Student Loan Calculator

What is the difference between subsidized and unsubsidized loans?

Federal student loans come in two types with important differences that affect how much you'll pay:

Subsidized vs. Unsubsidized Comparison

Example: $10,000 Loan at 5% for 4 Years of School

After leaving school, both types have the same interest rate and repayment terms.

Interest Capitalization

Unsubsidized loans: Interest accrues from disbursement

• If you don't pay interest during school, it capitalizes (adds to principal)
• You then pay interest on the interest
• This significantly increases total cost

Cost Example: $20,000 Unsubsidized Loan at 5%

Federal Loan Limits (2024)

Subsidized + Unsubsidized Combined:

Graduate Students: $20,500/year (unsubsidized only)

Should I choose standard, graduated, or income-driven repayment?

Federal student loans offer multiple repayment plans. Choosing the right one can save you thousands or provide crucial flexibility.

Standard Repayment Plan

How it works: Fixed payment for 10 years

Best for: Stable income, want to pay off ASAP, can afford higher payments

Graduated Repayment Plan

How it works: Payments start low, increase every 2 years for 10 years

Best for: Expect significant income growth, need lower payments initially

Income-Driven Repayment Plans

How they work: Payments based on income and family size (10-20% of discretionary income)

Four plans:

• SAVE (newest, most generous): 5-10% of discretionary income
• IBR (Income-Based Repayment): 10-15% of discretionary income
• PAYE (Pay As You Earn): 10% of discretionary income
• ICR (Income-Contingent Repayment): 20% of discretionary income

Best for: Lower income relative to debt, public service, income uncertainty

Comparison Example: $50,000 Loan at 5%

Which Plan Should You Choose?

Choose Standard if:

• You can afford the payment
• Want to minimize interest
• Have stable income
• Want debt gone quickly

Choose Graduated if:

• Entry-level salary expected to grow significantly
• Can't afford standard payment now
• Confident in income growth

Choose Income-Driven if:

• High debt relative to income (debt > 1.5x income)
• Income is low or variable
• Pursuing Public Service Loan Forgiveness
• Need payment flexibility
• Might qualify for forgiveness

Is student loan refinancing a good idea?

Refinancing can lower your rate and save money, but you'll lose valuable federal loan benefits. Weigh carefully!

What is Refinancing?

Private lender pays off your federal/private loans and gives you a new private loan at (hopefully) a lower rate.

Potential Benefits

Example: $50,000 at 6.5% → 4.0% (10-year term)

What You Lose (Federal Loans Only)

Critical federal benefits you'll lose:

• ❌ Income-driven repayment plans
• ❌ Public Service Loan Forgiveness (PSLF)
• ❌ Loan forgiveness (after 20-25 years)
• ❌ Federal forbearance/deferment options
• ❌ Death and disability discharge
• ❌ Potential future forgiveness programs

When Refinancing Makes Sense

Good candidates:

• ✅ Have private student loans (no federal benefits to lose)
• ✅ Have federal loans BUT certain you won't need protections
• ✅ Excellent credit score (740+)
• ✅ Stable, high income
• ✅ Secure employment
• ✅ Healthy emergency fund
• ✅ NOT pursuing PSLF
• ✅ Not planning to use income-driven plans

When to AVOID Refinancing

Don't refinance if:

• ❌ Working toward Public Service Loan Forgiveness
• ❌ On or might need income-driven repayment
• ❌ Income is unstable or may decrease
• ❌ Work in public service/non-profit (PSLF opportunity)
• ❌ May need forbearance/deferment
• ❌ Poor credit (won't get better rate anyway)
• ❌ Already have low rates (less than 4%)

Hybrid Strategy

Consider this approach:

1. Keep federal loans as federal (preserve protections)
2. Refinance only private loans
3. Or: Refinance only portion of federal loans you're confident about

Shopping for Refinance Rates

Compare multiple lenders:

• Rates vary widely (3-8%+ depending on credit)
• Many allow soft credit check (no impact on score)
• Consider variable vs. fixed rates
• Check for fees (most have none)
• Look for perks (rate discounts for autopay, etc.)

Common Lenders: SoFi, Earnest, CommonBond, LendKey, Laurel Road, Splash Financial

How do I pay off student loans faster?

