Student Loan Daily Interest Calculator: How It Works

Want to know the real cost of your student loans? This calculator shows how your daily interest adds up and impacts your total loan balance.

If you borrowed $35,000 in federal loans at 6.8% interest, your monthly payment on a 10-year standard plan might be $400. But if you only pay the minimum and take a long time to pay off the loan, you’ll pay much more than you originally borrowed.

So, why does this happen? The culprit is student loan interest.

For borrowers with federal or private student loans, interest payments are often the biggest factor driving up the total cost. This calculator will help you determine how much interest you’re paying daily—and show you how to save on your student loan payments.

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Annual Avg Interest Rate: 0.0%

How Student Loan Interest is Calculated

The student loan daily interest calculator uses this formula:

Daily Interest = (Loan Balance × Annual Interest Rate) ÷ 365

Here’s how the math works in practice:

  • Step 1 – Find your daily interest rate. Divide your annual interest rate by 365 to get your daily rate. Example: With a yearly rate of 5.50%: 0.055÷365=0.000150.055 \div 365 = 0.000150.055÷365=0.00015, or 0.015% per day.

  • Step 2 – Calculate your daily interest. Multiply your loan balance by the daily rate to find the interest your loan accrues daily. Example: On a $27,000 loan: 27,000×0.00015=4.0527,000 \times 0.00015 = 4.0527,000×0.00015=4.05, or $4.05 per day.

  • Step 3 – Figure out your monthly interest. Multiply your daily interest by the number of days since your last payment to see how much interest has added up. Example: If 30 days have passed: 4.05×30=121.504.05 \times 30 = 121.504.05×30=121.50, or $121.50 in monthly interest.

You can save money on interest if you pay more than your regular monthly payment. Extra payments reduce the total loan balance, so less interest adds up each day.

How Can You Use a Daily Interest Calculator for Your Student Loans?

You can use a daily interest calculator to see how much interest your loans add up daily. Just plug in three key numbers:

  1. Your loan balance

  2. Your annual interest rate

  3. The number of days since your last payment

The calculator does the math for you, showing your daily interest and the total interest you’ve accrued over time. This information can help you:

  • Understand your costs: See how much your monthly payment goes toward interest versus the loan balance.

  • Plan smarter payments: Find out how paying more than the minimum can reduce your total interest.

  • Compare repayment options: Evaluate how different interest rates or repayment plans impact your long-term costs.

It’s a quick way to take control of your student loan payments and potentially save thousands over the life of your loan.

How Capitalization Increases Interest Costs

Capitalization happens when unpaid interest is added to your loan balance. This means your loan gets bigger, and you end up paying interest on the new, higher amount—basically, paying interest on interest.

When Does This Happen?

  • Federal Loans: Capitalization happens after forbearance (temporary postponement of payments), grace periods (6 to 9 months), or when you switch repayment plans (like leaving an Income-Driven plan).

  • Private Loans: This usually happens at the end of deferment or forbearance.

How to Avoid It: Make interest-only payments during deferment or forbearance. This keeps your loan balance from growing and saves you money over time.

How Student Loan Payments Are Applied

When you make a payment, your loan servicer splits it into parts:

  • First, they cover any late fees or other charges.

  • Then, they pay the interest that’s built up since your last payment.

  • Finally, they apply the rest to your loan balance (the principal).

Example: If your daily interest is $8, and you make a $293 payment:

  • $121.50 goes to cover the interest (assuming no fees).

  • The remaining $171.50 lowers the loan balance.

Use this breakdown to help decide if aggressive payments make sense.

For borrowers considering refinancing, a payoff strategy, or working toward forgiveness, knowing your daily interest helps you figure out how much of your payment impacts your balance—and whether a different repayment plan aligns with your goals.

Strategies to Save on Student Loan Interest

Knowing how daily interest works can help you save thousands over the life of the loan. Here are two strategies you may consider to lower your overall costs and better manage your student loans:

1. Save by Making Extra Payments

Extra payments directly toward your principal amount can significantly reduce the interest you pay. Use the student loan calculator to see how much interest you’re currently paying based on your student loan interest rate, then determine how much more you can afford to contribute.

