All About Private Loan Repayment Options

Flickr user Wade Morgen

The type of student loan repayment plan you choose is almost as important as the loan itself. A repayment plan dictates the terms of paying back your loan, including when you start making payments and how much those payments are. Most private lenders offer student borrowers four repayment options:

Immediate Repayment

Choosing this option means you are agreeing to pay back the full principal and interest while you are still in college, starting as soon as you receive the funds. While this minimizes the interest you pay on your loan, the downside to this plan is that you have to focus on payments while studying.

Interest-Only Repayment

With this plan, you are choosing to pay back only the interest that accrues every month. While the benefit of this plan is that it prevents your loan balance from growing, the downside is that it does not really reduce your loan amount. Your principal amount stays the same.

Partial Interest Repayment

If you can commit to paying back only part of the accrued interest every month, this is the plan for you. With this plan you can agree to pay a fixed amount every month, say $50 or $75, to cover a percentage of the accrued interest. While a partial interest repayment may not take care of the full interest that you owe every month, it does help to slow down the pace at which your loan balance grows so you do not have an overwhelming amount of debt to handle after you graduate.

Full Deferment

With a full deferment plan, you commit to start paying back the loan only after you graduate. This means you do not pay anything while you are still in school. The advantage of full deferment is that it allows you to focus on your academics without worrying about your loans. However, your interest and loan balance will keep increasing throughout and you will end up paying much more by way of interest over the life of the loan.

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College Raptor Staff

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