Student Loan Calculator
The part people miss is what happens before the first payment. Unsubsidised loans accrue interest from the day they are drawn, and if that interest is capitalised you start repaying a larger balance than you borrowed.
Monthly payment
$351.71per month
- Monthly payment
- $351.71
- Borrowed
- $30,000.00
- Accrued while studying
- $975.00
- Balance at repayment
- $30,975.00
- Total interest
- $11,230.78
- Total repaid
- $42,205.78
- The $975.00 that accrued before repayment began has been added to the balance, so from now on you pay interest on it too. Paying that interest off before it capitalises is the single cheapest thing you can do with a student loan.
- Unsubsidised loans accrue interest from the day they are drawn, including while you are studying and through any grace period. Subsidised ones do not.
- This is the standard repayment plan. Income-driven plans, deferment, forgiveness and consolidation all change the picture and are set by scheme rules rather than by arithmetic.
About the student loan calculator
The repayment itself is ordinary amortization: a fixed payment over a fixed term. On $30,000 at 6.5% over ten years that is around $352 a month. What makes student debt different is what happens in the months before that starts.
Unsubsidised loans accrue interest from the day they are drawn — through study and through any grace period after. On $30,000 at 6.5%, six months of grace adds $975. If that interest is capitalised, it joins the balance and you begin repaying $30,975, paying interest on the interest for the next ten years.
Paying that interest off before it capitalises is the cheapest thing anyone can do with a student loan. It is a small sum at exactly the moment it is hardest to find, which is why it so rarely gets done — but the alternative is carrying it, with interest, for a decade.
This models the standard repayment plan and nothing else. Income-driven plans, deferment, forbearance, forgiveness and consolidation all change the picture substantially, and they are set by scheme rules that vary by country and by year rather than by arithmetic. Check what your own loans are on before planning against this figure.
What it works out
- The standard monthly payment
- Interest accruing during study or a grace period
- What capitalising that interest costs
- Total repaid over the term
The formula
Balance at repayment = Borrowed + (Borrowed × Rate ÷ 12 × Grace months), then amortize
Two stages. During the grace period interest accrues but nothing is repaid: $30,000 at 6.5% accrues $162.50 a month, so six months adds $975.
If that is capitalised it joins the principal. Repayment then starts on $30,975 rather than $30,000, and the ordinary amortization formula runs from there — $351.71 a month over ten years, $42,206 repaid in total.
Capitalising costs more than the $975 itself, because that $975 now earns interest for ten years too. Paying the accrued interest before it capitalises removes the whole compounding effect for a one-off sum found at the start.
Longer grace periods make this steeper. Four years of study on an unsubsidised loan accrues $7,800 on this balance before a single payment is due, and capitalising that is a materially different loan from the one that was borrowed.
- Borrowed
- The principal drawn.
- Grace
- Months before repayment starts. Interest still accrues on unsubsidised loans.
- Capitalised
- Whether the accrued interest joins the balance. If it does, you pay interest on it.
A worked example
$30,000 borrowed at 6.5% with a six-month grace period, the accrued interest capitalised, repaid over ten years.
That works out to $351.71 per month.
- Monthly payment
- $351.71
- Borrowed
- $30,000.00
- Accrued while studying
- $975.00
- Balance at repayment
- $30,975.00
- Total interest
- $11,230.78
- Total repaid
- $42,205.78
Questions
What is capitalised interest?
Interest that has accrued but not been paid, added to the principal. From then on you pay interest on it too. On $30,000 with a six-month grace period at 6.5%, that is $975 joining the balance.
Does interest accrue while I am studying?
On unsubsidised loans, yes — from the day the money is drawn. Subsidised loans have the interest covered during study and any grace period, which is the whole difference between the two.
Should I pay interest during the grace period?
If you possibly can. It stops the interest capitalising, which removes ten years of compounding on it. It is a small amount at the worst possible time, and it is the single highest-return thing available on a student loan.
How much is the payment on $30,000?
About $352 a month over ten years at 6.5%, once six months of grace-period interest is capitalised. Total repaid comes to roughly $42,200.
Should I pay off student loans early?
It depends heavily on the loan. On private debt at a high rate, usually yes. On government loans with income-driven repayment or forgiveness attached, paying early can mean paying more than you would ever have been required to — which is the opposite of the usual advice about debt.
What is the standard repayment plan?
A fixed payment over a fixed term, usually ten years, which is what this calculates. It is the default and normally the cheapest in total interest, because everything else lowers the payment by extending the term.
Does this cover income-driven repayment?
No. Those tie the payment to income rather than to the balance, and the rules differ by country, scheme and year. They usually cost more in total interest and may end in forgiveness, which changes the calculation entirely.