Any Private Loans with a lower interest rate?
Started by Dr Gerrard
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Cheaper than the gov't student loans? No definitely not...the student loans are subsidized as it is
you might be able to find a cheaper interest rate, but interest rates in private loans are subject to change. the beauty of the government loans is that those interest rates are set.
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Some loans are subsidized for 4.5 years - no interest. Hard to beat that anywhere.
What I've seen some friends do is take out a loan from a relative to pay off med school loans after the 4.5 years. The relative could charge 4% or so per year and both parties win. Savings accounts only pay 1% right now and 4% is better than the 6.8% for government loans.
What I've seen some friends do is take out a loan from a relative to pay off med school loans after the 4.5 years. The relative could charge 4% or so per year and both parties win. Savings accounts only pay 1% right now and 4% is better than the 6.8% for government loans.
2.5% car loan and 4% mortgages require excellent credit - which most students do not have. They also limit the amount you can take out based on income.
Government interest rates are guaranteed in very high amounts to every student. They are extremely reasonable all things considered...
I would rethink that last statement a bit: http://www.usatoday.com/money/economy/2011-05-02-feds-sue-over-student-loans_n.htm
The Justice Department is being much more aggressive in pursuing student loan defaulters who owe more than 35k.
+1 on this. Be careful with private loans. They make strike you in the beginning with a low interest rate, but they are DEFINITELY set to change. Federal loans are now a set interest rate
Perkins = 5%
Staffords = 6.8%
Grad plus =8.5%
Private loans have their own policy and I'm willing to bet they ALL realize how disoriented medical students are with their loans. It's overwhelming and most choose not to think about it until they graduate. By then the amount of debt that's been accrued is phenomenal and the interest rate (EVEN A LOW ONE) can crush one's soul.
Defaulting on your student loans is a BIG no no. It will destroy your credit and the lenders can demand everything back in one lump sum. That sh-t will follow you for a long time...
you can't default on gov't student loans. They will garnish them automatically from your wages the rest of your life.
If anyone ever finds themselves in the position where they are 500K in debt with no means to pay it off (say you go into FM), your best bet will be to leave the country and work elsewhere
If anyone ever finds themselves in the position where they are 500K in debt with no means to pay it off (say you go into FM), your best bet will be to leave the country and work elsewhere
That's a bit of an exaggeration. Yes they expect you to pay your loans back, and they are not dischargeable on bankruptcy. However there are ways to eventually have the loan forgiven. If you pay income based repayment for 25 years the remainder is discharged. They leave options for people.
How can you say that? Undergrad loans are subsidized at 3.4% yet med school loans are I believe at 6.8%. You're telling me that on the whole, undergrad loans are safer than med student loans? Hardly! And since when is a house (I believe 30 yr mortgages are still below 5% nationwide) a safer investment than a medical education?
These educational loans are a perfect example of government involvement ruining free markets. Just because some POS drunk driving murderer with the last name of Kennedy declares college as a right and homeownership as a given, doesn't mean it should be so. Educational loans are the next bubble and it is a travesty that med students of all people pay more than college students, let alone people buying their third house or fourth car.
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Again it has to do with the maximums loaned and the lack of collateral. Its a bigger risk to give a med student 200k than to give an undergrad 30k. It's a bigger risk to give a med student money with nothing to repossess than to give someone money to buy a house when you can always foreclose.
But if you prefer conspiracy theories then that's cool too.
First, undergrad can cost as much as med school, or at least the same order of magnitude. Univ of Phoenix tuition is ~ 70k to get a bachelors and many places full sticker price is over $40k tuition a year. So we are talking about the same ballpark.
Second, while I get that a house is a physical object one can foreclose on, look at the ROI one gets from a college degree, a house, and a medical degree. The house and bachelors don't come close! And housing debt can be forgiven in bankruptcy (and in some states one can even keep the house). Medical degree debt can't. If anything, I'd say backing a medical degree is orders of magnitude safer than backing college debt or a house.
It's not conspiracy theories. It's logic.
There's a difference between secured debt (car, boat, house loans) and unsecured debt (signature/personal loans). Not that I've done a lot of research on a private loans, but my guess is that you would be hard-pressed to find an unsecured loan with rates less than 7.9% these days.
Undergrad loans are subsidized this much by the govt.? Since when? I have loans from undergrad. The lower interest rate I have is a 5% Perkins loan. The stafford loans that I have from 4 years of undergrad are all in the 6% range.
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I agree that medical loans should not be subsidized at a higher rate than undergrad ones, but I would take it a step further and argue that all educational loans are bad for students in the long run because of the system that it creates.
