The date on which interest charges for a loan begin to accrue. Some loan programs provide for cancellation of the loan under certain circumstances. For example, if the student becomes a teacher in certain national shortage areas, they may be eligible for cancellation of all or part of the balance of their educational loans. The practice of adding interest to the principal, or loan amount, instead of paying the interest while in school.
Capitalization eliminates payments while in school, but does increase the amount owed after school.
Consolidation Loan A consolidation loan combines several loans into one bigger loan. This sometimes results in a lower interest rate, as when a consumer loan is used to pay off credit card balances. Such loans often reduce the size of the monthly payment by extending the term of the loan. An extension of the term of the loan may also increase the overall cost of the loan. Consolidation loans also simplify the repayment process by allowing a single payment instead of several.