Cpa Cat (or anyone interested...), would you mind checking me belong RE: loan interest capitalization discussion and your preference for full deferment rather than making interest only payments during the deferment period?
Found a great resource here:
http://www.hesc.ny.gov/content.nsf/SFC/HESC_Interest_Capitalization_EstimatorSo using the example of the Federal Direct Unsubsidized student loan that I plan to take to pay for my school costs this coming fall and spring semesters. (the tool assumes a standard 10 year repayment term and 6mo grace period)
Full DefermentTotal Fees: $219.97
Loan Funds Disbursed: $20,280.04
Amount Financed: $20,500.00
Grace Period: 6 months
Full Deferment (including grace) Period: 16 months
Total Capitalized Interest: $1,697.40
Total Repayment Amount: $22,197.40
Monthly Payment: $248.78
Total Interest Cost (after repayment begins): $7,656.68
Total Cost of Loan: $29,854.08Making interest-only payments during the deferment periodTotal Fees: $219.97
Loan Funds Disbursed: $20,280.04
Amount Financed: $20,500.00
Grace Period: 6 months
Full Deferment (including grace) Period: 16 months
Total Interest Paid During Deferment: $1,697.40
Total Repayment Amount: $20,500.00
Monthly Payment: $229.76
Total Interest Cost (after repayment begins): $7,071.19
Total Cost of Loan: $29,268.59I guess I'm still not quite understanding how full deferment is a better option. Something to do with tax deductions for the interest ... but I thought you were allowed to deduct the interest you
paid, not simply interest that has accrued (and will be capitalized).
Thanks for your patience and I look forward to understanding better!