Hello everyone. I am going to start pharmacy school this August and needed some advice on financial issues. Pharmacy school is definitely a big financial decision since most of us will probably get student loans to pay for it. My situation is that I already have over 30k in student loans from undergraduate and vocational college. Since going to pharmacy school will defer payments on them, is it better to continue to defer them or I was thinking to pay interest only during pharmacy school so that the loan doesn't build up to a lot more after I finish school. Now I know there are different ways to look at this..one way could be since pharmacy school loans will already be a lot, it doesn't really matter if my previous loans add up since I will be in big debt anyway..another is to keep my debt as minimal as possible. Anyways if I pay interest only during pharmacy school, it would seem weird that I am using some of my pharmacy school student loans to pay for my previous loans. I am sure there are some students in similar situation and it would be a big help to get some good advice on it.
Help!! Financial Advice
- Thread starter dPharm1
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Don't pay on it. Using loan money to pay off loan interest is still debt. I don't see how this helps you in any way...if you have extra money you should pay on the pharmacy school loans, if anything, because they will most likely be at a higher interest rate.
Since you're getting loans for your PharmD, you're screwed anyway....your interest on those will far outweigh your interest at this point as there are no longer subsidized loans for graduate students. http://www.usnews.com/education/bes...13/grad-students-to-lose-federal-loan-subsidy
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I am certainly not the most knowledgeable on the subject of student loans, but I have worked with other loans, so I'll give it a shot. 🙂
If I understand properly, you are going to be paying the undergrad loan interest with another loan, rather than deferring. In either case, you will be converting interest to loan principal for the duration of pharmacy school. It seems to me that the only advantage to paying with the grad loans are if your undergrad loans are at a higher cost (read interest rate). If the grad loans are higher interest, you may be better off not taking as much during pharma school rather than paying the interest.
I have no idea of the tax ramifications of paying the loan interest with other loans, during a year of little or no other income, but I would be interested if anyone does know.
The other thing to consider is the opportunity cost of using your limited grad loan moneys to pay interest. The only reason it is good to finance your living & educational expenses with loans is to allow you to pursue what you couldn't otherwise. If you need those funds later in the year (for example, for car repairs so you can get to class), if you haven't deferred the undergrad loans, you could be stuck defaulting on them or taking other loans at worse terms to cover the necessary, unexpected expense.
If you do decide that the most cost effective solution is to pay on the undergrad loans, is it possible to choose to defer & make "optional" interest payments? This way, you could see what you have left at the end of the semester (after the next disbursement) & throw that at the loan. Just an idea.
If I understand properly, you are going to be paying the undergrad loan interest with another loan, rather than deferring. In either case, you will be converting interest to loan principal for the duration of pharmacy school. It seems to me that the only advantage to paying with the grad loans are if your undergrad loans are at a higher cost (read interest rate). If the grad loans are higher interest, you may be better off not taking as much during pharma school rather than paying the interest.
I have no idea of the tax ramifications of paying the loan interest with other loans, during a year of little or no other income, but I would be interested if anyone does know.
The other thing to consider is the opportunity cost of using your limited grad loan moneys to pay interest. The only reason it is good to finance your living & educational expenses with loans is to allow you to pursue what you couldn't otherwise. If you need those funds later in the year (for example, for car repairs so you can get to class), if you haven't deferred the undergrad loans, you could be stuck defaulting on them or taking other loans at worse terms to cover the necessary, unexpected expense.
If you do decide that the most cost effective solution is to pay on the undergrad loans, is it possible to choose to defer & make "optional" interest payments? This way, you could see what you have left at the end of the semester (after the next disbursement) & throw that at the loan. Just an idea.
Thank you for the advice and also to JonPrePharmD. I will definitely keep the interest rate and the money for rainy days into great consideration when I think about the best plan. I will more likely defer the previous loans and plan out my personal expenses carefully.
