· 8 min read · worthmydegree.com
A private student loan, after you have signed
Private student loan stories tend to have the same shape. A balance with a bank's name on it, a rate between 11 and 18 percent, a first payment that is a third or half of a paycheck, and a question that starts with "what are my options." The federal loan guides on this site are about options, because federal loans have them. A private loan has almost none, and that is the first thing to say plainly: no income-driven payment, no forgiveness at the end, no federal rules about forbearance, discharge on death or disability only if the contract says so, and a cosigner who owes every dollar if the borrower stops.
So once the loan exists, most of the questions are arithmetic, and arithmetic can be shown. Every figure below is computed with this site's repayment tool on four hypothetical loans, rounded and carrying a tilde. The balances and rates are made up, and they are the shape private loans commonly take. The one section that is not arithmetic is marked as such.
Why the payment is what it is
A private loan is repaid the way a car loan is: a fixed payment that clears the balance over the term in the contract, usually ten years, at the contract rate. Nothing about income enters it. That is the whole reason the first bill can be a third of a paycheck.
| The loan | Monthly payment over ten years | Of the first payment, interest |
|---|---|---|
| $78,000 at 16 percent | ~$1,310 | ~$1,040 |
| $59,000 at 11 percent | ~$810 | ~$540 |
| $175,000 at 16 percent | ~$2,930 | ~$2,330 |
| $180,000 at 15 percent | ~$2,900 | ~$2,250 |
The third column is the part that feels like a scam and is not one. At these rates interest is most of the payment for years, so a borrower paying $700 on $59,000 and watching $150 reach principal is seeing the loan work exactly as written. The share reaching principal grows every month, slowly at first. That is what a high rate is.
How $84,000 becomes $252,000
Picture a loan that has grown to three times what was borrowed. No fee or trick is needed for that. A balance compounding at 15 percent doubles in about five years and triples in a little under eight, so a loan that goes unpaid or mostly unpaid through the years after graduation reaches that figure on the arithmetic alone. Partial payments that fall short of the month's interest do not stop it; they slow it. The lesson is not about the borrower. It is that on a private loan, time without a full payment is the most expensive thing there is, because there is no plan that pauses the clock.
Interest-only, priced
Some lenders offer a stretch of interest-only payments to a borrower who cannot make the full one. It is worth pricing before accepting, because the relief is smaller than it sounds.
On the $175,000 loan at 16 percent, the full payment is ~$2,930 and the interest alone is ~$2,330. That is the reduction: about a fifth. After a year of it the balance is exactly where it started, the remaining term is a year shorter, and the payment that resumes is ~$3,070. The year of relief costs about ~$7,400 in extra interest over the life of the loan, on top of the ~$28,000 paid during it that bought nothing.
It is a real tool for a real gap, a job that starts in six months, a move, a medical bill. It is not a way to make an unaffordable loan affordable, and a borrower who cannot make the interest-only payment either is past what this section can help with.
Refinancing the private loan, priced
Refinancing a private loan is the one lever with no federal privilege on the other side of it. The old loan had no income-driven plan and no forgiveness to lose. So the question is only whether the new terms are better, and there are two ways they can be, which pull in different directions.
| $59,000 at 11 percent | Monthly | Total interest |
|---|---|---|
| Stay: 11 percent, ten years | ~$810 | ~$38,500 |
| Refinance: 7 percent, ten years | ~$685 | ~$23,200 |
| Refinance: 7 percent, fifteen years | ~$530 | ~$36,500 |
| Stretch: 11 percent, twenty years | ~$610 | ~$87,200 |
A lower rate at the same term is better every month and in total; there is nothing to weigh. A longer term is where the trade lives: the fifteen-year refinance at 7 percent lowers the payment by ~$280 a month and gives back most of the interest the rate cut saved. The last row is the one to look at twice. Stretching the existing 11 percent loan to twenty years lowers the payment by ~$200 and more than doubles the interest, and a borrower who asks a lender for "a lower payment" without naming a rate is often offered exactly that.
Two things this site cannot price. A refinance is a credit decision, and a borrower can be declined because the federal minimums push the debt-to-income ratio past the lender's line; parking the federal loans on the lowest legitimate plan is what moves that ratio, and it is the federal side's job. And some lenders want a payment history before they will refinance a loan. What that history is varies by lender and is not published anywhere this site can cite, so the honest instruction is to ask the lender directly rather than to assume a number.
What a cosigner is worth, and what it costs them
Suppose a borrower holds three offers on a $15,000 loan: 17.8 percent as it stood, 8 percent to refinance alone, 5.71 percent to refinance with a cosigner.
| $15,000 over ten years | Monthly | Total interest |
|---|---|---|
| 17.8 percent | ~$270 | ~$17,200 |
| 8 percent, alone | ~$180 | ~$6,800 |
| 5.71 percent, with a cosigner | ~$165 | ~$4,700 |
The refinance itself is worth about ~$10,400. The cosigner's signature is worth about ~$2,100 more, ~$18 a month. That is the value of asking someone to sign. The cost to them is the other column: the entire balance, every month the borrower misses, on their credit report as well, and sometimes a relationship that no longer exists. Cosigner release, where a contract offers it, has conditions the contract sets, usually a run of on-time payments and a fresh credit check on the borrower alone. Read that clause before signing, on both sides.
When the payment cannot be made
This section is not arithmetic and this site prices none of it. It is here because this is the question asked most often, and because the order of the options is worth knowing before the first missed payment rather than after the third.
The lender's own options come first: an interest-only stretch, a hardship or reduced-payment period, a term change. They are in the contract or in the lender's policy, not in any law, and asking in writing is the only way to find out what is on offer. A refinance elsewhere, if credit allows, is the second. A negotiated settlement is a third, and one warning applies: a settlement is only what it says if a missed payment cannot revive the original balance, so the default clause matters more than the headline figure.
Bankruptcy is the last, and it is not the closed door it is described as. Two questions decide it in court. First, whether the particular loan is protected by 11 U.S.C. 523(a)(8) at all, which depends on the loan's documents, the school's eligibility and whether the amount exceeded the cost of attendance, not on the words "student loan" in the contract. Second, if it is protected, whether repaying it is an undue hardship, a test that varies by court. Neither is answered by a website, and a balance that disappears from a portal after a filing has been charged off, not discharged; only a court order discharges a debt. That is a conversation with a lawyer, and the documents to bring are the promissory note, the disbursement records and the school's cost of attendance for the year.
A nonprofit student loan counselor will go through all of this at no cost and is not paid by anyone who benefits from the answer.
Before you sign one
Everything above is for a loan that exists. The other question comes earlier: a transfer student facing a $12,000 semester with $5,500 of federal room, or a nursing admit needing $80,000 in private money. For them the arithmetic runs the other way and is cheaper to do now. The calculator prices whatever sits above the federal caps as private money, at a stated rate, and says what share of the first paycheck that payment takes. The school search finds the price that needs no private loan at all, and the guide on where the federal money runs out says how often it does.
Run your own numbers
The repayment tool opens on the $59,000 loan above with a 7 percent offer over fifteen years and a year of interest-only entered, and prices both against the loan as it stands. Enter your own balance, rate and term, the offers you actually have, and a cosigner's rate if you were quoted one. If you also hold federal loans, add them and it prices every federal plan beside the private payment and says which loan an extra dollar should go to and why.