What the loan costs, and what changes when you pay a little extra every month.
| Total interest | — |
| Total paid | — |
| Payoff time with extra payment | — |
| Interest saved | — |
| Months saved | — |
M = P x r x (1 + r)^n / ((1 + r)^n - 1)
P is the balance, r is the monthly rate (annual divided by 12), and n is the number of monthly payments. Student loans typically amortise, so early payments are mostly interest. That is why extra payments made in the first years save far more than the same extra payments made near the end.
$35,000 at 6.8 percent over 10 years:
Note the ratio: an extra $100 against a $403 payment is 25 percent more, but it cuts the term by about two years. Amortisation rewards early extra payments disproportionately.
| Lever | Effect |
|---|---|
| Refinancing to a lower rate | Largest single saving, but check whether you lose income-driven repayment or forgiveness eligibility |
| Extra monthly payments | Reduces interest directly and shortens the term |
| Shorter term | Higher payment, dramatically less interest |
| Lump-sum payment | Applied to principal, saves all future interest on that amount |
| Capitalised interest | Unpaid interest added to the balance at the end of grace or deferment periods, which raises everything after it |