deferring loans during residency-mods please don't move to fA forum

[daisygirl]

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I found out today that I will be uneligible for deferring my loans during residency due to my enormous salary (48,500) 🙄 I simply cannot afford to pay my loans during residency since the cost of living is so high in NY. I would also prefer to hold off on choosing forebearance since I'd like to use this later during fellowship.

Are any other future pgy-1's also having an issue with deferring? If so, how are you trying to remedy the situation. Does your choice of lender affect your ability to defer? My lender is T.H.E., and apparently I have to deal with some company named Great Lakes with regards to haggling over this deferring issue.

Any insight/advice would be appreciated since I am very soon to be snowed over in debt.

 

[bigeyedfish]

Do you not have very much in loans? Are you consolidated? If you are make sure they are using the 10 year payments when calculating for deferment. They are required to.

 

[daisygirl]

Do you not have very much in loans? Are you consolidated? If you are make sure they are using the 10 year payments when calculating for deferment. They are required to.

I have 144,900 overall. I consolidated the first three years of debt prior to July of last year. I have an additional thirty-something thousand from fourth year which is not consolidated. I most likely will consolidate this prior to July (seperately in order to keep the low interest rate that I have on the first consolidation).

I'm not under the assumption that I have a low loan balance. While I agree that it isn't that horrendous, I do believe that I am within the mean of the average medical school graduate.

I have no idea if they used 10 year payments when calculating for deferrment. I will make another call to the company tomorrow. Thanks for your help.

Anyone else 😳

 

[pedicards]

I think you can use your 2005 income to determine whether you qualify for deferment beginning in 2006. That's what a THE rep told me, although I haven't tried to do it myself. You have to renew your deferment annually, so you should qualify for PGY-2 (since you will earn 1/2 annual salary in 2006), but might not qualify after that.

 

[Mumpu]

So the Orman book claims you cannot defer/forbear if you consolidate. Doesn't make sense to me and I don't recall ever reading about this when I did my consolidation.

 

[Blade28]

Maybe she's talking about a specific situation. I consolidated by July 1st (soon after graduation) and currently have my loans deferred.

 

[pruritis_ani]

An idea...get a job now that pays squat, get a payroll stub and use that income for your deferment calculation. I am under the impression that they must go by payroll stub (not tax forms or a contract) when calculating deferment. So, before residency starts, get a job for a weekend through a temp agency, get a paycheck for a day of work, and use that paycheck for your deferment form. With that low of an income, you should qualify.

 

[Idiopathic]

So the Orman book claims you cannot defer/forbear if you consolidate.

Absolutely not right. You do lose your grace period, but you must be able to defer/forbear.

 

[14022]

If you consolidated with a private company (like the degenerates that send you unsolicited emails and postcards), then you may have lost your grace period. But it doesnt sound like you did this. If you only have loans from THE, I believe you can only consolidate with them anyways. The private companies tempt you with very high discounts for paying all payments on time. They have fine print about strict conditions and losing your deferment privileges may be one of them. This way they get you to fail to make a payment on time and lose your discounted rates. This is exactly why very few (like <10%) actually meet all the conditions to qualify for the excessively low rates promised by these random lenders.

If you consolidated with T.H.E. (which it sounds like you did) then you are dead wrong about your consolidation eligibility. You are considered in economic hardship if more than 20% of your gross income (ONLY yours; your spouses does not count) goes to student loan payments and you are easily in this range. But as a previous poster indicated, if you are a fourth year now, you had no income in 2005 and did not fill out an income tax form so you have no income, meaning any student loan payment will put you in economic hardship. See deferment info below.

http://www.northstar.org/Consolidation/Deferments.aspx


Even next year, your monthly income will be $4000 per month, and your loan payment will definately be over $800 (probably even over $1000-1200) per month.

