- Deferral period
- A stretch at the start of a loan when no payments are required. Interest still accrues during it unless the lender or a program covers it. This calculator assumes interest accrues and is added to the balance each month of the deferral, so repayment begins from a larger amount than was originally borrowed.
- Capitalized interest
- Unpaid interest added to the loan balance, after which it becomes principal and earns interest itself. Here it happens monthly during deferral, so the balance grows by compounding. Deferral and capitalization rules vary by loan: some capitalize only once, at the end of deferral, which would produce a slightly smaller balance.
- Interest accrued during deferral
- The balance after deferral minus the original loan amount: the interest that built up while no payments were made. Paying that interest as it accrues, even without paying principal, keeps the balance from growing and lowers the payment that follows. This result shows how much doing so would prevent.
- Balance after deferral
- The amount owed when repayment begins: the original loan plus capitalized interest. The monthly payment is calculated on this figure, not on the amount originally borrowed. A longer deferral or a higher rate raises it, and every added dollar is then repaid with interest over the full repayment term.
- Monthly payment
- The fixed payment that repays the balance after deferral over the repayment term at the stated rate, using the standard amortization formula. It is higher than the payment would be with no deferral, because it has to cover both the original principal and the interest that was capitalized.
- Total interest paid
- Total of payments minus the original loan amount. It includes both the interest capitalized during deferral and the interest charged over the repayment term. Comparing it with the same loan at zero deferral months shows the full cost of postponing payments, which is often larger than the deferral interest alone.
- Repayment term
- The number of years over which the loan is repaid once the deferral ends. It does not include the deferral months, so the total time from borrowing to payoff is the deferral period plus this term. A longer repayment term lowers the monthly payment but raises total interest.
- Interest rate
- The annual percentage charged on the balance, before fees. In this calculator the same rate applies during deferral and repayment, divided by 12 and applied monthly. A higher rate makes deferral more expensive twice: more interest capitalizes during the deferral, and the larger balance then accrues more interest during repayment.
- Amortization
- The schedule by which each payment is split between interest and principal until the balance reaches zero. Here amortization begins only after the deferral period, starting from the balance after deferral. Early payments are mostly interest, so capitalized interest is repaid slowly and keeps generating interest for much of the term.