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Choosing the Best Private Student Loan Repayment Plan

Kathryn Morstad
choosing the best private student loan repayment plan
choosing the best private student loan repayment plan

Federal student loan
Payments Return December 31

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Federal student loan
Payments Return December 31

We've got you covered.

Get Purefy’s free 20-page Ultimate Guide with just one click.

For many students, attending college means taking on federal and private student loans to pay for school. But did you know there are options for private student loan repayment?

In this guide, we’ll examine the most common private student loan repayment options and weigh the pros and cons of each option.

An Overview of Private Student Loan Repayment Plans

With any private student loan, interest starts to accrue when the loans disburse to your college or university.

If you choose a plan that doesn’t tackle interest in full while you’re attending school, then any unpaid interest is added to your principal balance and capitalized. This means the interest accrued during school becomes part of your principal balance, and then interest is charged on your total principal (including that interest).

The good news is that if you have multiple student loans, you can choose different repayment options on each loan based on what you can afford, which gives you some flexibility regarding your long-term finances.

Let’s explore the four most common repayment plans for private student loans.

Full Repayment or Immediate Repayment [Principal + Interest]

This repayment plan is as straightforward as it gets. Once your funds are disbursed, you begin making payments with the total principal and interest included.

That means if you have a payment with $200 in principal and $160 in interest, then you pay $360 every month. That’s $4,320 per year, and your average student most likely can’t afford these payments.

However, students with jobs or parents taking out loans on the behalf of their child may be able to pay the full monthly payment – and they will be glad they did.


  • With a full payment, you can minimize the amount of interest you pay over the life of the loan, saving yourself a ton of money in the long run.


  • This can be an unattainable option for many students, especially those taking a full load of classes and working very little.

Interest-Only Repayment

Interest-only repayment plans are exactly as they sound — you’ll pay only the interest accruing while you’re in school, and you’ll defer the principal until after you graduate. In our example, you would be paying $160 per month, or $1,920 per year.


  • Your monthly payments will be much more manageable.
  • The principal loan balance will not grow while you finish your education.


  • You won’t be making any progress reducing your principal balance until after you graduate.

Flat Fee, Fixed, or Partial Interest Repayment

This type of arrangement has you pay a flat rate, usually $25 per month. This payment goes toward the interest first, with any remaining interest accruing and capitalizing when the loan enters full repayment.

In our example, you would pay $25 per month or $300 per year, so $135 per month (or $1,620 per year) in interest would be added to the principal balance.


  • The monthly payments are more affordable for many students, and even small payments will make a difference on the total loan cost in the long run.


  • The remaining interest is added to the principal balance and continues to grow.

Full Deferment

If you can’t make payments while you’re in school, don’t worry. Many lenders will give you the option of deferring repayment until after graduation by offering a grace period, which usually lasts six to nine months. By choosing Full Deferment, you opt to pay nothing while you are in school, but your loan balance will continue to grow.


  • Postponing repayment until you’ve graduated and begun working is the most realistic option for most students. This can be especially appealing to people who carry full loads or have extremely challenging coursework and need to focus all energy on school.


  • Your interest continues to pile high on top of the principal, which can seem overwhelming upon graduation. This option can cost thousands of additional dollars in interest over the life of the loan.

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Fixed Rate

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Variable Rate

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Private Student Loan Repayment Options After Graduation

Once you graduate, you have a couple of ways to tackle private student loan repayment. Consider these options:

Graduated Repayment

Some private lenders offer a period of time after your grace period ends to get your bearings. Graduated repayment usually includes a reduced payment for a set period of time (for example, the first year). This is intended to give you time to land the perfect job and get your career rolling before payments ramp up. Your payment would then increase after this initial period of time has passed, until you are making the standard monthly payment on your loan.

Refinancing Student Loans

Once you graduate, you may want to at least explore the savings potential of refinancing your student loans. With a job under your belt and some credit history built up, you might qualify for a lower interest rate. You may also want to release a cosigner from one or more loans.

The good news about refinancing is there are typically no origination or application fees, and it doesn’t cost anything but a small amount of time to consolidate your loans into a more cost-effective package.

