January 17, 2008

Frequency of Capitalization for Federal Consolidation Loans

Some provisions of the November 1 Final Rules may be implemented prior to the effective date of July 1, 2008, such as the frequency of capitalization of interest on Federal Consolidation loans. These provisions may be implemented by lenders on or after November 1, 2007 [§682.202(b)(5)]. Currently, accrued interest on Federal Consolidation loans may be capitalized once each quarter and is also permitted when repayment begins or resumes. The Final Rules specify that accrued interest on a Consolidation loan during a period of authorized in-school deferment may only be capitalized at the expiration of the deferment.