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?

Sincerely,
Rose

i work for a federal student loan servicer. interest on student loans accrues per day and is calculated as follows:
unpaid principle bal * interest rate / divided by 365 so $20000 x6.8% = 1360 /365= 3.72 so interest is $3.72 per day.....so if you take out more unsub loans just plug in the new loan balance and follow the formula
*note interest does not capitalize(meaning added to your principal balance) unless your account goes through a status change, i.e...def to repayment or forbearance to repayment. interest does not just capitalize at the end of the year. your account has to go through a status change.