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Capitalizes when you graduate (or when you start repayment, I forget). Until then it's just simple interest on the original loan amount.midwest17 wrote:I'm a little confused about interest capitalization on unsubsidized federal loans. I know that you don't have to make payments while you're in school, but does your unpaid interest capitalize while you're in school, so that you're accumulating interest on the interest? Or does it just capitalize when you graduate?
PAYE wrote: Limitation on the capitalization of interest—While you have a partial financial hardship, interest that accrues but is not covered by your loan payments will not be capitalized, even if interest accrues during a deferment or forbearance. Unpaid interest capitalizes if you are determined to no longer have a partial financial hardship, but the total amount of interest that capitalizes while you are repaying your loans under the Pay As You Earn plan is limited to 10% of your original principal balance when you begin paying under Pay As You Earn.
God this is complicated.swampman wrote:Looks like you're interested in public interest. If you're planning on using PAYE then the interest will not capitalize until you leave PAYE (or is forgiven, if you stick around long enough) and the interest that capitalizes is limited to 10% of the original principal.
PAYE wrote: Limitation on the capitalization of interest—While you have a partial financial hardship, interest that accrues but is not covered by your loan payments will not be capitalized, even if interest accrues during a deferment or forbearance. Unpaid interest capitalizes if you are determined to no longer have a partial financial hardship, but the total amount of interest that capitalizes while you are repaying your loans under the Pay As You Earn plan is limited to 10% of your original principal balance when you begin paying under Pay As You Earn.
Would anyone else know exactly when it starts capitalizing?patogordo wrote:Capitalizes when you graduate (or when you start repayment, I forget). Until then it's just simple interest on the original loan amount.midwest17 wrote:I'm a little confused about interest capitalization on unsubsidized federal loans. I know that you don't have to make payments while you're in school, but does your unpaid interest capitalize while you're in school, so that you're accumulating interest on the interest? Or does it just capitalize when you graduate?