ReckonBoxWhat a student loan really costs
A student loan calculator estimates the monthly payment on a loan, and on a federal unsubsidized loan it should also count the interest that builds up before you ever make a payment. That in-school interest is the part most calculators skip, and it changes the balance you start repaying.
On a $20,000 unsubsidized loan at 6.5% over the standard 10-year term, $5,850 of interest accrues across 54 months of school and grace. Let it capitalize and repayment starts on $25,850, at $293.52 a month. Pay that interest as you go and the balance stays $20,000, at $227.10 a month.
Subsidized or unsubsidized changes who pays
On a subsidized federal loan the government pays the interest while you are in school and through the grace period; on an unsubsidized loan you owe it from the day the money is disbursed. That single difference is worth thousands.
For the subsidized borrower, nothing accrues against them during those 54 months, so repayment begins on the original $20,000. The unsubsidized borrower racks up $5,850 in the same window. Bankrate and the university calculators we checked ask only for an amount, a rate, and a term, so they treat both loans identically, which they are not.
The capitalization nobody quantifies
Interest capitalization is when unpaid interest is added to your principal, usually the moment the grace period ends, after which you pay interest on the larger balance. It is compounding working against you, and it is the number the field leaves out.
Experian's own example makes the mechanic plain: $20,000 at 5.5% over 54 months accrues about $4,946, which capitalizes to a $24,946 balance. calculator.net will show you a balance after grace, but it never tells you what that capitalization costs. We do:
| $20,000 unsubsidized loan at 6.5%, 10-year repayment | |
|---|---|
| Interest accrued in school (54 months) | $5,850 |
| Balance once it capitalizes | $25,850 |
| Total interest if you let it capitalize | $15,223 |
| Extra cost versus paying interest in school | $2,121 |
Paying interest in school, and what it saves
Paying the interest as it accrues keeps it off the principal, so it never capitalizes and never earns interest of its own. Small payments during school do more than their size suggests.
On the default loan, covering the $5,850 as you go saves about $2,121 across the 10 years, because it never joins the principal and never earns interest. The monthly payment in repayment drops from $293.52 to $227.10, since you are amortizing $20,000 and not a larger figure. Whether that fits a student budget is a personal question, and the tool shows both paths so the tradeoff is a concrete number you can weigh.
Where the numbers come from
In-school interest accrues simply on the principal at your rate for the months before repayment: principal times rate times months over twelve. On a subsidized loan that figure is zero, because the government pays it. On an unsubsidized loan, if you do not pay it, it is added to the principal once, and the monthly payment is then the standard amortization of that larger balance over your term. Total interest is everything you repay above what you originally borrowed.
Federal rates are set annually and fixed for the life of each loan. For 2026-27, per Federal Student Aid, undergraduate Direct loans are 6.52% and graduate Direct Unsubsidized loans 8.07%, so the rate is an input you set to match your own loans.
What this does not cover
This models the standard fixed repayment and the capitalization that comes with it. It does not model the income-driven plans, the newer Repayment Assistance Plan, or Public Service Loan Forgiveness, which base payments on income and forgive a balance after years of qualifying payments. Those plans were changing through 2026, and a payment estimate cannot capture their eligibility rules.
None of this is advice about which loan to take or which plan to enroll in. For a decision that turns on your income and family size, the federal loan simulator and a student aid counselor are the right places to go.
Frequently asked questions
What is the difference between subsidized and unsubsidized student loans? On a Direct Subsidized loan the federal government pays the interest while you are in school, during the 6-month grace period, and during deferment, so nothing capitalizes. On a Direct Unsubsidized loan interest accrues from the day the loan is disbursed, and you owe all of it. On a $20,000 loan at 6.5% over 54 months in school, that unpaid interest is $5,850.
What is student loan interest capitalization? Interest capitalization is when unpaid interest is added to your loan principal, usually when the grace period ends and repayment begins, after which you pay interest on the larger balance. On a $20,000 unsubsidized loan at 6.5%, $5,850 of in-school interest capitalizes, so repayment starts on $25,850 rather than $20,000.
How much does capitalization cost me? It costs you the interest charged on the capitalized amount for the rest of the loan. On the default $20,000 loan, letting $5,850 capitalize rather than paying it in school adds about $2,121 over a 10-year repayment, because you spend a decade paying interest on that interest. Paying even part of it while in school reduces the effect.
What is the monthly payment on a $20,000 student loan? On a $20,000 unsubsidized loan at 6.5% over the standard 10-year term, the monthly payment is $293.52 once $5,850 of in-school interest capitalizes to a $25,850 balance. Had you paid the interest in school, the balance would stay $20,000 and the payment would be $227.10. The rate and term drive the number.
What are the current federal student loan interest rates? For loans first disbursed between July 1, 2026 and June 30, 2027, per Federal Student Aid, undergraduate Direct Subsidized and Unsubsidized loans carry a 6.52% fixed rate, graduate Direct Unsubsidized loans 8.07%, and Direct PLUS loans 9.07%. Federal rates are set each year and fixed for the life of the loan, so this tool takes your rate as an input.
Should I pay interest while I am in school? Paying interest as it accrues keeps it from capitalizing, which lowers your balance at repayment and the total you pay. On the default loan that avoids about $2,121 of extra interest. Whether it fits your budget while studying is your call, and this tool shows both paths side by side so the tradeoff is visible.