I talked to THE last week and they told me this. To get approved for deferment, fill out the form below. You should probably consolidate your 4th year loan since rates is already determined to go up another 1-2% in July and likely will not go back down any time soon. Under section 2, put June 1st in for the date since I believe repayment begins then for fourth years that consolidated while in school. Then Check box number 5 (since you do not currently work) and put "0" after "My monthly income is _____" In the margin, write that you did not have income in 2005 and you did not fill out an income tax return (if applicable, of course).

http://www.northstar.org/downloads/defer_hardship.pdf

 

[fishmonger69]

I have 144,900 overall. I consolidated the first three years of debt prior to July of last year. I have an additional thirty-something thousand from fourth year which is not consolidated. I most likely will consolidate this prior to July (seperately in order to keep the low interest rate that I have on the first consolidation).

might want to do the math on this one. current rate for consolidation of your year 4 debt will be at 4.77% if you act before the rate increase in July. The weighted average of all your debt for the past 4 years will be closer to 3.3%. (versus 2.77% on the 3 years of consolidated loans and 4.77% on the final year). If you run the numbers on your trusty financial calculator you'll see it's a better deal to go ahead and consolidate all loans into one.

If you consolidated with a private company (like the degenerates that send you unsolicited emails and postcards), then you may have lost your grace period. But it doesnt sound like you did this. If you only have loans from THE, I believe you can only consolidate with them anyways. The private companies tempt you with very high discounts for paying all payments on time. They have fine print about strict conditions and losing your deferment privileges may be one of them. This way they get you to fail to make a payment on time and lose your discounted rates. This is exactly why very few (like <10%) actually meet all the conditions to qualify for the excessively low rates promised by these random lenders.

first off, interesting name. economics or options buff? regarding the above statement, there are some third parties that actually do make good on promises of lower rates if you follow their 'terms' along with allowing for deferment/forbearance. an example is www.nextstudent.com. i would agree though that everyone should read the terms before signing anything.

 

[daisygirl]

Thank you so much scholes 😀 I'm going to call THE again tomorrow.

Also, thanks to all those who have replied so far. 🙂

 

[daisygirl]

might want to do the math on this one. current rate for consolidation of your year 4 debt will be at 4.77% if you act before the rate increase in July. The weighted average of all your debt for the past 4 years will be closer to 3.3%. (versus 2.77% on the 3 years of consolidated loans and 4.77% on the final year). If you run the numbers on your trusty financial calculator you'll see it's a better deal to go ahead and consolidate all loans into one.

Sorry, but I need some help here due to my being economically illiterate 😳
I don't understand how consolidating all of my loans using the current interest rate would create a weighted average that would wind up being much less than the current rate. I apologize again for my stupidity, and I am very thankful for your insight 🙂

 

[fishmonger69]

Sorry, but I need some help here due to my being economically illiterate 😳
I don't understand how consolidating all of my loans using the current interest rate would create a weighted average that would wind up being much less than the current rate. I apologize again for my stupidity, and I am very thankful for your insight 🙂

no problem. first, the weighted average:

say you had $95k in loans consolidated for the first 3 years @ 2.77%. then, you had $35k for your fourth year loans @ 4.77%. this comes out to a 73/27 split. if you take the weighted average of the rates, you get (.73*2.77) + (.27*4.77) == 3.31% rate approximately.

Now, you can check payments and future values of those payments using each scenario.

scenario 1 is keeping 2 separate consolidated loans at $95k (2.77%) and $35k (4.77%) --> payment is $388.84 (loan 1) + $183.00 (loan 2) == $571.84 * 360 payments == $205,862.40 total payoff

scenario 2 is consolidating together $130k (3.31%) --> $570.06 == $205,221.60 total payoff

i confess it's not much, but if you get breaks on the rate because of 1) automatic drafts each month and 2) on time payments for 36months you can drop the rate to 3.1 for the first 3 years and then to 2.1 for the final 27 years. total savings of this comes to about [($570.06-$555.12)*36] + [($570.06-$487.03)*324] == $537.84 + $26,901.72 == $27,439.56 or 48 months of payments at the original $570.06 monthly payment. that's four years off the note, not bad.

these are estimates of course and might be slightly different than the actuals depending on number of compoundings, etc. but i would suggest talking with your lender to see what they can offer.

10 year deferment payment is about $1273.98/month, about 51% of your net income assuming $40k annual with 25% tax bracket. remember, these are general assumptions but should be quite close to your situation.

 

[CameronFrye]

Sorry, but I need some help here due to my being economically illiterate 😳
I don't understand how consolidating all of my loans using the current interest rate would create a weighted average that would wind up being much less than the current rate. I apologize again for my stupidity, and I am very thankful for your insight 🙂

You've already consolidated 3 years worth of loans at 2.77%. Your 4th year loans will be consolidated in at the current rate. Therefore, roughly 75% of your loan will still be at the 2.77% and the rest will be at the 4+%. That works out that your final rate will be in the 3's. Really, the only way consolidating can hurt you is that they round up the weighted interest rate, but I think the benefits of locking in a rate far outweigh that slight negative.

