Loan interest question

[def1]

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Hey guys I'm trying to figure out how much financial aid loans I should take out. My school is offering me 48000 but I don't think I am going to need that much. I have created a budget that allows for only 27000 (this is with a lot of cushion as well), however I would hate to run out of money towards the end of the year and not have any options. As far as I can tell, once you only accept a partial amount then you can't ask for more later. I am considering taking out the full amount for stafford loans which is 40000.

That is probably way over what I am going to need but I figure whatever I don't use I can just subtract from what I take out next year. This will allow me to figure out what my true budget will be without risking running out of money. However I don't quite understand how the interest will work. I figure if I take out 40,000 right from the 1st year instead of 27000, I will have an extra 13000 dollars on the principal adding to my interest. I am not sure if this will make a significant difference in overall amount I will owe at the end of my loan repayment.

Does anyone know how much that initial interest on the 40000 will affect the entire loan even though the final principal will be the same?

 

[Freddie Mercury]

As far as I can tell, once you only accept a partial amount then you can't ask for more later.

Actually, I'm pretty sure you can 🙂 I know my school's financial aid office allows this; in fact I think its all part of the national student loan programs to allow this. Might want to check with your particular schools financial office to see how it works there. For us, we just fill out a form requesting additional loans.

 

[Member 331305]

Assuming you do not compound interest:

$27,000 at 7% interest will accrue $1,890 of interest per year. When you graduate, you will have accrued $7,560 in interest. The total amount you owe on this loan at graduation is principal+interest*4=$34,560

$40,000 at 7% interest will accrue $2,800 of interest per year. When you graduate, you will have accrued $11,200 in interest. The total amount you owe on this loan at graduation is principal+interest*4=$51,200

Assuming my math and my understanding of how interest works is correct, then what started as a difference of $13,000 in principal will end up being a difference of $16,640 by graduation.

 

[mvenus929]

You should be allowed to request more loans up until March 1st. Don't take out an extra 13K just to provide yourself a cushion.

 

[Ost3oclast]

Actually, I'm pretty sure you can 🙂 I know my school's financial aid office allows this; in fact I think its all part of the national student loan programs to allow this. Might want to check with your particular schools financial office to see how it works there. For us, we just fill out a form requesting additional loans.

This. At my school, if we need more cash we just go give the people at financial aid a form. Done.

 

[calvnandhobbs68]

Hey guys I'm trying to figure out how much financial aid loans I should take out. My school is offering me 48000 but I don't think I am going to need that much. I have created a budget that allows for only 27000 (this is with a lot of cushion as well), however I would hate to run out of money towards the end of the year and not have any options. As far as I can tell, once you only accept a partial amount then you can't ask for more later. I am considering taking out the full amount for stafford loans which is 40000.

That is probably way over what I am going to need but I figure whatever I don't use I can just subtract from what I take out next year. This will allow me to figure out what my true budget will be without risking running out of money. However I don't quite understand how the interest will work. I figure if I take out 40,000 right from the 1st year instead of 27000, I will have an extra 13000 dollars on the principal adding to my interest. I am not sure if this will make a significant difference in overall amount I will owe at the end of my loan repayment.

Does anyone know how much that initial interest on the 40000 will affect the entire loan even though the final principal will be the same?

I think the first question is, how are you cutting that much off the suggested COA? I mean, a 21K cut is pretty deep...so I think you need to assess if that's realistic or not. Have you truly taken into account all your living expenses, school fees, etc.?

Anyway, like everyone else said, you can take out more in Stafford loans later in the year. You can also cancel all or part of a disbursement within 30 days of it being posted to your account if find during the end of the year that you have extra money and you don't really need the later disbursements. This is the exact wording from the emails I get from them:

"You have the right to cancel all or a portion of the Federal Perkins, Stafford, PLUS, or Grad PLUS Loan that has been posted to your tuition account. If you wish to cancel all or a portion of the loan disbursed, please submit the written cancellation request to your financial aid office within 30 days of the disbursement date. If you wish to cancel all or a portion of the loan more than 30 days after the date of this email, contact your financial aid office as listed below."

