Consolidation loans during residency?

[Pingu]

Is anyone going to consolidate their loans during residency (or has already done so?) I keep getting offers in the mail for super cheap interest rates and it would make sense to have all my student loans together instead of several different lenders but I have no idea if when you consolidate if you can still defer during residency? Or if it's better not to consolidate?

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[Molecule]

Is anyone going to consolidate their loans during residency (or has already done so?) I keep getting offers in the mail for super cheap interest rates and it would make sense to have all my student loans together instead of several different lenders but I have no idea if when you consolidate if you can still defer during residency? Or if it's better not to consolidate?

Hey Pingu.

Actually, you do NOT qualify for an in-residency deferment UNLESS one of your Stafford loans is pre-1993. If one is, however, all of the loans are deferable for a period not to exceed 2 years (in residency).

Different consolidation lenders vary on whether you lose the 2-year deferment if the pre-1993 loan that qualifies you is included in the consolidation. I know that the Federal Direct Loans program is pretty cool about this--and will let you keep your 2-year residency deferment of loans--EVEN IF the qualifying loan gets consolidated, too.

My choice is whether I want to consolidate my loans under the Direct Loans umbrella--or under Sallie Mae (which keeps all my other Staffords).

You can't consolidate until AFTER you graduate medical school, though.

The other thing to consider is that interest rates are going UP this Summer. So, if you want to lock-in the record low interest rates that we have in effect right NOW for consolidation--you need to put-in your consolidation application sometime in the month of June 2005.


Hope that helps.

 

[fuegofrio17]

Another thing to consider is that there is a bill in congress to eliminate fixed rate consolidation. President Bush has also stated in his proposed budget for this year the elimination of the fixed consolidation rate.

The current graduating class will most likely be the last people able to consolidate at a fixed rate. Combined with the rising interest rates of the past year, consolidating as soon as possible after graduation at the rate set last July appears to be the smartest move.

 

[Jeff698]

What's up with this 1993 nonsense? That would eliminate most current students. Is there no other way to avoid paying your loans during residency?

Thanks and take care,
Jeff <- clearly should have been paying more attention to these loan thingees

 

[Seaglass]

Most residents get a deferrment based on financial hardship. The way that works is they figure out how much you would pay each monthh based on a 10 year repayment schedule (no matter what your actual schhedule is, for example mine is 30 year graduated) and if making those payments would be a big ding on your monthly take home pay (which it almost always is) you qualify for financial hardship deferment. A financial hardship deferment is just like any of the other deferments - the government keeps paying interest in your subsidized loans and interest does not capitalize on your unsubsidized loans. You can only take a deferment up to 3 years and you have to reapply each year. After that you can forebear during which you lose the perks of subsidized interest and uncapitalized interest.

 

[Pingu]

Most residents get a deferrment based on financial hardship. The way that works is they figure out how much you would pay each monthh based on a 10 year repayment schedule (no matter what your actual schhedule is, for example mine is 30 year graduated) and if making those payments would be a big ding on your monthly take home pay (which it almost always is) you qualify for financial hardship deferment. A financial hardship deferment is just like any of the other deferments - the government keeps paying interest in your subsidized loans and interest does not capitalize on your unsubsidized loans. You can only take a deferment up to 3 years and you have to reapply each year. After that you can forebear during which you lose the perks of subsidized interest and uncapitalized interest.

Do you still get any of this if you consolidate?...my financial aid office has not been much help (not that they have been the past 4 years)

My problem is that I have multiple lenders and thus bringing them all together would really benefit me plus a cheaper interest rate, but I want to be sure I can consolidate EVERYTHING and still get a hardship deferment/forbearance

 

[Seaglass]

Yes you can do this even if you consolidate - I did.

 

[taozi]

Does anyone know where I can look at the "pre-1993" requirement for in-residency deferment? This really sucks and I didn't expect this.

BTW, knowing that many banks give incentives for on-time payment (like 1-point deduction for making 36 on-time scheduled payment, etc.), what do you guys think about the idea of using a graduated or income-sensitive payment plan so you can make payments during residency and get that 1-point deduction more quickly?

 

[drgirlnyu]

has anybody heard of the new amsa two step program? how does that work for current 4th years about to graduate?

 

[Molecule]

Does anyone know where I can look at the "pre-1993" requirement for in-residency deferment? This really sucks and I didn't expect this.

http://www.1student.org/deferments-pre.cfm

Sorry I couldn't find a more official source than this. However, I have read this information, always, on my deferment forms (the fine print)--and I also confirmed it with the Financial Aid Office at my medical school....

Hope that helps.

 

[vanelo]

Hi:

Any of you guys have any info on which consolidation program has the best rates, or are all basically the same?

I have received many offers where they say their interests are the lowest. Are the interests rates standard or vary from bank to bank?

Thanks

 

[Jamezuva]

Hi:

Any of you guys have any info on which consolidation program has the best rates, or are all basically the same?

I have received many offers where they say their interests are the lowest. Are the interests rates standard or vary from bank to bank?

Thanks

many of these private companies will "get you" in the fine print. For example, some of them do that by charging you a fee around 1-2% of the total amount of your loans in exchange for this "rock bottom low rate." Don't lose your common sense people, these consolidation companies would not be in business if they didn't make a profit some way.

 

[vanelo]

many of these private companies will "get you" in the fine print. For example, some of them do that by charging you a fee around 1-2% of the total amount of your loans in exchange for this "rock bottom low rate." Don't lose your common sense people, these consolidation companies would not be in business if they didn't make a profit some way.

Thanks

Do you have a web address for the government consolidating agency?

