Investing in your education is one of the most important decisions you'll make, and for many, student loans are a necessary part of that journey. Understanding how these loans work, how interest accrues, and what your payments will look like after graduation is crucial for responsible borrowing and long-term financial health. Our Student Loan Calculator is specifically designed to demystify this process. It helps you estimate your future monthly payments and see the total cost of your loan over time, empowering you to make informed decisions about your education financing.
How to Use the Student Loan Calculator
Estimating your future student loan payments is a straightforward process:
- Enter Loan Details: Input the total "Loan Amount" you plan to borrow, the loan's "Annual Interest Rate," and the "Repayment Term" in years (the standard term for federal student loans is 10 years).
- Enter School and Grace Periods: Provide the "Deferment Period" (the number of years you'll be in school) and the "Grace Period" (typically 6 months after you leave school before payments begin).
- Select Loan Type: Choose whether the loan is "Subsidized" or "Unsubsidized." This is a critical distinction that affects how interest accrues.
- Calculate Your Payments: Click the "Calculate" button to see your estimated monthly payment and a summary of your total repayment.
Subsidized vs. Unsubsidized Loans: A Key Difference
The most important factor to understand about federal student loans is the difference between subsidized and unsubsidized loans, as it directly impacts the total amount you'll owe.
Subsidized Loans
Direct Subsidized Loans are available only to undergraduate students who demonstrate financial need. Their main advantage is that the U.S. Department of Education pays the interest on your loan while you are in school at least half-time, for the first six months after you leave school (your grace period), and during any period of deferment. You are only responsible for the interest that begins to accrue once you enter repayment. This is a significant benefit that reduces the overall cost of your loan.
Unsubsidized Loans
Direct Unsubsidized Loans are available to both undergraduate and graduate students, and there is no requirement to demonstrate financial need. With an unsubsidized loan, you are responsible for paying all the interest that accrues from the moment the loan is disbursed. While you are in school and during your grace period, interest is calculated and added to your loan balance. This process is called interest capitalization.
What is Capitalized Interest?
When you have an unsubsidized loan, the interest that accrues while you are not making payments (during school and your grace period) is "capitalized" when you enter repayment. This means the accrued interest is added to your original principal balance. From that point on, you begin paying interest on this new, larger principal amount. This is why the total cost of an unsubsidized loan is higher than a subsidized loan of the same amount and interest rate.
Our calculator shows you the "Capitalized Interest" amount so you can see exactly how much interest was added to your balance before your payments even began. Many students choose to make small, interest-only payments while in school to prevent their loan balance from growing, which can save a significant amount of money in the long run.
Understanding Repayment
This calculator models the Standard Repayment Plan, which consists of fixed monthly payments over a 10-year period. While this is the default plan, the federal government offers several other repayment options designed to make payments more manageable.
- Graduated Repayment Plan: Payments start lower and then increase every two years.
- Extended Repayment Plan: Allows you to extend your repayment term up to 25 years, resulting in lower monthly payments but more total interest paid.
- Income-Driven Repayment (IDR) Plans: These plans (like SAVE, PAYE, and IBR) calculate your monthly payment based on a percentage of your discretionary income. They can make payments much more affordable and may lead to loan forgiveness after 20-25 years of qualifying payments.
Frequently Asked Questions About Student Loans
What is a grace period?
A grace period is a set amount of time after you graduate, leave school, or drop below half-time enrollment before you must begin making payments on your student loans. For most federal student loans, the grace period is six months.
Should I pay the interest on my unsubsidized loans while I'm in school?
If you can afford to, yes. Making interest-only payments while you are in school can save you a significant amount of money over the life of your loan because it prevents that interest from being capitalized and added to your principal balance. You won't be paying interest on top of interest once you enter repayment.
What's the difference between federal and private student loans?
Federal student loans are funded by the U.S. government and offer fixed interest rates and important borrower protections, such as access to income-driven repayment plans and loan forgiveness programs. Private student loans are offered by banks and credit unions, often have variable interest rates, and do not offer the same level of flexibility or protection as federal loans. It is almost always recommended to exhaust your federal loan options before considering private loans.