Can You Make Interest-Only Payments on Student Loans?

Making interest-only payments on student loans can decrease the amount you repay overall.

Ryan LaneJuly 27, 2020

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You can make interest-only payments on student loans to save money. Making these payments before you graduate — or while you’re postponing repayment — can keep thousands of dollars in interest from being added to your loan’s balance.

If you have subsidized federal student loans, interest doesn’t accrue while you’re in school.

But interest always accrues on unsubsidized loans and private student loans. Interest-only payments can keep those debts from snowballing.

Student loan interest-only payment calculator

Paying off student loan interest before it capitalizes — or is added to your loan balance — decreases the total amount you repay. Use this calculator to estimate your monthly student loan interest payments and how much they could save you in the long run.

When to make interest-only student loan payments

There is never any penalty for prepaying a student loan, and you should consider making interest-only payments any time your loans are accruing interest and payments aren't required. This can include:

  • While you, or your child for parent PLUS loans, are enrolled in school.

  • During the six-month student loan grace period.

  • When you’re temporarily pausing repayment via deferment or forbearance.

For example, say you borrowed a $26,000 graduate PLUS loan at the current 5.30% interest rate for each year of a two-year program. Each month, $117 in interest would accrue on that loan.

By making interest-only payments, you’d prevent $5,616 from being added to your balance after your grace period ended, and your required payments would fall from $620 to $559. Even accounting for the interest-only payment amounts, you'd wind up more than $1,600 ahead on a 10-year repayment plan.

Keep in mind that subsidized student loans don’t accrue interest while you’re enrolled at least half-time or on an approved deferment. During these periods, making extra payments directly on your principal balance can help minimize the amount you repay overall.

How to make interest-only payments on student loans

You'll make interest-only payments directly with your student loan servicer. Visit its website or contact your servicer to confirm how much your interest-only payments should be and to set up these payments. If you’re in school or otherwise unsure of who your servicer is, you can find out at studentaid.gov.

There is no federal student loan repayment plan that lets you pay just interest. However, if you opt in to a deferment or forbearance, the application may give you the choice to make interest-only payments during this break. Even if you do not select that option, you can still set these payments up with your servicer.

Private student loans may offer — or require — interest payments while you’re in school. They may also have post-graduation interest-only payment plans for a period of time. Contact your lender for details.

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