Paying off student loans early can save thousands in interest and free up your budget sooner. Here are proven strategies:

1. Make Extra Payments

Key: Specify payments go to principal, not next month's payment

Impact Example: $30,000 loan at 5% interest

2. Use the Debt Avalanche Method

Pay off highest interest rate loan first while paying minimums on others

Why it works: Mathematically optimal, saves the most money

Example: Multiple Loans

Strategy:

1. Pay minimums on B and C ($242 total)
2. Put all extra money toward Loan A (highest rate)
3. Once A is paid off, attack Loan B
4. Finally pay off Loan C

Alternative: Debt Snowball (pay smallest balance first) - less optimal but psychologically motivating

3. Increase Your Income

Use windfalls for loans:

• Tax refunds
• Work bonuses
• Side hustle income
• Raises (put half toward loans)
• Gifts

Example: $2,000 tax refund applied to $30,000 loan saves ~$5,000 in interest!

4. Refinance for Lower Rate

(See previous FAQ for details)

If you save 2% on $40,000, could save $4,000+ in interest

5. Enroll in Autopay

Many lenders offer 0.25% rate reduction for automatic payments

• Free money
• Never miss a payment
• On $40,000 loan, saves ~$500 over life of loan

6. Avoid Capitalized Interest

For unsubsidized loans:

• Pay interest during school if possible
• Prevents interest-on-interest
• Can save thousands

7. Use Employer Benefits

Some employers offer student loan repayment assistance:

• Up to $5,250/year tax-free
• Ask HR if available
• Free money toward loans!

8. Tax Deduction

Deduct up to $2,500 of student loan interest (income limits apply)

• Reduces taxable income
• Available even if you don't itemize
• Phase-out starts at $75,000 single, $155,000 married

Aggressive Payoff Example

$40,000 loans at 5.5%, normally 10 years ($433/month, $11,941 interest)

Combine strategies:

• Refinance to 4.0% (saves ~$3,000)
• Add $100/month extra
• Put $3,000 tax refund toward principal
• Use autopay discount

Result: Paid off in ~6 years, save $6,000+ in interest!

What is Public Service Loan Forgiveness (PSLF)?

PSLF forgives remaining federal student loan balance after 120 qualifying payments while working for qualifying employer. It's incredibly valuable if you qualify!

How PSLF Works

Requirements (must meet ALL):

1. Qualifying loans: Direct Loans only (can consolidate others)
2. Qualifying employer: Government or 501(c)(3) non-profit
3. Qualifying payments: 120 on-time payments (10 years)
4. Qualifying plan: Income-driven or standard 10-year plan
5. Full-time employment: 30+ hours/week

Qualifying Employers

YES:

• ✅ Federal government
• ✅ State/local government
• ✅ Public schools/universities
• ✅ 501(c)(3) non-profit organizations
• ✅ AmeriCorps, Peace Corps

NO:

• ❌ For-profit companies
• ❌ Non-profit without 501(c)(3) status
• ❌ Private practice (even if clients are low-income)

PSLF Value Example

Scenario: Teacher with $80,000 in loans

Maximizing PSLF

Strategies:

1. Choose SAVE or IBR plan (lowest payments = most forgiven)
2. Don't refinance! (lose PSLF eligibility)
3. Certify employment annually (track progress)
4. File taxes separately if married (may lower payment)
5. Consolidate FFEL or Perkins loans to Direct Loans ASAP
6. Make 120 payments before paying extra (maximize forgiveness)

Common PSLF Mistakes

Avoid these pitfalls:

• ❌ Not certifying employment annually (may lose qualifying payments)
• ❌ Making extra payments (reduces forgiven amount)
• ❌ Refinancing federal loans (disqualifies completely)
• ❌ Wrong repayment plan (extended/graduated don't qualify)
• ❌ Working for non-qualifying employer
• ❌ Not being on Direct Loan program

PSLF Timeline

Typical path:

• Graduate with loans
• Start qualifying job
• Enroll in income-driven plan
• Certify employment (annually)
• Make 120 on-time payments (10 years)
• Submit PSLF application
• Remaining balance forgiven (tax-free!)

Is PSLF Worth It?

PSLF makes sense if:

• ✅ High debt-to-income ratio
• ✅ Plan to work in public service long-term
• ✅ Want career in government/non-profit anyway
• ✅ Have federal Direct Loans

PSLF doesn't make sense if:

• ❌ Low debt balance (would pay off before 10 years)
• ❌ Don't want to work in public service
• ❌ Have mostly private loans
• ❌ Income will be very high (low income-driven payment won't save much)

Recent Improvements

PSLF is now more reliable:

• Limited waiver expanded eligibility (through Oct 2024)
• Improved tracking systems
• Higher approval rates
• More borrowers succeeding

Check your progress: Use the PSLF Help Tool at StudentAid.gov