Is average med school indebtedness the figure before or after interest?

[LondonFog1997]

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Hey SDN!

I was wondering if the figures given out on the MSAR for average indebtedness is before or after interest. Is the average med school indebtedness figure of “200,000” also considering interest? I am wondering because I am looking to take out 45k a year and was wondering if that would place me at the average. Would I say I’m taking out 180k of debt?

Also wanted to thank my undergrad for not teaching me about financial literacy!

 

[LondonFog1997]

Also please move this to general discussion... I realized I can’t use the internet either.

 

[deleted966008]

Yes I believe the numbers reported are calculated at the time of graduation, so before interest accrues.

 

[LondonFog1997]

Yes I believe the numbers reported are calculated at the time of graduation, so before interest accrues.

I was under the belief that interest accrues every year?

 

[deleted962973]

I was under the belief that interest accrues every year?

Interest doesn't accrue until you graduate.

 

[LondonFog1997]

Interest doesn't accrue until you graduate.

I was reading about the Direct Stafford loan and this is what I read about interest, which is why I thought interest accrued every year:

• If you choose not to pay the interest while you are in school and during grace periods and deferment or forbearance periods, your interest will accrue (accumulate) and be capitalized (that is, your interest will be added to the principal amount of your loan).

Am I missing something?

 

[MedApplicant.com]

Those "average" numbers can be deceiving depending on how much help an applicant is getting from family or their own funds, but an applicant who is totally reliant on student loans for everything can easily expect to add $100,000 to that number even before interest. Sad but true!

 

[deleted966008]

I was reading about the Direct Stafford loan and this is what I read about interest, which is why I thought interest accrued every year:

• If you choose not to pay the interest while you are in school and during grace periods and deferment or forbearance periods, your interest will accrue (accumulate) and be capitalized (that is, your interest will be added to the principal amount of your loan).

Am I missing something?

I could be mistaken but I believe the best loan option is the Grad PLUS which does not accrue interest during school and has an upper borrowing limit that should be enough to cover your needs.

 

[KaioKaizen]

Many applicants have their parents' money to help them through so that number is under the average you can expect if you don't have aid from family

 

[deleted966008]

Those "average" numbers can be deceiving depending on how much help an applicant is getting from family or their own funds, but an applicant who is totally reliant on student loans for everything can easily expect to add $100,000 to that number even before interest. Sad but true!

This is very true. Median would be far more useful than mean (as in most things), but a select few with close to $0 debt make the numbers look smaller so that's probably why the choose to report the latter.

 

[slice33]

I could be mistaken but I believe the best loan option is the Grad PLUS which does not accrue interest during school and has an upper borrowing limit that should be enough to cover your needs.

Pretty sure that Grad Plus does accrue interest during med school. It also has a higher interest rate and fee than the Stafford. The problem with the Stafford is that it is capped at around 42K/year where Grad Plus is not.

 

[deleted966008]

Pretty sure that Grad Plus does accrue interest during med school. It also has a higher interest rate and fee than the Stafford. The problem with the Stafford is that it is capped at around 42K/year where Grad Plus is not.

Okay I must have mixed the two up but does Stafford accrue interest in school? If OP took out the max on Stafford and then just a few K of the Grad PLUS they should be able to graduate with minimal interest

 

[slice33]

Okay I must have mixed the two up but does Stafford accrue interest in school? If OP took out the max on Stafford and then just a few K of the Grad PLUS they should be able to graduate with minimal interest

Unfortunately both accrue interest during school ...

 

[LondonFog1997]

Okay I must have mixed the two up but does Stafford accrue interest in school? If OP took out the max on Stafford and then just a few K of the Grad PLUS they should be able to graduate with minimal interest

Hmm my school offered me a $47k max Stafford loan, so maybe they changed the maximum amount recently?

 

[deleted962973]

Okay I must have mixed the two up but does Stafford accrue interest in school? If OP took out the max on Stafford and then just a few K of the Grad PLUS they should be able to graduate with minimal interest

I’m fairly sure Stafford loans don’t accrue interest while in school. The interest is paid for by the government on subsidized loans and can be deferred throughout enrollment for unsubsidized loans. Unless these terms apply only to undergraduates? I’m less familiar with Grad PLUS. Check out https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized

 

[deleted962973]

OK I’ve done some more research... under the Budget Control Act of 2011, subsidized Stafford loans are no longer offered to graduate students. You won’t have to make payments on the principal or interest during medical school, but the interest will accrue. It’s added to your principal after graduation @LondonFog1997 🙁

Damn and here I was this whole time only calculating interest for ~5 years of residency. You actually need to calculate the interest for med school and residency together. Wow what a f*ing bummer

 

[LondonFog1997]

OK I’ve done some more research... under the Budget Control Act of 2011, subsidized Stafford loans are no longer offered to graduate students. You won’t have to make payments on the principal or interest during medical school, but the interest will accrue. It’s added to your principal after graduation @LondonFog1997 🙁

Damn and here I was this whole time only calculating interest for ~5 years of residency. You actually need to calculate the interest for med school and residency together. Wow what a f*ing bummer

Brb crying about the government

 

[efle]

People who take $0 aren't factored into the AAMC debt cards. It's the average among borrowers. It is still a little deflated from people who get partial assistance from their parents and take only partial loans to cover the rest.

