Use this calculator to estimate when you'll pay off your student loans and see how increasing your monthly payment can help you become debt-free faster.
Understanding how to calculate your student loan payoff is crucial for managing your educational debt effectively. This guide will walk you through the process of determining your payoff date and how extra payments can impact your loan term and total interest paid.
The formula used to calculate the number of months needed to pay off a student loan is:
$$n = \frac{\log(1 - \frac{Br}{P})}{\log(1 + r)}$$
Where:
Let's calculate the payoff time and total interest for a student loan with the following terms:
Step 1: Calculate the monthly interest rate
$$r = \frac{5\%}{12} = 0.4167\% = 0.004167$$
Step 2: Calculate the number of months to payoff without extra payments
$$n = \frac{\log(1 - \frac{30000 \times 0.004167}{318.20})}{\log(1 + 0.004167)} = 120 \text{ months}$$
Step 3: Convert to years and months
120 months = 10 years
Step 4: Calculate the number of months to payoff with extra payments
$$n = \frac{\log(1 - \frac{30000 \times 0.004167}{418.20})}{\log(1 + 0.004167)} = 86 \text{ months}$$
Step 5: Convert to years and months
86 months = 7 years and 2 months
Step 6: Calculate total interest paid without extra payments
Total Interest = (318.20 × 120) - 30,000 = $8,184
Step 7: Calculate total interest paid with extra payments
Total Interest = (418.20 × 86) - 30,000 = $5,965.20
Result: By making an extra $100 monthly payment, you can pay off the loan 2 years and 10 months earlier and save $2,218.80 in interest.
This diagram illustrates how a $30,000 student loan is paid off over time with and without extra payments. The blue line represents the loan balance with regular payments of $318.20 per month, while the red line shows the accelerated payoff with an additional $100 monthly payment. Notice how the extra payments significantly reduce the loan term and result in substantial interest savings.