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Understanding Student Loans

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Student Loan Repayment Options

Flexible undergraduate repayment options including deferred payment.

Option 1 - Immediate Student Loan Repayment

  • Maximum savings over the life of the loan
  • Principal and interest payments begin approximately 45 days after funds are disbursed
  • Payment amounts change annually based on interest rate fluctuations

Option 2 - Interest-Only Repayment

  • Reduce debt by making monthly interest payments while you're in school
  • Defer principal and pay only interest while enrolled in school at least half time for up to four years (five years if enrolled in a five-year program)
  • Payments begin approximately 45 days after you get your check
  • Repayment of principal and interest begins approximately 45 days after you graduate or cease to be enrolled at least half time
  • Student loan repayment amount will change annually based on interest rate fluctuations

Option 3 - Deferred Payment

  • Delay repayment of principal and interest while you're in school
  • Make no payments while enrolled in school at least half time for up to four years (5 years if enrolled in a 5-year program)
  • Repayment of principal and interest begins approximately 180 days (six months) after you graduate or cease to be enrolled at least half time
  • Interest is capitalized at repayment and quarterly prior to repayment (all accrued interest will be added to the principal loan amount)
  • Payment amount will change annually based on interest rate fluctuations

National City Undergraduate Direct Student Loan Repayment Examples1

Option 1 Option 2 Option 3
  Immediate Repayment Interest-Only Repayment Deferred Repayment
Amount Requested $10,000.00 $10,000.00 $10,000.00
Origination Fee2 3.00% 3.00% 5.00%
Principal Amount of Loan at Disbursement $10,309.28 $10,309.28 $10,526.32
Deferment Period 0 Months 48 Months 48 Months
Monthly Interest Payment3 (while in school) (included below) $48.97 (Deferred)
Principal Amount of Loan at Repayment4 $10,309.28 $10,309.28 $14,006.36
Monthly Principal & Interest Payment5 (after deferral period, if any) $72.09 $72.09 $110.33
Repayment period 240 months 240 months 240 months
APR6 6.08% 6.01% 7.63%
Total Finance Charge7 $7,301.60 $9,652.16 $16,479.20

Up to 0.50% rate reduction with automated payments.8

There are advantages to paying student loans via automatic direct debit. A 0.25% interest rate reduction is available for borrowers who elect to have monthly principal and interest payments transferred electronically from a savings or checking account. Upon request, loan borrowers are also entitled to an additional 0.25% interest rate reduction if the first 36 payments of principal and interest are paid on time and the borrower signs up for automated payments.8

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1 These repayment examples assume the variable interest rate for the National City Undergraduate Direct Student Loan is equal to the LIBOR Index plus a margin of 3.00% for Options 1 & 2 and plus a margin of 4.5% for Option 3. The interest rate used in this example and in effect as of 05/01/2008 is 5.70% for Options 1 & 2 and 7.20% for Option 3. The interest rate margins for the National City Undergraduate Direct Student Loan range from 3.00% to 9.50% (APRs range from 6.01% to 13.26%), depending on the creditworthiness of the borrower and cosigner, if any. The LIBOR Index equals the one-month LIBOR (London Interbank Offered Rate) published in the 'Money Rates' section of The Wall Street Journal on the first business day of the preceding calendar month. The interest rate and APR will increase during the life of the loan if the LIBOR Index increases. National City Bank, is the lender for the National City Undergraduate Direct Student Loan. The loan terms described are for the 2007-2008 academic year and are subject to change.

2 These repayment examples assume origination fees of 3.0% of the total loan amount (the requested loan amount plus the origination fee) for Options 1 and 2 and 5.0% of the total loan amount for Option 3. The origination fee ranges from 3.0% to 10.5%, depending on the repayment option selected, and the creditworthiness of the borrower and cosigner. The origination fee will be added to and financed with the requested loan amount at disbursement.

3 The amount shown here is the payment that will be made during the deferment period if the student elects to defer principal and make interest-only payments while in school. The monthly interest payment will increase if the interest rate increases. Interest-only payments during deferment do not reduce the principal balance of the loan. After deferment, full principal and interest repayment begins.

4 Principal at repayment is the principal amount of the loan at disbursement plus, if you elect to defer repayment, interest that accrues during the deferment term (which is assumed to be 48 months) under Option 3, where both interest and principal are deferred. Under Option 3, deferred interest is capitalized quarterly and at the time your loan enters repayment.

5 Monthly payments under repayment Option 1 will be fixed for the first year and then recalculated once each year based on the interest rate applicable at the time of the calculation and reset on the anniversary of your most recent repayment start date so as to pay the loan in full over the remaining repayment period. Monthly payments of principal and interest under repayment Options 2 and 3 will be fixed for the first year when the loan goes into repayment and then recalculated once each year based on the interest rate applicable at the time of the calculation and reset on the anniversary of your most recent repayment start date so as to pay the loan in full over the remaining repayment period. If principal or principal and interest are deferred, the monthly payment amount shown here will increase if the interest rate increases and will be computed based on the interest rate applicable at the time repayment begins. Minimum monthly payments will be at least $25.

6 Annual Percentage Rate (APR) is a measure of what a loan will cost. It takes into account the rate, fees, length of the loan and the timing of all payments. The APR will increase if the LIBOR Index increases, and decrease if the LIBOR Index decreases.

7 Finance charge is interest paid over the life of the loan, plus the origination fee.

8 The 0.25% interest rate reduction is available for borrowers who elect to have monthly principal and interest payments transferred electronically from a savings or checking account. The interest rate reduction will begin when automatic principal and interest payments start, and will remain in effect as long as automatic payments continue without interruption. This reduced interest rate will return to contract rate if automatic payments are cancelled, rejected or returned for any reason. Upon request, borrowers are also entitled to an additional 0.25% interest rate reduction if (1) the first 36 payments of principal and interest are paid on time, and (2) at any time prior to the 36th on-time payment, the borrower who receives the monthly bill elects to have monthly principal and interest payments transferred electronically from a savings or checking account, and continues to make such automatic payments through the 36th payment. The reduced interest rate will not be returned to contract rate if, after receiving the benefit, the borrower discontinues automatic electronic payment.
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