Question

Mitch is attending a 4-year college. As a freshman, he was approved for a 10-year, federal

unsubsidized student loan in the amount of $8,100 at an APR of 4.29%. Mitch decides to
make no payments during the 4.5-year deferment period. After interest is capitalized at the
end of the 4.5-year period, what will his new principal amount be?

Answer 1

Interest capitalization occurs when unpaid interest is added to the principal amount of your student loan. When the interest on your federal student loan is not paid as it accrues (during periods when you are responsible for paying the interest), your lender may capitalize the unpaid interest.

Explanation: