How are student loan payments calculated?
Standard repayment uses the same amortization formula as any installment loan: PMT = P × i / (1 − (1 + i)⁻ⁿ), where P is the balance, i the monthly rate, and n the number of months. A $35,000 loan at 5.5% over 10 years costs about $380/month, with roughly $10,600 of total interest.
How much do extra payments actually help?
A lot, because they attack principal directly. On the example above, an extra $100/month clears the loan about 2.5 years early and saves over $3,000 in interest. Even $25/month makes a visible difference — run your own numbers with the extra-payment field to see the exact impact.
Should I pay off student loans early or invest?
Compare your loan rate to realistic long-term investment returns. High-rate private loans (7%+) are usually worth attacking aggressively; low-rate loans (under ~4%) often lose the comparison to investing, especially with employer 401(k) matching available. Many people split the difference for both progress and peace of mind. Consider tax deductions on student loan interest where applicable — this tool shows the raw numbers, not tax effects.
What repayment term do student loans use?
The US federal standard plan is 10 years; extended and consolidated plans run 12–30 years. Longer terms lower the monthly payment but increase total interest substantially — a 20-year term on the example loan roughly doubles the interest paid. Enter different terms here to see the trade-off precisely.
Does refinancing federal loans into a private loan lose anything?
In the US, yes, and permanently. Refinancing federal loans with a private lender converts them into private debt, which forfeits income-driven repayment plans, federal deferment and forbearance, and eligibility for forgiveness programmes including Public Service Loan Forgiveness. A lower rate can still be the right choice for a borrower with secure high income and no intention of using those routes — but the protections cannot be recovered afterwards if circumstances change. Model what repayment looks like on a reduced income before giving them up.
What is interest capitalisation and why did my balance grow?
Capitalisation is unpaid interest being added to the principal, after which interest is charged on the larger total. It typically happens at defined events — leaving a deferment or forbearance, or exiting a grace period — and it is why borrowers who paused payments often restart owing more than they originally borrowed despite having paid nothing extra. Making interest-only payments during a pause, even partially, prevents the effect. Where possible it is worth knowing which events trigger capitalisation on your specific loans.