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If I consolidate my Federal loan during residency then claim defement or forbearence, how long can I go without paying anything or just the interest? The full five years of my surgical residency?
consolidation and forbearence
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After consolidation, you can defer paying off your loans for three years maximum under economic hardship (no interest accumulating), then for unlimited years under forbearance (interest accumulating).
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i would check with your med school fa officer and your lender for details/guidance -- there are some nuances to be aware of with consolidation/forbearance and deferment. hopefully you'll learn about these in your exit interview.
I could be wrong, but i think most would recommend that you use up your maximal deferment first - you have that time, may as well use it. interest rates aren't going to change so drastically that you need to lock it in now with a consolidation loan...plus if the rate goes lower, you'll be able to take advantage of tha
after your maximal pre-consolidation deferment is over, then you consolidate. once you consolidate (at least for federal loans) i believe you get to defer all over again for the same time period you would have been allowed for any one of the other loans.
then once you are done with your consolidation deferment, you can apply for forbearance.
after you use up your forbearance time, you can head for economic hardship.
all this can easily take the length of your residency...though if you can pay even a little bit as you go (since most of them let you do so without penalty) you should try to do so.
I could be wrong, but i think most would recommend that you use up your maximal deferment first - you have that time, may as well use it. interest rates aren't going to change so drastically that you need to lock it in now with a consolidation loan...plus if the rate goes lower, you'll be able to take advantage of tha
after your maximal pre-consolidation deferment is over, then you consolidate. once you consolidate (at least for federal loans) i believe you get to defer all over again for the same time period you would have been allowed for any one of the other loans.
then once you are done with your consolidation deferment, you can apply for forbearance.
after you use up your forbearance time, you can head for economic hardship.
all this can easily take the length of your residency...though if you can pay even a little bit as you go (since most of them let you do so without penalty) you should try to do so.
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Ed-
Just wanted to respond (respectfully) to your reply.
a) Class of '02 medical school graduates were the luckiest ones when it comes to managing their loans. Stafford interest rates were at the lowest ever (3.46%). On July 1st, they will most like either stay the same or increase. They could be 5% or even the maximum (8%ish) - no one knows.
b) Nearly everyone recommends consolidation - but only if you think you're locking in the lowest interest rate possible. I locked in all of my loans at 3.46%.
c) There are two types of deferment - no matter whether your loans are consolidated or not - "economic hardship" (maximum three years, interest-free), and "forbearance" (unlimited years, interest accumulating). Everyone should do their economic hardship deferment first, obviously, because it's interest free. Forbearance has its pros/cons: you can defer payments, but interest starts accruing again.
d) The advice I was given: Make no payments during the six-month grace period after graduation, then consolidate right before grace period ends. Defer the consolidated loan under economic hardship for three years, and then under forbearance for 1/2 year (I'm doing a 4-year residency).
e) What most people don't realize is that the formula used to calculate economic hardship is not very good. I know several residents who did not qualify for this deferment because their resident salary was "too high" with respect to their medical school debt (too low). They were stuck either making payments starting as interns or using their forbearance option.
Just wanted to respond (respectfully) to your reply.
a) Class of '02 medical school graduates were the luckiest ones when it comes to managing their loans. Stafford interest rates were at the lowest ever (3.46%). On July 1st, they will most like either stay the same or increase. They could be 5% or even the maximum (8%ish) - no one knows.
b) Nearly everyone recommends consolidation - but only if you think you're locking in the lowest interest rate possible. I locked in all of my loans at 3.46%.
c) There are two types of deferment - no matter whether your loans are consolidated or not - "economic hardship" (maximum three years, interest-free), and "forbearance" (unlimited years, interest accumulating). Everyone should do their economic hardship deferment first, obviously, because it's interest free. Forbearance has its pros/cons: you can defer payments, but interest starts accruing again.
d) The advice I was given: Make no payments during the six-month grace period after graduation, then consolidate right before grace period ends. Defer the consolidated loan under economic hardship for three years, and then under forbearance for 1/2 year (I'm doing a 4-year residency).
e) What most people don't realize is that the formula used to calculate economic hardship is not very good. I know several residents who did not qualify for this deferment because their resident salary was "too high" with respect to their medical school debt (too low). They were stuck either making payments starting as interns or using their forbearance option.
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Hey Ratty,
Thanks for the clarifications (and they were very respectfully taken 😉 )... as I mentioned in my post, I may have had some things mixed up. Plus I'm out 3 years. I've also been lucky i haven't had to deal with much of this...I had a student loan outstanding from 1992 and so I have been covered under a slightly different set of rules than applies now (i.e. i was able to defer for 2.5 years post med school, without having to do anything except send an annual update letter). My loans are coming in now.. in fact, now that i read my original post, the plan i outlined is for a pre-1992 borrower...so ignore me...sorry 😳
Re: hardship formula, I agree, it's lousy...especially if you are in NY programs where residents are making decent money compared to other parts of the country.
Consolidation is something very worthwhile to do if you can do it...just talk it out with your financial aid advisor. that was probably the more important take home message from my original post.
aahhh... debt...sigh.....
