Student Loan Payoff Calculator

How Student Loan Repayment Works

The average federal student loan debt for bachelor's degree graduates is around $28,000. Under the standard 10-year repayment plan, you make 120 fixed monthly payments. Your payment is split between the principal (the amount you originally borrowed) and the interest (the cost of borrowing the money).

In the beginning, a large portion of your monthly payment goes toward interest because your loan balance is at its highest. As you slowly chip away at the principal, the amount of interest you are charged each month decreases, meaning more of your payment begins to go toward the principal.

Income-Driven Repayment (IDR) Plans

If you have federal student loans and the standard 10-year payment is too high, you might qualify for an Income-Driven Repayment (IDR) plan. These plans (such as SAVE, PAYE, and IBR) base your monthly payment on your income and family size, rather than your loan balance. They can make your monthly payments much more affordable, but it's important to note that you will be paying over a longer period (usually 20 to 25 years), which generally means paying more in total interest over the life of the loan.

Public Service Loan Forgiveness (PSLF)

If you work full-time for a government agency or a non-profit organization, you might be eligible for Public Service Loan Forgiveness (PSLF). Under PSLF, if you make 120 qualifying payments under an IDR plan while working for a qualifying employer, the remaining balance on your federal Direct Loans will be forgiven completely tax-free.

The Power of Extra Payments

Because student loans accumulate interest based on your remaining balance, even a small extra payment each month can make a massive difference. By paying an extra $50 a month toward your principal, you can shave years off your repayment timeline and save thousands of dollars in interest. The extra payment bypasses interest and goes directly toward reducing your principal balance.