Credit Rating and Loans

[MD13]

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Hi--I posted this on a school-specific page, but maybe I'll get more luck here:

I've just started looking into financial stuff re: med school and I had a couple questions. Will a higher credit rating allow you to get better loans/etc, or does everyone get the same type of loan/interest rate/etc.

Is Stafford the best type to get for a med student? (I assume private loans have a much higher interest, but are there other options?)

If I remember correctly, one receives a certain amount of no-interest federal loans, a certain amount of low-interest federal loans and the rest will be covered by institutional loans (which I assume are of much lower interest than private loans we can get elsewhere?)..is this correct? If so, then I assume that these institutional loans (covering all expenses including tuition/fees/housing/etc) are guaranteed for all students, correct?

 

[yadayadadude]

Will a higher credit rating allow you to get better loans?

Not really. Interest rates are fixed on federal student loans. There is a minimum credit-worthiness required to get GradPlus loans, but aside from that, everyone's in the same boat.

Is Stafford the best type to get for a med student?

Yes, with the exception of Perkins loans, which you may or may not get. Perkins loan allocation is school dependent and, frankly, kind of mysterious. If you do get them, they rock: 5.0% interest and 9 month grace period following graduation.

If I remember correctly, one receives a certain amount of no-interest federal loans, a certain amount of low-interest federal loans and the rest will be covered by institutional loans (which I assume are of much lower interest than private loans we can get elsewhere?) ... is this correct?

Not really.

You are eligible for $8500/year in subsidized Staffords which carry a fixed interest rate of 6.8%. The feds pay the interest during school. You can get another $32500 in unsubsidized Staffords/year. Same interest rate, but you get to pay the interest while you're in school (i.e., it accrues and the whole mess capitalizes when you enter repayment). Some people won't qualify for the subsidized loans, but most people do. If you don't get the subsidized, you can take out that amount in unsubsidized. In other words, there's a $40500 annual cap on Stafford loans. (This number is a little squishy and may be increased proportionately if your school argues that you have a 10 or 11 or 12 month school year.) If you need more than $40500, you can take GradPlus loans up to the total cost of attendance set by your school, minus any other aid. GradPlus loans carry a fixed 8.5% interest rate and the interest accrues while you're in school.

So if the total COA at your school is, say, $60,000/year, you could potentially borrow

-$8500 in subsidized Staffords
-$32500 in unsubsidized Staffords
-$19500 in GradPlus

None of this is exactly "guaranteed" except for the unsubsidized Staffords. You have to have somewhat decent credit to get the GradPlus and if you have a ton of cash floating around you may not get the subsidized Staffords. But most medical students get the above loans with minimal hassle.

Some schools may throw in some instututional aid in the form of low interest loans or grants, but this is very school dependent. Unless you're thinking of a specific school that you know offers this kind of aid, I wouldn't count on it.

 

[MD13]

thanks a lot! That was very helpful