Hello, Financial Aid Forum
I'm trying to figure out how the interest works for an unsubsidized Stafford loan (USL). My college gave me a form to fill out that explains capitalized interest on USLs, but I can't figure it out, and the school's financial aid office can't figure it out either, so I thought I would ask you.
The form has a table in it that shows the "cumulative year-end capitalized interest" (CYCI) on a $9500 USL to be $646 after the first year. I understand that part: 6.8% times $9500 = $646.
I get lost after the second year though, where an additional $10,500 has been borrowed, bringing the total borrowed to $20,000. By my calculations, the interest would be 20,000 times 6.8% ($1360) plus the first year's interest of $646. That total would be $2006. However, the table lists the CYCI as $2720.
Can you explain to me how this works? Is the form wrong? Or is my calculation wrong?
This web page:http://www.staffordloan.com/stafford-lo ... t-loan.php
says that the interest is not capitalized until the loan enters repayment. Is that right?
Could you help me figure out what I am missing?