Quick answer: A 30,000 student loan at 5.5% with a 6-month grace period builds 825 of interest; added to the balance, the 10-year payment is 334.53 a month and total interest is 10,143.87.
How it's calculated
During the grace period interest builds as simple interest: balance × rate × months ÷ 12. If it is not paid, it is added to the balance (capitalized) when repayment starts, and from then on you pay interest on it too.
Repayment uses the standard formula M = P·r ÷ (1 − (1 + r)^−n), with P the balance when repayment starts, r the annual rate ÷ 12 and n the number of months.
Whether unpaid interest is capitalized depends on the loan: US federal subsidized loans do not charge interest during grace, and US rules on capitalization changed in 2023, so check with your servicer. Islamic education finance quotes a profit rate; the payment maths is the same.
Worked examples
- 30,000 at 5.5%, 10 years, 6-month grace added: P = 30,825 → M = 334.53
- Same loan, grace interest paid as it builds: M = 325.58, total interest 9,894.46
Frequently asked questions
Is it worth paying interest during the grace period?
It stops the interest being added to the balance. In the example it saves 249.41 over the life of the loan.
Can I repay faster?
Most student loans allow extra payments without a fee. See how much you save with the debt payoff calculator.
What about income-driven plans?
US income-driven repayment ties the payment to income and is not modelled here; use the US Department of Education Loan Simulator at studentaid.gov.
What is a grace period?
A period after you finish studying when you don't have to make payments. Interest usually still builds during it unless the loan is subsidised.
Does interest added to the balance really cost more?
Yes. Once added, it earns interest too. In the worked example, 825 added to the balance raises both the payment and the total interest.
Can I use this for studying abroad?
Yes, for any loan with a fixed rate and a term. Enter the balance in the loan's currency, and remember exchange rates can change what you repay in your own currency.