How student loan payments work
Most student loans are repaid like any other installment loan: a fixed payment every month for a set number of years. Each payment first covers the interest charged that month, and the rest reduces your balance. The US federal standard repayment plan has long used 10 years. Private student loans typically offer 5 to 20 years.
What makes student loans different is the time before repayment. Interest on most loans starts the day the money is paid to your school, even though you do not have to make payments until after you leave school and a grace period ends. That interest can add thousands to the amount you eventually repay. This calculator shows both parts: the time in school and the repayment years.
The formulas
Interest while in school (simple interest, the way US federal loans accrue it):
If you do not pay that interest, it is added to the amount you repay. The monthly payment then follows the standard amortization formula:
P = amount repaid · r = yearly rate ÷ 12 · n = months of repayment
Extra payments go straight to principal, so the loan ends sooner while the regular payment stays the same.
Worked example 1: $30,000 over 10 years
You owe $30,000 at 6.5% and choose a 10-year term.
- r = 0.065 ÷ 12 = 0.0054167 and n = 120
- M = 30,000 × 0.0054167 ÷ (1 − 1.0054167^−120) = $340.64 a month
- First payment: $162.50 interest and $178.14 principal
- Total interest over 10 years: $10,877.27; total repaid $40,877.27
The same balance on longer terms:
| Term | Monthly payment | Total interest |
|---|---|---|
| 10 years | $340.64 | $10,877.27 |
| 15 years | $261.33 | $17,039.80 |
| 20 years | $223.67 | $23,681.27 |
| 25 years | $202.56 | $30,768.64 |
Going from 10 to 25 years lowers the payment by about 40% but almost triples the interest. A longer term can be a useful safety net, but if you can afford the shorter one, it is much cheaper.
Worked example 2: paying extra
Same $30,000 at 6.5% over 10 years, with an extra payment every month:
| Extra each month | Paid off after | Time saved | Interest saved |
|---|---|---|---|
| $50 | 100 payments (8 years 4 months) | 1 year 8 months | $1,985.10 |
| $100 | 86 payments (7 years 2 months) | 2 years 10 months | $3,346.98 |
| $200 | 67 payments (5 years 7 months) | 4 years 5 months | $5,099.41 |
Federal servicers may treat an extra payment as paying ahead, which pushes back your next due date instead of cutting principal. Tell your servicer, in writing or in the online payment form, to apply extra money to principal and not to advance your due date. If you have several loans, directing extra money to the one with the highest interest rate saves the most.
Worked example 3: interest while you are in school
You borrow $20,000 at 6.5% and repayment starts 30 months from now (two more years of school plus a six-month grace period). What happens depends on the loan type and on whether you pay the interest along the way:
| Interest in school | Interest before repayment | Amount repaid from | Monthly payment (10 years) | Total interest |
|---|---|---|---|---|
| Builds up (unsubsidized or private) | $3,250.00 added | $23,250.00 | $264.00 | $11,679.89 |
| You pay it ($108.33 a month) | $3,250.00 paid as you go | $20,000.00 | $227.10 | $10,501.51 |
| Subsidized (government pays) | $0 | $20,000.00 | $227.10 | $7,251.51 |
Paying the interest while in school, even part of it, keeps your balance from growing and saves $1,178 here, because the capitalized interest no longer charges interest of its own. Turn on I’m still in school under More options to run your own numbers.
Federal vs private student loans
| Federal Direct Loans | Private student loans | |
|---|---|---|
| Interest rate | Fixed, set each year by a formula in federal law | Fixed or variable, based on your credit |
| In-school interest | Paid by the government on subsidized loans; accrues on unsubsidized loans | Usually accrues |
| Grace period | 6 months on most Direct Loans | Varies by lender |
| Repayment plans | Standard, plus income-driven options | Set by the lender |
| Forgiveness | Public Service Loan Forgiveness and others | Rare |
| Prepayment penalty | None | Not allowed on US private education loans |
Federal rates are set by formula: the high yield on the 10-year Treasury note at the last auction before June 1, plus a fixed margin that differs for undergraduate, graduate and PLUS loans, up to a cap. Each new rate applies to loans first paid out from July 1 to June 30 and stays fixed for the life of the loan. You can find the current rates and loan fees on studentaid.gov.
Recent changes to federal repayment
Federal repayment rules changed significantly in 2025. The law known as the One Big Beautiful Bill Act created a new income-based Repayment Assistance Plan and a standard plan whose term depends on how much you owe, for loans made on or after July 1, 2026. Under that standard plan, the term is reported to be 10 years for balances under $25,000, 15 years from $25,000, 20 years from $50,000 and 25 years from $100,000. Rules for existing borrowers and transition dates are still being put in place, so check studentaid.gov or your servicer for the plans you can use. This calculator lets you enter any term, so you can model those standard terms, but it does not model income-driven plans. For those, use the official Loan Simulator on studentaid.gov.
Tips
- List every loan. Your federal loans are listed in your studentaid.gov account. Enter them one by one, or add them up and use a weighted average rate (each balance × its rate, added up and divided by the total balance).
- Pay interest during the grace period if you can. Even small payments stop the balance growing before repayment begins.
- Use autopay. Many lenders, including federal servicers, offer a small rate cut, often 0.25 percentage points, for automatic payments.
- Target the highest rate first when you have spare money, and keep enough cash for emergencies.
- Plan the payment against your income. The paycheck calculator shows your take-home pay, and the debt-to-income ratio calculator shows how lenders will see your student loan when you apply for a mortgage or car loan.
Common mistakes
- Ignoring unsubsidized interest. It builds up even while payments are not due. On the $20,000 example, 30 months adds $3,250.
- Refinancing federal loans without thinking. A private refinance can lower your rate, but you lose federal options such as income-driven plans, deferment and forgiveness programs. Compare the new payment and total interest carefully before you switch; the personal loan calculator shows how a fixed-rate offer with fees adds up.
- Choosing the longest term by default. The lowest payment is the most expensive option. Pick the shortest term you can comfortably afford and keep the option to pay extra.
- Paying extra on a loan heading for forgiveness. If you expect Public Service Loan Forgiveness, extra payments reduce the amount forgiven rather than saving you money.
About these numbers
Federal loans charge interest daily, and servicers apply payments to fees, then interest, then principal. This calculator charges interest monthly and adds unpaid in-school interest to the balance when repayment starts, which is how private lenders usually work. Federal rules have removed some capitalization events, so your federal balance may show unpaid interest separately; you still owe it, and the totals here will be close. For an exact figure, use the payoff amount from your servicer. Need a schedule for any other loan? Try the amortization calculator.