Private student loan repayment options

There are multiple options to consider when its time to pay back private student loans. (iStock)

Unlike federal student loans, repaying private loans can be tricky. There’s no one-size-fits-all method for student loan repayment options. But there are methods loan borrowers may want to consider, especially if they're looking to change their loan term and lower their loan balance, interest rate, monthly payments or make them go away — albeit temporarily.  

Although the bulk of college students have federal student loans, there are a good number of students with private loans. This means they got their money from banks, credit unions, online loan servicers, and other non-federal institutions to finance their education.

Whenever you take out a private loan or you already one and you're considering a loan refinance, you can always use multi-lender marketplace Credible. With a loan refinance, you simply have to fill out one form to compare rates and access options from several lenders.

With private loan servicers regulating their own loan terms and conditions, (unlike federal loans) it’s up to lenders to set repayment terms. Here's everything you need to know.

What are the repayment options for student loans?

Private student loans don’t qualify for a newer experimental plan called shared income agreements, which allows users to repay the loan based on their post-college income. They operate more as "real world" loans resembling car notes or mortgages. Private loan interest rates are also higher and have more rigid repayment plans. Interest begins accruing right away.

Again, it may be worth considering a student loan refinance if your billing statements are becoming overwhelming. A loan refinance can help you chip away at student loan debt with a potentially lower monthly payment. Enter your current loan balance in Credible's free tools to choose a new repayment term and see what refinance rates you're eligible for.

While it's a good time to get a loan refinance (while interest rates hit record lows), this isn't your only option. Here are five types of repayment plans you should know, including refinancing.

  1. Fixed monthly payments immediately
  2. Interest-only repayments
  3. Partial interest-only repayment
  4. Deferred repayment
  5. Loan refinance

Note: Student loan interest rates can be fixed or variable. They are often dependent upon the credit rating. Fixed rates may be higher, but guarantee stability and variable interest rates are more likely to go up these days than down. Read on to learn more.

1. Fixed monthly payments immediately

Chipping away at the balance while still enrolled in college may be ideal if loan borrowers can handle the full monthly payments. They won’t be stuck with huge billing statements after four years of college. Borrowers should make these payments throughout their college years and during any grace period the lender offers.


2. Interest-only repayments

This option allows borrowers to pay toward just the interest. Remember, as soon as the loan check is written, interest will start accruing. If loan borrowers can’t make the full monthly payment on their private loan, they can at least work on paying the interest each month and during the grace period.

3. Partial interest-only repayment

Something is better than nothing. These payments don’t have to amount to a large monthly cost and can be as small as $20. Just something toward the repayment will go a long way in helping to alleviate some student loan debt. Borrowers should continue to make partial interest rate payments during school and the grace period.


4. Loan refinance

Another option is to refinance student loans to get a lower rate. This would lead to a lower monthly payment and make your amounts more manageable, while potentially saving money over the course of the loan.

To see what kind of private loan rates you qualify for, use Credible to compare options (without any impact on your credit score) from different private loan servicers. Click here to get started.


According to a 2019 report by Sallie Mae, private student loans average about $8,430. While there’s not much flexibility, knowledge is power so take note of the following loan repayment options. Unfortunately, qualifying for student loan forgiveness programs are difficult and limited to federal student loans.

Some of the largest student loan companies offer a grace period to help borrowers get on their feet after graduation. The lender assumes the user will be in the workforce soon after leaving school and allows time to find employment before the loan payments begin.  Although most of these periods are six months after graduation, some student loans give up to nine months to repay the loan.

It's vital to get quotes from several loan servicers to ensure you're getting the most affordable refinance rates possible (rates vary by lender). Use Credible for all of your comparison shopping needs — plus, you can get started on the process from the comfort of your own home.

Sallie Mae notes that many families are getting a head start on paying back loans. In fact, 41 percent are making payments on student loans while in school. Try using a student loan repayment calculator to figure out what your monthly payments would be.

4. Deferred repayment

By deferring payments, borrowers don’t pay anything toward the loan while in school. With this option, there's no concern about a monthly bill until after the borrower graduates and after the grace period ends. But most borrowers should avoid the deference plan to prevent student debt because this option will leave them with the largest chunk to repay.