Federal and private student loans
US federal loans have fixed rates set each July for loans disbursed in the following academic year, the same for every borrower regardless of credit. Private loans are priced on credit history and may carry variable rates. Federal loans also come with repayment plans, deferment and forgiveness programmes that private lenders rarely match, which is why the usual advice is to exhaust federal eligibility before borrowing privately.
| Loan | Rate | Origination fee | Notes |
|---|---|---|---|
| Direct Subsidized (undergraduate) | 6.39% | 1.057% | Government pays interest in school and grace |
| Direct Unsubsidized (undergraduate) | 6.39% | 1.057% | Interest accrues from disbursement |
| Direct Unsubsidized (graduate) | 7.94% | 1.057% | Interest accrues from disbursement |
| Direct PLUS (parents and graduates) | 8.94% | 4.228% | Credit check; higher fee |
| Private loans | about 4% – 17% | Usually none | Set by credit score; fixed or variable |
Interest while you are still in school
Unless a loan is subsidized, interest accrues from the day it is paid out, through your years of study and the six-month grace period after leaving. That interest is capitalised — added to the principal — when repayment begins, and from then on you pay interest on it too. Borrowing $30,000 at 6.5% for a four-year degree with a six-month grace period adds nearly $9,000 to the balance before the first payment is due. Paying even the interest during school avoids that.
| Deferment + grace | Interest accrued | Balance at repayment | Monthly payment | Interest in repayment |
|---|---|---|---|---|
| 0 months | $0 | $30,000 | $340.64 | $10,877 |
| 6 months | $975 | $30,975 | $351.71 | $11,231 |
| 12 months | $1,950 | $31,950 | $362.79 | $11,584 |
| 24 months | $3,900 | $33,900 | $384.93 | $12,291 |
| 30 months | $4,875 | $34,875 | $396.00 | $12,645 |
| 54 months | $8,775 | $38,775 | $440.28 | $14,059 |
Repayment terms compared
The standard federal term is ten years. Longer terms lower the payment but raise total interest, and the gap is large: stretching this loan from 10 to 25 years cuts the payment by about a third but more than doubles the interest paid.
| Term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 5 years | $586.98 | $5,219 | $35,219 |
| 10 years | $340.64 | $10,877 | $40,877 |
| 15 years | $261.33 | $17,040 | $47,040 |
| 20 years | $223.67 | $23,681 | $53,681 |
| 25 years | $202.56 | $30,769 | $60,769 |
Federal repayment plans
Federal borrowers can choose among several plans and switch between them. The calculator models fixed-payment plans of any length; income-driven plans set the payment from your income instead, so they need your tax data rather than a formula.
| Plan | How the payment works | Notes |
|---|---|---|
| Standard | Fixed payment, 10 years | Lowest total interest of the federal plans |
| Graduated | Starts low, rises every two years, 10 years | For incomes expected to grow; more interest than Standard |
| Extended | Fixed or graduated, up to 25 years | Needs over $30,000 in Direct Loans; lowest payment, most interest |
| Income-driven (several plans) | 10–20% of discretionary income, 20–25 years | Payment tracks income; remaining balance may be forgiven; rules change often |
| Public Service Loan Forgiveness | 120 qualifying payments on an income-driven plan | For government and non-profit employees |
Paying less overall
Three moves cut the cost of a student loan. Pay the interest during school on unsubsidized loans, so nothing capitalises. Choose the shortest term you can afford. And pay extra when you can, directing it to the highest-rate loan first if you have several — servicers otherwise spread extra payments across all of them. Interest of up to $2,500 a year is deductible from US taxable income within income limits.
- Autopay discounts of 0.25% are common on federal and private loans.
- Refinancing federal loans into a private loan gives up federal protections; weigh that against the lower rate.
- Forgiveness under income-driven plans and Public Service Loan Forgiveness is only available on federal loans.