Refinancing your student loans involves taking out a new loan to pay off your existing student loans. The primary goals of refinancing are typically to obtain a lower interest rate, a different loan term (shorter or longer), or to consolidate multiple loans into a single payment. This calculator helps you estimate the potential financial impact of refinancing your student loans.
How the Calculation Works:
The calculator uses standard loan amortization formulas to estimate monthly payments and total amounts paid.
Monthly Interest Rate: The annual interest rate is divided by 12.
Number of Payments: The loan term in years is multiplied by 12.
Monthly Payment Formula (M):
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
P = Principal loan amount
i = Monthly interest rate
n = Total number of payments
Total Paid: Monthly payment multiplied by the total number of payments.
Interest Saved: Current Total Paid minus New Total Paid.
Total Savings: Current Total Paid minus New Total Paid (this is the same as interest saved if the principal remains the same, but we show it separately to emphasize overall financial benefit).
When to Consider Refinancing:
Lower Interest Rate Available: If you've improved your credit score or market rates have dropped, you might qualify for a significantly lower interest rate, saving you money on interest over time.
Shorter Loan Term for Faster Payoff: A shorter term can help you become debt-free sooner, though it will likely result in a higher monthly payment.
Longer Loan Term for Lower Monthly Payments: If you need to reduce your monthly cash outflow, a longer term can lower your payment, but you'll pay more interest overall.
Consolidating Multiple Loans: Refinancing can simplify your finances by combining multiple student loans (federal and/or private) into a single loan with one payment.
Important Note: Refinancing federal student loans into a private loan means you will lose access to federal benefits such as income-driven repayment plans, deferment, forbearance, and potential loan forgiveness programs. Carefully weigh these potential losses against the benefits of refinancing.
function calculateLoanDetails(principal, annualRate, termYears) {
var monthlyRate = annualRate / 100 / 12;
var numberOfPayments = termYears * 12;
var monthlyPayment = 0;
var totalPaid = 0;
if (monthlyRate > 0 && numberOfPayments > 0) {
monthlyPayment = principal * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
totalPaid = monthlyPayment * numberOfPayments;
} else if (principal > 0) { // Handle zero interest rate case
monthlyPayment = principal / numberOfPayments;
totalPaid = principal;
}
return {
monthlyPayment: monthlyPayment,
totalPaid: totalPaid
};
}
function calculateRefinance() {
var originalLoanAmount = parseFloat(document.getElementById("originalLoanAmount").value);
var originalInterestRate = parseFloat(document.getElementById("originalInterestRate").value);
var originalLoanTerm = parseInt(document.getElementById("originalLoanTerm").value);
var newInterestRate = parseFloat(document.getElementById("newInterestRate").value);
var newLoanTerm = parseInt(document.getElementById("newLoanTerm").value);
var currentResult = { monthlyPayment: 0, totalPaid: 0 };
var newResult = { monthlyPayment: 0, totalPaid: 0 };
var totalInterestSaved = 0;
var totalSavings = 0;
if (isNaN(originalLoanAmount) || isNaN(originalInterestRate) || isNaN(originalLoanTerm) || originalLoanAmount <= 0 || originalInterestRate < 0 || originalLoanTerm <= 0) {
alert("Please enter valid details for your original loan.");
return;
}
if (isNaN(newInterestRate) || isNaN(newLoanTerm) || newInterestRate < 0 || newLoanTerm <= 0) {
alert("Please enter valid details for the new refinanced loan.");
return;
}
currentResult = calculateLoanDetails(originalLoanAmount, originalInterestRate, originalLoanTerm);
newResult = calculateLoanDetails(originalLoanAmount, newInterestRate, newLoanTerm);
totalInterestSaved = (currentResult.totalPaid – originalLoanAmount) – (newResult.totalPaid – originalLoanAmount);
totalSavings = currentResult.totalPaid – newResult.totalPaid;
document.getElementById("currentMonthlyPayment").textContent = currentResult.monthlyPayment.toFixed(2);
document.getElementById("currentTotalPaid").textContent = currentResult.totalPaid.toFixed(2);
document.getElementById("newMonthlyPayment").textContent = newResult.monthlyPayment.toFixed(2);
document.getElementById("newTotalPaid").textContent = newResult.totalPaid.toFixed(2);
document.getElementById("totalInterestSaved").textContent = totalInterestSaved.toFixed(2);
document.getElementById("totalSavings").textContent = totalSavings.toFixed(2);
}