Student Loan Repayment Calculator | COVID-19

The COVID-19 pandemic triggered profound changes in the American financial landscape. One of the most hard-hit areas is presumably the most extensive student loan scene in the world: the Federal Student Aid system. The extension of the automatic suspension of the federal student loan payments with a zero percent interest rate (originally from March 13, 2020, until September 30, 2020, in the frame of CARES Act) until December 31, 2020, has been put forward by Trump's Executive Order. What's more, the government has also considerably reduced the fixed interest rates applied on loans to be disbursed for the first time in the upcoming academic year.

When millions are experiencing a sharp drop in income due to the abounding layoffs and pay cuts, the unfolding crisis pushed a considerable part of the 45.1 million Americans carrying the burden of student loan debt into financial hardship. For those who have been worried about the monthly payment obligations, the temporary forbearance provided essential relief.

But how does this automatic forbearance impact your loan? Will your repayment term be extended after the forbearance? What if you keep paying the monthly installments or make any payment before the 31st of December? How much cheaper will your credit be if you start studying (with a student loan) in the upcoming academic year?

Motivated by these questions and the effect on the youth, where 1 in 3 young workers have lost their jobs while half of those with student debt are under 35, we created this calculator, where you can find out the impact of the COVID-19 crisis on your existing or future student loan repayment.

Key takeaways incorporated into the present calculator:

• Suspension of federal student loan payments and zero interest from March 13, 2020, until December 31, 2020 (administrative forbearance) has been extended by Trump's Executive Order until December 31, 2020; and
• Exceptional reduction in fixed interest rates applied for loans to be disbursed for the first time in the upcoming 2020/21 academic year.

As you probably know, the administrative forbearance will last from March 13, 2020, until December 31, 2020. This forbearance has two essential parts which will affect your balance during this period:

• 0% interest is applied on your outstanding loan balance; and
• All monthly payments are automatically suspended.

There are some practical matters that you should keep in mind.

• Auto-debit payments are suspended during the administrative forbearance. Any auto-debit payments processed during this interval can be refunded to you;
• If you don't want administrative forbearance and want to continue making payments, contact your loan servicer to opt-out of the administrative forbearance;
• As long as you are in forbearance, you will not be penalized for making a payment that is less than your usual monthly payment. Meanwhile, you still have the option to make a payment on your loan to reduce your balance; and
• There are no prepayment penalties on federal student loans or private student loans. You can make extra payments on your student loans or pay them off in-full without paying a fee or other penalty.

But why would you keep paying your monthly installment if it's not necessary? It's all about the amortization procedure that all repayment plans follow. More precisely, this is the general fact that, at the beginning of the loan term, your loan balance is high, so most of your payment pays off the calculated interest. As you proceed with the payments, however, your principal gradually decreases, so the computed interest became less. Accordingly, the part of your monthly payments that goes towards the principle becomes larger, and the reduction of your loan balance speeds up. Therefore, if you keep paying your monthly installment when the interest rate is zero, the amortization procedure can be accelerated substantially.

However, it is worth keeping in mind that until there is no interest charged (31st of December), you can make the payment at any time to have the same effect on your loan. Therefore, if you want to make the most of it, you may keep your money in a savings account, for example, in a High-Yield Savings Account (HYSA), where funds are not locked into a specified term. Alternatively, you can make some investments as well in the meantime. In this way, you can gain some interest and make a payment on your student loan account right before the end of forbearance. But since interest rates are generally low, your gain in 7 or fewer months probably will be minor (you can quickly compute the interest gain with our savings calculator). Nevertheless, in the case of HYSA, you can still maintain liquidity, so if your financial situation deteriorates, you can use this money at any time.

The exact effect of administrative forbearance is that the full amount of your payments goes towards the principal, if all the interest accrued before March 13 is paid. Thus, if you make any payment during the forbearance period, the paid amount will directly reduce your loan balance. This way, after December 31, 2020, interest will be calculated on the reduced loan balance, so, in the end, the cost of your loan can be significantly lower. Therefore, continuing to make payments between March 13, 2020, and December 31, 2020, could help you pay down your loan balance more quickly.

