What causes the APR to be lower than the interest rate in the following example?

$10,000 fully deferred student loan at an interest rate of 3.50% that assumes 4 years in school, 6 month grace after graduation and a 15 year repayment term. U.S. Rule is the computation method. Interest is capitalized at repayment. There are no fees. The APR is calculated to be 3.41%, slightly lower than the interest rate.

It's due to the lost opportunity to either receive or compound accruing interest during the 4.5 years before the loan goes into repayment. U.S. Rule does not allow compounding, but the APR math assumes that compounding has taken place.