If education is a gift that keeps on giving, the students loans we use to fund that education are the gifts that keep on taking. Depending on the type of loans you have and when you got them, your interest rate will vary. But regardless of your rate it may surprise you to see how much you're paying in interest alone.

To find the amount of interest you're paying on your student loans daily, use the following formula:

(interest rate) x (current principal balance) / (days in the year)

To simplify the math for an example, let's calculate the daily interest for a $20,000 student loan with an interest rate of 6 percent. Plugging those numbers into the formula, we have:

(0.06) x (20,000) / (365) = 3.287

Rounding up to the nearest cent, that gives us a daily interest rate of $3.29 per day. To find the weekly interest payment, times that by seven and we get $23.03 per week spent on interest alone. For a monthly interest payment, we'll again simplify the math and multiply the $3.29 daily interest payment by 30 days to get $98.70.

Note that this is nearly $100 paid each month for student loan interest alone, not the principal. So in this example, $100 of your payment each month would go toward your student loan interest before any of it would be applied to your loan total. If you've been paying on your student loans for a while and it seems like the principal has barely gone down, this is likely the reason why.

Multiply this daily interest rate of $3.29 by 365 and you get a total of $1,200.85 paid in student loan interest each year (though the figure will go down as you chip away at the principal balance over time), which should drive home the value of paying off your student loans as quickly as possible: The sooner you pay, the less interest you pay and the quicker your loan payments will go away entirely.

Stay tuned to the Shopping Deals blog for one great suggestion on a way to save big by paying off your student loans earlier.



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