How to Calculate Monthly Student Loan Interest

If you take out student loans, interest will increase the total amount you'll pay for college. Interest accrues daily on federal student loans and most private student loans, and it's generally calculated using a simple daily interest formula.

To calculate the amount of student loan interest that accrues monthly, find your daily interest rate and multiply it by the number of days since your last payment. Then, multiply that by your loan balance.

» MORE: Current student loan interest rates

Monthly student loan interest calculator

For a student loan in a normal repayment status, interest accrues daily but generally doesn’t compound daily. In other words, you pay the same amount of interest per day for each day of the payment period — you don’t pay interest on the interest accrued the previous day.

Step by step: Calculate your monthly student loan interest

To see how to calculate student loan interest in practice, follow along with pen and paper using the example below. Not a math person? Our student loan interest calculator above can handle the work for you.

For this example, say you borrow $27,000 at a 5.5% annual interest rate. On a 10-year standard repayment plan, your monthly payment would be about $293.

» CALCULATOR: Estimate your full monthly student loan payment

1. Calculate your daily interest rate (sometimes called interest rate factor). Divide your annual student loan interest rate by the number of days in the year.

.055/365 = 0.00015, or 0.015%

2. Calculate the amount of interest your loan accrues per day. Multiply your outstanding loan balance by your daily interest rate.

$27,000 x 0.00015 = $4.05

3. Find your monthly interest payment. Multiply your daily interest amount by the number of days since your last payment. We’ll use 30 days in this example to represent a typical month.

$4.05 x 30 = $121.50

» COMPARE: Fixed vs variable rate student loans

How student loan payments are applied

Student loan servicers typically apply monthly payments in the following order:

• Outstanding fees.

• Outstanding interest.

• Loan principal, which is the amount you originally borrowed.

Using the previous example, with a $293 monthly payment — and assuming no fees — $121.50 would go toward interest, while $171.50 would go toward your remaining principal balance. Generally, student loan payments aren’t due until you leave school and finish your grace period. If you’re still in school, save money on your future student loan bills by making optional interest-only payments.