Student Loan Calculator
A student loan is unusual in that it starts charging interest before you make a single payment, and on an unsubsidised loan that interest is added to the balance when repayment begins. The amount borrowed and the amount repaid are therefore two different numbers, and the gap surprises people. This shows both.
Your inputs
Your result
Formula
Subsidised and unsubsidised are not a small difference
On a subsidised federal loan the government pays the interest while you are enrolled and through the grace period, so the balance you begin repaying is the balance you borrowed. On an unsubsidised loan interest accrues from disbursement, and at the end of the grace period it is capitalised — added to the principal, after which it earns interest itself.
Two years of study plus a six-month grace at 6.5 percent adds roughly a sixth to the balance before the first payment is due. From then on you are paying interest on that interest, which is why the total repaid on an unsubsidised loan runs so far ahead of the amount borrowed.
Paying interest while you study is the highest-value option available
If you can pay even the interest during study — nothing towards principal — the capitalisation never happens. On the figures above that is a few dollars a day during term, and it removes thousands from the eventual total. Very few opportunities in personal finance have that ratio of small effort to large effect, and almost nobody takes it, because the loan does not demand anything and so it is easy not to.
The grace period is not free
Six months without payments sounds generous, and on an unsubsidised loan it is six more months of accrual added to the balance. If you have income before the grace period ends, starting early is worth more than the deferral is.
Longer terms lower the payment and raise the cost
Extending from ten years to twenty roughly cuts the monthly payment by a third and roughly doubles the interest. That trade is sometimes the right one — an affordable payment you can actually sustain beats a default — but it should be a decision rather than a default setting. If you take a longer term for safety, paying at the shorter term’s amount when you can gets you both.
Income-driven plans and forgiveness change the arithmetic entirely
This calculator models a standard amortising loan. If you are on an income-driven repayment plan, or working towards public service forgiveness, the maths is different in kind: your payment is set by income rather than balance, and overpaying can actively reduce the amount eventually forgiven. On those plans, paying extra is often the wrong move. Check which plan you are on before acting on any payoff figure, including this one.
Frequently asked questions
What is capitalised interest?
Interest that accrued while you studied and is then added to your principal at repayment. From that point it earns interest itself, which is why the balance can be well above the amount borrowed.
Should I pay interest while still in school?
On an unsubsidised loan, yes if you possibly can. It costs a few dollars a day and prevents capitalisation, removing thousands from the total.
Is it worth paying extra on student loans?
On a standard plan, yes — it saves interest at your loan rate. On an income-driven plan aiming at forgiveness, it can be actively counterproductive.
Should I choose a longer repayment term?
It lowers the payment and roughly doubles the interest over twenty years versus ten. Take it for safety if you need it, then pay at the shorter amount when you can.
Does the grace period cost anything?
On an unsubsidised loan, yes: interest keeps accruing through it and is capitalised at the end. Starting payments early avoids that.