because of improvements in the borrower’s credit scores after graduation.

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