let's play a game: how much interest did your federal direct loans accrue today?

Andrei Marks · July 19, 2010

To Whom It May Concern:

My law school loans felt like free money. My father took care of my undergrad tuition, and I worked for a year after graduation.  That gave me enough money to travel abroad for a year, and so I started law school with a net worth of more or less zero. Yes, those were the good old days.

My first trip to the financial aid office took five minutes max, and a couple thousand dollars popped into my bank account a few days later. It was exhilarating.  I could pay my rent, buy my books, pay for gas, shop for groceries, eat out, and act like a self-sufficient adult.

Two years later, I’m most certainly not a self-sufficient adult, I’m more of a man-child in purgatory. Waiting, just waiting for the moment the loan deferment period buzzes off, the gates open, and the hounds of debt are released. I suppose I’m mad at the system for making the money so easily accessible with so little prior warning, and mad at myself for falling hook, line, and sinker for this ruse.

A look at what’s going on in the dark electronic bowels of the loan system is always a nice shock to the system, and anyone who wants to get out of debt should keep such information close at hand and at the front of their mind. I don’t have any private loans, so all of this up ahead deals with the Federal Direct Loan System.

Your Daily Interest

Log in to your account and you’ll see your info and your student loan summary in a table right there on the front page. However, all the juicy information is found at the page linked to in each row’s Account Number Column.  That will get you interest rates, amount due, etc. Here’s an abbreviated and embellished screen of my own situation.

Student loan summarySo if you’re still in school, it’s likely that you haven’t paid anything yet; for every loan you’ll want to take note of its type, when it was disbursed, its interest rate, and you’ll also want to know the date on which the system says you will be finished with school.

There are three types of loans that most grad students receive. Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS loans. They vary in their interest rates and when their interest begins to accrue.

Table of Direct Loans
Type Rate Accrual Period Begins...
Subsidized 6.8% after school finishes
Unsubsidized 6.8% upon disbursement
PLUS 7.9% upon disbursement

The interest formula is:

Direct Federal Loan Interest Formula And now you have all the tools needed to make a spreadsheet! If you haven't made any payments, then the date of disbursement (or the date you leave school, for subsidized loans) will be the "last payment date." And remember to convert the interest rate to a decimal in order to get that third variable. Don't forget to toss in a Today() function so that your spreadsheet updates automatically.You'll notice the resulting interest amount is slightly different from the above, and that's either because the Direct Loan site wasn't updated or something in my spreadsheet is slightly off. But over-estimating what I owe isn't necessarily a bad thing.

I also made a column showing me exactly how much interest I pay every day.  Currently it's about $14. What a racket! I am essentially handing over $14 a day, $98 a week, $392 a month, and this is only counting the first two years.  Moreover, I was just notified that my PLUS loans for the upcoming year have come through, and they have yet to show up on my account...

Excel Spreadsheet of Student Loan Interest




citi_thanks for your interest

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