Student Loan Repayment Explained

May 24th, 2013 by Jennifer Frankel

college loan135903390If you are planning to apply for student loans come July or August, it’s important to know key terms so that you can evaluate lenders and choose the one that works best for you. The international student loans that are available have different repayment options. Repayment is defined as the act of paying back the money (with interest) that was initially loaned to you. It means that you are looking not only at how much you are borrowing, but the timing – when will you be expected to begin paying back the loans? So let’s take a closer look at student loan repayment.

Borrowers typically have three different options available on private student loans, it includes full deferral, payment of interest only, or immediate interest and principal repayment. We will explain the three options below, however keep in mind the further you delay payments the more money the lender will expect you to pay.

  • Full Loan Deferral – Student loans with a full loan deferral mean that you will not be required to pay back interest or principal until 6 months after graduation, or if you are no longer considered a full time student. Keep in mind that interest will accrue during the deferral period and will be added to the amount you owe.
  • Interest Payments Only – As the name alludes, you will only pay back interest while you are enrolled in school and the principal (and remaining interest) will be deferred until 45 days after graduation or if you are no longer considered full time. With this option, you will be required to begin making payments on your loan while you are in school, but since you will be paying back interest during this period – you will owe less since you will not be deferring interest as well.
  • Immediate Repayment – This means that once you’ve received your loan, you will begin immediately making payments back to the lender to cover both the principal and repayment. This option requires you to pay back the money right away, and thus is typically the less expensive option since you do not defer payments (and accrue more interest).

Interested in learning more about student loans? Check out our previous blog on understanding interest rates.

One Comment

  1. ABDISSA says:

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