1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to pay off a loan with interest over a specified term. This is the standard formula used for unsubsidized student loans with rates starting at 5.50% (2025).

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (annual rate divided by 12)
• \( n \) — Number of monthly payments (loan term in years × 12)
• \( PMT \) — Fixed monthly payment amount (USD)

Explanation: The formula accounts for compound interest over the life of the loan to determine a fixed payment amount that will pay off the loan in full by the end of the term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. It also allows you to compare different loan options and terms.

4. Using the Calculator

Tips: Enter the principal amount in USD, annual interest rate as a percentage (e.g., 5.50), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between subsidized and unsubsidized loans?
A: Unsubsidized loans accrue interest while you're in school, while subsidized loans don't accrue interest until after graduation.

Q2: Are student loan interest rates fixed or variable?
A: Federal student loans have fixed rates, while some private loans may have variable rates.

Q3: Can I pay off my student loans early?
A: Yes, most student loans allow early repayment without penalty, which can save you money on interest.

Q4: What if I can't make my monthly payments?
A: You may qualify for income-driven repayment plans, deferment, or forbearance options.

Q5: Does this calculator account for loan fees?
A: No, this calculator doesn't include potential loan origination fees which may affect your actual payment amount.