Thanks for the clarifications (and they were very respectfully taken 😉 )... as I mentioned in my post, I may have had some things mixed up. Plus I'm out 3 years. I've also been lucky i haven't had to deal with much of this...I had a student loan outstanding from 1992 and so I have been covered under a slightly different set of rules than applies now (i.e. i was able to defer for 2.5 years post med school, without having to do anything except send an annual update letter). My loans are coming in now.. in fact, now that i read my original post, the plan i outlined is for a pre-1992 borrower...so ignore me...sorry 😳
Re: hardship formula, I agree, it's lousy...especially if you are in NY programs where residents are making decent money compared to other parts of the country.
Consolidation is something very worthwhile to do if you can do it...just talk it out with your financial aid advisor. that was probably the more important take home message from my original post.
aahhh... debt...sigh.....
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You guys rock! Thanks for the help. My last question pertains to consolidtion. Since we dont know if the interest rates will change for better or worse in July, I was thinking of consolidating before July 1st. The rates are so low, its hard to resist. My question is whether i will lose my grace period and be forced to stat paying immediately before my deferment papers are even processed? Its so much easier having SDN answer my questions since my loan servers/collectors just see me as a big dollar sign.
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From what I understood from our exit interview, once you consolidate, your grace period ends. However, you can request that the processing of your application be postponed until the end of the grace period. And if you consolidate while in your grace period, you'll get a lower interest rate because your loans are still charged the lower in-school interest rate rather than the higher in-repayment rate. If you consolidate while you are still in the grace period, the lower rate will be used to calculate the weighted average of interest rates that will be used to determine the interest rate of your consolidation loan.
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Lucas,
Inspector is right - once you consolidate, your grace period ends. Current Stafford interest rates for 7-1-02 to 6-30-03 are 3.46% (during grace) and 4.06% (after grace). Like inspector and handygirl said, you are definitely better off consolidating during grace period because you get the lower fixed rate.
I'm assuming you are about to graduate in May or June. If I were in your shoes, I would consolidate my loans right after graduating in order to lock in at 3.46%, which will change this July 1 (up? probably. down? maybe). After doing so, your grace period will immediately end. Once the consolidation is processed (it can take around 2 months), the consolidator will ask for your first payment in 60 days. At this point, you immediately fill out the forms for economic hardship deferment (this part takes only a week or so to process). And sha-zam! Your loans are deferred interest-free for one year. A year later, you can then apply for economic hardship for two additional years, and then for forbearance for however many years after that you need during residency (esp. if going into surgery, etc.)
My experience: Graduated medical school with $100k in debt, consolidated everything at a fixed rate of 3.6% (it was slightly higher because I consolidated my Perkins loans, which had a 5% rate, with my Stafford - consolidation is the weighted average). When I'm in repayment, this will go down to 3.35% if electronic debits are used (offered by most consolidators).
Who to consolidate with? Everyone wants your money. I still get tons of those mailings and phone calls from all those different groups. My FA office said the best consolidator was good ol' Uncle Sam - the US Dept of Ed. As the agency that doles out the Staffords, you can't go wrong consolidating with them, as opposed to the possibly shady for-profit banks that harass you. But everyone has a different opinion about this one.
Good luck!
Inspector is right - once you consolidate, your grace period ends. Current Stafford interest rates for 7-1-02 to 6-30-03 are 3.46% (during grace) and 4.06% (after grace). Like inspector and handygirl said, you are definitely better off consolidating during grace period because you get the lower fixed rate.
I'm assuming you are about to graduate in May or June. If I were in your shoes, I would consolidate my loans right after graduating in order to lock in at 3.46%, which will change this July 1 (up? probably. down? maybe). After doing so, your grace period will immediately end. Once the consolidation is processed (it can take around 2 months), the consolidator will ask for your first payment in 60 days. At this point, you immediately fill out the forms for economic hardship deferment (this part takes only a week or so to process). And sha-zam! Your loans are deferred interest-free for one year. A year later, you can then apply for economic hardship for two additional years, and then for forbearance for however many years after that you need during residency (esp. if going into surgery, etc.)
My experience: Graduated medical school with $100k in debt, consolidated everything at a fixed rate of 3.6% (it was slightly higher because I consolidated my Perkins loans, which had a 5% rate, with my Stafford - consolidation is the weighted average). When I'm in repayment, this will go down to 3.35% if electronic debits are used (offered by most consolidators).
Who to consolidate with? Everyone wants your money. I still get tons of those mailings and phone calls from all those different groups. My FA office said the best consolidator was good ol' Uncle Sam - the US Dept of Ed. As the agency that doles out the Staffords, you can't go wrong consolidating with them, as opposed to the possibly shady for-profit banks that harass you. But everyone has a different opinion about this one.
Good luck!
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1. Don't consolidate *all* of your federal loans in the beginning - leave some of them out so that after 3 yrs, you can consolidate them into the first batch and extend your "economic hardship" status by another 3 yrs (for a total of 6 if yer a lucky surg rez like moi).
2. Also, don't forget that not all loans are created equal - unsub loans continue to accrue interest no matter what you do (this goes for both federal and private).
