For an unsubsidized federal student loan, when does interest capitalization typically occur, leading to an increase in the principal balance?

Question

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C) At the end of the grace period if interest accrued during school or deferment was not paid.. Interest capitalization on unsubsidized loans primarily occurs when the loan enters repayment after deferment or the grace period, if accrued interest during those periods has not been paid.

For an unsubsidized federal student loan, when does interest capitalization typically occur, leading to an increase in the principal balance?

✓ Correct Answer: Option C

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