Student Loan Repayment Calculator

Alex just graduated with a typical amount of undergraduate debt and is starting a new job. Alex wants to understand the baseline cost of the loans on a standard 10-year plan.

Key Inputs:

Loan Balance: $30,000
Interest Rate: 5.8%
Loan Term: 10 Years
Extra Monthly Payment: $0

Calculation Breakdown:

Using the standard amortization formula, we can determine Alex's payments and total cost.

Monthly Payment: The calculation determines a consistent payment of $330 per month.
Total Repayment: $330/month * 120 months = $39,600.
Total Interest Paid: $39,600 (Total) - $30,000 (Principal) = $9,600.

Verdict: A Clear Baseline

Over 10 years, Alex will pay nearly $10,000 in interest alone. This is the "sticker price" of the loan. Knowing this, Alex can now explore how extra payments could reduce that interest cost.

Maria is a few years into her career and just received a raise. Her top financial goal is to eliminate her student debt as quickly as possible. She decides to make a significant extra payment each month.

Key Inputs:

Loan Balance: $50,000
Interest Rate: 6.2%
Loan Term: 10 Years
Extra Monthly Payment: $300

Calculation Breakdown:

Standard Monthly Payment: $560 (Total Interest: $17,200)
New Monthly Payment: $560 + $300 = $860 per month.

By applying this higher payment, the calculator simulates the new amortization schedule:

New Payoff Time: The loan is paid off in just 6 years and 1 month (73 months) instead of 10 years.
New Total Interest: Approximately $12,780.

Verdict: Massive Savings

Maria's aggressive strategy saves her over $4,400 in interest and frees her from debt nearly 4 years sooner. This frees up significant cash flow for other goals like saving for a home or investing.

David finished grad school with a substantial loan balance and a higher interest rate. He can't afford a huge extra payment right now, but he wonders if a smaller, consistent extra amount would make a real difference.

Key Inputs:

Loan Balance: $75,000
Interest Rate: 7.0%
Loan Term: 10 Years
Extra Monthly Payment: $150

Calculation Breakdown:

Standard Monthly Payment: $871 (Total Interest: $29,520)
New Monthly Payment: $871 + $150 = $1,021 per month.

New Payoff Time: The loan is paid off in 8 years and 1 month (97 months).
New Total Interest: Approximately $23,940.

Verdict: Small Changes Add Up

Even a modest extra payment of $150 saves David over $5,500 in interest and gets him out of debt almost 2 years earlier. This demonstrates that you don't need to double your payments to make a meaningful impact on your financial future.

This is a classic financial dilemma with no single right answer. It's a trade-off between a guaranteed return and a potentially higher, but riskier, return.

• Paying off loans: The "return" you get is your loan's interest rate. If your loan has a 6% interest rate, paying it off is like getting a guaranteed 6% return on your money. This is risk-free.
• Investing: The stock market has historically returned an average of 7-10% annually over the long term, but this is not guaranteed. In any given year, you could lose money.

A common approach is to do both. If your interest rate is high (e.g., >7%), prioritizing the loan is often wise. If your rate is low (e.g., <4%), you might be better off investing the extra cash after taking advantage of any employer 401(k) match.

Federal loans are funded by the U.S. government. They offer borrower protections like fixed interest rates, income-driven repayment (IDR) plans, and opportunities for forgiveness programs (like Public Service Loan Forgiveness). They do not require a credit check for most undergraduate loans.

Private loans are issued by banks, credit unions, and other financial institutions. They typically require a credit check and may have variable interest rates. They offer fewer flexible repayment options and forgiveness programs than federal loans.

Capitalization is when unpaid interest is added to the principal balance of your loan. After it's capitalized, you'll be charged interest on the new, larger principal balance. This can happen at specific times, such as after a period of deferment or forbearance, or when you leave school. Capitalization increases the total amount you'll repay over the life of the loan.

This calculator is designed to analyze one loan at a time. If you have multiple loans, you have two options:

1. Calculate a Weighted Average: You can calculate the weighted average interest rate of all your loans and enter the total balance. To do this, multiply each loan's balance by its interest rate, sum these amounts, and then divide by the total loan balance.
2. Analyze One by One: Use the calculator for each loan individually. This is useful for deciding which loan to target with extra payments (usually the one with the highest interest rate, a strategy known as the "avalanche method").