3. Always defer rather than forbear if you can help it - if you forbear, interest will accrue on *both* sub and unsub loans (which kinda defeats the purpose of the sub loans - yanno?).
4. Consolidate federal stuff *now* if you don't trust the new July 1 interest rate to drop further. My FA informed me today that interest rates for some things have already started to creep back up amid all the war-shinnanigans so she wouldn't be surprised if the federal loan interest rates climb a little in July. You might as well lock in the 3.46% now if your mortgage co. demands documentation that you won't have that $100K price tag eating into your monthly paycheck.
5. Cheers!
2. Also, don't forget that not all loans are created equal - unsub loans continue to accrue interest no matter what you do (this goes for both federal and private).
3. Always defer rather than forbear if you can help it - if you forbear, interest will accrue on *both* sub and unsub loans (which kinda defeats the purpose of the sub loans - yanno?).
4. Consolidate federal stuff *now* if you don't trust the new July 1 interest rate to drop further. My FA informed me today that interest rates for some things have already started to creep back up amid all the war-shinnanigans so she wouldn't be surprised if the federal loan interest rates climb a little in July. You might as well lock in the 3.46% now if your mortgage co. demands documentation that you won't have that $100K price tag eating into your monthly paycheck.
5. Cheers!
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Someone correct me if I'm wrong, because I'm no financial expert, but as I understand it, there is no rush to consolidate before July 1 because the new interest rates won't be a surprise sprung on everybody in July. It was explained to me that the rates are based on the federal t-bill rate which does in fact change on July 1, but that exactly what that change will be is made known around the end of May, giving everyone a few weeks to consolidate and lock in at the old rate if that is more favorable.
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If you qualify for economic hardship, you can defer your federal loans for a max of 6 years assuming you:
- consolidate *some* federal loans right after graduation and then
- *add* more federal loans (the ones you didn't consolidate originally) to the first batch and re-consolidate the whole thing again for another 3 years.
So the question becomes "what the heck is happening to the federal loans that I didn't initally consolidate??" Weeell, I believe they fall into forbearance which can last for the life of your residency. This is good and bad since it means you won't have to pay any interest during your residency BUT it also means that they start charging interest on your subsidized loans as well as the subsidized ones. Luckily, the interest rate can be fixed once you re-consolidate everything.
Confusing enough for ya?
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I would respectfully disagree with the assessment of a couple posters that the loan rates will likely increase July 1. The current 91-day T bill rate, which the student loan rates are based on, is 1.12%. This would yield a consolidated student loan rate of 2.75% (for people consolidating during school, grace or deferment). T-bill rates have actually declined slightly since the start of the war. While theoretically possible, my feeling is that the chances that the July 1 rate (based on the May 31 T-bill auction) will be higher than the current rate are far less likely than other posters have suggested. That said, it wouldn't be a bad idea to have all the paperwork drawn up so you can submit it May 31 if the rates do climb and hopefully get in under the buzzer.
The most recent T-bill rates are listed at http://wwws.publicdebt.treas.gov/AI/OFBills
The most recent T-bill rates are listed at http://wwws.publicdebt.treas.gov/AI/OFBills
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Nice Forum, thanks for everyone's input. One person has recommended consolidating with the US gov, does anyone have any opinion on consolidating with Sallie Mae or other private companies (the annoying ones that keep calling me and sending me mail!). Is there any advantage to using these companies as opposed to the US gov for consolidation? - Thanks!
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Shop around and learn the lingo. I know FA officers mean well, but their advice is not always in touch with real-world finances. My biggest regret is not having begun payments as soon as possible. If you live in a city, your salary will likely disqualify you from economic hardship deferment, and forbearance is an evil, evil, thing. Those debts will skyrocket in no time at all. My advice--consolidate and pay. Shop around for the best rates and service (ex: do they have an easy-to-navigate website?)--and become a well-educated consumer.
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absolutely correct.
this is one of those free lunch situations which rarely comes about. at the end of may, you can know what the rates will be for the upcoming year which will be changed on july 1. if the rates were calculated today, they would be lower for next year than this year. however if you forget, and rates go up, then you will lose out by being a pig. some of us consolidated at 8.5 many years ago and are still stuck with those loans.
So if I have this straight.....
If one qualifies for economic hardship throughout say a 6 year residency/fellowship period one should take this mode of action.
1.) Immediately consolidate all of one's unsub staffords and nearly all of one's sub staffords, assuming that this is as low as the rate gets
2.) For the next 3 year period of economic hardship your large consolidated loan does not accumulate interest due to economic deferment even though it has a unsub stafford element....can you claim economic deferment on the loan that was subsidized that you did not consolidate?
3.) After the 3 year period is up, add the small (say $1000) of sub stafford to the intial consolidated loan maintaining a low weighted average on the loan and your hardship period resets
Using this plan you essentially pay no interest for 6y. I think I maybe wrong in the fact that the unsub still accumulate interest in the economic hardship deferment period, but nonetheless you still would lock them in a the current low rate without losing deferment benefits.
