How Student Loan Repayment Works
Each month, interest accrues on your remaining balance. Your monthly payment first covers that interest, then reduces the principal. Making larger payments cuts both the repayment timeline and the total interest you pay.
Payoff Time Examples ($25,000 at 5.5% Interest)
| Monthly Payment | Payoff Period | Total Interest |
|---|---|---|
| $200 | ~18 years | ~$18,000 |
| $270 (standard 10-yr) | 10 years | ~$7,400 |
| $400 | ~6 years | ~$4,600 |
| $600 | ~4 years | ~$2,900 |
Federal student loan rates for 2026 are fixed at 6.53% (undergraduate) and 8.08% (graduate). Income-driven repayment plans may lower monthly payments but increase total interest paid over time.
Frequently Asked Questions
Does paying extra reduce my principal directly?
Yes — any amount above the required monthly payment goes directly to principal reduction. Even small extra payments compound over time and significantly shorten your payoff period.
Are student loan interest rates tax-deductible?
Up to $2,500 in student loan interest may be deductible if your income is below the phase-out threshold. This reduces your effective cost of borrowing.