BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON, D.C. 20551

DIVISION OF BANKING

SUPERVISION AND REGULATION

DIVISION OF CONSUMER AND 

COMMUNITY AFFAIRS

SR 15-2

CA 15-1

January 29, 2015

TO THE OFFICERS IN CHARGE OF SUPERVISION AND APPROPRIATE 

SUPERVISORY AND EXAMINATION STAFF AT THE FEDERAL RESERVE 

BANKS AND FINANCIAL INSTITUTIONS SUPERVISED BY THE FEDERAL 

RESERVE

SUBJECT: Guidance on Private Student Loans with Graduated Repayment Terms at 

Origination

Applicability to Community Banking Organizations: This guidance applies to all institutions 

regulated by the Federal Reserve, including those with $10 billion or less in consolidated assets. 

The Federal Reserve, the Consumer Financial Protection Bureau, the Federal Deposit 

Insurance Corporation, the National Credit Union Administration, and the Office of the 

Comptroller of the Currency, in conjunction with the State Liaison Committee (SLC) of the 

Federal Financial Institutions Examination Council, have issued the attached guidance to provide

principles that financial institutions should consider in their policies and procedures for 

originating private student loans with graduated repayment terms.

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 may align borrowers’ income levels with loan repayment requirements, provide 

flexibility to repay the debt sooner if borrowers’ incomes increase more quickly than projected, 

and may help long-term probability of full repayment. Financial institutions should prudently 

underwrite their private student loans in a manner consistent with safe and sound lending 

practices. Financial institutions should also comply with all applicable federal and state 

consumer laws and regulations, including providing disclosures that clearly communicate the 

timing and the amount of payments to facilitate borrower understanding of loan terms and 

features. 

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Reserve Banks are asked to distribute this letter to the supervised organizations in their 

districts and to appropriate supervisory staff. Questions regarding this letter should be directed to 

the following individuals: 

• Division of Banking Supervision and Regulation: David Emmel, Manager, at 

(202) 912-4602; or Donald Gabbai, Senior Supervisory Financial Analyst, at 

(202) 452-3358. 

• Division of Consumer and Community Affairs: for general questions, Amal Patel, 

Senior Supervisory Consumer Financial Services Analyst, at (202) 912-7879; and for 

operational questions, Tim Robertson, Manager, at (202) 452-2565.

In addition, institutions may send questions via the Board’s public website.1

Michael S. Gibson

Director

Division of Banking Supervision

and Regulation

Eric S. Belsky

Director

Division of Consumer

and Community Affairs

Attachment: 

• Guidance on Private Student Loans With Graduated Repayment Terms at Origination

1 See http://www.federalreserve.gov/apps/contactus/feedback.aspx

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