How student loan payments are calculated
Federal and most private student loans are fixed-payment installment loans. On the standard 10-year plan, each payment covers that month's interest plus a slice of principal.
Example: $30,000 at 6.5% over 10 years is $340.64 a month, with $10,877.27 of interest. Adding $100 a month pays it off in 7 years and 2 months, 34 months sooner, and saves $3,712.07 of interest.
Ways to pay student loans faster
- Target the highest rate first if you have several loans; the debt payoff calculator shows the best order.
- Autopay often cuts 0.25 percentage points off the rate on federal and many private loans.
- Tell your servicer to apply extra payments to principal, not to future payments.
- Refinancing federal loans into a private loan can lower the rate, but you lose income-driven repayment, deferment and forgiveness options.
Income-driven plans base the payment on your income instead and can stretch repayment to 20 to 25 years. Check your options at studentaid.gov.
Frequently asked questions
How long does it take to pay off student loans?
The federal standard plan is 10 years. Extended and graduated plans run up to 25 years, and income-driven plans 20 to 25 years. Extra payments shorten any of them.
Is it better to pay off student loans early or invest?
Compare the loan rate with what you'd reasonably earn investing after tax. Paying off a 7% loan is a guaranteed 7% return; a 3% loan is often better left on schedule while you invest.
Do extra payments go to principal?
They should, but servicers sometimes apply them to future payments instead. Ask for extra payments to be applied to principal on your highest-rate loan.
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