Finally, since I'm currently in school and will be so for 2 more years can I employ this method but instead do the consolidation for another cycle (ie. consolidate most of my loans now, 3 years out add $1000 and consolidate again, and 3 years after that add another $1000 and consolidate a third time). Essentially, is there a limit to the amount of time you can claim economic deferment. Just wondering because I want to take advantage of these low rates.
If one qualifies for economic hardship throughout say a 6 year residency/fellowship period one should take this mode of action.
1.) Immediately consolidate all of one's unsub staffords and nearly all of one's sub staffords, assuming that this is as low as the rate gets
2.) For the next 3 year period of economic hardship your large consolidated loan does not accumulate interest due to economic deferment even though it has a unsub stafford element....can you claim economic deferment on the loan that was subsidized that you did not consolidate?
3.) After the 3 year period is up, add the small (say $1000) of sub stafford to the intial consolidated loan maintaining a low weighted average on the loan and your hardship period resets
Using this plan you essentially pay no interest for 6y. I think I maybe wrong in the fact that the unsub still accumulate interest in the economic hardship deferment period, but nonetheless you still would lock them in a the current low rate without losing deferment benefits.
Finally, since I'm currently in school and will be so for 2 more years can I employ this method but instead do the consolidation for another cycle (ie. consolidate most of my loans now, 3 years out add $1000 and consolidate again, and 3 years after that add another $1000 and consolidate a third time). Essentially, is there a limit to the amount of time you can claim economic deferment. Just wondering because I want to take advantage of these low rates.
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i don't know how you guys plan on getting the hardship deferment. several will qualify, but most will not. i wouldn't count on getting the deferment, certainly not throughout your residency.
i would respectfully disagree with handygirl on one point-if you can force yourself to save, what is the rush to pay off the loans? this is almost free money. if you can't control your spending however, it is maybe a different story. however, the benefits of having a little cash during residency to vacation with or splurge with may still outweigh the benefits from paying off a 3% loan earlier rather than later. once you finish and your income jumps, you can aggressively pay them off, but i would suggest that you are still better paying down a mortgage than your student loans at 3%. i'm paying down my mortgage at 4% rather than my student loans at 8+%.
ymmv
i would respectfully disagree with handygirl on one point-if you can force yourself to save, what is the rush to pay off the loans? this is almost free money. if you can't control your spending however, it is maybe a different story. however, the benefits of having a little cash during residency to vacation with or splurge with may still outweigh the benefits from paying off a 3% loan earlier rather than later. once you finish and your income jumps, you can aggressively pay them off, but i would suggest that you are still better paying down a mortgage than your student loans at 3%. i'm paying down my mortgage at 4% rather than my student loans at 8+%.
ymmv
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hi, great thread!
Just wanted to say that I called IDAAP (my loan servicer) and they told me to call them on June 1st and they would know whether or not it would be time to consolidate now or later based on the interest rate.which would give you a month to get the paperwork going if the interest rate is going to go up.
I just wanted to say, the economic hardship deferment equation SUCKS!!!!!! Sometimes I wonder whether I should have borrowed more unsubs than I did just so I would meet the criteria..I fall under by just 5,000 of what I need. I know in the long run that's a good thing, but the idea of forebearance/paying my loans now..not pretty.
just had to get that out of my system.
thanks!
Just wanted to say that I called IDAAP (my loan servicer) and they told me to call them on June 1st and they would know whether or not it would be time to consolidate now or later based on the interest rate.which would give you a month to get the paperwork going if the interest rate is going to go up.
I just wanted to say, the economic hardship deferment equation SUCKS!!!!!! Sometimes I wonder whether I should have borrowed more unsubs than I did just so I would meet the criteria..I fall under by just 5,000 of what I need. I know in the long run that's a good thing, but the idea of forebearance/paying my loans now..not pretty.
just had to get that out of my system.
thanks!
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I know I qualify because my FA did the calculation and told me so. Since I have a 6 year residency, I made it my business to find out how long the economic hardship can extend (6 years). If you call your program, they will tell you how much your income will be - then add up all of your loans etc. and plug it into the calculation. Your FA can also tell you how much income you can make and still qualify. Anyone who's going to a state school and isn't a resident of that state will almost certainly qualify.
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great!
did your FA tell you that you have to requalify every year? did they tell calculate it out including projected pay raises and cola? how close are you so that when you start moonlighting how much could you make before you would lose your deferment? or how much, assuming you get married during the 6 years, your spouse could make before you lost it? i think some people can get it for 1-2 years, but after that many lose it.
ymmv
did your FA tell you that you have to requalify every year? did they tell calculate it out including projected pay raises and cola? how close are you so that when you start moonlighting how much could you make before you would lose your deferment? or how much, assuming you get married during the 6 years, your spouse could make before you lost it? i think some people can get it for 1-2 years, but after that many lose it.
ymmv
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I believe the rates will be lower July 1st 2003. It's based on the 91 day T-bill rate which today is 1.10. Future forcasts show that it may even drop below 1.0 by July. Using today's T-bill rate we'd have 1.1+1.7=2.8% interest for in school/grace and 1.1+2.3=3.6% for post grace in repayment interest rate. I guess I'd just see what it is in June and decide whether you want to consolidate or now but I bet the rates will be even lower next year.