Also, you should easily qualify for deferrment.

 

[CameronFrye]

the only rub might be deferment with a monthly payment of $575 and after tax income > $2500/month. good luck.

When determining eligibility for deferrment, you use the monthly payment for a 10 year repayment, even if you are doing a 30 year plan. She should be fine.

 

[fishmonger69]

When determining eligibility for deferrment, you use the monthly payment for a 10 year repayment, even if you are doing a 30 year plan. She should be fine.

you're right, my mistake.

 

[APACHE3]

I'm buying a house. And the mortgage company wanted a statement from Sallie mae that my loans can be deferred for 12 months. My federal loans are deferred until July then I qualify for a 60 month foreberance. Since I will not do a fellowship, this wont be a problem. Now my private loans through Nellia mae are a different story, I'll get a deferment until April 2007 (which is what the mortgage company wants) but I'm not sure what my options are after that. Theres no way I can pay the actual monthy installment (which will rival my mortgage payment). What option are available for the private loan "deferment"...economic hardship? I'm sure I'll work it out, but just curious..Thanks! 🙂

 

[southerndoc]

If I remember correctly, there is no limit to the amount of years you may claim forbearance during residency. There is an option for "graduate fellowship" deferment that is separate from forbearance.

When calculating if you are eligible for hardship, keep in mind that you base this on a 10-year payment schedule, regardless of what you choose. I chose a 30-year payment schedule, but for calculation purposes, you always use 10%.

 

[Methyldopa]

no problem. first, the weighted average:

say you had $95k in loans consolidated for the first 3 years @ 2.77%. then, you had $35k for your fourth year loans @ 4.77%. this comes out to a 73/27 split. if you take the weighted average of the rates, you get (.73*2.77) + (.27*4.77) == 3.31% rate approximately.

Now, you can check payments and future values of those payments using each scenario.

scenario 1 is keeping 2 separate consolidated loans at $95k (2.77%) and $35k (4.77%) --> payment is $388.84 (loan 1) + $183.00 (loan 2) == $571.84 * 360 payments == $205,862.40 total payoff

scenario 2 is consolidating together $130k (3.31%) --> $570.06 == $205,221.60 total payoff

i confess it's not much, but if you get breaks on the rate because of 1) automatic drafts each month and 2) on time payments for 36months you can drop the rate to 3.1 for the first 3 years and then to 2.1 for the final 27 years. total savings of this comes to about [($570.06-$555.12)*36] + [($570.06-$487.03)*324] == $537.84 + $26,901.72 == $27,439.56 or 48 months of payments at the original $570.06 monthly payment. that's four years off the note, not bad.

these are estimates of course and might be slightly different than the actuals depending on number of compoundings, etc. but i would suggest talking with your lender to see what they can offer.

10 year deferment payment is about $1273.98/month, about 51% of your net income assuming $40k annual with 25% tax bracket. remember, these are general assumptions but should be quite close to your situation.

Although I agree with you reasoning, I would not consolidate all the loans together because you are forgetting that inflation is in fact working for you on that 2.77% rate, meaning that even though you are paying technically "more" than you borrowed on your loan because of the interest rate, in the long run you're really paying back less because the inflation rate is a lot higher than the interest rate (ie the US dollar is getting devalued as time goes on).

For example, a $10,000 loan 30 years ago was a significant amount of money but now is very little in comparison (because the dollar has become more devalued).

 

[lilycat]

I agree with fishmonger on consolidating all four years together. The 3.3% is still a great rate, and while I appreciate methyldopa's point about inflation, for me, the relatively small difference between 2.7 and 3.3 is worth it because of the ease of having all of my fed. loans bundled into one payment -- that's one less bill to keep track of every month.

 

[CameronFrye]

Although I agree with you reasoning, I would not consolidate all the loans together because you are forgetting that inflation is in fact working for you on that 2.77% rate, meaning that even though you are paying technically "more" than you borrowed on your loan because of the interest rate, in the long run you're really paying back less because the inflation rate is a lot higher than the interest rate (ie the US dollar is getting devalued as time goes on).