 

[def1]

I think the first question is, how are you cutting that much off the suggested COA? I mean, a 21K cut is pretty deep...so I think you need to assess if that's realistic or not. Have you truly taken into account all your living expenses, school fees, etc.?

Anyway, like everyone else said, you can take out more in Stafford loans later in the year. You can also cancel all or part of a disbursement within 30 days of it being posted to your account if find during the end of the year that you have extra money and you don't really need the later disbursements. This is the exact wording from the emails I get from them:

"You have the right to cancel all or a portion of the Federal Perkins, Stafford, PLUS, or Grad PLUS Loan that has been posted to your tuition account. If you wish to cancel all or a portion of the loan disbursed, please submit the written cancellation request to your financial aid office within 30 days of the disbursement date. If you wish to cancel all or a portion of the loan more than 30 days after the date of this email, contact your financial aid office as listed below."

My budget looks like this

Tuition: 16,000
Loan fees: 500
Books/supplies: 2000
Car/gas: 2000
Misc/fun:6000

I plan on continuing to live at home so that really cut out a lot of the loan I would need.

I've tried contacting my schools fin aid dept to ask if I can take out additional money later but so far haven't gotten through. I hope you guys are right though because that would be the best solution.

-edit- So I was told I could in fact take out additional money any time before the spring semester ends. Thank you guys for the information.

 

[Pons Asinorum]

I plan on continuing to live at home so that really cut out a lot of the loan I would need.

MS1 might be a good time to finally cut the umbilical cord.

 

[jturne54]

MS1 might be a good time to finally cut the umbilical cord.

This^

 

[def1]

MS1 might be a good time to finally cut the umbilical cord.

I'd rather save 60k over 4 years.

 

[Pons Asinorum]

I'd rather save 60k over 4 years.

And one day you'll have a bit more to draw from and you'll understand what you could have gotten for your $60k.

 

[SoulinNeed]

Try using this.

https://services.aamc.org/30/first/home/organizer#.UbqVTfmsj0s

It's an official tool from aamc. I'm not sure how accurate it is, though, so maybe some current med students will tell you.

 

[John Lannister]

MS1 might be a good time to finally cut the umbilical cord.

+1

Don't worry about a few K now when you will earn 200k. Use the extra $ to support yourself.

 

[John Lannister]

Hey guys I'm trying to figure out how much financial aid loans I should take out. My school is offering me 48000 but I don't think I am going to need that much. I have created a budget that allows for only 27000 (this is with a lot of cushion as well), however I would hate to run out of money towards the end of the year and not have any options. As far as I can tell, once you only accept a partial amount then you can't ask for more later. I am considering taking out the full amount for stafford loans which is 40000.

That is probably way over what I am going to need but I figure whatever I don't use I can just subtract from what I take out next year. This will allow me to figure out what my true budget will be without risking running out of money. However I don't quite understand how the interest will work. I figure if I take out 40,000 right from the 1st year instead of 27000, I will have an extra 13000 dollars on the principal adding to my interest. I am not sure if this will make a significant difference in overall amount I will owe at the end of my loan repayment.

Does anyone know how much that initial interest on the 40000 will affect the entire loan even though the final principal will be the same?

You should be allowed to request more loans up until March 1st. Don't take out an extra 13K just to provide yourself a cushion.

Do you guys understand how the loans work? The interest compounds at the end of the year. You could pay off the "extra" you borrowed at anytime. It's not a good idea to take less if you may need it.

I'm all for budgeting and not over spending. However, a few hundred extra dollars a month is helpful. To take better care of your nutrition, exercise, other things (qbanks).

If you can really save 60k, that's phenomenal. However, more often than not we're talking about 10-20k or less. And when you're going to earn a few million dollars in the next few decades, I'm not sure if stressing out over 10k and possibly making school rougher (possibly making it more difficult to match) - is worth the risk. Look at it like this, if school goes terrible and you don't match, that can cost 200k (per year of not matching). On the up side, you could become a phenomenal applicant and earn 5-6 million+ in a few decades.

