I'm trying to calculate the interest I'll accrue on loans I'm taking out and came across FAFSA's simple daily interest formula: Interest = Outstanding principal balance * Number of days since last payment * (Interest rate/Number of days in the year). The formula can be found at https://studentaid.ed.gov/sa/types/loans/interest-rates#how-calculated.
Regarding the "number of days since last payment", would making a payment of $0.01 every day keep the variable at 1 or 0 days, and hence significantly lower the interest I'll be paying? This appears too good to be true and I think I'm misunderstanding how interest will accrue on my loans.
Could some of you more mathematically inclined folks please explain where I've gone wrong? Thanks.
Edit: I think the formula is incorrect and shouldn't include the "number of days since last payment" variable.
Regarding the "number of days since last payment", would making a payment of $0.01 every day keep the variable at 1 or 0 days, and hence significantly lower the interest I'll be paying? This appears too good to be true and I think I'm misunderstanding how interest will accrue on my loans.
Could some of you more mathematically inclined folks please explain where I've gone wrong? Thanks.
Edit: I think the formula is incorrect and shouldn't include the "number of days since last payment" variable.
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