I'm in at least a 5 year residency and I consolidated all my loans last September but this left me with another semester of direct loans that I'll be able to consolidate again when my 3 year hardship deferment is up to get another 3 years. The federal government is paying the interest on a tad over $70,000 for free and I would like that to continue.
I'm also married and with my wife's income would have put me over the amount to get hardship. I just sent in my W-2 forms, made no mention of my wife and just copies of all the loans I owed and was granted hardship without a problem. We'll see if I have any trouble in the future though.
I'm in at least a 5 year residency and I consolidated all my loans last September but this left me with another semester of direct loans that I'll be able to consolidate again when my 3 year hardship deferment is up to get another 3 years. The federal government is paying the interest on a tad over $70,000 for free and I would like that to continue.
I'm also married and with my wife's income would have put me over the amount to get hardship. I just sent in my W-2 forms, made no mention of my wife and just copies of all the loans I owed and was granted hardship without a problem. We'll see if I have any trouble in the future though.
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The economic hardship formula does indeed suck. I graduated with a little over $100k in debt, and with my PGY2 salary of $40k in Chicago, I just barely made it under.
For those of you who didn't take out enough qualifying loans (sounds like an oxymoron? 🙂, there are other ways to help your cause:
1) If you don't meet the cut-off for hardship, the government said anyone could submit statements of their PRIVATE loans (which of course you couldn't consolidate), and they would be nice enough to take that into account to get you over the cut-off for hardship.
2) If you read the fine print, consolidators do not take into account spousal income for economic hardship - all they want for income proof is YOUR two most recent paystubs. (Jim Picotte - you shouldn't have any problem - it's all legit from what I understand)
3) Finally, for those who want to moonlight during residency (yet still qualify for economic hardship), there is another way to get around it: Don't tell them. Remember, all the consolidators want are your two most recent paystubs (from your residency program) - NOT last years 1040 tax form. So if you don't submit any moonlighting paychecks (assuming it's from other hospitals), they will never know, and you can still get economic hardship. Yeah, I know, it might seem dishonest, but like a previous poster said: Forbearance sucks!
I agree with smackdaddy - What's the rush to pay off loans if you can defer? Especially during residency - to me, paying off loans as a resident would be a financial hardship. I'd rather have extra money for nice meals, vacations, etc. Think about it - with a resident's salary, all you're gonna do is make a tiny miniscule dent in your loans, when as an attending, you can make a huge one. It's not worth the sacrifice during residency. Use that money for something fun. And 3-4% interest rate is like nothing - I kinda wish I took out more loans at that rate!
For those of you who didn't take out enough qualifying loans (sounds like an oxymoron? 🙂, there are other ways to help your cause:
1) If you don't meet the cut-off for hardship, the government said anyone could submit statements of their PRIVATE loans (which of course you couldn't consolidate), and they would be nice enough to take that into account to get you over the cut-off for hardship.
2) If you read the fine print, consolidators do not take into account spousal income for economic hardship - all they want for income proof is YOUR two most recent paystubs. (Jim Picotte - you shouldn't have any problem - it's all legit from what I understand)
3) Finally, for those who want to moonlight during residency (yet still qualify for economic hardship), there is another way to get around it: Don't tell them. Remember, all the consolidators want are your two most recent paystubs (from your residency program) - NOT last years 1040 tax form. So if you don't submit any moonlighting paychecks (assuming it's from other hospitals), they will never know, and you can still get economic hardship. Yeah, I know, it might seem dishonest, but like a previous poster said: Forbearance sucks!
I agree with smackdaddy - What's the rush to pay off loans if you can defer? Especially during residency - to me, paying off loans as a resident would be a financial hardship. I'd rather have extra money for nice meals, vacations, etc. Think about it - with a resident's salary, all you're gonna do is make a tiny miniscule dent in your loans, when as an attending, you can make a huge one. It's not worth the sacrifice during residency. Use that money for something fun. And 3-4% interest rate is like nothing - I kinda wish I took out more loans at that rate!
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I was told that after consolidation, all the rules change, and you might not be able to defer. After all, with consolidation, it becomes a private loan rather than a government loan.
And in terms of economic hardship deferment... according to the William Ford Direct Loan deferment application, you could submit either your paystubs OR your annual adjusted gross income (I'm assuming from 1040). So for all the 4th years out here, it seems like because we work only 1/2 a year for 2003, our 2003 adjusted gross income will be low enough to meet the economic deferment for the first year after the grace period ends.
I feel like I'm missing something here because that seems to be a big loophole... what do you all think?
And in terms of economic hardship deferment... according to the William Ford Direct Loan deferment application, you could submit either your paystubs OR your annual adjusted gross income (I'm assuming from 1040). So for all the 4th years out here, it seems like because we work only 1/2 a year for 2003, our 2003 adjusted gross income will be low enough to meet the economic deferment for the first year after the grace period ends.
