🎓 Student Loan Calculator
Work out the monthly repayment on a student loan, what the interest adds over the term, and how much sooner a modest overpayment clears it. It also shows what interest accrued during study adds to the balance.
What a student loan really costs, and the two numbers that decide it
A student loan is priced like any other instalment loan, but it behaves differently in one important way: interest usually starts accruing the day the money is disbursed, not the day you start repaying. That gap — study plus the grace period after graduation — is where a surprising amount of the final cost is quietly created, before a single payment has been made.
Payment = P × r / [ 1 − (1+r)−n ]
P is the balance when repayment begins, r the monthly rate and n the number of months. The formula is the same one behind a mortgage or a car loan; what makes a student loan distinctive is that P is often larger than the amount you were actually given.
Interest during study is not free money
On an unsubsidised loan, interest accrues throughout study and the grace period. It is typically capitalised — added to the principal — at the point repayment begins, after which you pay interest on that interest. A $32,000 loan at 6.5% sitting through four years of study and six months of grace accrues roughly $9,360 before the first payment, and the balance you start repaying is $41,360 rather than $32,000.
| Accrual before repayment | Starting balance | Monthly payment | Total paid |
|---|---|---|---|
| None (subsidised) | $32,000 | $363 | $43,602 |
| 6 months | $33,040 | $375 | $45,020 |
| 2 years | $36,160 | $411 | $49,271 |
| 4 years 6 months | $41,360 | $470 | $56,356 |
The difference between the first row and the last is $12,754 on the same $32,000 borrowed. Nothing about the loan changed except when the clock started. This is the single strongest argument for making small interest-only payments while still studying, if there is any way to manage it: a payment of $173 a month during study on the loan above keeps the balance flat and saves the entire $9,360.
Term sets the payment, overpayment sets the cost
Borrowers compare monthly payments, so lenders compete on term. Stretching a loan from ten years to twenty cuts the payment by about a third and roughly doubles the interest. The table below uses the same $33,040 starting balance at 6.5%.
| Term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 5 years | $646 | $5,748 | $38,788 |
| 10 years | $375 | $11,980 | $45,020 |
| 15 years | $288 | $18,767 | $51,807 |
| 20 years | $246 | $26,081 | $59,121 |
| 25 years | $223 | $33,887 | $66,927 |
Twenty-five years costs $21,907 more than ten for a payment that is $152 lower. If the long term is what makes the loan survivable in a first job, take it — but then treat the shorter payment as the target and overpay towards it as income allows. The general loan calculator and the amortization calculator show the same effect month by month.
Always confirm in writing that an overpayment reduces the principal rather than being held as an advance payment on next month's bill. Some servicers default to the latter, which saves you nothing in interest. The phrase to use is “apply to principal only”.
Why small overpayments work so hard
Interest is charged on the outstanding balance, so a dollar of principal removed today removes its interest for every remaining month of the loan. On the $33,040 balance at 6.5% over ten years, an extra $50 a month clears the loan eighteen months early and saves about $2,390 — almost five dollars of interest cancelled for every ten paid in ahead of schedule. An extra $150 a month clears it three years and six months early and saves $4,960.
The leverage shrinks as the loan ages, because there are fewer remaining months for the saving to apply to. Overpayments made in the first third of the term do most of the work; the same money in the final third barely moves the total. If you are choosing between overpaying a student loan and clearing a credit card, the card almost always wins — the debt payoff calculator ranks debts properly.
Income-driven plans change the arithmetic entirely
US federal income-driven repayment plans cap the payment at a percentage of discretionary income and forgive any balance left after a set number of years. Under those plans a larger balance does not necessarily mean a larger payment, and overpaying can be actively counterproductive if you expect forgiveness, because you are buying down a balance that was going to be written off. This calculator models a standard fixed-payment loan, which is the right tool for private loans, UK Plan 2-style loans paid off in full, and federal loans on the standard plan.
A worked example
A graduate owes $27,000 at 5.5% and is offered ten years at $293 a month or twenty years at $186. The ten-year plan costs $35,163 in total; the twenty-year plan costs $44,575. She takes the twenty-year plan for the safety margin, then pays $293 anyway from month one. The loan clears in ten years and one month, she pays $35,455 in total, and at any point in the first decade she retains the right to drop back to $186 if she loses her job. That optionality cost her $292.
If the number here raised another question, it is probably one of these: the loan calculator or the payment calculator.
Frequently Asked Questions (FAQs)
Does interest build up while I am still studying?
On an unsubsidised loan, yes, from the day the money is disbursed. It is normally capitalised into the principal when repayment starts, so you then pay interest on it. Subsidised federal loans are the exception: the government covers the interest during study and the authorised grace period.
Is it worth paying interest while studying?
If you can manage it, it is one of the highest-return payments available, because it stops the balance you will eventually repay from growing at all. On a $32,000 loan at 6.5%, interest-only payments of about $173 a month during four and a half years of study and grace save roughly $9,360 of capitalised interest.
Should I take the longest term available?
Take it for the lower obligation if the shorter payment leaves no margin, then voluntarily overpay towards the shorter figure. You keep the right to fall back on the low payment in a bad month while paying most of the short-term cost. Taking a long term and never overpaying is the expensive version.
How much does an extra $50 a month actually save?
On a $33,000 balance at 6.5% over ten years, about $2,390, and the loan clears eighteen months early. The saving is larger the earlier you start, because each dollar of principal removed cancels its own interest for every month remaining.
Should I clear my student loan before other debts?
Usually not. Student loan rates are generally lower than credit card rates, and in some countries the debt carries income-contingent repayment and eventual write-off. Clear the most expensive debt first unless a specific loan has unusually punitive terms.
Does refinancing a student loan make sense?
It can cut the rate, but refinancing a federal loan into a private one gives up income-driven repayment, forbearance options and any forgiveness programme. Those protections have real value even if they never get used. Run the numbers in the refinance calculator and weigh what you would be surrendering.
Why does my balance go up even though I am paying?
Because the payment is smaller than the monthly interest, so the shortfall is added to the balance. This is negative amortisation and it happens on income-driven plans with low incomes, and during deferment on unsubsidised loans. Paying at least the monthly interest stops it.