Repayment Options For Private Student Loans
There are four common repayment options available when it comes to private student loans. Again, keep your financial expectations in mind while doing your research.
Tip:
If you have a problem with a private or federal student loan, you can submit a complaint to the Consumer Financial Protection Bureau.
Immediate Repayment
Immediately begin making monthly payments on both the principal and interest while you are in school.
Pros
Pay off your loan much faster
Save a considerable amount of money in interest fees
Get a head start on repaying your loan by the time you graduate
Cons
You will need to make payments while you are in school, which you might find challenging as a young student
Interest Only
Make interest-only payments while you are in school.
Begin making principal and interest payments after graduation or if you drop below half-time enrollment.
Pros
You save money on interest because it doesn’t accrue while you are in school
If you agree to repay your private student loans while you are still in school, you could pay a lower interest rate
Cons
You will make payments while you are in school and most likely living on a limited budget (but those payments are much smaller when compared to a principal and interest payment)
Partial Interest Repayments
You make a fixed monthly payment that only covers part of the interest you owe while you are still in school.
Full Deferment Repayments
You can postpone repaying your loan for up to three years
You must apply (and qualify) for deferment unless you are enrolled in school at least half-time
If you don’t continue making payments on your student loans until your forbearance application has been approved, you risk default
Pros
Some private lenders provide deferment for economic hardship
Gives you time to improve your financial situation
Reduces the pressure of meeting monthly payments
Offers more time to postpone repayment than grace periods
Cons
Not all private student loan lenders offer it
You must qualify, which involves working with your loan servicer or lender, and, in most cases, filing an application
Deferment delays repayment, it does not forgive it
You accrue interest that is due at the end of the deferment period. You can avoid this by paying the interest as it accrues
Common points to compare before selecting a student loan
- Interest Rates
- Processing Fees
- Loan Amount and Concept of Margin Money
- Security Requested
- Moratorium Period and Interest rate repayment
- 80E Tax Benefit
- Disbursal Requirements
- Additional Charges
There Are Many Types of Student Loans
The two main types of student loans are federal and private. Within each type are subsets that might appeal to you based on your credit history, financial need, and other factors.
Federal loans were established to help students with limited funds, or a poor credit history, receive a good education. Private loans offer customized options to students with a strong credit history.
Federal Student Loans
Private Student Loans
Fees
Borrowing Limits
Interest Rates
Cancellation Policy
How to Apply for a Federal Student Loan
How to Apply for a Private Student Loan
Repayment Options for Federal Student Loans
Repayment Options for Private Student Loans
Forgiveness Options for Federal Student Loans
Tax Implications
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