How federal and private student loans amortize
This US Student Loan Calculator handles both federal loans (Stafford subsidized and unsubsidized, Direct Consolidation, Grad PLUS, Parent PLUS) and private student loans using daily simple interest — the same method used by federal loan servicers and most private lenders in the United States.
Subsidized vs. unsubsidized Stafford loans
With a Direct Subsidized Loan, the U.S. Department of Education pays the interest while you are enrolled at least half time, during the six-month grace period after leaving school, and during any authorized deferment period. With an unsubsidized Stafford loan, Grad PLUS or private loan, interest accrues from the day of disbursement — even while you are still in school.
Private loans and variable rates
Private student loans typically lack the borrower protections of federal loans (income-driven repayment, public service loan forgiveness, lengthy deferments) and may carry variable rates that can rise over time. Always exhaust federal eligibility before turning to a private lender.
Comparing repayment strategies
Federal borrowers can choose from several plans that produce very different monthly payments and total interest costs.
Standard 10-year repayment
The Standard Repayment Plan produces equal monthly payments over 120 months. It pays off the loan the fastest and costs the least in total interest, making it the best choice for borrowers who can afford the monthly amount.
Graduated repayment
Graduated Repayment starts with lower payments that rise roughly every two years over the 10-year term. Total interest is higher than the standard plan, but it can help recent graduates whose incomes are expected to grow steadily.
Income-Driven Repayment (IDR)
Plans such as SAVE, PAYE, IBR and ICR cap your monthly payment at a percentage of your discretionary income — typically 5–20 % — and forgive the remaining balance after 20 or 25 years of qualifying payments. Use the SAVE plan estimator on StudentAid.gov to compare.
Deferment, forbearance and capitalization
When you enter deferment or forbearance, your payments pause, but the treatment of interest depends on your loan type and the specific program.
What happens during deferment
For subsidized Stafford loans, the government continues to pay the interest during deferment. For unsubsidized and private loans, interest keeps accruing each day. If you do not pay the interest as it accrues, it is capitalized — added to the principal balance — at the end of the deferment period. Capitalization increases your future monthly payment and the total interest you will pay over the life of the loan.
$30,000 principal, 5.5 % APR, 10-year Standard Repayment, 6-month deferment after graduation (unsubsidized loan).
- Interest accrued during 6-month deferment ≈ $30,000 × 0.055 × 6/12 ≈ $825
- Capitalized principal entering repayment ≈ $30,825
- Monthly payment on 10-year standard plan ≈ $335
- Total payments over 10 years ≈ $40,200 → total interest ≈ $9,375
Without the deferment and capitalization (repayment starting immediately), the monthly payment would be roughly $326 and total interest about $9,130 — a difference of roughly $245 over the life of the loan caused by just six months of deferred interest.
Paying the accruing interest every month during deferment — even if you cannot afford full principal — avoids capitalization and saves you money long term.