You may choose to pay interest on your Direct Unsubsidized or Direct PLUS loans while you are in school. If you choose not to pay the interest while you're in school, it will be added to the unpaid principal amount of your loan.

This is called "capitalization," and it can substantially increase the amount you repay, especially if you are receiving multiple loans for a multi-year program. Capitalization increases the unpaid principal balance of your loan, and you will be charged interest on the increased principal amount.

It will save you some money in the long run if you pay the interest as it accrues on your loan while you're in school or during the grace period. This is also true if you pay any interest that accrues during periods of deferment or forbearance after you leave school.

If you've already taken out at least one Direct Loan, you can check your interest statements and use the online calculators to find out how much you'll pay over the life of the loan if the in-school interest is added to your loan balance.