Over the past eight weeks we have touched on the basics of each of the federal student loan repayment options. For those of you with private student loans there are different repayment plans available to you and they vary based on your loan provider.
The most common repayment options for private student loans are immediate, interest only, partial interest, and full deferment. As you may notice, there aren’t any income based repayment options listed. That is because it’s very rare to find a private student loan provider who offers this option. Instead, some private loan providers offer an extended repayment term, so instead of the standard 10 year repayment plan you might be able to stretch your payments over 15 or 20 years. If you do this, you will still be paying back your full loan and won’t receive any loan forgiveness. The longer you stretch your repayment terms, the lower your monthly payment will be, but the more you will end up paying in total, due to interest.
If you elect the immediate repayment option, your full monthly student loan payment will begin as soon as you take out the loan. This results in the lowest overall cost because you will have already paid down principal and interest before you graduate. Most students aren’t able to select this repayment option because it’s difficult to afford the monthly payment while in school.
Check back next week for additional information on the interest only repayment option for private student loans.