If you are in financial hardship and can't make any payment, still no reason to worry: your monthly payments will remain the same after the forbearance, and there will be no additional interest charged on your loan. Your loan term, however, will be extended by the same number of months if you are not under income-driven repayment plans (PAYE, REPAYE, IBR, ICR, ISR).

There is an important caveat to keep in mind, however, if you are under an income-driven repayment plan (PAYE, REPAYE, IBR, ICR, ISR), depending on your income throughout the loan term, you may end up with loan forgiveness. In such a case, it is better to use the forbearance and skip payments during this period. Besides, if you are under one of these repayment plans, your original loan term will be not extended, and months of relief will be part of the loan forgiveness.

This tool has been created to analyze different student loan repayment plans available for federal student loans in the context of the present COVID-19 situation. To do this, as well as find the best repayment option which fits your preferences, the two main questions you can answer with this device are:

1. What is the effect of the automatic forbearance on my loan and how much interest can I save if I keep paying the monthly installments?
2. How much cheaper will be my student credit be if I start my studies (and receive the student loan) in the upcoming academic year?

Therefore, the tool can be particularly handy either if you are already in the repayment period or are going to receive the loan in the following academic year and start repaying it in the future.

Besides, through the dynamic chart and repayment schedule, you can review how all of the accessible student loan repayment options will progress, so you can check the estimated future loan balances at different points in time. In any case, you may use this tool to study the federal student loan repayment programs and get familiar with their specific features. Please check out our loan balance calculator and loan repayment calculator.

As a first step, you need to set the way you applied (I applied as) for the federal student aid, as it determines the fixed interest rates, the available loan types, and the repayment plans you can access. They are:

• undergraduate student;
• graduate or professional student; and
• parent of a student.

Afterward, in the student loan specification section, you need to select the academic year in which you received the first part of the student loan (disbursement date), the loan type of your student loan, and the available repayment plans. Then you need to set your expected or current loan balance and the corresponding due date.

You can read the results immediately in the case of the first four options (Standard, Graduated, Extended Fixed, Extended Graduated). If you choose an income-driven plan, however, (REPAYE, PAYE, ICR, IBR, ISR), you need to provide further details to estimate your balances.

The further specifications for the income-driven repayment plans if you are already repaying the loan are:

• Repayment started from;
• Monthly payment; and
• Expected yearly growth in payment.

In case you are not in the repayment yet, you need to specify the following:

• Adjusted Gross Income;
• Marital status;
• Spouse's Adjusted Gross Income (if you are married);
• Expected yearly income growth;
• Number of dependents;
• The state you live in; and
• Income percentage (for ISR plan).

If you set the date of your loan balance before the closing date of the automatic forbearance (December 31, 2020), you will see an additional section of COVID-19 impact on your loan related to the temporary relief. Here you can set if you made (or will make) the monthly repayments during the forbearance within the related date, and you will see how it affects (or would affect) your loan.

After setting all the necessary parameters, you can immediately read the results in the repayment details section, which are the following:

• If you are going to begin your studies in higher education with federal student aid in the 2020/21 academic year, you will see how much cheaper your loan is expected to be compared to the same scenario but with the previous year's interest rate.
• Repayment term: note that this is for the most extended period given; you can always repay the loan earlier without an additional cost;
• Interest rate: fixed annual rate;
• Monthly payments: when the payments are not fixed, you can read the estimated amount for all months in the table below the chart;
• *Expected date for the pay-off: it may change if you change the repayment plan or consolidate the loan. Besides, you may repay the loan earlier with repayment, which is allowed without penalty for all federal education loans;
• Total payment amount with the estimated sum of charged interest;
• Forgiveness amount (if applicable).

Besides the above information, you can check the following expected yearly balances in a dynamic chart.

• Principal balance;
• Paid principal amount;
• Paid interest amount; and
• Total payment amount.

