A loan arrangement whereby you may add unpaid interest to the principal, rather than pay the interest when it is due.
Capitalization occurs when unpaid interest charges are added to the principal balance (the original amount you borrowed), thereby increasing the size of the loan. Interest is then charged on this new larger balance, which now includes both the unpaid principal and the "accrued" interest. If you defer the interest on your Brazos HELP loan, it will be capitalized quarterly and once at repayment. The addition of unpaid interest to the principal balance increases the monthly payment and total repayment amount.
Submenu Adding unpaid accumulated interest to the loan principal. Capitalizing interest increases the principal amount of the loan, and therefore, the total cost of the loan. Capitalizing the interest increases the monthly payment and the amount of money you will eventually have to repay. If you can afford to pay the interest as it accrues, you are better off not capitalizing it. Capitalization is sometimes called compounding.