Price all four in-school repayment options, with the capitalization reveal
Private loans start charging interest the day money moves, and what you do about that in school sets the whole bill. On $30,000 at 9.49% fixed with four years until graduation: full deferral means $0 now but $11,388 of interest capitalizes and the payment after school is $535.32; interest-only costs $237.25 a month now and holds the after-school payment to $388.03; flat $25 payments split the difference at $519.80 after school; immediate repayment is $323.33 a month from day one and saves $9,919 in total interest versus deferral. Run your real numbers below.
| Option | In School | Capitalized | After Graduation | Total Interest |
|---|---|---|---|---|
| Full deferral | $0/mo | $11,388 | $535.32/mo | $34,239 |
| Flat $25/month | $25/mo | $10,188 | $519.80/mo | $33,576 |
| Interest-only | $237.25/mo | $0 | $388.03/mo | $27,951 |
| Immediate | $323.33/mo | $0 | $323.33/mo | $24,320 |
Read the last column twice. Choosing interest-only over deferral saves $6,287 on the same loan, same rate, same school. Choosing immediate saves $9,919. Nothing about the loan changed except when you started paying it.
| Loan | Fixed APR | Variable APR | Origination Fee |
|---|---|---|---|
| Federal Direct (undergrad) | 6.39% | n/a | 1.057% |
| Federal Grad PLUS | 8.94% | n/a | 4.228% |
| Sallie Mae | 6.50% – 16.94% | 5.50% – 16.70% | 0% |
| College Ave | 6.99% – 17.99% | 4.99% – 17.99% | 0% |
Federal rates are for loans disbursed 7/1/2025-6/30/2026 (StudentAid.gov). Private ranges are lenders' published 2026 ranges (CollegeFinance comparison); floors need mid-700s credit or a strong cosigner. A private variable rate that starts below federal can climb past it, since most variable loans reprice monthly or quarterly.
The calculator simulates two phases. During school, interest accrues as simple interest on the principal you borrowed, at your rate divided by 12, and anything your repayment option doesn't cover piles up as unpaid accrued interest. At the end of the grace period that pile capitalizes once, meaning it becomes principal you'll pay interest on from then on. After school, the loan amortizes like any fixed loan over the repayment term. This matches how Sallie Mae, College Ave, and the other major private lenders actually bill: simple daily interest in school, one capitalization event at repayment.
The damage isn't compounding during school, it's what capitalization does afterward. Four years of simple accrual on $30,000 at 9.49% adds $11,388 of interest, turning the balance into $41,388 before the first real payment. That extra $11,388 then rides through the whole 10-year amortization as principal, and you pay 9.49% on it for another decade. Total bill: $64,239 for a $30,000 education, against $57,951 if you'd covered the interest as it accrued. Deferral feels free and costs the most; that's the whole trade.
Take $30,000 at 9.49% fixed, 4 years in school, 10 years to repay after. Interest-only: the in-school payment is 30,000 × (0.0949 ÷ 12) = $237.25 a month, the balance never grows, and after graduation the payment is a plain 10-year amortization: 30,000 × r × (1+r)^120 ÷ ((1+r)^120 − 1) with r = 0.0079083 = $388.03. Total interest across both phases: $27,951. Full deferral: 48 months of simple accrual is 30,000 × 0.0079083 × 48 = $11,388, which capitalizes once at graduation for a balance of $41,388; amortizing that over 120 months gives $535.32. The gap between the two options, $6,287, is pure capitalization cost.
Second check, the immediate option: it's one straight 14-year loan (48 + 120 months) at 9.49%, payment $323.33 from month one, total interest $24,320. Consistent with the table above.
If you have no income, deferral isn't a choice, it's a default, and it's fine; just know the number. If you work part-time, interest-only is the highest-leverage few hundred dollars a month you'll ever spend, because every dollar of interest paid during school avoids compounding for years. The flat $25 option most lenders advertise barely dents the problem: it trims capitalized interest by about $1,200 on the default loan. It exists to make the loan feel manageable, not to save you money.
Refinancing is the escape hatch from a high private rate, and unlike federal loans there's nothing to lose by refinancing private debt. Strong credit a few years into your career can drop a 9.49% loan to the 6s. The refinance calculator prices the switch, and if part of your stack is federal, keep that part federal and check the RAP calculator for what income-based payments would look like.
For the 2026-27 academic year, advertised fixed rates run from about 6.5% to 17.99% and variable rates from about 4.99% to 17.99%, depending on lender, credit, and whether you have a cosigner. Sallie Mae's published range is 6.50% to 16.94% fixed and College Ave's is 6.99% to 17.99% fixed. The floor goes to borrowers (or cosigners) with mid-700s credit and steady income; most students land closer to the middle or top of the range.
On most private loans, interest accrues from the day funds are disbursed. If you defer everything, that interest compounds into the principal when you graduate (capitalization), and you then pay interest on interest. On $30,000 at 9.49% over four years of deferral, $11,388 capitalizes, and the balance leaving school is $41,388. Paying interest-only during school keeps the balance at exactly what you borrowed.
Immediate repayment, meaning full principal and interest from day one, is always cheapest in total dollars: on $30,000 at 9.49% it costs $24,320 in interest versus $34,239 for full deferral, a difference of $9,919. Interest-only is the practical middle ground, costing $27,951 total. The right choice depends on whether you can earn anything while in school; if you can pay about $237 a month, interest-only is the best value per dollar of effort.
Most major private lenders charge no origination fees, including College Ave and Sallie Mae, which is one genuine advantage over federal PLUS loans (4.23% fee for 2025-26). But fee-free doesn't mean cheap: a 9% APR with no fee still costs more over 10 years than a 7% APR with a fee on a typical loan size. Compare APRs, not fees alone.
Federal first, almost always. Federal Direct loans carry fixed rates set by law (6.39% for undergraduates in 2025-26), income-driven repayment including the Repayment Assistance Plan, and forgiveness options. Private loans price on credit, offer none of that, and their variable rates can rise. The usual order: subsidized and unsubsidized Direct up to the annual limit, then scholarships and work-study, then PLUS or private for the gap.
Almost never. Federal forgiveness programs (PSLF, RAP's 30-year timeline) don't touch private loans. A few state programs forgive private debt for specific professions like healthcare or law in underserved areas, but coverage is narrow. If forgiveness is part of your plan, that debt needs to stay federal; our RAP calculator shows the federal path.