What is capitalization of interest?
Capitalized interest is accrued interest added to the borrower’s outstanding principal. If you are an unsubsidized Federal Stafford loan borrower, you are responsible for all interest that accrues on your loan during in-school, grace, deferment, and forbearance periods. During these periods, you may either make monthly or quarterly interest payments, or you make ask your lender to capitalize the interest. Subsequent interest accrues on the new total principal balance, which includes any capitalized interest.
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