What is Interest Capitalization?

If you receive a federal student loan, you will be required to repay that loan with interest. Interest is additional money that you pay to a lender as a cost of borrowing money.
It’s important to understand how interest is calculated and the fees associated with your loan because these will impact the amount you will be required to repay. When interest capitalizes on your student loan, unpaid interest is added to the principal amount of the loan.
Capitalization increases your loan’s principal balance, and interest is charged on the new, higher balance. Your monthly payment may also increase. Unpaid interest capitalizes only under certain conditions.
Learn more about interest capitalization and when it can happen to you: studentaid.gov...

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