Taking on student loan debt is a requirement for many individuals pursuing a college degree. The ease of receiving student loans from the federal government is beneficial but it also creates situations where students take on more debt than they can handle in the future.
It is important to understand how student loans work and what your monthly payments will be after graduation. This student loan payment calculator offers some guidance on how to calculate the amount of your student loan payments based on several factors, as well as ways you can reduce your student loan debt.
On this page:
- How to Use This Student Loan Payment Calculator
- How are Student Loan Payments Calculated?
- Haven’t Borrowed Yet? Here’s How to Reduce Your Student Loan Burden
- Already Borrowed? Here is How You Can Decrease Your Student Loan Rates
How to Use This Student Loan Payment Calculator
The student loan payment calculator is a simple tool that allows borrowers to see what their monthly payments will be after graduation based on their loan amount, interest rate, and loan term.
First, input your total student loan balance, interest rate, and repayment term into the calculator. With these simple details, you can see the results, including the monthly payment, the total interest paid over the life of the loan, and the total cost of the loan including principal and interest payments added together.
How are Student Loan Payments Calculated?
Student loan payments, like other loan payments, are calculated based on the details of your loan. This includes how long you plan to be in repayment on the loan, the interest rate you received, and the total amount you borrowed.
The higher your interest rate and your balance, the higher your monthly payment will be. In addition, the shorter your repayment term, the higher your monthly payment will be and vice-versa.
In the first several years of a student loan repayment term, you pay more toward interest accrued than you do the principal balance. However, as you continue to make the same monthly payment, your principal balance starts to go down quicker.
Haven’t Borrowed Yet? Here’s How to Reduce Your Student Loan Burden
For students who have yet to borrow for their education but plan to do so, the concern over how much student loan debt will be a burden in the future is pressing. However, there are several steps you can take to ensure your student loan obligation is not overwhelming or too costly.
The most important factor in reducing your student loan burden is a low interest rate. Federal student loans may offer the best option for those who have no credit history, but the interest rates may range from 5.05% up to 7.6%.
Borrowers may qualify for a lower interest rate with a private student loan, but only when they have the credit history and income – or a cosigner – to be eligible. Getting the lowest possible interest rate on student loan debt means more of your payments are going toward principal, and your total cost of borrowing is lower.
In addition to getting a low interest rate from the start, you may also opt to pay for the interest accruing on loans while you are in school or, even better, to make full payments.
Most student loan lenders defer your payments until you have left college, but interest still accrues on the balance. If left unpaid, this can add a significant amount to your total debt burden when you begin repayment. Think about your ability to make interest payments even during your deferment period.
Students should also look into financing options that do not require repayment, including scholarships and grants. There is no need to repay the funds received through these sources, so apply for them before leaning on student loans.
Alternative strategies may include negotiating the tuition rate with the school or seeking out work-study opportunities that help cover the cost of attendance. Any combination of these methods for reducing your student loan burden can have a powerful impact on your financial life for the long-term.
Already Borrowed? Here is How You Can Decrease Your Student Loan Rates
If you’re one of the millions of borrowers who already has student loan debt, you are not out of luck in managing your loan payments effectively.
You may consider refinancing your federal or private student loans to obtain a lower interest rate on your debt. Doing so creates a much rosier picture for your total student loan payments and it may help reduce your monthly obligation immediately.
Having a lower interest rate can be difficult to achieve, but if you have strong credit and steady income, you may qualify for a more affordable loan through a private student loan refinance.
To help better manage your student loan payments for federal loans, consolidation may also be beneficial. Similar to a refinanced loan, the Direct Consolidation Loan from the federal government allows you to combine multiple loans under a single, new loan.
This will not lower your total interest, but it will allow you to take advantage of income-driven repayment plans or an extended repayment plan that can ease the cash flow burden each month. Talk to your loan servicer to learn more about federal consolidation.
Student loan payments range significantly from borrower-to-borrower, but managing student loan debt can be done effectively through a variety of strategies.
Be sure to understand what your monthly student loan payment will be if you have yet to begin borrowing or repaying your loans. This is based on your total loan balance, the interest rate received, and the term for repayment.
If the monthly amount from the student loan payment calculator above seems too high or unmanageable, consider your options for alternatives.
This may include paying the interest on your loans while in school, refinancing to get a lower interest rate or longer repayment term, or consolidating student loans to gain access to income-driven repayment plans or other extended repayment options.
Regardless of what your student loan balances are, know that you have options for creating a more manageable repayment strategy through one or more of these methods.
Author: Melissa Horton
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