Updated: March 21, 2021 by FinPins
Use the FREE student loan payoff calculator app and calculate your early payoff and savings!
Student Loan Payoff Calculator: How to use? (with screenshots)
Fill in all the relevant values such as the loan amount for example $75000, interest rate (yearly) for example 7.25%, loan tenure in years and months, for example 25 years and 0 months.
After filling in the details, hit the calculate button at the bottom.
Using the information provided in the form, the app calculates the following:
Monthly payment – how much you’re supposed to pay every month: $542.11
Total months remaining – how many months you’d have to make the payment to pay off the loan: 300 (i.e. 25 years you had input)
Total interest payable – this is the sum of all interest payments (on top of your principal amount or the borrowed amount of $75,000) you would pay to payoff the loan: $87,631.54
So effectively, you’d pay $87,631 (interest) + $75,000 (principal) = $162,631 in total.
Till here, it’s the basic loan repayment math. Next we will explore the impact of two things –
- refinancing to a lower rate
- making extra payments on top of calculated ‘monthly payment’
There are two fields below the calculated results for that.
Step 3: Impact of refinance on student loan payoff
You should always check for refinance offers on your loans.
Suppose you find a lender that is willing to refinance your student loan at a lower rate, for example 5.25%. Enter 5.25 in the ‘what’s your refinance rate’ field.
Hit RE-CALCULATE button to see the impact of refinancing.
We observe that based on the lower interest rate of 5.25%, the new monthly payment is $449.44, down from $542.11.
A 2% lower interest rate enables you to save $27,800 in total interest!!!
Step 4: Impact of extra payment on student loan payoff
If you are not able to find a lower interest rate currently, you can still accelerate your student loan payoff by making small extra contributions every month.
Let’s say you can pay $50 extra every month, input 50 in the appropriate field and hit RE-CALCULATE.
The app recalculates your scenario taking the extra payment into account.
Based on the updated information, the new payment becomes $592.11 ($542.11 suggested monthly payment + $50 extra payment).
$50 extra monthly payment enables you to payoff your student loan 59 months faster and saves you $20,161 in total interest.
Step 5: Impact of both – refinance and extra payments on student loan payoff
Now this is the star scenario- you are able to refinance to a lower interest rate (5.25%) AND you commit to making extra payment ($50 per month) on the recommended monthly loan payments.
Based on the refinance rate of 5.25% and extra payment of $50 every month, your new monthly payment becomes $499.44 ($449.44 due to lower interest rate, as in step 3 + $50 extra monthly payment).
$50 extra every month and refinancing to 2% lower rate enables you to pay off the loan 54 months faster and save $40,216 in total interest.
Conclusion: For early payoff of student loans, there are two very effective levers you can pull: make extra payments and refinance to a lower rate
Bonus: See how a $100,000 loan for 25 years plays out at different interest rates varying from 0 to 12% interest rates per year.
The monthly payments and the total interest payable reduce drastically with every percentage point drop in the student loan interest rate. See chart below.
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