What is a Student Loan Calculator?

Patrick Roland

A student loan calculator is a digital program that helps individuals estimate monthly loan payments. In order to calculate student loan payments, the loan holder must provide the calculator with specifics about the loan, such as the principal debt amount. This information is readily available from several sources and will help budget loan payments and will factor in other amounts, such as interest and salary.

A student loan application form.
A student loan application form.

A student loan is a sum of money given to a person in order to help pay for college with the intent to repay the debt over time. Loans sometimes are issued by banking institutions, but they more commonly are handled by companies that specialize in student loans. Many lenders provide a student loan calculator on their website, but many also are available via independent websites.

A student loan calculator asks for some specific information up front in order to create its final figures. The principal amount of the loan is the most important number used to calculate student loan payments, and it represents the amount of money that still must be paid back to the lending institution. The interest rate is another important figure that must be entered, and it represents the percentage of the principal that the loan holder is being charged by the lender during each predetermined period of time. Finally, the number of monthly payments needs to be entered into the calculator, because this tells the borrower how many more months they must make payments if the minimum is paid each time.

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There are several places to locate this information in order to fill out a student loan calculator accurately. Most lenders mail loan holders a monthly statement that features these numbers. Another popular way to acquire this data is by logging onto the lender's website and viewing the borrower's account data there. If neither of those are options, loan holders frequently phone the lender directly and ask for the data.

After the information is correctly entered into a student loan calculator, many facts and figures come to light. By dividing the principle amount by the number of payout months and factoring in the interest percentage, a monthly payment amount is calculated. In addition, most calculators estimate, based on the interest percentage, how much interest will be paid over the life of the loan. Finally, some calculation programs also take the monthly payment figure and factor in a general estimate of the cost of living in order to give the loan holder an idea of what salary would allow for comfortably paying this monthly figure.

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