1. What is the Loan Payment Formula?

The loan payment formula calculates your fixed monthly payment (PMT) for a standard student loan. This is the formula used by most federal student loan servicers for standard repayment plans.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in years × 12)

Explanation: This formula accounts for both principal and interest payments over the life of the loan, ensuring each payment reduces your balance while covering accrued interest.

3. Understanding Your Loan Terms

Details: Federal student loans typically have fixed interest rates set by Congress. Standard repayment terms are 10 years for most loans, though extended plans may be available.

4. Using the Calculator

Tips: Enter your total loan amount, the annual interest rate (without the % sign), and the repayment term in years. For FAFSA loans, check your loan disclosure for exact rates.

5. Frequently Asked Questions (FAQ)

Q1: Does this work for all FAFSA loans?
A: Yes, this works for Direct Subsidized, Direct Unsubsidized, and PLUS loans. It doesn't account for income-driven repayment plans.

Q2: How often is interest compounded?
A: Federal student loans use simple daily interest, compounded monthly when unpaid interest capitalizes.

Q3: What's the difference between subsidized and unsubsidized?
A: The government pays interest on subsidized loans while you're in school; unsubsidized loans accrue interest immediately.

Q4: Can I pay off my loans early?
A: Yes, federal loans have no prepayment penalties. Extra payments go directly to principal.

Q5: What if I can't afford my payments?
A: Consider income-driven repayment plans which cap payments at a percentage of your discretionary income.