Student Loan Interest Calculator
Find out exactly how much interest your student loans accrue over any time period — while in school, during grace periods, or during repayment.
Interest Breakdown
How Student Loan Interest Works
Most student loans use simple daily interest, which means interest accrues each day based on your current loan balance. Unlike compound interest (like credit cards), student loan interest does not compound daily — but it can still grow significantly if left unpaid.
The daily interest formula is straightforward:
Daily Interest = (Loan Balance × Annual Rate) ÷ 365
For example, if you have a $30,000 loan at 6.8% APR, your daily interest is ($30,000 × 0.068) ÷ 365 = $5.59 per day. Over a month, that is roughly $168. Over a year, about $2,040.
Interest During School and Grace Periods
This is where many borrowers get surprised. Here is how different loan types handle interest while you are in school:
- Direct Subsidized Loans: The government pays your interest while enrolled at least half-time and during the 6-month grace period. Your balance does not grow.
- Direct Unsubsidized Loans: Interest accrues from the day the loan is disbursed. If you do not pay it, it capitalizes when repayment begins — meaning your principal grows.
- PLUS Loans: Interest accrues from disbursement. No grace period for Grad PLUS — repayment can begin 60 days after disbursement.
- Private Loans: Most accrue interest from disbursement. Some allow deferred payments, but interest still accumulates.
The Hidden Cost of Interest Capitalization
When unpaid interest is added to your principal (capitalization), you start paying interest on interest. Here is an example:
- You borrow $30,000 at 6.8% and make no payments for 4 years of school.
- Simple interest accrued: ~$8,160.
- After capitalization, your new principal is $38,160.
- Over a 10-year repayment, you pay interest on $38,160 instead of $30,000 — costing you about $3,100 more in interest.
Making even small interest-only payments while in school prevents this snowball effect.
How to Minimize Student Loan Interest
- Pay interest while in school. Even $50–$100/month on unsubsidized loans prevents capitalization.
- Choose shorter repayment terms. A 10-year term costs far less interest than a 20-year term on the same loan.
- Make extra payments. Use our Extra Payment Calculator to see how much you save.
- Refinance at a lower rate. If eligible, a 1–2% rate reduction saves thousands. Compare with our Refinance Calculator.
- Set up autopay. Most lenders offer a 0.25% rate discount for automatic payments — small but free money.
Frequently Asked Questions
Does interest accrue on student loans while in school?
For unsubsidized federal loans and most private loans, interest begins accruing as soon as the loan is disbursed — even while you are in school. For subsidized federal loans, the government pays the interest while you are enrolled at least half-time and during the 6-month grace period. Once repayment begins, any unpaid interest on unsubsidized loans is capitalized (added to your principal).
How is student loan interest calculated?
Student loan interest is calculated daily using the simple daily interest formula: Daily Interest = (Loan Balance × Annual Rate) ÷ 365. For example, a $30,000 loan at 6.8% accrues about $5.59 per day. Monthly interest is the daily rate multiplied by the number of days in the month.
What is interest capitalization on student loans?
Interest capitalization occurs when unpaid interest is added to your loan principal. This typically happens at the end of a grace period, after a deferment, or when you leave an income-driven repayment plan. Once capitalized, interest is charged on the new, higher principal — meaning you pay interest on interest.
How can I avoid student loan interest capitalization?
The best way to avoid capitalization is to pay at least the accruing interest each month while in school or during grace periods. Even small payments prevent interest from compounding. If you have unsubsidized loans, consider making interest-only payments while enrolled to keep your principal from growing.