You can make interest-only payments on student loans to save money. Making these payments before you graduate — or while you’re postponing repayment — can save you thousands of dollars over the term of the loan.
Interest always accrues on unsubsidized loans and private student loans, so making payments toward that interest can keep those debts from snowballing. (Note that interest doesn’t accrue on subsidized federal student loans while you’re in school.)
Student loan interest-only payment calculator
Paying off student loan interest before it capitalizes — or is added to your loan balance — decreases the total amount you repay. Use this calculator to estimate your monthly student loan interest payments and how much they could save you in the long run.
When to make interest-only student loan payments
There is never a penalty for prepaying a student loan. As such, you should consider making interest-only payments any time your loans are accruing interest and payments aren't required. This can include:
- While you, or your child for parent PLUS loans, are enrolled in school.
- During the six-month student loan grace period.
- When you’re temporarily pausing repayment via deferment or forbearance.
For example, say you borrowed a $26,000 graduate PLUS loan at the current 8.94% interest rate for each year of a two-year program. Each month, $197 in interest would accrue on that loan.
Over a 10-year repayment term, your total would be $40,069 with interest-only payments compared to $55,552 without interest-only payments. That's a difference of $15,483.
🤓Nerdy Tip
If your federal loans are subsidized, they don't accrue interest while you're in school or on an approved deferment. During these periods, making extra payments directly on your principal balance can help minimize the amount you repay overall.How to make interest-only payments on student loans
You'll make interest-only payments directly with your student loan servicer. Visit its website or contact your servicer to confirm how much your interest-only payments should be and to set up these payments. If you’re in school or otherwise unsure of who your servicer is, you can find out at studentaid.gov.
There is no federal student loan repayment plan that lets you pay just interest. However, if you opt in to a deferment or forbearance, the application may give you the choice to make interest-only payments during this break. Even if you do not select that option, you can still set these payments up with your servicer.
Private student loans may offer — or require — interest payments while you’re in school. They may also have post-graduation interest-only payment plans for a period of time. Contact your lender for details.