If you would like to learn more, you can check the yearly or monthly payments' allocation (principal and interest) in the table of repayment schedules, where you can also follow the amortization of your loan.

Different ways of managing your student loan repayment will substantially alter the monthly payment amount, the number of years provided for repayment, and the interest expenses you are obliged to pay during this time.

These three aspects are strongly linked to each other and, considering the extended length of the payback period, a change in one factor profoundly affects the others. For example, if you choose a repayment plan with a higher monthly payment, you can considerably decrease the number of years you need to repay the debt, and therefore reduce the interest expenses. The large monthly payment, however, may cause you financial difficulties if your monthly income is not high enough. Therefore, by choosing the payment program most suitable for your financial circumstances and personal preferences, you can find yourself in the best repayment scenario.

While you can change the repayment option at any time without incurring any additional costs, getting familiar with all the options before your first payment and, if preferred, starting the repayment with a non-default plan can ease your personal finance.

Before you make any decision on your student loan repayment program, the first thing you should consider is the goal you want to reach. The most decisive targets and their preferred programs are the following:

• Saving on interest - standard repayment plan;
• Lower monthly payments - income-driven or extended repayment plan; and
• Qualifying for student loan forgiveness - income-driven repayment plan.

For a more detailed review, you can check the following section to examine each option.

The most basic way to pay back your student loan is the standard repayment plan. It's the default program, which means you're automatically assigned to this plan when you start repayment unless you select a different option. Since this repayment plan has relatively high monthly payments, it's advisable to look into the other options and choose the one that most suits your priorities and you're eligible for before the payback period begins.

In this section, you can review all federal student loan repayment plans and their specific features. For a quick overview, the table below summarizes the main details of the existing repayment programs. Note, that these programs' availability depends on multiple factors, mostly on the loan type, the year you received the loan, and the kind of education program. To make things simpler, we designed the calculator in such a way that, when you set these parameters, only the available repayment plans will be visible.

* Public Service Loan Forgiveness

1. Standard Repayment Plan

• The default repayment plan assigned to you automatically (if you didn't choose a different option).
• Monthly payments are higher than under other repayment plans.
• You repay your loan in the shortest time with the least amount of interest.
• Monthly payments are generally higher than under other plans, but you pay a fixed amount (min. $50) so you can better plan your budget.
• Loan term is up to 10 years (for consolidation up to 30 years).
• Not a qualifying repayment plan for Public Service Loan Forgiveness.

2. Graduated Repayment Plan

• It might be suitable for you if your income is low now, but you expect it to increase steadily over time.
• You pay more interest than under the Standard Plan.
• Monthly payments start with low amounts and increase every two years.
• Loan term is up to 10 years (for consolidation up to 30 years).
• Payments are never less than the interest amount that accrues in a month - no negative amortization.
• Payments are never more than triple that of a previous payment amount.
• If your income doesn't grow as expected, the higher payments toward the end of the loan repayment period may strain your finances.
• Not a qualifying repayment plan for Public Service Loan Forgiveness.

3. Extended Fixed Repayment Plan

• You must have more than $30,000 in Direct Loan debt.
• You pay the same amount each month.
• Loan term is up to 25 years.
• You pay more interest over time than under the 10-year Standard Plan.
• Monthly payments are lower than under the 10-year Standard Plan or the Graduated Repayment Plan.
• Not a qualifying repayment plan for Public Service Loan Forgiveness.

4. Extended Graduated Repayment Plan

• You must have more than $30,000 in Direct Loan debt.
• Monthly payments start with low amounts and increase every two years.
• Loan term is up to 25 years.
• You will pay more interest than under any other plan.
• Monthly payments are lower than under the 10-year Standard Plan or the Graduated Repayment Plan.
• Not a qualifying repayment plan for Public Service Loan Forgiveness.