 

[mvenus929]

Do you guys understand how the loans work? The interest compounds at the end of the year. You could pay off the "extra" you borrowed at anytime. It's not a good idea to take less if you may need it.

I'm all for budgeting and not over spending. However, a few hundred extra dollars a month is helpful. To take better care of your nutrition, exercise, other things (qbanks).

If you can really save 60k, that's phenomenal. However, more often than not we're talking about 10-20k or less. And when you're going to earn a few million dollars in the next few decades, I'm not sure if stressing out over 10k and possibly making school rougher (possibly making it more difficult to match) - is worth the risk. Look at it like this, if school goes terrible and you don't match, that can cost 200k (per year of not matching). On the up side, you could become a phenomenal applicant and earn 5-6 million+ in a few decades.

13K is not a couple extra hundred dollars per month. It's an extra thousand. Unless you are atrocious at budgeting, there is no need to take out that much extra. We're also talking 13K in ONE year, not over the life of med school, which would be around 60K by the time of graduation.

So I stand by my advice to not take out extra until you learn you need it. More often than not, if you take out extra at the beginning, you won't be paying back those loans at the end of the year, you'll just hold onto them.

And while the interest may compound at the end of the year, it starts accruing at the time of dispersal. If you wait until March to take out new loans, then you won't accrue interest on them until March. The amount may not be significant in the short term, but you're certainly not going to get a better return on your money by letting the money sit in a savings account until you need it.

 

[45408]

MS1 might be a good time to finally cut the umbilical cord.

Maybe s/he lived away for a while and is moving back now. I personally would not have lived with my parents (I think my wife would have thought it was weird), but it's rude to insinuate someone hasn't "cut the cord" because they want to live at home to save thousands and thousands of dollars. The attitude of "Oh, you'll make more money later and can pay it off" is not a good one when we're talking about an amount that could reach six figures before it was paid off.

 

[def1]

And one day you'll have a bit more to draw from and you'll understand what you could have gotten for your $60k.

I don't really understand this?

What will I have gotten for $60k that I won't get living at home?

I don't need people to cook, clean, or do laundry for me. I've been away from home many times. At the end of the day, there is no financial sense in moving into my own place when I have a free place to lay my head at night.

 

[John Lannister]

13K is not a couple extra hundred dollars per month. It's an extra thousand. Unless you are atrocious at budgeting, there is no need to take out that much extra. We're also talking 13K in ONE year, not over the life of med school, which would be around 60K by the time of graduation.

So I stand by my advice to not take out extra until you learn you need it. More often than not, if you take out extra at the beginning, you won't be paying back those loans at the end of the year, you'll just hold onto them.

And while the interest may compound at the end of the year, it starts accruing at the time of dispersal. If you wait until March to take out new loans, then you won't accrue interest on them until March. The amount may not be significant in the short term, but you're certainly not going to get a better return on your money by letting the money sit in a savings account until you need it.

86$ a month.

That's the interest that you're paying for taking out that extra 13k.

I'm all for saving and agree with Prowler, that there is no need to take extra.

On the other side, I think a lot of med students are so used to being students that they forget what they're working on. Not too long ago, someone wanted to save $60 and buy zero NBME practice exams for Step 1. That's not wise, there's a lot on the line and those tests may help you.

Anyway, when making budget decisions - I always focus on the big #'s. The government is trying to cut physician pay to lower healthcare costs and we all say, that's dumb - it's the small expense. They should instead focus on cutting the fat and the other 90% of waste. Budgets work the same way. If the OP can really save 60k over 4 years, then yeah he can take less. My school loans didn't have that much room in them.

I don't really understand this?

What will I have gotten for $60k that I won't get living at home?

I don't need people to cook, clean, or do laundry for me. I've been away from home many times. At the end of the day, there is no financial sense in moving into my own place when I have a free place to lay my head at night.

Everyone's home situation is different. I wouldn't want to live at home and would happily pay rent and food $ for 4 years to be independent.


