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OCC Bulletin 2015-7 | January 29, 2015

Student Loans: Interagency Guidance on Private Student Loans With Graduated Repayment Terms at Origination


Chief Executive Officers of All National Banks and Federal Savings Associations, Federal Branches and Agencies, Department and Division Heads, All Examining Personnel, and Other Interested Parties


The agencies,1 in conjunction with the State Liaison Committee (SLC) of the Federal Financial Institutions Examination Council, today issued "Guidance on Private Student Loans With Graduated Repayment Terms at Origination." The interagency guidance provides principles that national banks and federal savings associations (collectively, banks) should consider in their policies and procedures for underwriting private student loans with graduated repayment terms at origination. The agencies and the SLC recognize that the competitive job market, traditionally low entry-level salaries, and higher student debt loads can contribute to some borrowers preferring greater flexibility with their payments as they transition into the labor market. Graduated repayment terms can facilitate this transition by providing lower initial monthly payments that gradually increase.

Note for Community Banks

This interagency guidance applies to all institutions supervised by the Office of the Comptroller of the Currency (OCC). While there are very few community banks engaged in student lending, community banks should be aware of the content of this guidance if they originate private student loans with graduated repayment terms.


Borrowers and banks generally are best served by amortizing repayments of principal and interest over a reasonable time frame. Nonetheless, banks that originate private student loans with prudently underwritten graduated repayment terms may align borrowers’ income levels with loan repayment requirements in a manner consistent with safe and sound lending practices.

Loans with graduated repayment terms should also incorporate provisions that

  • ensure orderly repayment
  • avoid payment shock
  • align payment terms with a borrower’s income
  • comply with all applicable federal and state consumer laws and regulations and reporting standards

Banks offering graduated repayment terms should also

  • contact borrowers before reset dates
  • provide borrowers with clear disclosures

When offering graduated repayment terms, banks should carefully weigh helping borrowers manage their overall financial obligations with consideration of the increased costs to borrowers and risk to banks over the term of such loans.

Further Information

Please contact your supervisory office or direct questions to Robert Piepergerdes, Acting Deputy Comptroller for Credit and Market Risk, or Maribeth Phillips, Risk Specialist, Credit Risk Policy Division, at (202) 649-6670.


Jennifer C. Kelly
Senior Deputy Comptroller and Chief National Bank Examiner

Related Link

1 The Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the OCC.