Best way to use savings

[stayingpositive2014]

I have about $50K saved up that I would like to use to help pay for medical school.
Would it be better for me to split this up over 4 years (thereby significantly reducing the amount of Grad PLUS loans I have to take out each year but I will still take out the full amount for the Direct unsubsidized loans each year) or use my savings to cover all of first year's tuition and cost of living which would require me to take out ~15K per year in Grad PLUS loans and ~40K in Direct unsubsidized loans for the next 3 years?
I've tried crunching the numbers but it's been 3 hrs and I'm struggling.

Grad PLUS loans have a %6.31 interest rate and a %4.7 fee.
Direct loans have a %5.31 interest rate and a %1.0 fee.

Cost of living and tuition brings me to ~55K every year.

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[Psai]

The numbers will change because they are pegged to 10 year treasuries at the moment and you don't know what congress will do. I think it's better to spread it out because that origination fee is predatory and the rate is higher. Saving on one year saves you one year of interest only. If it takes you 10 years to pay off the debt, it will be less in the long run from my quick napkin calculations.

 

[Stagg737]

Take out the max for direct loans and use your savings for whatever the direct loans won't cover in tuition and CoL. The goal is to keep your interest to a minimum, which means sticking to the Direct loans with a lower rate in this case. If by 4th year it turns out you have enough in savings that you don't need to take out the max for direct loans, great. Chances are that won't happen once you account for travel and test fees.

 

[Stagg737]

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[stayingpositive2014]

Take out the max for direct loans and use your savings for whatever the direct loans won't cover in tuition and CoL. The goal is to keep your interest to a minimum, which means sticking to the Direct loans with a lower rate in this case. If by 4th year it turns out you have enough in savings that you don't need to take out the max for direct loans, great. Chances are that won't happen once you account for travel and test fees.

But then won't I have to pay the additional year's worth of interest on the Direct loan from my M1 year?
I guess what it comes down to is that additional year's worth of interest on the Direct loan equivalent to the interest accumulated through ~15K loans for 3 years of the grad Plus loan?
I did the math and I think the numbers are in favor of the ~15K in grad plus loans for 3 years but only by about $2000. Maybe my math is wrong...

 

[Stagg737]

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[Stagg737]

But then won't I have to pay the additional year's worth of interest on the Direct loan from my M1 year?
I guess what it comes down to is that additional year's worth of interest on the Direct loan equivalent to the interest accumulated through ~15K loans for 3 years of the grad Plus loan?
I did the math and I think the numbers are in favor of the ~15K in grad plus loans for 3 years but only by about $2000. Maybe my math is wrong...

Sorry my computer decided to vomit all over your thread for some reason...Anyway, I personally like to keep some of my own money in savings in case there is an emergency that would majorly cut into my loans. By only taking the Direct loans you can have that safety net for most of med school. Plus an extra 2k in loans is nothing compared to the 200k you'll probably end up with. You can literally pay the extra 2k back in a few weeks as an attending. If the difference is really that small I wouldn't sweat it, go with whichever route you feel more comfortable with.

 

[Crayola227]

you're making this too hard
this came up in another thread, SDN search function maybe you can find it, I posted there

save that money. Financial aid doesn't usually cover Step exam costs or question banks
you can increase your loans if you car needs work, if it dies it won't cover the cost of buying another one
you get nothing for the cost of residency interviewing later down the line, years ago I was told the average students spend is about $12,000, depending on competiveness of field you go into it can certainly be more
if you do choose to do an away rotation you won't get money for living or rental car etc
there's tons of other things I can think of. You're going to graduate with a **** ton of debt no matter what. Why use this money and then come up short later?
also, when you start residency, there will likely be a deductible on your health insurance, so depending on what Rx's you have... you might have to cough up a LOT of money up front
you can get loans for residency relocation, but it's easier if you just have money for moving
also, some people like to buy a house when they move for residency, so having a down payment like what you have could be helpful, otherwise there's first month last month security deposit to think of

 

[sinombre]

you're making this too hard
this came up in another thread, SDN search function maybe you can find it, I posted there

save that money. Financial aid doesn't usually cover Step exam costs or question banks

To add to this, it also doesn't cover interviews during 4th year, or any of the costs that they entail. I'm taking out a private loan to pay for interview costs because the interest rates are significantly lower than any credit card interest rate, unless you can find something with a large enough credit limit that has 0% interest for 6 months to a year, which may be possible.

 

[sinombre]

Actually I probably should have just read the rest of her post. It pretty much says the same thing.

But yeah... there is a lot that student loans don't cover.

 

[akwho]

I had this exact problem as an MS1, now a new intern. When I was an MS1 Stafford loans = 6.8% and Grad + = 7.9%. I decided to spread it out over the four years so I didn't have to take out any Grad + loans. Interest rates changed for the better after first year, and it turns I would have been better paying off the whole first year and taking out the new lower rate loans 2 - 4. Impossible to predict what the government is going to do, makes it aggravating to make a good financial plan.

 

[stayingpositive2014]

I had this exact problem as an MS1, now a new intern. When I was an MS1 Stafford loans = 6.8% and Grad + = 7.9%. I decided to spread it out over the four years so I didn't have to take out any Grad + loans. Interest rates changed for the better after first year, and it turns I would have been better paying off the whole first year and taking out the new lower rate loans 2 - 4. Impossible to predict what the government is going to do, makes it aggravating to make a good financial plan.

that is a great point! gave me something to think about..