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What is interest capitalization? | Private Student Loans

Interest capitalization occurs when any unpaid interest on your loan is added to the principal balance upon entering full repayment. This new balance will then be used to calculate your daily interest rate and monthly payment.  Here’s an example of how capitalization works in regards to each of our available repayment plans.


When does interest capitalization occur?

At the time your grace period ends or you exit a forbearance or deferment, or you have a date of separation (generally caused by being enrolled less than half-time), the amount of unpaid interest that exists on your loan will be added to your principal loan balance. From there, your loan will begin to accrue simple daily interest based on this new loan balance. 

How can I keep from interest capitalizing?

You can prevent interest from capitalizing by paying any accrued interest before the date capitalization is due to occur on your loan. This will help keep your overall loan cost down. Each month, we’ll send you a loan statement, where you can reference the amount of interest that has accrued on your loan.

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