I feel like I'm missing something here because that seems to be a big loophole... what do you all think?
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If you consolidate and get an economic hardship can you still make payments with extra money?
Thanks
Scott
Thanks
Scott
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you can always repay in advance. however, most financial advisors would probably tell you that if you are not fully funding your roth ira during the years you are a resident (which for most people would be the only eligible years) that would be preferable to making early payments on a 3% loan.
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Good thread -
I've actually heard that if one is in a longer residency, it is advantageous to take the economic hardship deferment first, when income is low and moonlighting opportunities rare - When you are in your last 2-3 years, switch over to the automatic residency deferment...
Anyone else hear of this?
Airborne
I've actually heard that if one is in a longer residency, it is advantageous to take the economic hardship deferment first, when income is low and moonlighting opportunities rare - When you are in your last 2-3 years, switch over to the automatic residency deferment...
Anyone else hear of this?
Airborne
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Well...seeing as I'll only have 34,000 in subsidized loans, doesnt look like I'll qualify for the hardship deferment. What is up with forebarance? Does the interest just accrue at the consolidated rate or do they tack on an additional amt of interest? What's the ugly details?
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Airborne-
What is the "automatic residency deferment" you refer to? I'm not sure that this exists anymore. There is something called "Internship/Residency Deferment" that now only qualifies for loans taken out before 1993 (!). It seems like the government got rid of this automatic deferment. Now the only options are economic hardship deferment or forbearance deferment. Am I mistaken?
What is the "automatic residency deferment" you refer to? I'm not sure that this exists anymore. There is something called "Internship/Residency Deferment" that now only qualifies for loans taken out before 1993 (!). It seems like the government got rid of this automatic deferment. Now the only options are economic hardship deferment or forbearance deferment. Am I mistaken?
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1. yes
2. yes
3. up to $51K/yr
4. i'm not getting married until after residency
Each person has to consult with their FA to get the bottom line. I was just offering my experience as an example how one could qualify for the full 6 years.
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I just had my consolidation session with the nice people from the AAMC and SalieMae. Here is the gist of what they told us:
Everyone gets a 6 month grace period after graduating. During this period interest accrues on unsubsidized loans at the normal low rate. After the 6 month grace period, you want to apply for economic hardship. As during grace, during deferment, interest accrues on unsubsidized loans at the normal low rate. You can take up to 3 years of deferment. You have to reapply for deferment every year. Only your income (not your spouse's income) counts as long as you supply your lender with an individual tax return or pay stubs (ie, don't tell them your spouse's salary).
After deferment (either because you no longer qualify or your 3 years are up) you automatically qualify for forbearance. During forbearance, the interest rate is slightly higher and interest accrues on all loans (subsidized and unsubsidized). Forbearance can last for the duration of your residency.
You can consolidate at any time. When you consolidate, your interest rate is locked in at whatever you are paying currently (low if you consolidate during grace/deferment, higher if you consolidate durign forbearance/repayment). After consolidating, you are eligible for another 3 years of deferment (if you meet the economic hardship standard). If you consolidate non-Stafford loans with your Stafford loans, the consolidated interest rate is a weighted average of the rates on all your loans. As with unconsolidated loans, you can automatically qualify for forbearance on your consolidated loan for the duration of residency.
The people who spoke to us predicted lower interest rates for the coming year. In any case, the interest rate is announced at the end of May and you have until June 30 to consolidate at the old rate if, by chance, the interest rate will be going up. (You, of course, have to leave some time for the paperwork to go through.)
Everyone gets a 6 month grace period after graduating. During this period interest accrues on unsubsidized loans at the normal low rate. After the 6 month grace period, you want to apply for economic hardship. As during grace, during deferment, interest accrues on unsubsidized loans at the normal low rate. You can take up to 3 years of deferment. You have to reapply for deferment every year. Only your income (not your spouse's income) counts as long as you supply your lender with an individual tax return or pay stubs (ie, don't tell them your spouse's salary).
After deferment (either because you no longer qualify or your 3 years are up) you automatically qualify for forbearance. During forbearance, the interest rate is slightly higher and interest accrues on all loans (subsidized and unsubsidized). Forbearance can last for the duration of your residency.
You can consolidate at any time. When you consolidate, your interest rate is locked in at whatever you are paying currently (low if you consolidate during grace/deferment, higher if you consolidate durign forbearance/repayment). After consolidating, you are eligible for another 3 years of deferment (if you meet the economic hardship standard). If you consolidate non-Stafford loans with your Stafford loans, the consolidated interest rate is a weighted average of the rates on all your loans. As with unconsolidated loans, you can automatically qualify for forbearance on your consolidated loan for the duration of residency.
The people who spoke to us predicted lower interest rates for the coming year. In any case, the interest rate is announced at the end of May and you have until June 30 to consolidate at the old rate if, by chance, the interest rate will be going up. (You, of course, have to leave some time for the paperwork to go through.)
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Of course Sallie Mae predicts lower interest rates! Then on July 1st, bang! it shoots up to 8% Dont listen to them Brewster, consolidate now or before july 1st, you dont know what will happen and the current 3.46% is damn low. Sallie Mae wants your money, as much as they can get. Its your life, dont let them dictate how you live it!
