What Will Your Student Loan Really Cost You?

Interest during school

Subsidized loan — no interest accrues during school

= $0.00

Subsidized loans don't accrue interest while you're enrolled at least half-time. The government covers it. This is worth thousands in savings compared to an unsubsidized loan.

Federal Student Aid — Subsidized vs Unsubsidized Loans (studentaid.gov)

Interest during grace period

interest = capitalizedAfterSchool × (rate/12) × gracePeriodMonths

= $30,000.00 × 0.004583 × 6 mo

= $825.00

The 6-month grace period after graduation — interest accrues and gets added to your balance. You haven't made a single payment and you already owe more.

Federal Student Aid — Grace Period definition (studentaid.gov)

Capitalized principal (what you actually owe on Day 1 of repayment)

capitalizedPrincipal = principal + interestDuringSchool + interestDuringGrace

= $30,000 + $0.00 + $825.00

= $30,825.00

This is the number that actually matters — your real starting balance. It's $825.00 more than you originally borrowed.

Monthly payment (10-year standard amortization)

PMT = P × r(1+r)^n / ((1+r)^n − 1)

P = $30,825.00, r = 0.004583, n = 120

= $334.53/mo

Over 10 years at 5.5% annual interest. Month 1: most of this goes to interest.

Standard amortization PMT formula; IDR calculation — studentaid.gov Loan Simulator

Total amount paid over the life of the loan

totalPaid = monthlyPayment × termMonths

= $334.53 × 120 months

= $40,143.87

You borrowed $30,000. You'll pay back $40,143.87. The difference — $9,318.87 — is pure interest.

Interest as % of original loan (the "wow" number)

interestPct = totalInterestPaid / originalPrincipal × 100

= $9,318.87 / $30,000 × 100

= 31.1% — you pay 31.1% on top of what you borrowed

For every $1 you borrowed, you'll pay back $1.31. Paying even $50/mo extra dramatically reduces this.