Calling the wise
@bc65!!!
Thanks for the compliment, but your confidence in me is misplaced, as student loans are not my area of expertise. However, since I'm here, I'll chime in. As one of my surgery attendings used to say, "I'm often wrong, but never in doubt."
I applied with my co-signers and got offer a private medical student loan at the APR of 4.85%, full deferment and this is a fixed rate. This is the first time that I ever applied for student loan. As such, I don't know whether this rate is a good one. People at school assured me that this will be the best I could ever get. However, I find the rate to be rather high in comparison to the fed rate.
I'm not very familiar with the intricacies of student loans, but I agree with a poster above, 4.85% is lower than the Federal loans available to med students, currently at 6.8%, which, incidentally, is still low by historical standards. Student loans were 12% in the 1980's. Mortgages were 7.5% in the early 2000's. So, if 4.85% is a fixed rate on a student loan , it's a great deal.
Of course, you won't have the benefits of the repayment plans such as IBR and PAYE, and PSLF, but as a foreign student, you probably wouldn't have had access to them anyway, and in any event, most students refinance and pay off the loans early anyway.
I have seen residents get loans refinanced at rates that low and lower, but those loans are a safer bet for the lender, since the borrowers have already finished med school, and often residency as well. If this is indeed a fixed rate, perhaps it's because of the co-signing, as you suggested.
I think I got such good rates because I have very good cosigners.
The big problem in this thread is for the co-signer. It's a huge risk, and such loans often destroy families, when the borrower can't or won't pay back the loan. I realize that this is a special case, as it's for med school tuition, but there are still risks for the co-signer. You may not graduate, or get kicked out for some violation or other.
My advice to co-signers would be not to sign. For a small loan, I would recommend giving the money as a gift, rather than lending it. If you lend money to a friend you will lose the friend, as they will stop returning phone calls so as not to have to pay the loan back. People who borrow from friends or need co-signers often won't ever be able to get it to pay back the loan. So as a general rule, don't co-sign unless you can afford to pay back the loan without difficulty or regret in the event of default.
Fortunately for OP, his uncle probably won't see my post.
Question regarding the bolded: Does that mean that if my loan balance is 10,000.00/year then everyday the interest charge for that first year is the same because the outstanding balance won't capitalize until after 4 years, when I enter the repayment period? And the second year, after another 10,000.00 is taken out the daily interest charge will only be double?
If I understand that question correctly, then yes. They mean that you will owe simple interest during the deferral period, but that interest won't compound during that deferral period. So yes, every year you would owe the interest for the principal, but you won't start paying interest on the interest you owe until the deferral period ends. At that point, the accumulated interest that you owe will be added to the loan, and at that point the loan will compound, i.e. you will start paying interest on the unpaid interest which has already accumulated.
Understand that all loans are subject to compound interest. However, since almost all loans have you paying off the interest you owe each month, plus some principal, you don't actually see any compounding. Most loans in which you don't pay the interest would have that interest compound from the beginning, so this feature is slightly better for you, but the deferral period is relatively short, so I don't think the financial benefit of this temporary lack of compounding is enormous. It would be even better to have a student loan that had no interest accumulation during a deferral period, but we take what we can get.
he odds of you dying (except by suicide, which they won't cover anyway) are so small that such policies are cheap.
I agree, if the loan doesn't have built in life and disability insurance, make sure that you have life and disability insurance to protect the co-signer.
As for suicide, I believe that most life insurance policies actually cover suicide, but only after the policy has been in place for a year or two. I guess they assume that someone really depressed and planning suicide wouldn't be able to wait that long to collect on the policy.
