1. What is Interest-Only Payment for Student Loans?

Interest-only payments for student loans allow borrowers to pay only the interest that accrues on their loans each month, without reducing the principal balance. This option is often available during grace periods, deferment, or specific repayment plans.

2. How Does the Calculator Work?

The calculator uses the interest-only payment formula:

Where:

• \( P \) — Principal loan amount (currency units)
• \( R \) — Annual interest rate (%)

Explanation: The formula calculates the monthly interest payment by converting the annual rate to a monthly rate and applying it to the principal balance.

3. Importance of Interest-Only Payments

Details: Interest-only payments can help borrowers manage cash flow during financial hardship or education periods. However, since the principal doesn't decrease, the overall loan cost may be higher in the long term.

4. Using the Calculator

Tips: Enter the principal loan amount and annual interest rate. Both values must be valid (principal > 0, interest rate ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: When should I consider interest-only payments?
A: During financial hardship, while still in school, or during grace periods when full payments are difficult to manage.

Q2: Does interest continue to accrue during interest-only payments?
A: Yes, but you're paying the accruing interest each month, so your principal balance remains unchanged.

Q3: How long can I make interest-only payments?
A: This depends on your loan terms and repayment plan. Typically limited to specific periods like grace periods or temporary hardship arrangements.

Q4: Will interest-only payments affect my credit score?
A: Making timely interest-only payments as agreed should not negatively impact your credit score.

Q5: Can I switch from interest-only to regular payments?
A: Yes, most lenders allow you to switch to standard repayment plans at any time.