Helena has taken out a $9,300 unsubsidized Stafford loan to pay for her college education. She plans to graduate in four years. The loan has a duration of ten years and an interest rate of 6.4%, compounded monthly. By the time Helena graduates, how much greater will the amount of interest capitalized be than the minimum amount that she could pay to prevent interest capitalization? Round all dollar values to the nearest cent.

Interest capitalization is the addition of the interest payable on an unsubsidized student loan at the end of the grace and deferment periods. To prevent interest capitalization, the student should pay off the new accrued interest before the capitalization.

To calculate the two interests and determine the difference, we can use an online finance calculator as follows:

Data and Calculations:

Un-subsidized Stafford loan = $9,300

Graduate period = 4 years

Loan duration = 10 years

Rate of interest = 6.4% compounded monthly

N (# of periods) = 48 months (12 x 4)

I/Y (Interest per year) = 6.4%

PMT (Periodic Payment) = $0

FV (Future Value) = $9,300

Results:

PV = $7,204.42

Total Interest after deferment = $2,095.58

Total Interest after grace period = $2,321.88

Additional interest = $226.30 ($2,321.88 - $2,095.58)

Thus, the amount of interest capitalized will be $226.30 greater than the minimum amount that she could pay to prevent interest capitalization.

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