How is student loan payment calculated

Before using the student loan calculator above, come prepared with a few pieces of information about your loan. Loan amounts for private student loans can vary by lender.

Each lender sets its own borrowing criteria, annual borrowing limits, interest rates and repayment terms. Regardless of whether you borrow federal or private student loans, borrow only the amount you need per school year after exhausting all grant and scholarship options. If you must take out loans to finance educational gaps, consider maximizing federal student loan limits before turning to a private student loan, as federal student loans come with additional benefits like income-driven repayment plans and standardized hardship programs.

Your loan term is the amount of time you have to repay the loan in full. For federal student loans under a standard repayment plan, the default loan term is 10 years. However, student loans that are under an alternative payment plan offer terms from 10 to 25 years. Like private student loan amounts, private student loan repayment terms vary by lender. Terms for private student loans can be as short as five years and as long as 20 years. A shorter loan term can help you save more money on interest charges during your repayment period but result in a larger monthly payment.

Some lenders offer lower interest rates as an incentive for a short term length. The amortization of the loans over time is calculated by deducting the amount you are paying towards the principal each month from your loan balances. College is supposed to be fun, right? For many students, the only way to stay atop this rising tide has been by taking on an increasing amount of student loans.

The result has been skyrocketing student loan debt over the past decade. Sure, some recent graduates have student loan horror-stories to tell: high debt, low job prospects and a load of other expenses to boot; and others have simply stopped bothering to make loan payments at all the total number of people with defaulted student loans recently climbed to over 7 million. Many graduates, however, find their debt to be manageable, and, in the long run, worthwhile.

By looking at a student loan calculator, you can compare the costs of going to different schools. Variables like your marital status, age and how long you will be attending likely four years if you are entering as a freshman, two years if you are transferring as a junior, etc.

Of course how much you will pay will also depend on what kind of loans you choose to take out. The federal government has a number of different student loan programs, described below, that offer low interest rates and other student-friendly terms.

If you are able to use any of these programs to pay for part of your college tuition, your debt after graduation may be easier to manage. Like any type of loan auto loan, credit card , mortgage , student loans cost some small amount to take out an origination fee and they require interest and principal payments thereafter. Typically, if you miss payments, the interest you would have had to pay is added to your total debt.

In the U. Federal student loans are unique in that, while you are a student, your payments are deferred—that is, put off until later. Every student who receives a Stafford loan pays the same rate. There are two different types of Stafford loans: subsidized and unsubsidized. Subsidized Stafford loans are available only to students with financial need. For students who are ineligible to receive subsidized loans, unsubsidized Stafford loans are available. These offer the same low interest rate as subsidized loans, but without the government-funded interest payments.

That means that interest accumulates while you are in school, and is then added the amount you have to pay back also known as your principal balance once you graduate.

While this may sound like a minor difference, it can add up to hundreds or thousands of dollars of debt beyond what you borrowed. A good student loan repayment calculator takes into account the difference between subsidized and unsubsidized loans. Graduate and professional students can no longer get subsidized loans. Since , they are only eligible for unsubsidized options. For graduate and professional students, the federal government offers a separate option, called PLUS Loans.

Please note the monthly payment amount is an estimate provided for information purposes only. Your loan repayment term is the number of years you have to pay it back. Federal loans generally have a standard repayment schedule of 10 years. You'll be given a definite term for your loan when you apply. The average interest rate will be different for federal student loans and private student loans. Federal student loans have a single, fixed interest rate, which means that your loan's rate doesn't change over time.

You may have noticed that there's a range of interest rates associated with a private student loan. Private student loans are credit-based. That means the rate you'll be offered depends on your creditworthiness—and that of your cosigner, if you have one—together with several other factors. When you apply for a loan, you'll be given an interest rate, either fixed or variable , depending on which is offered and which type of rate you've chosen.

If you're wondering how much to borrow for college—whether it's a public university or private university—the College Planning Calculator SM can help.