Student Loan Calculator
Here we have a simple student loan calculator, which can be used to compute the borrower’s monthly payments, the total of all payments, and interest charges. The calculator requires three inputs by the user:
- The size of the student loan, which is the amount of money borrowed
- The number of years the loan will be outstanding. This is often referred to as the term of the loan
- The annual interest rate charged, which is usually relatively low for these types of loans
The calculator then provides the user with the following:
- The monthly payment, which is how much the borrower will need to repay the lender each period
- The total of all payments, which is found by multiplying the monthly payment times the number of months the loan is outstanding
- The total interest paid on the loan, which is calculated by taking the total of all payment and subtracting from it the student loan value
- A graph showing the remaining loan balance over time. In this case, we are showing five data points starting at year zero and ending with zero balance at the end of the loan’s term
Note: hovering over the bar in the chart reveals the remaining balance on the student loan.
About Student Loans
In the United States, students and / or their parents do not need to begin repaying federal student loans until after the student leaves school or drop below a half-time status. The federal government will also pay the interest due on a loan for students that demonstrate financial need until graduation; this type of arrangement is called a subsidized student loan. In fact, there are a total of four federal student loans in the United States:
- Direct Subsidized Loans, which are made available to undergraduate students demonstrating financial need
- Direct Unsubsidized Loans, which are made available to undergraduate and graduate students; however, eligibility is not based on financial need and interest accrues on the loan even while the student is still in school
- Direct PLUS Loans, which are made to parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid
- Direct Consolidation Loans, which allows former students to combine their eligible federal student loans into a single loan
Interest Rates on Federal Student Loans
The rate of interest charged on a loan will vary by loan type. You can find the most recent interest rates on student loans here. Typically, interest rates on PLUS loans will be the highest, while undergraduate loans will be the lowest. Regardless of the loan type, the rate of interest is fixed, meaning it does not change over the life of the loan.
Applying for a Federal Student Loan
Finally, anyone interested in applying for a student loan must complete a Free Application for Federal Student Aid (FAFSA). Students and their parents / guardians will need to provide details of their assets as well as earnings, which may include submitting federal income tax documents. Once a determination of financial aid is complete, the student’s college or university will provide the student with a summary of their eligibility and explain the process to accept all, or part, of the loans.