Student Loan Calculator
Plan Your Repayment Strategy
How Student Loan Payments Work
Student loans use standard amortization, similar to mortgages and auto loans. Each monthly payment covers two components: interest that accrued on your remaining balance and a portion of the principal. Early in repayment, most of your payment goes toward interest. As the balance shrinks, more goes toward principal.
The standard federal repayment plan is 10 years (120 payments). Extended plans stretch to 25 years, lowering monthly payments but dramatically increasing total interest. Making any extra payment — even $50/month — goes directly to principal and can shave years off your repayment.
The Formula
- M = Monthly payment
- P = Loan balance
- r = Monthly interest rate (annual ÷ 12)
- n = Total number of payments
Student Loan Repayment Strategies
- Pay biweekly instead of monthly — Making a half-payment every two weeks results in 26 half-payments (13 full payments) per year instead of 12. This one extra payment per year can cut 1-2 years off a 10-year loan.
- Target subsidized loans last — If you have multiple loans, pay off unsubsidized loans first since they accrue interest during all periods, including any deferment.
- Check for employer repayment benefits — Many employers now offer $50-$200/month toward student loan repayment as a benefit. Since the SECURE 2.0 Act, employers can even match student loan payments in 401(k) plans.
- Explore Public Service Loan Forgiveness — If you work for a government or nonprofit employer, PSLF forgives your remaining federal loan balance after 120 qualifying monthly payments (10 years). The forgiven amount is tax-free.
- Deduct interest on your taxes — You can deduct up to $2,500 of student loan interest per year, even if you don't itemize. This effectively reduces your interest rate by your marginal tax rate.
Frequently Asked Questions
What is the current average student loan interest rate?
Federal student loan rates for 2024-2025 are approximately 5.50% for undergraduate Direct loans, 7.05% for graduate Direct loans, and 8.05% for Direct PLUS loans. Private loans vary widely from 3% to 15% depending on credit score, co-signer, and lender.
Should I refinance my student loans?
Refinancing makes sense if you can get a lower interest rate and you don't need federal loan protections (income-driven repayment, Public Service Loan Forgiveness). Never refinance federal loans to private if you might need these safety nets. Only refinance when the math clearly favors it.
What is income-driven repayment?
Income-driven repayment (IDR) plans cap your monthly federal loan payment at 10-20% of your discretionary income. After 20-25 years of payments, any remaining balance is forgiven (though forgiven amounts may be taxable). The SAVE plan caps payments at 5% of income for undergraduate loans.
Is it better to pay off student loans or invest?
Compare your loan interest rate to expected investment returns. If your loans are at 7% and you expect 8-10% market returns, investing marginally wins mathematically — but paying off debt gives guaranteed returns. Most experts suggest splitting: pay more than the minimum on loans while also investing in employer-matched 401(k).