Student Loan Payment Calculator

Student loan payments are figured in the same way as home mortgages and auto loans. Your monthly payment depends on the total amount you borrowed to pay for college, the annual interest rate, and the length of the lending term.

Regardless of whether you borrow from a bank, the government, or a private lender, the formula for calculating monthly payments is the same. If you don't qualify for special waivers, you will have to repay the loan in full within the allotted time frame. Ten years is a typical length for student loans.

Many college loans have graduated repayment terms, which means that your monthly payments start out low, then gradually increase for the next 2 to 5 years, whereafter they level off. This payment plan proves useful to college graduates who start working at entry level salaries but anticipate future pay increases.

(Graduated payments imply negative amortization, which is risky to lenders. Not all institutions offer this option to students.)

Variables needed to compute college loan payments:

• M = number of years in loan period
• i = annual interest rate, expressed as a decimal (for calculator, leave as percent) Example: 12% = 0.12
• P = principal, the amount borrowed

Once you have the loan data gathered, you can compute the monthly payments with the equation

Payment= P(i/12)(1 + 1/12)^12M/[(1 + 1/12)^12M - 1]

Example 1: Suppose you take out a loan for $50,000 at an annual rate of 6% for 10 years. Then we have P = 50000, i = 0.06, and M = 10. The monthly payments for a regular fixed rate loan are

50000(0.005)(1.005)¹²⁰/[1.005¹²⁰ - 1] = $555.10

Example 2: Student loans with graduated payments work a little differently. For example, suppose we have the same loan terms as in Example 1, but for the first 5 years, the payments will increase by 7.5% annually. You can plug these numbers into the student loan calculator above, or read our graduated payment formula article, where the math is described in more detail.

With graduated payments, your monthly payment schedule will look like this:

Year 1: $436.21
Year 2: ($436.21)(1.075) = $468.92
Year 3: ($468.92)(1.075) = $504.09
Year 4: ($504.09)(1.075) = $541.90
Year 5: ($541.90)(1.075) = $582.54
Years 6-10: ($582.54)(1.075) = $626.23

Notice how in the first 4 years the monthly payments are less than $555.10. But in Year 5 they jump to $582.54 a month, and every year after that you pay $626.23 per month. With graduated payments there is a trade off.

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