 

[southerndoc]

I consolidated with Sallie Mae. If you consolidate, make sure you consolidate while in economic hardship or in your grace period. By doing so, you lock in an interest rate that's .5% lower. If you consolidate during forbearance or repayment, you'll lock in on a higher interest rate -- permanently. I locked in at 2.875% with a .25% reduction for direct payments and a 1% reduction with 36 consecutive ontime payments. So after 3 years, my interest rate will be 1.625%. Not bad, not bad at all!

Regarding the 1993 thing...

The government eliminated the automatic deferment in residency. However, you are not required to make payments during residency or graduate fellowships. Here's what you get:

Grace period -- 6 months after you graduate. Subsidized loans are paid and your interest rate is the lower (currently 1.6% I believe).

Economic hardship -- up to 3 years. To qualify, your monthly payments must be greater than 20% of your gross monthly salary (based on a 10-year payment schedule, regardless if your actual consolidation is set up on a 30-year schedule). Your income also cannot exceed 220% of the federal poverty level for a family of two. Economic hardship means you get the lower interest rate and your subsidized loans have interest paid by the government (just like the grace period).

Forbearance -- if you don't qualify for economic hardship and cannot make payments, then this is your option to avoid payments during residency. Your interest rate is higher (2.4% I believe), but you can get around this if you consolidate during your grace period or economic hardship period. Miss the boat and consolidate during forbearance and you lock into the higher interest rate -- permanently. Subsidized loans accrue interest during forbearance. Use this option only if you cannot qualify for economic hardship. I believe you can use this for up to 5 years, but don't quote me on that.

If you use the economic hardship for 2 years, then consolidate, most companies will allow you to "refresh" or "renew" your hardship status for another 36 months. Some companies will not, so make sure the company you are consolidating with will allow you to do this if you are in a 5-year residency program, such as surgery.

 

[joedogma]

Let me see if I have this straight...

I graduate in May with about $160k in student loans. I have a 6month grace period from graduation where I don't have to do anything with my loans. Then, just before the grace period is up, I consolidate my loans to lock in a good rate. Now I can claim forebearance? (I doubt I will qualify for economic hardship because my wife works and together we will make b/t 80 and 100k/year) Forebearance lasts for up to 5 years....did I miss anything?

 

[fuegofrio17]

The new interest rate for Stafford Loans comes out in July. It is calculated based upon the 90 day T-bill. Because interest rates have risen this year, the rate will most definitely be higher than last year. So it might be to your advantage to waste some of your grace period and consolidate before the rate increase in July. This way you can lock in this year's low rate for the entirety of your loan repayment. Also as I stated earlier, Congress is quickly moving to repeal fixed rate loan consolidation.

 

[kcrd]

Does it matter who you consolidate with? How do I find out who to consolidate with?

 

[taozi]

Thanks guys, this is really helpful.

Any comments for the 2nd part of my post? I calculated roughly that I'll be paying at least $450-550 with a graduated payment plan for 3 years...don't know if I can manage it with what I'll be making...

BTW, knowing that many banks give incentives for on-time payment (like 1-point deduction for making 36 on-time scheduled payment, etc.), what do you guys think about the idea of using a graduated or income-sensitive payment plan so you can make payments during residency and get that 1-point deduction more quickly?

kcrd: it doesn't matter who you consolidate your loans with...the initial rate will be a weighed average of all your eligible loans. It's the incentives (rate reduction after on-time payment of 4 years, cash back, etc.) that makes the difference. Likewise, beware of hidden fees with smaller agencies.

Interest rate will definitely be higher this July, so try to get this year's rate if you can (before June 30)!

 

[spikyhairedgirl]

Let me see if I have this straight...

I graduate in May with about $160k in student loans. I have a 6month grace period from graduation where I don't have to do anything with my loans. Then, just before the grace period is up, I consolidate my loans to lock in a good rate. Now I can claim forebearance? (I doubt I will qualify for economic hardship because my wife works and together we will make b/t 80 and 100k/year) Forebearance lasts for up to 5 years....did I miss anything?

according to the financial folks at my school, we were told that spouse's income does not matter as educational loans are considered one's own. so your wife's salary would be inconsequential. with $160K of loans, you're almost guaranteed to qualify for economic hardship on a resident's salary. also, if you consolidate with Direct Loans while you're in school, you still get your 6 mo grace period and then deferrement happens.
also, instead of using your residency monthly salary to meet the need of economic hardship, you can also use your previous year's tax return. and if you're like most medical students, that should also place you well within the economic hardship range and may be able to do so the following year as well since for 2005, you'll probably only be earning a salary for the last 6 mo.

 

[KungPOWChicken]

Im a third year who won't be taking out loans during 4th year and could make loan payments during fourth year. Would it be possibe for me to consolidate this summer.

 

[southerndoc]

Does it matter who you consolidate with? How do I find out who to consolidate with?

No. Federal guidelines regulat consolidation loans. The only advantage to consolidating with one company v. another is the incentives (i.e., reduced interest for direct payment/ETF transactions, reduced interest for on-time payments, cash back incentives for on-time payments, etc.)

The Department of Education publishes the new rates in May. You have 30 days to consolidate at that rate. If you wait until after the new rates take effect, then you consolidate at the new rate. This could be less (not likely for 2006) or more.

I think spikeyhairedgirl is correct with her statement that only your income is factored into economic hardship calculations. (I could be wrong, but I think that's correct.)

She is also correct that if you consolidate while enrolled in school, you should still get a 6-month grace period. If you consolidate during the grace period, then you surrender the grace period (many companies will hold your application until the grace period ends if you ask them... Sallie Mae did this with mine).