Student Loan

Projecting Your Payment After Deferment Interest Capitalizes

Most student loans don’t require payments while you’re in school — but unless the loan is subsidized, interest keeps accruing the whole time, and it gets added to your principal the moment repayment begins. Enter your loan amount, interest rate, how many months you’ll be deferred (in school plus any grace period), and your repayment term, and this calculator finds your monthly payment once real repayment starts.

This is the one thing genuinely unique to student loans that a general Loan Calculator doesn’t model: a deferment period where interest builds up without being paid, followed by capitalization — the accrued interest gets folded into your principal, so you end up paying interest on that interest for the rest of the loan.

The Formula

$$\vD{\text{Interest Accrued During Deferment}} = \vA{\text{Loan Amount}} \times \vB{\text{Interest Rate}} \times (\vC{\text{Deferred Months}} \div 12)$$ $$\text{Capitalized Principal} = \vA{\text{Loan Amount}} + \vD{\text{Interest Accrued During Deferment}}$$

From there, the monthly payment uses the same standard amortization formula as any fixed-rate loan, applied to the capitalized principal instead of the original loan amount.

Worked Example

A $30,000 loan at 5% interest, 48 months deferred (4 years in school), then a 10-year repayment term:

1. Interest accrued during deferment: $\vA{\$30,000} \times \vB{5\%} \times 4 = \vD{\$6,000}$.
2. Capitalized principal once repayment begins: $\vA{\$30,000} + \vD{\$6,000} = \$36,000$.
3. Monthly payment on that capitalized amount: ≈ $381.84.
4. Total interest paid during the 10-year repayment: ≈ $9,820.

Key Factors to Consider

• Paying accrued interest during deferment, even without a required payment, avoids capitalization entirely and can meaningfully reduce total cost. Some borrowers choose to make voluntary interest-only payments while still in school specifically to prevent that interest from ever being added to the principal — this is a real, worthwhile option to consider even when no payment is legally required yet.
• Federal and private student loans can have very different rate structures and repayment protections. Federal loans generally offer fixed rates and options like deferment, forbearance, and Income-Driven Repayment plans, while private loans vary lender to lender and may lack some of these protections — the calculator’s formula applies to both, but the flexibility around deferment and repayment terms differs significantly by loan type.
• Loan forgiveness and Income-Driven Repayment programs can produce a very different real-world outcome than this calculator’s standard fixed-schedule projection. Depending on career path and loan type, some borrowers may end up paying less overall (through eventual forgiveness) or more overall (through extended IDR terms with ongoing interest accrual) than a standard amortization schedule would suggest — checking eligibility for these programs is worth doing before relying solely on this calculator’s standard-repayment figures.
• Refinancing a student loan after graduation can lower the rate, but often means giving up federal loan protections. Refinancing federal loans into a private loan can secure a lower rate for someone with strong credit and stable income, but it also forfeits federal-specific benefits like IDR eligibility and certain forgiveness programs — see the Refinance Calculator for the general math, but weigh this tradeoff carefully for federal student loans specifically.

Common Mistakes

• Not distinguishing subsidized from unsubsidized interest accrual. Subsidized federal loans don’t accrue interest while in school; unsubsidized loans do — this calculator models the unsubsidized case (interest accruing during deferment), which overstates the deferment interest for a fully subsidized loan.
• Forgetting capitalized interest becomes part of the principal. Once deferment ends, accrued interest is typically added to the loan balance — future interest is then charged on that larger amount, not just the original amount borrowed.
• Assuming standard repayment is the only option. Income-Driven Repayment plans can produce a very different monthly payment and payoff timeline than the standard fixed schedule modeled here — check your loan servicer’s own options if IDR might apply to you.

Useful to Know

• Already out of school and comparing this against a general installment loan? Loan Calculator handles standard amortization once there’s no deferment period left to model.
• Juggling this loan alongside other debts and want a payoff strategy across all of them? Debt Payoff Calculator compares the avalanche and snowball methods for multiple balances.
• Still planning ahead for a future student’s education costs? College Cost Calculator projects tuition inflation to estimate how much to save before enrollment.