Federal student loans charge simple daily interest: each day, your principal balance is multiplied by your fixed annual rate divided by the number of days in the year. On $5,500 at 6.52% that is about $0.98 a day. Interest on unsubsidized loans accrues from the day the money is disbursed — including while you’re in school — while the government pays the interest on subsidized loans during school, the six-month grace period and deferment.
The student loan interest formula
Federal servicers use a daily “interest rate factor”: the annual rate divided by the number of days in the year. The interest added between payments is:
Example: $5,500 unsubsidized loan at 6.52%. Daily interest ≈ $5,500 × 0.0652 ÷ 365 = $0.98, or about $29.47 in a 30-day month. Because the interest is simple, it is charged on principal only — interest does not earn interest unless it is capitalized (added to principal).
Subsidized vs unsubsidized: interest during school
Undergraduates with financial need can get Direct Subsidized Loans; everyone else (and all graduate students) gets unsubsidized loans. The difference shows up before your first payment:
| Loan | In school (4 yrs) + 6-mo grace | Who pays it |
|---|---|---|
| $5,500 subsidized at 6.52% | $0 to you | U.S. Department of Education |
| $5,500 unsubsidized at 6.52% | $1,614 | You (accrues while in school) |
| $20,500 graduate unsub. at 8.07% (2 yrs + grace) | $4,136 | You |
| $20,000 Parent PLUS at 9.07% (1 yr before repayment) | $1,814 | Parent |
Paying the interest while in school — even $30–$50 a month — stops it from being capitalized later. Capitalization now happens in fewer situations than before 2023 (for example it can still follow some deferments), but whenever it happens your future interest is charged on a bigger principal.
Why early payments are mostly interest
On a $30,000 loan at 6.52% over 10 years the payment is $340.95. In year one, $1,891 of the $4,091 you pay is interest; by year ten only $141 is. Total interest: $10,914.
That is why extra payments early in the loan save the most: every extra dollar of principal stops accruing interest for all the remaining years.
How payments are applied
- Payments go first to any outstanding fees, then to accrued interest, then to principal.
- Paying before the due date reduces the days of interest charged that cycle.
- If you have several loans, ask the servicer to put extra payments on the highest-rate loan (usually PLUS or graduate loans).
- Enrolling in auto-debit typically earns a 0.25% rate reduction on federal loans.
- On RAP, interest your payment doesn’t cover is waived — it neither accrues nor capitalizes.
Check what fits your take-home payRun your salary through the paycheck calculator to see how much a student loan payment leaves for everything else.
2026-27 rates in daily terms
| Loan | Rate | Daily interest per $10,000 | Monthly per $10,000 |
|---|---|---|---|
| Undergraduate Direct | 6.52% | $1.79 | $54.33 |
| Graduate Unsubsidized | 8.07% | $2.21 | $67.25 |
| PLUS (parent / grad) | 9.07% | $2.48 | $75.58 |
Rates are fixed for the life of each loan and apply to loans first disbursed July 1, 2026–June 30, 2027. Loans from other years keep the rate set for their year.
Frequently asked questions
Is student loan interest daily or monthly?
Federal student loan interest accrues daily as simple interest on the principal balance and is billed monthly.
Does interest accrue while I’m in school?
On unsubsidized and PLUS loans, yes, from the day each loan is disbursed. On subsidized loans, the government pays the interest while you’re in school at least half time, during the six-month grace period and during deferment.
What is capitalized interest?
Capitalization adds unpaid interest to your principal, so you then pay interest on it. It happens in fewer situations since 2023 rule changes, and on RAP unpaid interest is waived instead.
How much interest accrues on $10,000 a month?
About $54.33 at the 6.52% undergraduate rate, $67.25 at 8.07% and $75.58 at the 9.07% PLUS rate.
Do extra payments reduce interest?
Yes. Any extra amount that goes to principal stops accruing interest immediately, which shortens the loan and cuts total interest.
Related student loan guides
- 2026-27 interest rates6.52% / 8.07% / 9.07%
- Pay off or invest?Rate vs return, the 401(k) match
- Interest deduction 2026$2,500 and the phase-out
- RAP explainedPayment chart, $50 match, 30-year forgiveness
- Refinance student loans?Savings vs federal protections
- How much debt is too much?Income needed, 10% rule
- Monthly payment on $20,000 in student loansEvery plan, 2026-27 rates
- Monthly payment on $30,000 in student loansEvery plan, 2026-27 rates
- Monthly payment on $50,000 in student loansEvery plan, 2026-27 rates
Payments by balance
Sources & methodology
- U.S. Department of Education, FSA Electronic Announcement GENERAL-26-33, “Interest Rates for Federal Direct Loans First Disbursed Between July 1, 2026 and June 30, 2027” (June 4, 2026).
- Payments use standard amortization with monthly interest. RAP and IBR projections are our simplified models (income +3%/yr, single loan, on-time payments) — your servicer’s figures will differ. Information only, not financial, tax or legal advice. Rules checked 2026-11-03.