5. Pay As You Earn Repayment Plan (PAYE)

• Your monthly payments will be 10 percent of your discretionary income, but never more than the monthly payment under the Standard Plan.
• Loan term is up to 20 years.
• Might be suitable if you have high loan balances.
• Good option if you are seeking PSLF.
• The monthly payments will decrease if your income shrinks, keeping the payment affordable.
• You must recertify your income annually, otherwise, your payment will be the amount you would pay under a Standard Repayment Plan with a 10-year repayment period.
• Due to the more extended payment period, you may pay more in interest over the repayment period than under other repayment plans.

6. Revised Pay As You Earn Repayment Plan (REPAYE)

• Your monthly payments will be 10 percent of your discretionary income, but never more than the monthly payment under the Standard Plan.
• The monthly payments will decrease if your income decreases, keeping the payment affordable.
• Payments are recalculated each year and are based on your updated income and family size.
• You must update your income and family size each year, even if they haven't changed.
• If you're married, you and your spouse's income or loan debt will be considered, whether taxes are filed jointly or separately (with limited exceptions).
• Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years (if all loans are for undergraduate study only) or 25 years (if you have any credit for graduate or professional education).
• You'll usually pay more over time than under the 10-year Standard Plan.
• You may have to pay income tax on any amount that is forgiven.
• Good option for those seeking PSLF.

7. Income-Based Repayment (IBR)

• Generally 10 percent of your discretionary income if you took the loan on or after July 1, 2014, but never more than the 10-year Standard Plan amount.
• Generally 15 percent of your discretionary income if you took the loan before July 1, 2014, but never more than the 10-year Standard Plan amount.
• Loan term is up to 25 years.
• While you pay more for your loan over time, payments are lower than the Standard Plan.
• You may qualify for forgiveness of outstanding balance after only 10 years but could pay income tax on the amount forgiven.

8. Income Contingent Repayment (ICR)

• Your monthly payments will be 20 percent of your discretionary income without payment cap.
• Typically, it has the highest payment of the four income-driven repayment plans, so it is the least popular among borrowers.
• It defines discretionary income as the amount by which adjusted gross income (AGI) exceeds 100% of the poverty line. 
• The remaining debt is forgiven after 25 years of payments (300 payments), and the forgiveness is taxable under the current law.
• Public Service Loan Forgiveness (PSLF) cancels the remaining debt after 10 years of payments (120 payments), and the forgiveness under PSLF is tax-free under the current law.
• If the borrower is married and files a joint federal income tax return with his or her spouse, discretionary income will be based on the joint income.
• The federal government does not pay the interest on subsidized or unsubsidized loans.
• Accrued but unpaid interest is capitalized annually until the capitalized interest reached 10% or more of the principal balance when the loan entered repayment.
• Interest continues to accrue but is not capitalized until the loan status changes, such as when the borrower is no longer eligible for this plan or switches to a different repayment plan.
• The minimum monthly payment is $5.00 unless the estimated payment is zero. For example, if the borrower's income is less than the poverty line, the monthly loan payment will be zero. Otherwise, the monthly loan payment will be $5.00 or the calculated loan payment, whichever is greater.
• Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 10 years, and the forgiveness under PSLF is tax-free under the current law.

9. Income Sensitive Repayment (ISR)

• It might be suitable if you have a low-paying job.
• It is a short-term solution for borrowers facing significant financial problems.
• Only Federal Family Education Loans (FFEL) are eligible.
• Monthly payments are between 4% and 25% of your gross monthly income, and you can choose the percentage.
• Must be renewed every year for a maximum of 10 years.
• Using ISR for more than 1-2 years will dramatically increase the amount of interest you pay on your loan. If financial woes continue, consider consolidating loans.

The results of the student loan calculator should be considered as a close approximation financially. All monthly payment figures, loan balances, and interest figures are estimates based on the data you provided in the specifications that are, despite our best efforts, possibly not exhaustive.

For this reason, and also because of other potential shortcomings, the calculator is created for instructional purposes only. Therefore you are encouraged to review all available options stated in the official sources and make decisions about borrowing and repayment that align with your individual goals. Yet, in case you notice a relevant drawback or encounter any inaccuracy, we are always grateful to receive useful feedback and advice.