Interest on all loans borrowed under the Department’s federal student loan programs are calculated on a simple daily basis.
The following formula demonstrates how the simple interest is calculated between payments:
Average daily balance between payments x
Interest rate x
(Number of days between payments/365.25)
= Monthly interest
Example:
How interest accrues between payments made on April 15 and May 15:
Average daily balance: $10,000 x Interest rate: .068 = $680
Days between payments (30/365.25) = 0.08214
Monthly interest: $680 x 0.08214 = $55.86