1. What is the Student Loan Deferment Calculator?

This calculator determines monthly payments for student loans that have been in deferment, where interest accrues and capitalizes (is added to the principal balance) before repayment begins.

2. How Does the Calculator Work?

The calculator uses two formulas:

Where:

• \( PV \) — Original loan amount (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( d \) — Deferment period in months
• \( n \) — Repayment term in months
• \( \text{New PV} \) — Capitalized principal after deferment
• \( \text{PMT} \) — Monthly payment amount

Explanation: First calculates the new principal including capitalized interest, then calculates the payment based on that higher amount.

3. Importance of Loan Capitalization

Details: Interest capitalization significantly increases total repayment costs. Understanding this helps borrowers make informed decisions about deferment use and early payments.

4. Using the Calculator

Tips: Enter original loan amount, annual interest rate, deferment period, and repayment term. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this apply to all student loans?
A: Only applies to loans where interest accrues during deferment (typically unsubsidized loans). Subsidized loans don't accrue interest during deferment.

Q2: How much does capitalization increase my loan?
A: Depends on interest rate and deferment length. A $10,000 loan at 6% deferred for 4 years would grow to ~$12,704 before repayment.

Q3: Can I avoid capitalization?
A: Yes, by making interest-only payments during deferment, though this is often not required.

Q4: Are there tax benefits to student loan interest?
A: In many countries, student loan interest payments may be tax-deductible, even on capitalized interest.

Q5: Should I use deferment if I don't have to?
A: Generally no, as it increases total repayment costs. Consider income-driven repayment plans instead if struggling with payments.