The full cost of borrowing for a degree
Student debt is usually taken on before the borrower has income, and repaid over a decade afterwards. This calculator shows the whole obligation rather than the instalment alone, which is the number that matters when choosing a course or a school.
Interest often accrues during study on unsubsidised balances. If it capitalises at graduation, the amount that begins amortising is larger than the amount originally drawn, and every figure below shifts upward.
The formula behind the number
An amortising loan is repaid in equal instalments. Each one covers the interest that accrued since the last payment, and whatever is left reduces the balance. The instalment that brings the balance to exactly zero on the final payment is:
Here P is the amount borrowed, i is the monthly rate (the annual rate divided by 12) and n is the number of payments. Nothing else enters the calculation, which is why two lenders quoting the same three inputs must arrive at the same instalment.
Worked example: $30,000 at 5.5% over 10 years
The calculator opens on this scenario, so you can follow every step:
- Amount borrowed: $30,000
- Annual rate: 5.5%, so the monthly rate is 5.5 ÷ 12 = 0.4583%
- Term: 10 years, so n = 10 × 12 = 120 payments
Paying $325.58 every month for 120 months comes to $39,069. Subtract the $30,000 you actually borrowed and the cost of the credit is $9,069.46, or 30% of the sum borrowed.
Where each payment goes
The instalment never changes, but its composition does. The first payment carries $137.50 of interest and only $188.08 of principal. By payment 60 the split has moved to $79.25 interest against $246.33 principal.
| Payment | Instalment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $325.58 | $137.50 | $188.08 | $29,812 |
| 2 | $325.58 | $136.64 | $188.94 | $29,623 |
| 3 | $325.58 | $135.77 | $189.81 | $29,433 |
| 60 | $325.58 | $79.25 | $246.33 | $17,045 |
| 120 | $325.58 | $1.49 | $324.09 | $0.00 |
Repayment usually begins after a grace period. Any interest accrued during that window is typically added to the balance first, so the schedule starts from a higher figure than the sum borrowed.
What moves the answer most
Two levers change the total, and they do not pull with equal force.
Add one percentage point to the rate and the instalment goes from $325.58 to $340.64, which is $1,807.81 more over the full term. Cut 2 years off the term instead and the instalment rises to $386.98, but total interest falls from $9,069.46 to $7,150.05. Refinancing lowers the rate but on many government loans it also forfeits income-driven repayment and forgiveness options, so the cheaper rate is not automatically the better deal.
What this calculator leaves out
Income-driven plans, deferment, forbearance and forgiveness programmes all change the outcome and none are modelled here. This is the standard fixed schedule, which is the baseline the alternatives are measured against.
Related calculators
- Student loan payment calculator — focuses on the monthly figure against your income
- Lifetime earnings calculator — the other side of the decision
- Debt-to-income calculator — how the payment affects later borrowing