What Are the Benefits of Making Payments While in School?

When you compare student loan repayment plans, Full Repayment sounds like the best option (and it is). You don’t accrue interest and your principal doesn’t continue to grow.

Unfortunately, that is not always a feasible solution. Sometimes, circumstances just don’t allow you to work and make full payments on your student loans while attending school. It is preferable to at least make partial payments for two reasons:

Save on Interest

With Partial Repayment or Interest-Only Repayment Plans, you at least pay some of the interest and keep it from being capitalized into your loan. This saves money on interest for the entire life of the loan and can be worth significant money over time.

Build Credit History

While you are making payments, even partial payments, you are establishing and continuing to build your credit. Credit history is extremely important when you graduate. It can affect your ability to buy a car, rent an apartment, or even the type of job you can land.

Why not get started on building that shiny new credit portfolio as early as possible? It will pay big dividends in the future.

How Selecting a Shorter Loan Term Could Save You Money

With private student loan repayment, you will often get lower interest rates when you select a shorter term for your loan. Lenders loan money to earn interest, but they also want their money and earnings back sooner rather than later. To encourage this, the lowest rates are reserved for the shortest-term loans.

Lenders live by the Time Value of Money (TVM) principle, meaning money in hand has more value than money paid in the future due to its earning potential.

This works in your favor if you can swing the payments. If you opt for a five-year loan term, your payment will be higher, but you will pay less interest over the life of your loan. The cost savings can be in the thousands, depending on how much you owe. You’re happy, the lender is happy — it’s a win-win for everyone.

Comparing Private Lenders

When you are shopping around for private student loans, most lenders are upfront about their repayment plans. They have clear policies regarding the types of repayment programs they offer and how you can apply for them.

If you are pursuing additional funding for your education, or are graduating soon and want to explore refinancing, consider our rate comparison tool.

You can use this tool to compare interest rates, terms, and special offers from multiple top-level private student loan companies. Just complete the quick and easy form, and within minutes you will have several pre-qualified offers from highly reputable lenders in the private student loan sector.

Purefy also offers a skilled team of student loan experts who can answer your questions about private loans, interest rates, and private student loan repayment options for a variety of lenders. Schedule an appointment or talk to someone today by calling 202-524-1115 (during regular business hours – 9 am to 6 pm, EST).

Talk to a student loan expert

Purefy’s Student Loan Advisors are ready to guide you through the student loan process.


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Student Loan Refinancing

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with no impact on your credit score.

Earnest Rate Disclosure

Rates displayed include the 0.25% Auto Pay discount. You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.47% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.59% APR to 11.69% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.

Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.

Loan Eligibility criteria: Eligible students must: 1) For college Freshmen, Sophomores and Juniors, attend, or be enrolled to attend, a Title IV school full-time. For college Seniors and Graduate students, attend, or be enrolled to attend, a Title IV school at least half-time; and 2) be pursuing a Bachelor’s or Graduate degree. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification.

Responsible borrowing tip: Explore all scholarship, grant and federal options before applying for a private loan.

Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104.

Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.

ELFI Rate Disclosure

Education Loan Finance is a nationwide student loan provider offered by Tennessee based SouthEast Bank. ELFI is designed to assist students financially with receiving their education. Subject to credit approval. See Terms & Conditions. Interest rates current as of 07-01-2022. Variable interest rates may increase after closing but will never exceed 18.00%. Interest rates may also differ from the rates shown above. The term of your loan, financial history, and other factors, including your cosigner’s (if any) financial history can affect the interest rate. For example, a 10-year loan with a fixed rate of 7% would have 120 payments of $11.61 per $1,000 borrowed. Rates are subject to change.

College Ave Rate Disclosure

College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
Minimum loan amount $1,000, as certified by your school and less any other financial aid you might receive.
This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 08/01/2022. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.

Ascent Rate Disclosure

Ascent Student Loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit:

Rates are effective as of 6/15/2022 and include a 0.25% on the lowest rate offered and a 2.00% discount on the highest offered rate. Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized back account each month. For Ascent rates and repayment examples please visit:

1% Cash Back Graduation Reward subject to terms and conditions. Click here for details.

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