Federal student loan interest capitalization | 12.11.08
It took me forever and a day to find the answer to the question of when interest is capitalized on a federal student loan like the Stafford loan.
Capitalization occurs when:
- The loan enters repayment
- The loan exits deferment
- The loan exits forbearance
- The loan exits any status in which interest accrues
For the average student, interest will capitalize when the grace period ends on a subsidized Stafford loan. If you put a subsidized or unsubsidized Stafford loan into deferment or forbearance, once you return to repayment, accrued interest will capitalize. (see: College Loan Rates)
If you’re not familiar with capitalization, read What is capitalized interest?
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