Sebastian has just graduated after four years of university. He took out an unsubsidized Stafford loan worth $8,180 to help pay for his tuition. The loan has a duration of ten years. If the loan has an interest rate of 5.3%, compounded monthly, how much interest capitalization has occurred by the time he graduated? Round all dollar values to the nearest cent.

Interest on an unsubsidized loan accrues while Sebastian is in school and is capitalized at graduation. Over four years, it compounds for 4 × 12 = 48 months: $8,180 × [(1 + 0.053/12)^48 − 1] ≈ $1,926.97. The correct choice is $1,926.97; the ten-year repayment duration does not affect the interest accrued before graduation.

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