Formula
Unsubsidized interest accrues simply during school, without monthly compounding, and is added once when repayment starts:
Accrued interest = balance × annual rate / 12 × in-school months
The repayment payment uses the standard fixed-rate formula on the balance plus that accrued interest. A subsidized loan adds no in-school interest.
Assumptions
- In-school interest does not compound each month.
- Repayment is a fixed monthly payment after the in-school period.
- Income-driven plans, forgiveness, and fees are not included.
Worked example
An unsubsidized $20,000.00 balance at 6.5% accrues $2,599.92 over 2 years. Repayment over 10 years is $256.62 a month.
Input definitions
- Subsidized
- No interest is added for the in-school months in this model.
- Unsubsidized
- Monthly interest accrues and is added to the balance once before repayment.
Limitations
This is an estimate, not a federal or private loan quote. Servicers may accrue interest daily and capitalize it on a different date.
Questions
Why is the repayment balance higher than the amount I entered?
On an unsubsidized loan, unpaid in-school interest is added before the payment is calculated.
Does a subsidized loan still charge interest later?
Yes. The subsidy in this calculator applies only to the in-school months. Repayment interest is still calculated.