Student Loan Interest Calculator Formula
Understand the math behind the student loan interest calculator. Each variable explained with a worked example.
Formulas Used
Total Interest Paid
total_interest = monthly_pmt * n_payments - principalFirst Month Interest
first_month_interest = principal * monthly_rateInterest as % of Principal
interest_pct = ((monthly_pmt * n_payments - principal) / principal) * 100Variables
| Variable | Description | Default |
|---|---|---|
principal | Loan Balance ($) | 30000 |
annual_rate | Annual Interest Rate (%) | 6 |
term_years | Loan Term (years) | 10 |
monthly_rate | Derived value= annual_rate / 100 / 12 | calculated |
n_payments | Derived value= term_years * 12 | calculated |
monthly_pmt | Derived value= principal * monthly_rate * pow(1 + monthly_rate, n_payments) / (pow(1 + monthly_rate, n_payments) - 1) | calculated |
How It Works
How Student Loan Interest Works
Interest accrues daily on your outstanding balance.
Total Interest Formula
Total Interest = (Monthly Payment x Number of Payments) - Principal
Daily Interest
Daily Interest = Balance x (Annual Rate / 365)
Early payments are mostly interest; later payments are mostly principal.
Worked Example
A $30,000 loan at 6% interest over 10 years.
- 01Monthly rate = 6% / 12 = 0.5%
- 02Monthly payment = $333.06
- 03Total paid = $333.06 x 120 = $39,967
- 04Total interest = $39,967 - $30,000 = $9,967
- 05Interest as % of principal = ($9,967 / $30,000) x 100 = 33.2%
Frequently Asked Questions
Is student loan interest tax deductible?
You can deduct up to $2,500 per year in student loan interest on your federal taxes if you meet income requirements.
What is the difference between subsidized and unsubsidized interest?
With subsidized loans, the government pays interest while you are in school. Unsubsidized loans accrue interest from disbursement.
How can I pay less interest?
Make extra payments toward principal, choose a shorter repayment term, refinance at a lower rate, or pay interest while in school.
Ready to run the numbers?
Open Student Loan Interest Calculator