I'm trying to do some what if analysis. I remember in the entrance counseling for plus loans seeing something about interest accruing for plus loans, but not having it capitalize until the end of the “in school full time deferment” period. Is this the case for plus (or unsubsidized Stafford) loans? If not, do the vendors decide how when the interest is capitalized? Similarly, are there laws determining how often interest is compounded? I would assume that compounding, accrual, and capitalization schedules would be in sync, but in the first case they obviously aren’t.

Basically, for the following examples, are they all legally possible (I’m using 10% interest for ease of calculation)? Which one would be the safest bet for financial planning?

1) 10K Loan taken at beginning of year 1. Interest accrues but isn’t capitalized. At end of year 3, the interest is capitalized and thereafter the balance of $13K is compounded monthly
2) 10K Loan is taken at beginning of year 1. The interest begins compounding immediately (or after 60 days w/e the law is) at some undetermined rate, set by the lender, perhaps continuously.
3) 10K Loan is taken at the beginning of year 1. The interest begins compounding immediately at some federally determined rate.

I ask, because the student loan calculators seem overly simplistic (they don’t seem to have a place to put in number of years of deferment, they don’t seem to have a compounding frequency input). I’d like to know if these calculators are reliable and/or if there are any that do take all of these factors into consideration as they are actually prescribed by federal law.