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Of course I won't let SallieMae tell me what to do. But, if you read the rest of the paragraph, you will see that new interest rates are announced at the end of May, leaving four solid weeks to consolidate should the interest rate go up. There is no "bang" on July 1st. There is a "bang" at the end of May, then plenty of time to consolidate or not before the new interest rate takes effect on July 1st.
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One thing that I just learned that you need to be very careful about:
If you had a grace period on federal loans prior to entering medical school (eg: say you worked for 1 year after graduating college), you cannot have a grace period again, even if you got new federal loans during medical school. In other words, the grace period is a one time deal... once you use it up, it's gone.
So all of us who had worked or took time off between college and med school basically have to start repaying federal loans the day after we graduate.
So if you fit in this category, and you graduate before July 1st, it seems like you have to consolidate before you graduate in order to lock in the in-school interest rates. In other words, you cannot wait to see if interest rates will go down on July 1st, because you have no grace period to lock in in-school rates.
If you had a grace period on federal loans prior to entering medical school (eg: say you worked for 1 year after graduating college), you cannot have a grace period again, even if you got new federal loans during medical school. In other words, the grace period is a one time deal... once you use it up, it's gone.
So all of us who had worked or took time off between college and med school basically have to start repaying federal loans the day after we graduate.
So if you fit in this category, and you graduate before July 1st, it seems like you have to consolidate before you graduate in order to lock in the in-school interest rates. In other words, you cannot wait to see if interest rates will go down on July 1st, because you have no grace period to lock in in-school rates.
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If you have no grace period left, you can still apply for economic hardship deferment. The interest rate during deferment is the same as the interest rate during grace.
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Seems like doing a few years in the lab during surgery residency (meaning 7 instead of 5 years to complete the program) could throw a wrench into economic hardship deferment (I'm not sure how you could extend it for 7 years.)
I was thinking about consolidating before July 1st but my FA advised riding out the grace period for the entire 6 month length since I know I will be spending a minimum of 5 years in residency.
I wonder what the best plan would be if you choose to do a fellowship as well?
I was thinking about consolidating before July 1st but my FA advised riding out the grace period for the entire 6 month length since I know I will be spending a minimum of 5 years in residency.
I wonder what the best plan would be if you choose to do a fellowship as well?
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With regards to consolidation during grace or deferment, (Brewster) said the interest rate will be the same in both cases. If so, is it feasible to NOT consolidate right away and wait for the next interest rate (Jul 2004),which would put me in year 1 of deferment, before consolidating? Of course I understand by doing that I'm taking the chance with the interest rate, but i'm assuming as with this year, we can find out the new interest rate a month earlier. I'm thinking maybe the interest rate will drop again next year, who knows...
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Ok, for all those paranoid about new interest rates, keep tabs on this site. I really do not think that interest rates will be higher next year and will likely be lower. The 91 day T-bill on April 4 was 1.08.
To figure out the interest rate It's the 91 day T-bill on July 1 added to 1.7% for inschool/grace/economic hardship and added to 2.3% for in payment period. Last year the T-bill was 1.70 on July 1st and looks like (if you like to look at future trends) may be even lower than the 1.08 today especially with a more prolonged war effort and sluggish economy. I think everyone that doesn't consolidate in the next 3 months will be ok and likely you'll save about a half percent in the interest rate area which is $500 a year per $100,000 in debt you have out which is significant over a 10 year repayment period.
http://www.forecasts.org/interest-rate/91-day-treasury-bill-yield.htm
To figure out the interest rate It's the 91 day T-bill on July 1 added to 1.7% for inschool/grace/economic hardship and added to 2.3% for in payment period. Last year the T-bill was 1.70 on July 1st and looks like (if you like to look at future trends) may be even lower than the 1.08 today especially with a more prolonged war effort and sluggish economy. I think everyone that doesn't consolidate in the next 3 months will be ok and likely you'll save about a half percent in the interest rate area which is $500 a year per $100,000 in debt you have out which is significant over a 10 year repayment period.
http://www.forecasts.org/interest-rate/91-day-treasury-bill-yield.htm
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So let me get this straight...
(I've been following this thread from the get-go, and normally I am a big contributor, but I don't know much about this whole thing)...
I'm graduating in 2 months. I'll owe about 200k in loans (a shout out to all the private DO schools that siphon the money so the Dean can own a private jet, and new marble can be put up around the school)... and will make about 37k as a resident (EM residency, 3 yrs). I do not have any college loans, and I went straight from college to residency.
I do not want to even THINK about paying anything during my residency... I'd like to live off the 37k (and my future wife's salary, but on here it says the wife's salary shouldn't matter in regards to all this)... and pay it all off later.
Now, obviously, I'd want the best deal.
So what exactly do I do? What is your general concensus about how to go about it? I like the idea of economic hardship but am not sure how or when to do all of that. Also, I am not paranoid about locking in the current rate or whatever... so if you could be so kind as to give me some advice, I'd be much obliged. Thanks!
