Student Loan Calculator

What Are Student Loans?

Student loans are financial instruments designed to help students cover the costs of higher education, including tuition, books, housing, and living expenses. Unlike other forms of borrowing, student loans typically offer more favorable terms—lower interest rates, deferred payment options, and flexible repayment plans. They've become a cornerstone of how millions of Americans finance their college education.

The thing is, not all student loans are created equal. You'll find two main categories: federal loans backed by the government and private loans from banks or financial institutions. Each comes with its own set of rules, benefits, and potential pitfalls. Understanding these differences can save you thousands of dollars over the life of your loan.

Types of Federal Student Loans

Direct Subsidized Loans

These are need-based loans available to undergraduate students who demonstrate financial need. Here's what makes them special: the federal government pays the interest while you're in school at least half-time, during your grace period (usually six months after graduation), and during any deferment periods. It's essentially free money in the form of unpaid interest. For the 2024-2025 academic year, these loans carry a fixed interest rate of 5.50%.

Direct Unsubsidized Loans

Unlike subsidized loans, you don't need to demonstrate financial need to qualify for these. They're available to both undergraduate and graduate students. The catch? Interest starts accruing from the day the loan is disbursed. You can choose to pay the interest while in school, or let it accumulate and get added to your principal balance (a process called capitalization). Graduate students face a slightly higher rate at 7.05% for unsubsidized loans.

Direct PLUS Loans

These loans come in two flavors: Parent PLUS loans for parents of dependent undergraduate students, and Grad PLUS loans for graduate and professional students. They typically have higher interest rates (currently 8.05%) and require a credit check, though the requirements aren't as stringent as private loans. PLUS loans can cover the full cost of attendance minus any other financial aid received.

Direct Consolidation Loans

If you're juggling multiple federal student loans, consolidation allows you to combine them into a single loan with one monthly payment. The new interest rate is the weighted average of your existing loans, rounded up to the nearest one-eighth of a percent. While this doesn't lower your interest rate, it can simplify repayment and potentially give you access to different repayment plans.

Private Student Loans: What You Should Know

Private student loans fill the gap when federal aid doesn't cover your full education costs. Banks, credit unions, and online lenders offer these loans, and they typically base approval and interest rates on your creditworthiness (or your cosigner's if you're a student without established credit). Interest rates can be fixed or variable, and they're almost always higher than federal loan rates.

The key difference? Private loans lack the borrower protections that federal loans offer. You won't have access to income-driven repayment plans, loan forgiveness programs, or generous forbearance options. That's why financial experts universally recommend maxing out your federal loan options before turning to private lenders. If you do need private loans, shop around aggressively—rates can vary significantly between lenders.

Federal Repayment Plans Explained

The federal government offers several repayment plans, each designed for different financial situations. Here's what you need to know about your options:

Standard Repayment Plan

This is the default plan—fixed payments over 10 years. It costs the least in total interest because you're paying off the loan quickly, but monthly payments are higher than extended or income-driven plans. Most borrowers who can afford it should stick with this plan.

Graduated Repayment Plan

Payments start low and increase every two years, with the loan paid off in 10 years. This plan works if you expect your income to rise steadily, but you'll pay more interest overall compared to the standard plan because your early payments barely dent the principal.

Extended Repayment Plan

Available if you owe more than $30,000 in Direct Loans, this plan stretches payments over 25 years. Your monthly payment drops significantly, but you'll pay substantially more interest over the loan's life. It's a trade-off between cash flow and total cost.

Income-Driven Repayment Plans

These plans (including IBR, PAYE, REPAYE, and ICR) cap your monthly payment at a percentage of your discretionary income, typically 10-20%. After 20-25 years of qualifying payments, any remaining balance is forgiven. The new SAVE plan, which replaces REPAYE, offers even more generous terms—single borrowers earning under about $32,800 have $0 monthly payments, and interest doesn't grow beyond what you pay each month.

Income-driven plans are fantastic if you're in public service (eligible for forgiveness after 10 years through PSLF) or if your debt is high relative to your income. However, if your income is solid and you're not pursuing forgiveness, you'll pay significantly more interest over time.