Example:

  • Loan balance: $100,000

  • Interest rate: 7.0% (fixed rate)

  • Monthly student loan payment: $1,160

  • Total interest paid over the repayment period: $39,200

If you increase your payment amount by $300 to $1,460, your total interest drops to $30,400. That’s a savings of $8,800—simply by making slightly larger payments.

2. Save by Lowering Your Interest Rate

Lowering your interest rate is a great way to save money. Federal student loans don’t let you reduce your rate, but you can refinance with a private lender to get a lower rate.

You can choose a fixed rate that stays the same or a variable rate that might start lower but can change over time, which could increase your costs later.

Example:

  • Loan balance: $100,000

  • Current fixed interest rate: 7.0%

  • Refinanced variable interest rate: Starts at 4.5%

  • Monthly payment: $1,160

With the lower rate, your first payment would include $375 toward interest, compared to $583 with your original rate.

Over the loan term, assuming rates remain steady, you’d pay approximately $26,500 in total interest—a savings of $12,700.

But if your variable rate rises to 6.0% over time, you could pay closer to $33,000 in total interest.

What About Federal Loan Consolidation?

Federal loan consolidation doesn’t lower your interest rate. Instead, it combines your current rates into a weighted average and slightly rounds it up.

This simplifies repayment by merging multiple loans—like unsubsidized loans and PLUS loans—into one, but it doesn’t reduce how much interest you pay overall.

If you’re thinking about consolidating, try using our Weighted Interest Calculator. It shows how consolidation affects your total costs and helps you compare it with other options, like refinancing, to decide what works best for your situation.

FAQs About Student Loan Interest

How does student loan interest work—simple or compound?

Student loans usually use simple interest, which is calculated daily based on your loan balance. This means you pay the same amount of interest each day during the payment period. But if unpaid interest is added to your principal (a process called interest capitalization), it effectively acts like compound interest, increasing your overall costs. This often happens after deferment, forbearance, or leaving an Income-Driven Repayment (IDR) plan.

Will the government pay my student loan interest?

In some cases, yes. For subsidized loans, the government covers your interest while you’re in school at least half-time. Income-Driven Repayment plans like Saving on a Valuable Education (SAVE) also pay some or all of your unpaid interest. Other plans, like Income-Based Repayment (IBR) and Pay As You Earn (PAYE), include subsidies for the first three years of repayment.

Can student loan interest payments reduce my taxes?

Yes, you can deduct up to $2,500 in student loan interest payments from your taxable income each year. This deduction applies to interest you’ve paid on your loans, your spouse’s loans, or your dependent’s loans, even if you don’t itemize your taxes.

Can I lower the interest rate on federal student loans?

Federal loans have fixed interest rates that can’t be changed. You’d need to refinance with a private lender to get a lower rate, but doing so would forfeit federal benefits like IDR or forgiveness programs.

Will an Income-Driven Repayment plan cost me more in interest?

Yes, in most cases, you’ll pay more interest with an IDR plan. These plans extend repayment timelines, often doubling or tripling the standard 10-year schedule, which leads to more interest accruing. But, if you qualify for Public Service Loan Forgiveness, you can save on interest since loans are forgiven after 10 years.

How much does .25 interest save on student loans?

A 0.25% interest rate reduction can save you money over the life of your loan. For example, if you owe $50,000 with a 10-year term, dropping your rate from 6.5% to 6.25% could save you around $750 in interest. Check with your lender to see if you qualify for discounts.

Other Calculators

  • Weighted Average Interest Rate Calculator: Estimates the fixed interest rate of your new loan when you consolidate with the U.S. Department of Education.

  • Discretionary Income Calculator: Look at your family size and adjusted gross income to calculate the discretionary income loan servicers will use to calculate your monthly payment under income-driven repayment plans.

  • Student Loan Payoff Calculator: Reviews your loan balance, interest rate, monthly payments, and extra payments to determine your amortization schedule, i.e., the date you’ll payoff the loans.