For example, a $10,000 loan 30 years ago was a significant amount of money but now is very little in comparison (because the dollar has become more devalued).

If you consolidate all 4 years together, you will still be paying 2.77% interest on those first three years (and 4.7% on your 4th year debt). Consolidating doesn't really affect your interest rate (exception: they do round up the weighted average so that may cost you a fraction of a percentage point). Also, 3.3% is pretty close to the historical inflation rate. If you figure in your interest rate deductions for paying your loan bills on time and automatic debit, then that should get you even closer to (or below) the historical inflation rate.

I guess if you're planning on paying off your 4th year debt really quickly and just letting the debt from the first 3 years ride for 30 years, then I guess that's a legitimate reason for not consolidating. Of course, the variable rate is probably going to jump over 6% this July, so you're gonna want to pay off that 4th year debt really quickly.

 

[fishmonger69]

Although I agree with you reasoning, I would not consolidate all the loans together because you are forgetting that inflation is in fact working for you on that 2.77% rate, meaning that even though you are paying technically "more" than you borrowed on your loan because of the interest rate, in the long run you're really paying back less because the inflation rate is a lot higher than the interest rate (ie the US dollar is getting devalued as time goes on).

For example, a $10,000 loan 30 years ago was a significant amount of money but now is very little in comparison (because the dollar has become more devalued).

i agree with your point, but it's the effective rate of the entire loan that makes me smile. 3.1% immediately with 25 teenies discount and 2.1% after 3 years with that 100 teenies discount. add to that only having one payment automatically deducted each month at a rate 1.5% below historical inflation rate and i'm a happy camper.

i'm not saying my way is right, but it's right for me. everyone needs to run their own numbers and factor in their own situations.

 

[Methyldopa]

i agree with your point, but it's the effective rate of the entire loan that makes me smile. 3.1% immediately with 25 teenies discount and 2.1% after 3 years with that 100 teenies discount. add to that only having one payment automatically deducted each month at a rate 1.5% below historical inflation rate and i'm a happy camper.

i'm not saying my way is right, but it's right for me. everyone needs to run their own numbers and factor in their own situations.

Either way you consolidate, you're pretty golden!

 

[Plastikos]

i agree with your point, but it's the effective rate of the entire loan that makes me smile. 3.1% immediately with 25 teenies discount and 2.1% after 3 years with that 100 teenies discount. add to that only having one payment automatically deducted each month at a rate 1.5% below historical inflation rate and i'm a happy camper.

i'm not saying my way is right, but it's right for me. everyone needs to run their own numbers and factor in their own situations.

So if i were to consolidate again i dont necessarily lose the rate on the first 3 years. Then the company makes a weighted avg. so im not really going to pay the 4.7%. Is this standard practice?

If all that is right i will be consolidating shortly.

 

[peptidoglycan]

Try these guys:

www.graduateleverage.com

They came to my med school during 4th year and explained their program. They take care of everything for us and made sure we got our full grace periiod, consolidation and deferment. When problems came up with my husband (he's an "old borrower" with debt from the early 90s), they took care of every detail for us. All for free, too. Best decision I ever made (besides the whole marriage thing).

From their webpage:
Graduate Leverage, the student loan consolidation specialists, developed its educational debt management service after recognizing that college student debt was reaching precarious levels. During a field study at Harvard Business School, the GL team analyzed the student loan industry and recognized a heightened sensitivity to questions involving student loan consolidation and other debt management issues facing students today. Escalating tuition costs coupled with cutbacks in governmental financial support combined for dangerously high debt-to-income levels for graduates of even the top professional fields.
As the study progressed, team members from Wharton, UC Irvine, and Boston College came onboard. In consultation with experts in the financial field, the entire team developed a web information resource for managing student debt which covered student loan consolidation, debt refinancing, restructuring, and forgiveness. Initially targeted toward debt relief for graduates entering the non-profit arena, this web-resource has evolved into a full-service student debt management service with a Flash information presentation, student loan consolidation suggestions, and an overview of the entire student loan consolidation process for recent grads of schools across the nation.

Today GL works with the nation's top financial aid offices and student body organizations to communicate an unbiased message on debt management. Through the use of on campus presentations, interactive media and one-on-one counseling the team has helped graduates more effectively manage their debt.