Whether or not interest accrues depends on the kind of loan

 

[LondonFog1997]

I believe it works like this
1) GradPlus does accrue
2) Each year is considered a separate loan
3) It is simple interest compounding on principle only
4) typically, at the end of 4 years, the loans and interest are rolled into one new loan (recapitalized)

Example: 5% interest loan with $40,000 loan per year
MS 1: $40,000 + ($2000 interest x 4 years) = $48,000
MS 1: $40,000 + ($2000 interest x 3 years) = $46,000
MS 1: $40,000 + ($2000 interest x 2 years) = $44,000
MS 1: $40,000 + ($2000 interest x 1 years) = $42,000

Totals = $160,000 + $20,000 = $180,000 new loan total at graduation

Oh this is interesting. I didn’t realize each is considered a separate loan. I thought every year the loans got consolidated. This provided at least some comfort.

 

[Stellaartwa]

A lot of misinformation here. Slice and Gonnif are correct. The loans offered to graduate students are UNSUBSIDIZED stafford and Grad plus. Both accrue interest starting at disbursement (ie: week two or so of med school). That interest (6.8% for Stafford and 7.6% for Grad Plus and the applicable origination fees ~1-2k) will capitalize when you change status. Typical med students change status at graduation when you enter repayment and at the end of residency when you end deferment. If you can pay the interest balance at these two points, you can actually save a lot of money. Professional & graduate students have an aggregate Stafford loan maximum of $138,500.

To find out how much interest you'll be accruing take your interest rate and multiply it by the balance of your loan like Gonnif did. If you want to know the daily amount take your interest rate and divide it by 365 then multiply by loan balance.
i.e.: 0.068 * $40,000 = $2720/year or 0.068/365 * $40,000 = $7.65/day.

I agree with others, average indebtedness is misleading.

 

[deleted966008]

A lot of misinformation here. Slice and Gonnif are correct. The loans offered to graduate students are UNSUBSIDIZED stafford and Grad plus. Both accrue interest starting at disbursement (ie: week two or so of med school). That interest (6.8% for Stafford and 7.6% for Grad Plus and the applicable disbursement fees ~1-2k) will capitalize when you change status. Typical med students change status at graduation when you enter repayment and at the end of residency when you end deferment. If you can pay the interest balance at these two points, you can actually save a lot of money. Professional & graduate students have an aggregate loan maximum of $138,500.

To find out how much interest you'll be accruing take your interest rate and multiply it by the balance of your loan like Gonnif did. If you want to know the daily amount take your interest rate and divide it by 365 then multiply by loan balance.
i.e.: 0.068 * $40,000 = $2720/year or 0.068/365 * $40,000 = $7.65/day.

I agree with others, average indebtedness is misleading.

Thanks for explaining!

 

[Gilakend]

The cheapest public school in my state is over 215,000 COA without parental help or scholarships.

If you don't have parental help I would mentally prepare for 300,000 in debt.

 

[OchemOficionado]

Okay I must have mixed the two up but does Stafford accrue interest in school? If OP took out the max on Stafford and then just a few K of the Grad PLUS they should be able to graduate with minimal interest

I’m fairly sure Stafford loans don’t accrue interest while in school. The interest is paid for by the government on subsidized loans and can be deferred throughout enrollment for unsubsidized loans. Unless these terms apply only to undergraduates? I’m less familiar with Grad PLUS. Check out https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized

Stafford loans can be subsidized (gov pays the interest while in school) or unsubsidized. Grad students are not eligible for subsidized loans. A grad plus loan is an unsubsidized loan with a higher interest rate. My guess is that medical students have one unsub loan (max is about 20k) and a grad plus loan (with higher interest). All of this info can be found on studentloans. gov.

Hope that helps!

A lot of misinformation here. Slice and Gonnif are correct. The loans offered to graduate students are UNSUBSIDIZED stafford and Grad plus. Both accrue interest starting at disbursement (ie: week two or so of med school). That interest (6.8% for Stafford and 7.6% for Grad Plus and the applicable disbursement fees ~1-2k) will capitalize when you change status. Typical med students change status at graduation when you enter repayment and at the end of residency when you end deferment. If you can pay the interest balance at these two points, you can actually save a lot of money. Professional & graduate students have an aggregate loan maximum of $138,500.

To find out how much interest you'll be accruing take your interest rate and multiply it by the balance of your loan like Gonnif did. If you want to know the daily amount take your interest rate and divide it by 365 then multiply by loan balance.
i.e.: 0.068 * $40,000 = $2720/year or 0.068/365 * $40,000 = $7.65/day.

I agree with others, average indebtedness is misleading.

EDIT: Just saw this post and it is spot on. Just wanna add that the interest rates are subject to change each year and the fees that are taken out upon disbursement are called origination fees. You may see that you were awarded 20k on your award letter, but when it disburses to your account it's only 19k. That's why.