6 Things To Consider When Paying Back Private Student Loans

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Woman holding post-it note that says "stress less."

Freaking out about private loans? By gaining knowledge, you may be able to stress less.

My college education is complete. Woohoo!

And I started my first full-time job. Double woohoo!

Yah, life is pretty OK right now. Except for one thing: The terms “6-month grace period” and “four private student loans” won’t stop buzzing around in my head.


Private loans are stressful because they typically come with fewer options than federal loans for managing your payments.

To make myself feel better, I Googled the subject until my fingers hurt, asked around for advice, and compiled a list of things everyone should consider when figuring out the best way to pay off their private loans.

Here’s what I found.

1. Understand The Loans You Have

I didn’t quite know how much I owed when I graduated. I was also unsure about whether one of my loans from Sallie Mae was private or federal and had no idea how much my monthly payments were going to be. When I found out, I was disappointed—but it allowed me to better understand and compare my repayment options.

If you need to find out your loan details, check out the National Student Loan Data System (NSLDS®). This outlines things like loan type, servicer, and how much you owe for your federal student loans. For private loans, you can pull your credit report (free once every 12 months) to identify your lender and then reach out to them to find out more. Speaking of which …

2. Communicate With Your Lender

I found that all my student loan websites had a number to call for questions. By communicating your needs to your lender, you can work together to find the best options for managing your debt.

When you’re on the phone, get the full name of the person you speak with so you can refer back to him/her in future conversations. This will hold that person accountable for any information (or misinformation) they give you. If they’ll email you a summary of what you discussed, even better.

3. Understand Consolidation

Even if your current private loan provider doesn’t consolidate, a handful of other lenders do. You can see a list of some that do here.

For me, consolidation seems like a great option. I found a lender that offers an interest rate that will reduce my monthly payments, my amount repaid, and my stress levels.

Not sure if loan consolidation is right for you? Check out the pros and cons here.

4. Consider The Interest Rate

Lower is better. Duh.

If you’re looking to consolidate, be sure if the interest rate is fixed or variable. Fixed rates won’t change while variable rates can increase over time. With variable rates, all that stress that vanished in my previous point could reappear—and then some.

Also, look into ways to reduce your rate. For instance, if you have private student loans with Discover, you can sign up for their auto-debit reward program to lower your rate during repayment.

5. Investigate Alternative Plans

When researching my Sallie Mae loans, I saw that the company now offers graduated payment plans and 12-month reduction plans for some of its loans. These options allow you to make lesser payments for a short period at no penalty, if you’re in a tight spot financially.

Of course, the longer you take to pay, the more interest will accrue. That’s why I plan to make extra payments toward my principal, so my loans go away quicker. Still, if you really can’t afford your monthly payments for the time being, consider all your options before skipping a payment.

Also, Discover allows some borrowers to defer payments based on occupation. Again, not my cup of tea (I’m not in the military or working at certain public service organizations anyway), but if you are, this is something to consider if you need to.

6. Check For Prepayment Penalties

As I said above, the more you pay toward your principal, the better. Unfortunately, some lenders penalize you for making extra payments. This “repayment” fee will be outlined in your loan’s paperwork.

Lucky for me, my lender doesn’t do this. If yours does, it’s definitely a reason to consider switching to another lender. For details on how you may be able to do this, look here.

Have advice about managing private student loan payments? Post it in the comments.

(Photo: Ryan Chow)

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  1. Mike Giles July 19, 2014 / 5:04 pm

    Emerson College represent!! Excited to bump into some else from Emerson on the interwebs. Unfortunately not as excited (or surprised) that it happens to be on a loan repayment page… But I appreciate the write-up nonetheless, particularly the first two points. Best of luck!

    Mike Giles ’11

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