Student Loan Repayment Planner

Three inputs, and one of them dominates

A fixed repayment schedule takes what you owe, the rate charged on it and the number of years you have been given, and turns them into one instalment repeated until the balance is gone. Graduates tend to focus on the rate, because it is the number the loan is advertised with. The term is the lever that moves the total, and it moves it by amounts that make the rate look like a rounding error.

Anyone leaving with several loans has several schedules, not one. Loans taken out in different years usually carry different rates, and averaging them here will flatter whichever is largest. Run the expensive one on its own first: that is the balance any spare money should reach.

The term moves the total; the rate barely touches it

That claim is easy to make and easy to check, so here it is checked. Hold $32,000 and a rate of 6% fixed, and change nothing but the number of years.

Now hold the term at ten years and move the rate instead. At 5% the instalment is $339.41 and the interest $8,729; at 6%, $355.27 and $10,632; at 7%, $371.55 and $12,586. A whole percentage point is worth around $1,900 across the decade.

Set the two against each other and the asymmetry is stark. One point of rate costs about $1,900. Ten extra years cost about $12,400 on the same debt. This is why a refinancing offer that shaves half a point while quietly extending the schedule by five years is a worse deal than the headline suggests, and why the term is the first field to argue about.

A worked example: $32,000 over ten years at 6%

That balance on a ten-year schedule asks $355.27 a month. Over the full term you hand over $42,631.87, so the borrowing costs $10,631.87 — around a third of what you originally took out.

Stretch the same debt to twenty years and the instalment drops to $229.26, which is why long terms are offered at all. The interest bill goes to $23,021.91. You have roughly halved the monthly commitment and rather more than doubled the cost of the loan, because every extra year is another year of charges on a balance that is now coming down half as fast.

What an extra $100 a month buys

Keep the ten-year schedule and add $100 on top of each instalment. The debt clears after 87 months rather than 120, and the interest falls to $7,525.17 — 33 months and $3,106.70 saved for $8,700 paid in early. Those last 33 instalments simply never happen, which is where most of the gain comes from.

Raise the extra to $200 and it finishes in 69 months, saving $4,791.72. Notice that doubling the overpayment did not double the saving: the second $100 arrives when the balance is already falling faster, so there is less interest left for it to remove. The first slice of any overpayment is always the most productive one, which is an argument for starting small and early rather than waiting until you can afford a large gesture.

Highest rate first, and the small balance that tempts you

With several loans and one pot of spare money, there are two orderings people actually use. Send everything above the minimums at the highest rate first, and you pay the least interest — this is arithmetic, not opinion, and it wins every time by a margin you can calculate. Send it at the smallest balance first, and you close accounts sooner, which feels like progress and costs more.

The gap is real, and it is smaller than either camp claims. Take three loans — $6,000 at 4.5%, $11,000 at 6% and $15,000 at 7.5%, all on ten-year schedules — with $150 a month spare and every freed minimum rolled into the next loan. Aimed at the highest rate, the set clears in 76 months having cost $6,676 in interest. Aimed at the smallest balance, it takes 78 months and $7,565.

So the ordering is worth $889 on $32,000 of debt: real money, and not the transformation either method is sold as. The $150 itself is worth $4,807 against paying only the minimums. The decision that matters is whether the money is found at all, and that is the one neither camp argues about.

Which is why the honest answer is conditional. If you have abandoned two previous repayment pushes, the ordering that keeps you going is worth more than the ordering that is optimal on paper. If you have never abandoned one, take the interest.

Why your servicer may print a different number

The schedule starts from the balance you type today. If interest built up while you were studying and has since been folded into the principal, enter the figure after that happened rather than the sum you were originally advanced.

Fees are excluded. So is any charge for settling early, which exists on some agreements. And an overpayment only shortens a term if it is applied to the balance — some lenders treat extra money as your next instalment paid in advance, which buys a month off rather than a reduction in what you owe, and the saving above evaporates. That is worth a phone call before you set up a standing order.

A variable rate moves the payment or the end date, never neither

If your rate is not fixed, the schedule above describes one possible future rather than the contract. When the rate rises, an agreement does one of two things: it recalculates the instalment upwards and keeps the finishing date, or it holds the instalment and lets the term stretch. Which one yours does is written down, and the two failure modes are completely different — the first threatens this month’s budget, the second threatens the decade.

The way to use this page on a variable loan is to run it twice: once at today’s rate, once at the highest rate you think plausible over the term. The difference between the two totals is the size of the risk you are carrying, expressed in money rather than in adjectives, and it is the number to weigh against whatever a fixed-rate offer would cost you to take.

Not every student loan works like this

Several countries do not collect student debt as a fixed instalment at all. They take a percentage of income above a threshold through the payroll system, cancel whatever is left after a set number of years, and adjust both the percentage and the threshold by legislation — often annually. On those systems the monthly figure below is a hypothetical, and voluntary overpayment can be a poor idea if the balance was never going to be repaid in full anyway.

Check which kind of debt you hold before acting on any of this: the arithmetic here describes a fixed-term contract and nothing else.