Under the current policy of providing government subsidized loans to ANYONE, regardless of individual circumstances, colleges (medicine, dental, undergrad, whatever) can constantly raise tuition every year and at any rate they want, because it's guaranteed the money will come in via the US government. There is no incentive for fiscal responsibility among administrations, and no regard for keeping costs low. That's why increases in educational costs have drastically outpaced inflation every year for the past 3 decades...it's no coincidence.
With every hike in tuition costs, while some will go towards improving the "educational quality," many are not needed or only provide marginal returns in comparison to the tuition hike that results from them. For example, if you add a new 25 million dollar simulation center, that would surely mean a higher quality of medical education, but would that be worth a 10K tuition spike for students?
Medical Schools, because revenue is guaranteed, don't think in terms of cost: benefit ratios when they hike fees. The nifty new simulator would increase the schools reputation, and they don't have to worry about paying for it, so why not just keep expanding and "improving quality" each year? If we didn't have subsidized loans, the costs of all higher education would drastically drop, as colleges would be forced to restructure, and eliminate waste and unnecessary aspects of medical education. If they didn't, they would go bankrupt because no one would be able to pay. But most people don't realize that loans actually hurt students in the long run, and I think Kevin Baker is right that education will be the next bubble.
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Since the new legislation was enacted (don't remember exactly when).
From studentaid.ed.gov:
Federal loans are forgiven in the case of death/disability. It's kinda sadistic to think about, but also rather reassuring. I bet a bank would go after your family and relatives if you bite the dust with any amount of debt on a private student loan...
Eh even if you are disabled it can be almost impossible to get your federal loans erased. My best friend was in a near fatal car accident and is now on disability and he has been fighting to get his student loans forgiven since 2007. Currently he only gets $1000 for disability and the gov takes $200 of it for his loans every month. It sucks.
Yup exactly - there is very little incentive for the universities (and professional schools especially like law, dentistry, and medicine) to be fiscally responsible with the guaranteed ability of students to borrow any amount.
IMO the fix would be for the federal gvt to step in and say each student is eligible for 65k per year (or whatever number) in COA federal loans which is adjusted for inflation and if your COA is higher, students at your your school are not eligible for student loans. The COA will be tied to inflation. That'll fix it.
Instead of dealing with the student loan crisis, the government created IBR instead. The beauty of IBR is that after 10 years of public service (including residency and fellowship), your loans will be forgiven. However, only government loans are eligible (primary care loans and undergrad PLUS loans cannot be forgiven, however undergrad perkins and stafford--as well as grad perkins, stafford, and PLUS loans--can be forgiven). Point is, private loans cannot be forgiven either in 10 year or 25 year IBR
Yeah, but we are talking about private loans. Private lenders, ie banks, won't be as willing to lend money to students because they have a less likely chance of getting their money back than if there is collateral involved. Yes, if you graduate you'll eventually get a job and be forced to pay off your debt, but what if you don't even graduate? A government lien is fine and all, but if the person has other debts that have to be paid off first, such as child support, and is on a limited income, there is NO money to be had.
And if you have no money to pay back in that one lump sum? That's my point, student loans have no collateral, therefore banks will charge a higher interest rate to reflect the higher risk. Student loans are no longer considered GOOD debt.
What are you talking about? Orders of magnitude on debt?! Banks don't look at $100,000 the same as they look at $999,999. Also, medical school debt is often on top of student debt. So if a student has $70,000 in loans from undergrad and racks up $140,000 from med school, they actually end up with $210,000 in total student debt. I believe this is called addition.
Also, most reputable schools have specific departments to oversee how much debt a student is taking on and will nix any more loans if that student is trying to finance their whole education on debt. They also always have maximums that a student can take out for a year of education at their school. At my school, its $5,500. The problem is the less than reputable schools, ie the FOR-PROFITS. You see, bubbles like you described elsewhere only happen when you allow a crappy system, capitalism, into a good environment such as education.
My orders of magnitude comment is meant to show that the comparison of undergrad to med school loans is valid as both cost about the same, are done over the same timeframe, come with similar collateral (i.e. none). Your debt upon debt argument is interesting but as someone with zero college loans it is silly that I have to pay almost double the interest rate for med school as a Univ of Phoenix student.
I looked up undergrad debt limits and it is only 45,000 for the subsidized loans (I'm assuming this is done over four years and I'm using independent students as we are independents when applying for med school aid). That is definitely on the lower end for total med school tuition costs but why not allow us med students 45k worth of loans at 3.4%? That'd pay for Texas schools I think, and two years at some other state schools. My point being, there is a discrepancy here... a sign of an irrational market... A less risky good costs more than a volatile one to insure.
