Can I get bank loan instead?

[fastfingers]

I just founded out the federal financial aid loan is 6.8% and 7.9% (half half). Can I get a bank loan instead? These percentage is far from the advertised "low interest rate".

Anybody have tips on how I can better manage my future debt? Do banks have lower interest rates I can take instead?

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[Jlaw]

This is the route I'm trying to go when I start this fall. Paying 7%+ is ridiculous, plus I think they also charge dispersal fees which are taken off the top of whatever you are awarded when it pays out.

The benefit of the government loans are that they are fixed rate and straightforward/safe for people who might not necessarily have the financial acumen to pick a loan on their own and understand all the aspects of it, or those who have no financial means whatsoever, i.e. they will be taking out 250-300k in loans for medical school and then be making the minimum payments all through residency.

Do your research and only look at reputable banks...i.e. chase for private loans. Keep in mind some private loans dont have income based repayment so you may need to be coughing up the full payment during residency so you will likely need to be either independently wealthy or have someone who is willing to help support you so you can afford to do this and live. Though there are some private loans that do offer income based repayment and also death/disability waivers. Also you will probably need a cosigner to get a private loan at a good rate.

In my opinion if you have the financial means then get a cheap private loan and pay it off as soon as possible.

 

[fastfingers]

hmm for those who have done research, what banks seem to give the best terms? I'm looking to pay nothing off until residency and then pay off probably in like 8 years after i'm done with residency. my credit is great if thats ever an issue.

 

[crazyasian]

The problem with bank loans is that you have no collateral that they can repossess like a house or car loan. Because the loan is riskier, it will be higher interest. I looked around and they all seemed to be much higher than 8%, but if you do find anything lower please post as I'm taking out 65k this coming year at the 6.8% and 7.9% rates.

 

[whatbout2morrow]

Doesn't interest accrue on private loans while in school (like in the case of unsubsidized loans)? Can they change interest rates on you?

11+ years of interest (including undergraduate, med school and residency) would be alot of money, especially if your tuition + living expenses are high.

I don't know about the unsubsidized loans, but I'd probably take the subsidized loans.

 

[physicsnerd42]

I just founded out the federal financial aid loan is 6.8% and 7.9% (half half). Can I get a bank loan instead? These percentage is far from the advertised "low interest rate".

You can but, in general, it would be a pretty poor plan to give up federal loans for private loans. Because you have no collateral you will most likely not find a rate any lower than unsubsidized federal loans. Also, federal loans come with payback options and flexibility (IBR, PSLF, deferment, forbearance, etc.) which private loans do not come with. Many private loans also have other unfavorable clauses such as ridiculous penalties for non-payment.

Neither type of loan is dischargeable in bankruptcy so you'd better be careful before signing up for either, but especially private loans.

The federal student loan rates suck but federal loans are almost always better than any private loans you're likely to find unless you have a special relationship (like a parent willing to loan you the money).


Medical school is far too expensive. It's good you're thinking about your options. In general the best option is to go to the cheapest US school you can get into and then to live as frugally as possible after med school to pay off your loans as quickly as possible.

 

[physicsnerd42]

I don't know about the unsubsidized loans, but I'd probably take the subsidized loans.

Unfortunately medical school is now an extra poor financial option because subsidized federal loans are no longer available to medical students.

 

[whatbout2morrow]

Unfortunately medical school is now an extra poor financial option because subsidized federal loans are no longer available to medical students.

I guess OP could make use of them in undergrad at the least... Unless the interest rate he/she gets from the bank would be good enough to justify paying 7 to 10 years of interest that they would accrue while the OP is in medical school/residency.

 

[fastfingers]

hmmm, when you say federal loans doesn't accrue, what do u mean?

also, is the interest rate so high now cuz subsidize loans are no longer available?

 

[TheMightySmiter]

Only subsidized federal loans do not accrue interest til you graduate, and these are no longer available to med students. The government pays interest on subsidized Stafford loans while you're in school. On a positive note, you can defer payment AND interest accrual on subsidized loans from undergrad while you're in med school.

The problem with bank loans is that although the initial interest rate may be lower than the federal rate, I guarantee they'll be much higher before you pay them off. Some of these loans have fine print that stipulate the maximum interest rate to be 25% or something ridiculous.

I plan to stick with federal loans only. Something like 95% of med students who borrow choose federal loans, and there's a reason for that.

 

[fastfingers]

so for an unsubsidized loan, you actually start getting interest the day you take out the loan? so by the time I pay it off (after residency), i would have roughly 10 years of interest that accumulated up?

