Student loans · Payments
Student loan interest-only payment.
Enter the balance, rate and term. See the interest-only payment, what the full payment would be, and the extra cost of paying interest only for a while first.
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The short answer
An interest-only payment is the balance times the rate divided by 12, and it leaves the balance unchanged. On $40,000 at 6.5% that is $216.67 a month, against $454.19 for a fully amortizing 10-year payment. Paying interest only for 12 months, then paying off the balance over the remaining 108 months, lifts the payment to $490.18 and adds $1,036.48 of interest.
Why the balance does not fall. Federal Student Aid says no payment goes toward principal until all unpaid interest is paid. A payment equal to the interest accrued only covers the interest, so the principal stays put. Interest each month is balance times rate divided by 12, which equals the daily formula (rate divided by 365.25 times days) averaged over a year.
The tradeoff. Interest-only months lower the payment now, but the principal has fewer months to be repaid afterwards, so later payments are higher and total interest is greater. The extra interest line is that difference for the same total term.
Frequently asked questions
How do I calculate an interest-only payment on a student loan?
Multiply the balance by the annual rate and divide by 12. At 6.5% on $40,000 that is $216.67 a month.
Does an interest-only payment reduce my balance?
No. It covers the interest and nothing else, so the principal stays the same until you pay more than the interest.
Why is the payment higher after the interest-only period?
The same principal now has fewer months left to be repaid.
Is interest-only repayment available on my loan?
This tool does not know. Interest-only terms depend on your loan and lender, so check your servicer’s options.
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Estimate only
Arithmetic for a fixed-rate loan. Your servicer’s terms and statements govern.