$340.64 a month clears $30,000, and $10,877 of it is interest
A $30,000 balance at 6.5% repaid over ten years costs $340.64 a month and $40,877 in total. The interest of $10,877 is 36.3% of the amount borrowed — a useful way to read the number, because it converts an abstract rate into a proportion of the debt itself.
M = P × [r(1+r)^n] / [(1+r)^n − 1] | where P = principal, r = monthly rate, n = number of payments
The composition shifts as you go. The first payment is roughly $162 of interest and $178 of principal; the last is almost entirely principal. That is why the balance falls slowly at first and why early extra payments are disproportionately effective: they remove principal at the point where it is still carrying the most remaining interest.
Twenty years lowers the payment to $224 and raises the interest to $23,714
Extending repayment always lowers the monthly figure and always raises the total. On this balance, five years costs $587 a month and $5,215 of interest; ten years costs $341 and $10,877; twenty years costs $224 and $23,714. The twenty-year plan saves $117 a month against the ten-year and costs an additional $12,837 over its life.
Neither is automatically wrong. A lower payment that keeps a household solvent through a low-earning period is worth paying for, and extended or income-driven plans exist precisely for that. What matters is treating the longer term as a deliberate purchase of monthly headroom rather than a cheaper loan, and shortening it again once income allows.
Federal protections have no private equivalent, and refinancing gives them up permanently
Federal loans carry income-driven repayment, deferment and forbearance rights, and access to forgiveness programmes including Public Service Loan Forgiveness. Private loans carry whatever the contract says, which is usually far less. Refinancing a federal loan with a private lender is irreversible: the federal protections are surrendered at that moment and cannot be recovered.
That makes the arithmetic asymmetric. Refinancing $30,000 from 6.5% to 5% saves about $2,500 over ten years — worthwhile for a borrower with stable high income and no forgiveness prospect, and a poor trade for anyone whose income might fall or who works in qualifying public service. Compare the interest saving against the value of the protections rather than against zero.
Unsubsidised loans accrue from disbursement, and capitalisation adds it to the principal
Subsidised federal loans do not accrue interest while you are enrolled; unsubsidised and private loans do, from the day the money is disbursed. If that interest is not paid as it accrues, it is typically capitalised at the end of the grace period — added to the principal, after which it earns interest itself. A balance can therefore be larger on the first day of repayment than the amount originally borrowed.
The same mechanism operates during deferment, forbearance and some income-driven plans where the required payment is below the accruing interest. Paying even the interest portion during those periods prevents capitalisation and keeps the principal from ratcheting upward, which is often the single most valuable action available to a borrower who cannot yet make full payments.
One balance at one fixed rate on a standard amortising schedule
The model assumes a single loan at a fixed rate with equal monthly payments. Most borrowers hold several loans at different rates disbursed in different years, and the blended picture differs from any single calculation. It does not model graduated or income-driven plans, where payments change over time, nor any forgiveness after a qualifying period.
Origination fees, which federal loans charge at disbursement, are outside the figure, as is any interest capitalised before repayment began — enter the balance as it stands at the start of repayment rather than the amount originally borrowed. Tax treatment of student loan interest deductions and of forgiven balances varies and is not modelled here.
Frequently Asked Questions
What is the standard repayment plan?
Federal student loans default to a 10-year standard repayment plan. Extended plans can stretch to 25 years with lower payments but significantly more interest.
Can I pay off student loans early?
Yes — federal and most private student loans have no prepayment penalty. Extra payments go directly toward principal, reducing total interest.
What is income-driven repayment?
Income-driven repayment plans set your monthly payment as a share of your discretionary income rather than a fixed amount based on the balance. Payments rise and fall with your income, and any balance left after the plan period may be addressed under the plan rules. This calculator shows standard fixed repayment only; income-driven figures depend on your income and household details.
How does interest accrue on student loans?
Interest is charged on the outstanding balance, usually daily. The longer the balance stays high, the more interest builds. On a standard plan, your fixed payment covers the interest plus some principal each month, so the balance falls steadily, as the table below shows.
What is capitalized interest?
Capitalization is when unpaid interest is added to your principal, so you begin paying interest on a larger balance. It can happen after periods when payments were paused or were too small to cover the interest. Paying at least the interest as it accrues helps you avoid a larger balance later.
Should I pay extra toward my student loans?
If your loans have no prepayment penalty, extra payments go straight to principal and reduce the interest you pay over time. Paying early in the loan saves the most. Before paying ahead, make sure you have an emergency cushion and have addressed any higher-interest debt first.
Does refinancing a student loan make sense?
Refinancing replaces one or more loans with a new private loan, ideally at a lower rate, which can reduce total interest. The trade-off is that refinancing federal loans into a private loan can mean giving up federal repayment options and protections. Weigh the rate savings against the features you would lose.
When should I seek guidance on my loans?
If you are struggling to keep up, unsure which plan fits, or weighing refinancing, it is worth speaking with your loan servicer or a qualified advisor before making changes. Repayment terms and available programs vary, and the right move depends on your specific loans and finances.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Fixed interest rate over the entire repayment period.
No origination fees or additional charges included.
Does not account for income-driven repayment plans.
Where it stops
Does not model variable rate loans.
Income-driven repayment (IBR, PAYE) calculations require income data.
Does not account for loan forgiveness programs.
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Results are estimates based on the figures you enter and standard formulas. Rates, fees, taxes, and lender terms vary and change over time, so confirm important numbers with your lender or a qualified professional. This is educational information, not financial advice.