  <p>I understand how a subsidized loan works so don't write about that.</p>

<p>An unsubsidized loan starts to accrue interest the moment the money is disbursed and i'm responsible for the interest amount as soon as it's given to me.</p>

<p>So UF is offering my \$1,655 in unsubsidized loan at a 6.8% fixed interest rate. And I'm going to have this unsubsized loan in my file for ~3 years or so. HOW DOES THE INTEREST WORK ON THIS \$1,655. I want to defer any interest payments until after I graduate.</p>

<p>Is it every month that 6.8% is added to the 1,655 or does the interest work seperate if i defer interest payments until after I graduate. </p>

<p>What i was thinking was that every month 6.8% is added to my amount borrowed. Or is 6.8% just added to my principal balance sense day one.. Paying for the interest why in school is not an option. </p>

<p>It is 6.8% a year, not a month.</p>

<p>When you defer the interest it is capitalized. This means it is added to the principal and you pay interest on the interest.</p>

<p>great response thank you ^^. So how do you pay on interest on interest.</p>

<p>lets say \$1,655 x 6.8% = ~\$112 so that's the interest in one year so then you would multiply that by 6.8 = 112 x 6.8% = x amount?</p>

<p>Then if this is the case unsubsidized loan doesn't sound that bad. :) I could deal with 112 dollars a year or so.</p>

<p>Um I don't no if I am correct, but based on my knowledge and swimcatsmom's post. It would be something as such:</p>

<p>\$1,655 (Principal) x 6.8% (Interest Rate) = \$112.54 (Interest for a year)</p>

<p>Next, you have to add on the interest to your principal as it has accrued as such:</p>

<p>\$1,655 (Principal) + \$112.54 (Interest for a year) = \$1767.54 (Your new balance)
This above is one year. The following would be a second year.</p>

<p>\$1767.54 (Your new balance) x 6.8% (Interest Rate) = \$120.19 (Interest for the year)</p>

<p>\$1767.54 (Your old balance) + \$120.19 (Interest for the year) = \$1887.73 (Your new balance)</p>

<p>and you would basically repeat what I have done to get your final balance for the third year. </p>

<p>This is what I thought of when I read your question (although I maybe incorrect).</p>

<p>-Joe</p>

<p>thank you Joe. Sounds like it's right lol. Hope to hear from someone else to clarify or confirm.</p>

<p>Thanks,</p>

<p>Anyone else?</p>

<p>If you want to figure out how the debt will grow over time there is a mathematical formula.</p>

<p>If the interest was only calculated and capitalized annually then you would take the principal and multiply it by 1.068^n (.068 being the interest rate and n being the number of years before you start repaying the debt.) </p>

<p>So if it would be 3 years till you start paying the debt the debt would have grown 1655(1.068)^3 = \$2016 by the time you start paying it off. In reality the interest is probably calculated and added on at least a monthly basis so the amount will be a little higher (around \$2028 after 36 months)</p>