 

[physicsnerd42]

so for an unsubsidized loan, you actually start getting interest the day you take out the loan? so by the time I pay it off (after residency), i would have roughly 10 years of interest that accumulated up?

Yes. Hence why I suggested going to cheaper state medical school (or do MD/PhD or military if so inclined) if possible. My wife is a resident now after going to a state med school and even her debt level stresses her out. It would be a lot worse if she had gone to one of the private schools she got into.

 

[fastfingers]

do you know if the Federal Direct Graduate PLUS Loan is subsidized or unsubsidized?

and also, just to completely clarify, they only started taking out the nice 3.4% unsubsidized loan for med students this year. so our options is a subsidized 6.8% and a federal direct loan thats 7.9%.

 

[searun]

Yes. Hence why I suggested going to cheaper state medical school (or do MD/PhD or military if so inclined) if possible. My wife is a resident now after going to a state med school and even her debt level stresses her out. It would be a lot worse if she had gone to one of the private schools she got into.

My private east coast med school gave me a needs based grant that paid all of my tuition for 4 years, about $180,000, plus $20,000 in merit aid. It would have cost me an extra $125,000 to attend my state school. Just saying. Compare your financial aid grants.

 

[Chip Chipperson]

My private east coast med school gave me a needs based grant that paid all of my tuition for 4 years, about $180,000, plus $20,000 in merit aid. It would have cost me an extra $125,000 to attend my state school. Just saying. Compare your financial aid grants.

Oh my God!

 

[TheMightySmiter]

do you know if the Federal Direct Graduate PLUS Loan is subsidized or unsubsidized?

and also, just to completely clarify, they only started taking out the nice 3.4% unsubsidized loan for med students this year. so our options is a subsidized 6.8% and a federal direct loan thats 7.9%.

Graduate PLUS loans are unsubsidized, as are all med school loans. Your options are 6.8% unsubsidized Stafford and 7.9% unsubsidized PLUS.

 

[fastfingers]

oh wow, so if i were to take one or the other, i might as well take the 6.8%

 

[BrightandClear]

On a positive note, you can defer payment AND interest accrual on subsidized loans from undergrad while you're in med school.

Do you have a source on this?

 

[TheMightySmiter]

oh wow, so if i were to take one or the other, i might as well take the 6.8%

You can only take out 20k or so per year of Stafford loans. Beyond that, you can take out PLUS loans to the total cost of attendance as determined by the individual med school.

 

[TheMightySmiter]

Do you have a source on this?

http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp

 

[calvnandhobbs68]

Do you have a source on this?

You can do that for any loan including private ones (except PLUS loans). All you do is have the med school certify that you're student and you don't have to make any payments while you're in school. All student loans that I know of allow you to defer payment while you're enrolled at least half time.

 

[45408]

You're not going to get student loans for hundreds of thousands of dollars from a private lender for a reasonable interest rate, unless you have a lot of assets/collateral/equity. In which case, why would you take out tons of student loans?

The reason the bank will lend you $200K for a house is because they can just take the house from you.

 

[MT Headed]

You can only take out 20k or so per year of Stafford loans. Beyond that, you can take out PLUS loans to the total cost of attendance as determined by the individual med school.

The rules are different for medical schools. The unsubsidized stafford annual maximum for medical students is slightly over 40K, and everybody qualifies for those. Unfortunately staffords cover the full COA of only two or three medical schools anymore.

 

[iqe2010]

Private/bank loans suck. Not just in paying for school, but everything even getting a mortgage. I'd stay away from them if I were you.

 

[Santorum Surge]

I guess your parents are lazy or what? I don't know why so many people have to borrow $ to go to med school.

 

[Chip Chipperson]

I guess your parents are lazy or what? I don't know why so many people have to borrow $ to go to med school.

Troll or idiot. I'm thinking troll because of the ridiculous screen name.

 

[gravitywave]

This is the route I'm trying to go when I start this fall. Paying 7%+ is ridiculous, plus I think they also charge dispersal fees which are taken off the top of whatever you are awarded when it pays out.
<snip>
In my opinion if you have the financial means then get a cheap private loan and pay it off as soon as possible.

if you are actually able to do this, you are very lucky. no private loan will give you terms comparable to the federal loans unless you have a ton of collateral.

Unfortunately medical school is now an extra poor financial option because subsidized federal loans are no longer available to medical students.

meh. the total extra you pay isn't even as much as next year's tuition hike will cost you. it's not a reason not to go to medical school.

