LOANS and FINANCING MY FUTURE

[krbirc03]

I'm trying to plan out my financial future so I need a little advice. I will have some undergrad loans to pay off since i am graduating in may but they are Stafford, which means they are interest free as long as I am a fulltime student, that means med school. So My Grandparents said they would help me out (long story) and give me 10,000 to pay some of them off. So i'm thinking of putting those bucks in a fund so it can earn interest for me so when i'm out of med school I'll have the same amout of loan debt, but a larger sum of money to pay them off? Does this sound like a logical plan? But I need to know how long to take the fund out for....5 years? sound good? This may seem like a stupid question but all four years of med school counts as being a full time student right? And then when you do your residency you are not considered a student and you have to pay up on your loans if you have any. I would like other's input and plans of attack.

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[noshie]

I'm trying to plan out my financial future so I need a little advice. I will have some undergrad loans to pay off since i am graduating in may but they are Stafford, which means they are interest free as long as I am a fulltime student, that means med school. So My Grandparents said they would help me out (long story) and give me 10,000 to pay some of them off. So i'm thinking of putting those bucks in a fund so it can earn interest for me so when i'm out of med school I'll have the same amout of loan debt, but a larger sum of money to pay them off? Does this sound like a logical plan? But I need to know how long to take the fund out for....5 years? sound good? This may seem like a stupid question but all four years of med school counts as being a full time student right? And then when you do your residency you are not considered a student and you have to pay up on your loans if you have any. I would like other's input and plans of attack.

It depends on how much the interest is on your stafford loans. If the interest on your stafford loans is more then what you will be getting in a regular savings account (which I would think would be the case) then it would not make sence to put off these loans and place your money in a regular savings account. Now if you put it in a CD or some account that you cant touch the interest will be greater but you will not be able to use it if you need it for an emergency. A med student would count as a full time student and you will not need to pay off undergrad until after you graduate. Did you already get into med school? If you are taking sometime off in between then they will penalize you for not paying while not in school so you will have to pay even more interest. If it were me I would want to get my loans off of my mind and then start over with the med school debt. I just dont like debt, I like to pay everything off every month even if it means having to skimp on other things.

 

[iwilldlvr]

As far as I know, you are still considered in school for loan purposes while in residency since it is a required part of your education; therefore, you don't have to pay the loans back until after residency. As far as investing the $10,000, see a financial advisor at your bank to find out what your options are for interest bearing accounts. Like Noshie said, it won't do you any good if the interest earned is less than that is being charged for the loans. There may be some high yield cd's or something you can invest in. Just see a financial advisor to really find out your options and risks.

 

[krbirc03]

The thing about my stafford loans is there is NO interest accruing while i am in med school or any school for that matter, when I am no longer a full time student then it begins to start piling up. So when I get out of med school, I'll have the same amount coming out as i am going in as far as my undergrad loans are concerned. I did get accepted to LECOM I wont be taking time off, I just don't know how long to put away this money for. And this money has a stipulation... it's only for educational purposes...so even if i had an emergency I wouldn't be able to use it for that.

 

[EEL08]

Are those loans subsidized or unsubsidized?

 

[krbirc03]

subsidized

 

[bigdog8829]

Not sure if this will prove very helpful but your plan doesn't sound like a good one. I would change it.
Let's say you invest in a mutual fund or CD or whatever, the interest you will be receiving will be less than that of the interest your loans will be accumulating in med school.
Most educational loans run around 7-9% i think. You are not going to be able to get that much interest on your money; maybe if you pick a really good mutual fund you may. In the long run, I think you will come out on the bottom. It would be better to take that $10K and just pay off some tuition you will be borrowing for med school. Your med school loans start incurring interest right away, they don't wait for you. By the time you are able to pay off your loans, you'll be paying around $2 for every dollar you borrowed. Throw in that 10 grand you got, and it will be saving you ~20K in the future.
Again, I'm not a banker or anything. I would reccomend talking to a professional, but don't go to a bank bc they just want your money. Talk to family, educated friends, etc.

 

[melast]

If you aren't taking out ANY NEW LOANS for med school, your plan is a good one. But if you are paying for med school with loans, chances are that not all of them will be subsidized.. like unless you only need an extra 30k or whatnot. It would likely then end up being a much better deal to spend the 10k on school/living expenses so you have smaller unsubsidized loans. I wouldn't pay off the stafford until I had paid off (or avoided taking out) anything with a higher interest rate though.

 

[mshheaddoc]

I'm going to think outside the box here. If your gparents are willing to give you the 10K exclusively for these loans (and not to invest) this negates this whole discussion.

I think that investing that 10K if you have subsized loans is a wise decision. Some might say that you should use that in med school, but I disagree. Having a small nest egg is nice if you ever need a new car, plan to buy a house, etc. Also, if your school requires you only to take out stafford loans for med school (and you won't really need the private loans) this is even better in my opinion. I don't see medical school debt as a burden more like an investment. With the locked rate of 6.8% for your future med student loans there are PLENTY of investments where you can make double that interest a year. You could pay your interest in the loans you take out so it doesn't accrue interest with the interest earnings you make. I would save that money and use it for a rainy day b/c chances are you can use it later down the road. Maybe its for living expenses 3/4th year or maybe its to move across country for residency.

But I wouldn't use it right off the bat to "lower" your cost of schooling. Student loans are the "free-est" money you can get. While it sucks to be in debt, you will be making plenty of money to pay back your loans so don't worry about. After you are in debt well over $100K you will be so desensitized you won't care anymore

 

[MJB]

The thing about my stafford loans is there is NO interest accruing while i am in med school

You need to make 100% sure this is true...I'm not sure if that holds true for grad school or not.



Then, you would need to make sure you invest wisely to make sure you are making more on your investment than the student loan interest is accruing (assuming it will accrue).

 

[TMP-SMX]

I'd wait to see how much unsubsidized loans you will be forced to get next year. If you don't have to get any unsubsidized loans by using the money you got from before, then you should use it. Since interest adds over time you should try to avoid a lot of loans in your first couple years if you can avoid it. Using that money you have now would circumvent that problem.