After reading all these responses - I don't think this is even a budget conversation. This is a conversation about living preferences. There's no real financial advice to be given because it all depends on what the OP's preferences are and his unique situation.

 

[def1]

Do you guys understand how the loans work? The interest compounds at the end of the year. You could pay off the "extra" you borrowed at anytime. It's not a good idea to take less if you may need it.

I'm all for budgeting and not over spending. However, a few hundred extra dollars a month is helpful. To take better care of your nutrition, exercise, other things (qbanks).

If you can really save 60k, that's phenomenal. However, more often than not we're talking about 10-20k or less. And when you're going to earn a few million dollars in the next few decades, I'm not sure if stressing out over 10k and possibly making school rougher (possibly making it more difficult to match) - is worth the risk. Look at it like this, if school goes terrible and you don't match, that can cost 200k (per year of not matching). On the up side, you could become a phenomenal applicant and earn 5-6 million+ in a few decades.

I've given myself plenty of cushion I think with my budget. The 2000 for books and supplies is probably unnecessary since I already own the majority of the books in pdf format and I just need a stethoscope and few other things. I've given myself a 500 dollar a month budget for personal which is more than I allowed myself to have in undergrad.

Theres just a huge difference between graduating with 120k of debt vs 180k of debt. Even if I ended up going into derm, it would still be nice to pay off my debt much faster and easier. Plus the lower the amount of debt the more choices for specialty I have to choose. I won't really be worried about the salary a pediatrician makes if my debt is only 120k.


I agree with you though about not skimping out on important things like qbanks. I definitely don't plan on avoiding taking out extra money for school related necessities.

 

[John Lannister]

I've given myself plenty of cushion I think with my budget. The 2000 for books and supplies is probably unnecessary since I already own the majority of the books in pdf format and I just need a stethoscope and few other things. I've given myself a 500 dollar a month budget for personal which is more than I allowed myself to have in undergrad.

Theres just a huge difference between graduating with 120k of debt vs 180k of debt. Even if I ended up going into derm, it would still be nice to pay off my debt much faster and easier. Plus the lower the amount of debt the more choices for specialty I have to choose. I won't really be worried about the salary a pediatrician makes if my debt is only 120k.


I agree with you though about not skimping out on important things like qbanks. I definitely don't plan on avoiding taking out extra money for school related necessities.

👍

Like I said, this isn't really a budget question. This is a "what's your preference" question.

I know people who decided they don't need a cell phone. They just bought an iPod touch and used wi-fi connections and skype or texting apps. That saves 20k over 20 years.

I know people who decided a car isn't a necessity. They save 100k over 20 years - after gas, insurance, car purchases, etc.

Budget questions are usually about allocating $. This one is more about deciding how you want to live. I personally like my cell phone - so I will pay the $ to use it.

I think we all agree on the basics though, 120k is better than 180k.🙂

 

[def1]

👍

Like I said, this isn't really a budget question. This is a "what's your preference" question.

I know people who decided they don't need a cell phone. They just bought an iPod touch and used wi-fi connections and skype or texting apps. That saves 20k over 20 years.

I know people who decided a car isn't a necessity. They save 100k over 20 years - after gas, insurance, car purchases, etc.

Budget questions are usually about allocating $. This one is more about deciding how you want to live. I personally like my cell phone - so I will pay the $ to use it.

I think we all agree on the basics though, 120k is better than 180k.🙂

True definitely agree with this. I could have definitely allowed a larger budget but I prefer to live the way I have planned. I guess it helps my family is super chill and lets me do whatever I want and gives me space whenever I need it.

I personally couldn't live without my cell phone either, I'm constantly using up my 4g data limit browsing the web when Im bored. Thats an interesting savings technique though to just use wifi. Id hate it though when I was in an area without free wifi.

 

[Trogghunter]

You all are pansies. Take out max loans, live in a sweet condo, buy guns and gold. Worry about repayment later. How old are you, 35 with kids and a divorce? Free monaaaay.