Is it wise to only make interest payments on student loans?

Only paying interest on student loans can reduce your long-term costs as a borrower.

With a typical loan—be it a student loan, mortgage, or personal loan—you must pay back both the interest and the principal of your loan each month. Interest-only payments, on the other hand, allow you to pay only the interest that has accrued for the month and contribute nothing to the actual balance of your loan.

With federal student loansInterest payments are only an option if you are in school, are in, or have been in the six-month grace period after graduation admitted to deferral or indulgence. If you have a personal loan, only interest payments may be required while you are in school, or they may be a payment plan option if you meet certain qualifications.

Pros and cons of interest-linked student loan payments

The biggest advantage of interest-linked student loan payments is that the total amount of interest you have to pay decreases over time.

Here’s why: Even if You are on a grace period or otherwise fail to make payments on your loan, his balance will still accrue interest month after month, year after year. This interest is also compounded, meaning it adds to your previous loan balance, resulting in even higher interest charges in the next cycle. Paying off interest loans ensures that this doesn’t happen.


It can also help you develop good financial habits. You’ll get used to making monthly payments on time, and you’ll be better prepared when those bigger payback bills roll around later.

Only interest has disadvantages student loan payments, although. For example, if you’re still in school, these payments could cause financial stress — especially if you’ve taken out some large loans. Additionally, if you decide on an interest payment plan and you are out of school or on a grace period, it only delays the inevitable. You’ll eventually have to pay off that debt or risk defaulting on the loan — not to mention the consequences that come with it.

This is how you only make interest payments on student loans

To make only interest payments on your student loans, you must contact your servicer. If you have federal loans, you can find out who your servicer is with If you have personal student loans, check with your school’s tax office or get your credit report. This should list who your current borrower is.

The Best Ways to Pay Off Student Loans Fast

The best way to reduce the interest you pay on your student loans is to pay them back — and fast. One way to do this is to consider refinancing. Through Refinancing your student loans, you may get a lower interest rate and therefore a lower monthly payment. If you’re successful, you’ll keep making the same payments you’re used to, and you’ll eat up the principal balance faster, shaving months or even years off your payment deadline.

5 Student Loan Mistakes That Can Cost You Thousands

You can also:

  • Make payments bi-weekly. Split your monthly payment into two parts and pay them out in two-week increments. This results in a full additional payment each year that can really reduce that loan balance over time.
  • Take advantage of lucky breaks. If you receive a tax refund, vacation pay, or birthday bonus from a loved one, consider adding it directly to your student loan balance. Make sure your service provider provides it specifically for your main balance (and put it in the notes section of your check or e-payment as well).
  • Sign up for automatic payments. Some private lenders will lower your interest rate in exchange for setting up automatic payment. If your lender offers this benefit, take advantage, but keep making the same payments to really upset that balance.

If you find yourself in a bind, federal loans offer income-related repayment plans that can allow you to continue paying off your loan balance without putting too much financial strain on your budget. These are better options than forbearance or forbearance, as your loan will still earn interest during some of these plans.

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