Student loan balance at graduation.

The short answer

Unsubsidized loans collect interest from the day they are paid out. Borrow $5,500 a year for 4 years at 6.52% and, with a 6-month grace period, about $4,303.20 of interest builds up before the first payment, so you owe $26,303.20 on $22,000.00 borrowed. Federal Student Aid says interest on unsubsidized loans keeps accruing in school and during the grace period.

Assumptions. Each year’s amount is paid out at the start of a 12-month school year, interest is simple daily interest (rate divided by 365.25, per Federal Student Aid), nothing is paid during school, and fees are ignored. Federal Student Aid’s list of when unpaid interest capitalizes on Direct Loans (after an unsubsidized deferment, or on leaving IBR) does not include the end of the grace period, so the default keeps the interest separate and the payment line uses principal only. Switch the option to model a loan whose contract adds the interest to principal.

Why it matters. Paying the interest while in school, even a small amount, keeps the balance at what you borrowed.