As I understand it, for many student loans, when you take out the loan, there is a daily, fixed, simple interest that accrues. This accrues on the principal but does not capitalize. Therefore, if I am in school for 3 academic years, upon graduating, I then owe
Total = P + r_{daily}*P * 2.75 * 365
2.75 because I graduate in June.
After I graduate, I have a 6 month grace period during which interest continues to accrue but does not capitalize. So it's the same thing. If I still don't pay anything, when the grace period ends, I owe
Total = P + r_{daily}*P * 3.25 * 365
where the 3.25 comes from the additional 6 months. Let's suppose I couldn't pay my loans up to this point, perhaps because I couldn't find work. Now I get happen to get a job right at the end of this grace period. But too late, it ends and my interest gets capitalized.
So now future interest is calculated based on Total = P + r_{daily}*P * 3.25 * 365 instead of just P.
Now suppose my job isn't very good and I can't quite cover my interest payments. Would my daily accrual now capitalize daily as well?
I know this is all very speculative, but the point I was trying to understand was, does capitalization of loans only happen once or does it happen daily after the grace period is over?
I am using two types of loans
Direct Unsubsidized Loans: https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized
Grad Plus: https://studentaid.gov/understand-aid/types/loans/plus/grad
Any clarification on this would be great.