A few random questions about loans

[se2131]

Actually, a lot of random questions. I apologize in advance for the length of this post, hopefully it doesn't scare everyone away.

So I'll be the first to admit that I'm pretty clueless about loans (very fortunate that parents paid for undergrad, but medical school is all up to me now) and how they work, so I was hoping that some ppl could help me clarify some questions that I have.

1) Most lenders have origination fees, but if Chase's program turns out to be what it claims it will be (http://www.chasestudentloans.com/medical/index_chep.html, from the official lender thread in this forum), looks like we can avoid paying that. Suppose that Chase decides to re-instate the origination fee for next year. If I were to stick with them and borrow money for my M2 year, would there be an origination fee charged then? Or is it not considered a "new loan"?

2) Are there any issues with using a certain lender for one year, another lender for the next, and so on? Besides the hassle of managing all of them of course. One would probably want to go w/ the best lender incentives for that year, correct?

3) So let's assume that my COA is about $46,000, and let's also assume that there are two disbursements per year. How would it work? For the first disbursement, would I borrow $8500 subsidized, $14500 unsubsidized, and then for the second disbursement it would be $17500 unsubsidized, $5500 Grad Plus? Seems like this would be the best way to minimize interest, but I'm not sure if I need to split up the different types of loans more evenly.

4) I thought I had read somewhere that you could take out more than the $40500 limit on Stafford loans, if your academic year lasts longer than 9 months. For example, my first year will be 11-months long, could I possibly borrow somewhere around $43,000 from the Stafford program?

5) Stafford and GradPlus accrue simple interest while in school, and this is capitalized when repayment begins (so does this mean that it continues to accrue only simple interest during times of deferment/forbearance?). Also, the gov't will cover the interest on the subsidized loans even in times of deferment. Is all this correct?

6) It looks like a lot of the lenders have a ten-year repayment plan, with a possibility of extending it to 25 years if your FFEL debt exceeds $30,000. I would probably go with the 25 year plan, but I don't want to be in debt for that long. Are there penalties associated w/ paying off a debt early (i.e. paying more than the monthly requirement when I'm able to?)

7) Ok, so I'll be taking out a mix of Stafford loans and GradPlus loans. The GradPlus loans will be at a higher interest rate (somewhere between 8-8.5%), so tell me if this plan works: while in residency, pay off as much of the GradPlus loan as possible, put as much into a Roth IRA as possible (since residency is basically the only chance for that), and only make the minimum payment on the Stafford loan (it looks like $50/month is the minimum). I expect that it'll probably take about 3 years to pay off all of the GradPlus loans. But if I only make the minimum payments, does that adversely affect my credit rating or anything?

8) Related to the above question: theoretically if I do a 10-year repayment plan on the Stafford, I guess that means that if I spent all of the first three years paying off the GradPlus loans, then I only have 7 years left to pay off the rest of the Stafford loan?

9) What is the real difference between deferment and forbearance? Everywhere I read that deferment means you don't have to make monthly payments, and forbearance means you "temporarily postpone" monthly payments --> https://studentloan.citibank.com/s/slcsite/fr_def.asp . Isn't this the same effect, since you don't have to make regular monthly payments in either case? I ask b/c it sounds like deferment is not going to be an option for our class, and I'm wondering what are the real ramifications of that.

Sorry again for the very long post, I've been trying to do my own research on this but I just get more and more confused as I read more about taking out loans. I also didn't want to start 5-6 separate threads on what are probably simple questions.

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[yadayadadude]

Here are the answers I know:

1. I don't know the answer here.
2. I may be wrong, but I don't think lender incentives constitute a hard and fast promise. T.H.E. was chosen by many students as a lender because in the past they offered what appeared to be a very generous repayment bonus (I believe the interest rate reduction in repayment was in the neighborhood of 1.4%). However, T.H.E recently suspended the bonus (and then proceeded to stop making new loans altogether). I didn't realize that the bonus on loans already disbursed wasn't part of our contract, but apparently it wasn't, and T.H.E. was free to take it away for loans disbursed several years ago, on their whim. An incentive like "no origination fee" may be different, since you can realize that savings the minute you take out the loan ... but overall, I feel like worrying too much about lender incentives, in the current credit climate, is probably a waste of time.
3. My experience has been that my school's financial aid office will allow me take my Perkins loans asymmetrically (all $6K in a single quarter), but they insist that I take my (subsidized) Stafford split evenly over all enrolled quarters. As an example, I'm only enrolled winter and summer this year. My bill totaled $14K in the winter but will only be $2K in the summer. I was awarded $6K in a Perkins loan and $8500 in subsidized Staffords. But I was only able to take $10250 in the winter (when I need it) and will have another $4250 available this summer (when I don't). It's so dumb, I can only assume there's a federal regulation to this effect.
4. Don't know. I only take the subsidized loans.
5. Yes to all, so far as I know.
6. There's no prepayment penalty.
7. You're not understanding the minimum payment provision correctly. Imagine that your total debt was under $4K. Paid over a ten year term, this debt would yield a payment of less than $50/m. However, because Stafford loans have a "minimum payment" of $50, you'd get a monthly bill for $50 and pay off the debt in a little under 10 years. But you can't borrow $100K and then simply choose to send in $50/m. No way! (Well, you could, but I'm guessing they'd consider that a default.) What you could probably do is enter deferment or forbearance on just your Staffords and keep your GradPlus loans in repayment during residency. Then you could tackle the Staffords when you were ready.
8. Time in deferment or forbearance doesn't count toward the 10 year repayment period.
9. The significant difference between deferment and forbearance is that the government pays the interest on subsidized loans during deferment but not during forbearance. (There are other differences in terms of who qualifies and for how long.)

Good luck!

 

[se2131]

Thanks for your answers! That clarified quite a few things (esp. the minimum payment issue)

 

[mano82]

I'm wondering if i take 25 years loan repayment plan for my 200k private loan and pay all loans in 10 years then would it be a breaking of loan terms ?...I'm little confused about these.thanks

 

[mano82]

Thanks lortab.