I'll ignore your capitalism comment as I don't want to set off a !@#$storm in this thread but there is a reason the US dominates the list of top 20 worldwide universities and you won't find many public colleges up there.
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Ugh, is it really 25 years? I thought it was 10 years, no missed/late payments, working for a nonprofit hospital or whatever = rest of loan forgiven.
It is. Thats PSLF. But even if you don't work for a non-profit the loans are discharged after 25 years of on-time payments with IBR. Most people have paid off their loans by then. It would be pretty unusual for someone to make it 25 years (decided not to work as a doctor, etc) without paying it off.
It might still be possible to find cheaper rates. I have some private loan debt from undergrad around and below 5%. They are variable rate loans, but the rates have never changed. The lenders let me go into educational deferment with terms essentially identical to my unsub Stafford loans. Keep in mind I got these loans 3-4 years ago, and I seem to recall the student loan market really tightening up after that, so YMMV.
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Even if you could get private loans at a rate like that the problem is what are you going to do in residency? Not all have residency deferrals. And I've never heard of a private loan that offers a subsidized loan during residency or an income based repayment.
If all your loans were private and you entered repayment 6 months after ending medical school then its going to be a stretch making $2k/month payments when you only make $3100/month after taxes.
When I was looking at private loans last year, I found that the rates were ridiculous. I have excellent credit and the lowest interest rates I was finding were ~8% that could increase up to ~19%.
Get a loan from an international bank.. according to my dad, who almost fell over in shock when he saw the 8% gradPlus interest rate, interest rates in some asian countries can get as low as 1%
With this in mind, I was told do NOT consolidate your student loans with your spouse's. If something happens to you in that case, they will not forgive your portion of the debt.
I am glad that they do this, but I still think I would rather aggressively pay off my debt in well less than a decade than having it hang over my head until I'm in my 50s. That might just be me, though.
I'm a +1 on this. I had to shop around for this year but I found a private with great terms and sub-5% interest rate. It is variable.
Taking out some private loans can be a great idea, depending on the terms. I would never recommend the OP replace all federal loans with private, least of all subsidized loans. Depending on your career plans, some private loans can be a much better deal than the Grad Plus.
Many private lenders have loans specifically for medical students that include deferment during residency, but I think I've only seen one instance of private loans with IBR. So if you are banking on IBR during residency instead of deferment, privates are not the way to go. Privates are also obviously a bad choice if you're wanting to do the 10 or 25-year balance cancellation programs mentioned above.
However, if you're just planning to defer during residency, not working 10 years for a non-profit, and either paying your balance back within 25 years or making too much money for IBR to be a good idea for that long, private loans could be a good replacement for the Grad Plus. The danger is that the variable rate will increase when the government raises the federal interest rate. Still, if you're getting a rate around 5% the fed would have to go up in astronomical increments to reach the 8% range of the Grad Plus.
Lots of factors at play, but small portions of private loans could save you thousands of dollars in the long run. It's an awful lot of work to take your total debt burden from $250,000 down to say $242,000 so most young'ns don't bother.
There's disgusting variability with private student loans. I applied through two huge, well-known financial institutions, for the exact same principal amount. The first one approved me at 10.8% interest; the second approved me at 4.9%; both rates variable and tied to the same index.
I'm older and have excellent credit, but they both still wanted a cosigner.
Good point on the no spousal consolidation.
Regarding the second point, I think for many it's worth the peace of mind to pay them off early, even if it isn't the "best deal." However, one of many potential benefits to sticking to the minimum payments is that when our economy collapses and our government dissolves, you will have saved a lot of money by not paying off your loans early
So we have the work 10 years for a nonprofit deal, the 25-year IBR + balance cancellation, and of course some sort of Economic/Zombie Apocalypse debt erasure plan.
However, one of many potential benefits to sticking to the minimum payments is that when our economy collapses and our government dissolves, you will have saved a lot of money by not paying off your loans early
So we have the work 10 years for a nonprofit deal, the 25-year IBR + balance cancellation, and of course some sort of Economic/Zombie Apocalypse debt erasure plan.
Note that if you do stick to the minimum payments, you should not be saving or otherwise investing your money as it would end up being worthless on collapse, but rather stocking up on ammo, guns, and food.
Acceptable investments, when transactions are handled only through Swiss accounts, include:
- pure gold (please, no gold "funds")
- Chinese currency
- one or two Cook Islands
- a warehouse full of Shake Weights and Shake Weight Commercial DVDs
- oil, grain, and livestock futures that you switch to short positions after ~15 years
Otherwise all efforts outside of medical training should be directed toward stockpiling weaponry and strengthening melee skills.
Word, maubs. You beat me to it. Ammo and food will be the currency after Z-day.
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