Student loan

A student loan is money you borrow to pay for study — tuition, living costs, course materials, or any mix of those — and pay back with interest after you finish or leave the course.

How student loans typically work

Most student loans share a common structure regardless of jurisdiction:

• Disbursement — funds are released each year (or each term) directly to the institution or to the student
• Interest accrual — interest accumulates from the date funds are issued, sometimes deferred or subsidised during study
• Repayment — fixed monthly payments begin after a grace period, applied as standard amortisation of principal plus interest

Some products defer repayment until earnings exceed a threshold; others begin repayment on a set date. Rates may be fixed for the life of the loan or variable.

Example

A student borrows $30,000 across a four-year course at 5% annual interest. If interest capitalises during study, the balance on graduation day is roughly $33,000. On a 10-year repayment plan, the monthly payment is around $350 and the total amount paid back is approximately $42,000 — about 1.4 times what was originally borrowed.

Why the maths matters

The same loan can cost dramatically different amounts depending on the principal borrowed, the interest rate, the repayment term, and whether extra payments are made. Borrowing less, paying off faster, or both, can change the lifetime cost by tens of thousands of dollars. Compound interest does the heavy lifting either way — for or against the borrower.

The student loan payoff calculator projects total interest and the savings from extra payments. The cost of education calculator projects the loan balance you’ll graduate with.