The Power of Extra Payments

Here's a secret that can save you thousands: making extra payments toward your student loans can dramatically reduce both your total interest and your repayment timeline. Even an extra $50 or $100 per month makes a real difference.

Let's say you have $35,000 in loans at 4.5% interest with a 10-year repayment term. Your standard monthly payment would be about $363. But if you paid an extra $100 per month, you'd save nearly $3,000 in interest and pay off the loan 2.5 years earlier. That's money in your pocket and years of freedom from debt.

The key is to specify that extra payments should go toward principal, not future payments. Most loan servicers let you do this online when making a payment. Otherwise, they might just advance your due date, which doesn't save you any interest.

Smart Repayment Strategies

The Avalanche Method

If you have multiple loans, pay minimums on everything and throw extra money at the loan with the highest interest rate. Once that's paid off, move to the next highest rate. This approach saves you the most money in interest.

The Snowball Method

Pay minimums on everything except your smallest loan balance, which you attack aggressively. Once it's gone, move to the next smallest. This approach costs slightly more in interest but provides psychological wins that help many people stay motivated.

Refinancing Considerations

If you have good credit and steady income, refinancing your student loans with a private lender could lower your interest rate significantly. But be careful—refinancing federal loans means losing federal protections like income-driven repayment and forgiveness programs. Only refinance federal loans if you're absolutely certain you won't need those benefits.

Common Questions About Student Loans

Should I pay off student loans early?

It depends on your interest rate and other financial priorities. If your student loan rate is above 5-6%, paying it off aggressively usually makes sense. If it's below 4%, you might get better returns by investing that money instead, especially if you have access to employer 401(k) matching. Always keep an emergency fund of 3-6 months' expenses before aggressively paying down low-interest debt.

What happens if I can't make my payments?

Don't just stop paying. Contact your loan servicer immediately. For federal loans, you might qualify for deferment or forbearance, which temporarily pause payments. Income-driven repayment plans can also lower payments to as little as $0 if your income is low enough. Missing payments damages your credit and can lead to default, wage garnishment, and tax refund seizure.

How does interest capitalization work?

When unpaid interest gets added to your principal balance, that's capitalization. It happens at specific times: when a deferment or forbearance ends, when you leave an income-driven repayment plan, or when you fail to recertify your income. Once interest capitalizes, you're paying interest on interest, which significantly increases your total cost. The new SAVE plan eliminates capitalization in many situations.

Is student loan forgiveness taxable?

Currently, forgiveness through Public Service Loan Forgiveness (PSLF) is not taxable. However, forgiveness through income-driven repayment plans after 20-25 years is typically considered taxable income, though this could change with future legislation. Make sure to plan for this potential tax bomb if you're pursuing income-driven forgiveness.

Grace Periods and Deferment

Most student loans come with a grace period—typically six months after you graduate, leave school, or drop below half-time enrollment. During this time, you're not required to make payments. For subsidized federal loans, interest doesn't accrue during the grace period. For unsubsidized and private loans, interest continues to build.

Even if you're not required to pay during your grace period, consider making interest-only payments if you can. This prevents that interest from capitalizing onto your principal balance when repayment begins. A few hundred dollars paid during your grace period can save you thousands over the life of your loan.

Using This Calculator Effectively

This student loan calculator helps you understand the true cost of your education debt and visualize how different repayment strategies affect your timeline and total interest paid. Start by entering your current loan balance, interest rate, and term. The calculator will show your standard monthly payment and total interest.

Then experiment with the extra payment fields. Try adding $50, $100, or even $200 to your monthly payment and see how dramatically it changes your payoff date and interest savings. The payment schedule breaks down exactly where each dollar goes—principal, interest, and extra payments—month by month.

Use this tool to set realistic goals. Maybe you can't afford an extra $200 monthly right now, but you could swing $25. Every little bit helps, and seeing the concrete savings can motivate you to find room in your budget for those extra payments.