My private east coast med school gave me a needs based grant that paid all of my tuition for 4 years, about $180,000, plus $20,000 in merit aid. It would have cost me an extra $125,000 to attend my state school. Just saying. Compare your financial aid grants.

this. no one should fail to apply to more expensive private schools simply because of sticker shock. many don't pay full price. apply where you see yourself attending and then see how the financial aid packages shake out.

You're not going to get student loans for hundreds of thousands of dollars from a private lender for a reasonable interest rate, unless you have a lot of assets/collateral/equity. In which case, why would you take out tons of student loans?

The reason the bank will lend you $200K for a house is because they can just take the house from you.

why? one word: leverage. if you have substantial assets with which to guarantee the loan, then you could theoretically entertain loan offers from private banks, beating the rate the feds give you (which i agree is highway robbery, at least for AMG medical students with their epically low default rates). in the meantime, your assets are safe and sound earning a decent return and you pocket the difference.

the rich play by different rules, plain and simple.

 

[NickNaylor]

Another thing to keep in mind is that many private loans have variable interest rates. I was looking at private loans for undergrad and managed got approved for one with a 9% interest rate, which isn't terrible, except that it was variable up to 18%.

You're probably not going to find a better interest rate than the federal programs unless you're going to be taking advantage of your parents' excellent credit history. Even then I doubt you're going to be able to find many loans at sub-6.8%.

 

[45408]

why? one word: leverage. if you have substantial assets with which to guarantee the loan, then you could theoretically entertain loan offers from private banks, beating the rate the feds give you (which i agree is highway robbery, at least for AMG medical students with their epically low default rates). in the meantime, your assets are safe and sound earning a decent return and you pocket the difference.

the rich play by different rules, plain and simple.

This is probably applicable to 0.1% of med school students.

 

[MT Headed]

Lol, the reason isn't leverage it is transaction costs. Sometimes the act of turning an asset (like a house or a stock) into cash has high fees and/or taxes associated with it, so it can be cheaper to simply borrow against it.

Margin rates for medschool sized loans are greater than 6.8% right now, so borrowing against securities makes little sense. Home equity loans are lower, though, so if it is practical to remain a homeowner and go to medical school then getting a heloc might make more sense than selling the house or taking a govt loan.

But leverage? Really? If somebody was in a position to borrow against an asset at a rate lower than the growth the asset produces, and able to do this 'safely and soundly', then that money would have already been borrowed and leveraged whether or not you're going to medical school.

 

[Jlaw]

Yeah I should add that in my case I have both collateral, a co-signer and a source of cash flow which will continue through medical school so I will likely pay off my loans as I go. Though I am an older non trad so my situation is alot different from a kid coming out of college who is already 100k in debt.

 

[ILuvScience]

My private east coast med school gave me a needs based grant that paid all of my tuition for 4 years, about $180,000, plus $20,000 in merit aid. It would have cost me an extra $125,000 to attend my state school. Just saying. Compare your financial aid grants.

What the feezy??? lol. I didn't even know needs based grants existed in med school. Let alone a private school. hmmmm

 

[Ironmandoc]

Also, with a private loan you will have to make payments while you are in school, internship, and residency. You won't get the benefits of IBR or fixed interest rates either...

Never do private loans. Anyone who suggests to is a fool or a troll.

 

[calvnandhobbs68]

Also, with a private loan you will have to make payments while you are in school, internship, and residency. You won't get the benefits of IBR or fixed interest rates either...

Never do private loans. Anyone who suggests to is a fool or a troll.

I don't know where people get this idea from...you do not have to make payments while you're in school. If you even think about it for two seconds it makes no sense. How is the bank going to get money it just loaned someone with no income? They'll offer the option to repay while in school but it's definitely not a requirement.

 

[TheMightySmiter]

According to me many banks are provide loan for making your dream. All banks loan rates are different so you have to select some best loan rate. I think you have to check all banks site so getting more clear about loan.

Someone delete the bot!

 

[ROZAY]

allergic to broke

 

[Chip N Sawbones]

Do states that have loan forgiveness programs in exchange for working in underserved areas generally forgive all student loans, or just federal loans?

 

[Ironmandoc]

I don't know where people get this idea from...you do not have to make payments while you're in school. If you even think about it for two seconds it makes no sense. How is the bank going to get money it just loaned someone with no income? They'll offer the option to repay while in school but it's definitely not a requirement.

True. No payments in school but your interest rate will be increasing with the Fed. Biggest downfall is no IBR which is a killer.

Everyone can get enough federal loans to pay for medical school. Private loans should NEVER be used.