Q
(I've been following this thread from the get-go, and normally I am a big contributor, but I don't know much about this whole thing)...
I'm graduating in 2 months. I'll owe about 200k in loans (a shout out to all the private DO schools that siphon the money so the Dean can own a private jet, and new marble can be put up around the school)... and will make about 37k as a resident (EM residency, 3 yrs). I do not have any college loans, and I went straight from college to residency.
I do not want to even THINK about paying anything during my residency... I'd like to live off the 37k (and my future wife's salary, but on here it says the wife's salary shouldn't matter in regards to all this)... and pay it all off later.
Now, obviously, I'd want the best deal.
So what exactly do I do? What is your general concensus about how to go about it? I like the idea of economic hardship but am not sure how or when to do all of that. Also, I am not paranoid about locking in the current rate or whatever... so if you could be so kind as to give me some advice, I'd be much obliged. Thanks!
Q
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I think the best thing to do is call your lender and find out what you need to do ensure that you get your grace period and then find out how to apply for economic hardship. I imagine with $200k+ in loans and a resident's salary your should easily qualify for all three years of economic hardship and then can start paying it back after residency.
If this all Stafford loans, you are set. If not, you have to see what rules apply to your non-Stafford loans.
When/if to consolidate is more of a personal decision. I would do it eventually because:
1) It will lock in today's (or next year's or whatever) low rates for the life of the loan (10-30 years).
2) It allows you to extend the repayment period from 10 years to 30 years which makes for smaller monthly payments (although more money paid back overall).
If this all Stafford loans, you are set. If not, you have to see what rules apply to your non-Stafford loans.
When/if to consolidate is more of a personal decision. I would do it eventually because:
1) It will lock in today's (or next year's or whatever) low rates for the life of the loan (10-30 years).
2) It allows you to extend the repayment period from 10 years to 30 years which makes for smaller monthly payments (although more money paid back overall).
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Hmmm...I don't think this is necessarily true, Brewster. I graduated last year, and all my loans (Stafford) came from the same lender (IDAPP, the Illinois program). I could have consolidated with them, but I said no thanks, and went with the US Dept. of Ed. instead. The gov't told me that you are never bound to your lender. Just my experience...
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Thanks everyone for a lot of great info so far. Don't know if anyone's looked at the AAMC website's section on financial advice, but it offers some good basic info on loan repayment, consolidation, etc. Here are the links:
http://www.aamc.org/students/financing/debthelp/laymansguide/start.htm
http://www.aamc.org/students/medloans/loanconsolidation/primer.htm
Good luck to everyone graduating this month!
http://www.aamc.org/students/financing/debthelp/laymansguide/start.htm
http://www.aamc.org/students/medloans/loanconsolidation/primer.htm
Good luck to everyone graduating this month!
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This is exactly what I learned one year ago after graduating. What I was told is that it is better to wait for at least the grace period--free 6 months (no alteration in your loans/interest) AND wait through 3 years of economic hardship deferment if you can and THEN consolidate. This is of course, if you're willing to take the chance on what the 91-day T bill will be 3.5 years from graduation. However there are also some important things to remember when consolidating:
#1) If you consolidate perkins/subs stafford, you will most likely lose the government-paying interest factor and the interest will begin accruing on YOUR bill.
#2) When you consolidate...YOUR INTEREST THAT HAS BEEN SITTING IN A SEPARATE "PILE" WILL NOW BE CAPITALIZED ON YOUR PRINCIPLE. This means that you WERE paying interest on the 150,000 that you originally took out but you may soon begin paying interest on 160,000 (depending on how much interest you've accrued)...this may not be "worth" the drop in interest rate from your original loan rate. (I grad. in 2002 and happened to sign-on with loans at GREAT interest rates.)
#3) I've never heard of economic deferment for more than 3 years...even if you do consolidate. (This, of course, does not mean that it isn't true, but I had a GREAT loan exit interview and this was never even suggested).
#4) I have about 5 different loans/lenders. EVERY YEAR I HAVE TO SEND IN 5 ECONOMIC HARDSHIP DEFERMENT REQUESTS....FRANKLY, DURING VERY BUSY RESIDENCY THIS IS A HUGE PAIN IN THE BUTT, ESP. IF EACH LENDER REQUIRES DIFFERENT INFORMATION . (Some lenders required OFFICIAL copies of all of my loans).
I'm thinking of consolidating--waiting until May 31st (why not? It's like a look into the crystal ball for July) and having my paperwork ready to go...this is, for me, purely the convenience of talking to one lender and paying one bill, etc. I will probably end up paying slightly more in the end, but y'all can't believe how busy internship/residency can be some places...you won't have time to eat for, sometimes, 24 hours at a time let alone call lenders and work through all of their BS. (They want you to forget and fail and need to do forbearance; They WILL try to make it difficult to do an economic deferment...DO NOT TAKE NO FOR AN ANSWER. One lender insisted that all of my 180,000 in loans was NOT stafford. It took several call of bitching and telling them that they were wrong to work it out...It was EAS by the way...BEWARE!!!!!!!!!!!!!!!!!!!!!!!!!
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