Med-School Financial Issues

[osli]

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I can't help but wonder if older non-trad students look at med school fincial issues differently from younger traditional students who are in many cases (certainly not all) still supported by parents and not accustomed to the working and paying bills routine. 🙂

So here's a thread to discuss some of these issues. Things I'm curious about:

- loans, especially where there is no outside family (parental) contribution, and more especially when there is a spouse involved who may or may not be working but will not make enough to make a substantial dent in the tuition + living expenses. What types (including and beyond Stafford loans), best routes, interesting things you found, etc.

- Housing. In some areas apartments are just as expensive as rental houses, and for family life a rental house can be in many ways more desirable. But buying is typically cheaper than renting, especially when you consider the tax exemption of interest paid. If your primary source of "income" is student loans (public and/or private) is that even a possibility? Thoughts on getting stuck with a house you can't sell after four years vs. the potential to recoup some of your housing expenses by selling after four years? Thoughts on apartments vs. houses in general? Maybe we should be looking more along the lines of a nice fur-lined box.

- Working during medschool (especially the first two years)... anyone crazy enough to attempt this? I tried to quit from my job to return to take a year of premed classes and wasn't "allowed" to quit. They sent my computer and work materials with me to school and I work part time flexible consulting hours when I can. I wouldn't be able to work that much during med school obviously, but even 10hrs/week makes a decent dent in the bills.

- scholarships. Merit based? Need based? Apply before or after matriculation? Any advice on what to look for?

- sponsorship from public health foundation, hospitals, military, etc. Either before matriculation or after residency... any advice here? I'm getting information from a local hospital based out of the city I'd "like" to practice in one day (birthplace, all our family, etc.), but I'm wondering how what they tells me compares to what is typical. Is anyone considering selling their souls to relieve accumulated debt?

I'm sure there are more issues as well.

 

[blee]

Selling my soul would be nice, but I already did that when I took my first job. Dunno if they'll return it to me pro-rated. 🙂

Anyway, I'm curious about some of these issues as well, but I'm confident that I'll be able to make it one way or another. The current plan is to own a home wherever we end up moving, since we own one currently. I also do not plan to work at all, and I would suggest to just about anyone that work does NOT fit in a med student's schedule. I know it's possible for some people; it might even be possible for me, but I'd rather reserve that kind of free time for my wife and coming children. I just don't see myself staying sane if I was enslaved both to my books and to an employer.

 

[powerbooki]

I hope you sold enough high tech stocks back in 2000 just before the crash, have been working for Google for the last several years, or made good on your real estate investment. I fit NONE of these cases and that's why I have been keeping working full time in my field during all my pre-med work, and I will continue to do so until I get in a school. Saving is one financial source for me, including all unsold stock options. But these will definitely not allow me to sail through financially. At least you have a wife that can work, it has to be the hardest for those single parent non-traditionals. So for me, loans, wife's work, saving, being frugal, and going to my state schools make up the plan. If I could consult independently like you, I would work 5-10 hours/week.

 

[jc1409]

Earlier today I posted the following questions in the financial aid forum, but this seems appropriate.

My question is how my income will impact my financial aid award. If I have a fairly high income, and quit my job the year before attending school, will my financial aid award be impacted by my prior-year income? If so, how long will it take for my income to not impact my financial aid award.

Also, do 401ks and IRAs impact financial aid?

 

[blee]

The FAFSA uses the applicant's most recent tax return, which of course means that you will have to show a relatively high income in your application. This will lead to a much higher EFC than one would expect.

The solution is to contact your school(s)'s financial aid office to explain the situation. They have the ultimate discretion when it comes to funds disbursement, and they will take into account the fact that you were working full-time before. We expect to have a very similar situation.

 

[osli]

I ran into that very same issue when going from full time to part time as I reintered as a full time undergrad student to get the rest of my prereq premed courses.

The FAFSA does require your previous year tax return information so it does seem to paint an unrealstic picture of how much money you will be able to supply towards education. However, there is a "special circumstances" form that you can file in which you document any life changes: getting married, losing or drastically changing your employment standing (my case), spouse losing a job, or other "life changing" events. It generally takes, IIRC, 90 days from the time of the change under continuous conditions of reduced income etc. before you become eligible for a "correction."

What this does is to change the ratio of subsidized and unsubsidized loans... it doesn't change the maximum amount you are eligible for unless I totally missed something.

 

[medworm]

Also, do 401ks and IRAs impact financial aid?

If anyone could address this question from experience, that would be great. I'm curious about how this is treated, b/c it doesn't make sense to me that these funds should be touched!

 

[Doctor Bagel]

If anyone could address this question from experience, that would be great. I'm curious about how this is treated, b/c it doesn't make sense to me that these funds should be touched!

I am almost 100% sure they don't. I was looking over a FAFSA recently, and nothing was asked about 401ks. I don't know about IRAs (don't have one), but I'm sure it's the same. You're right -- retirement funds should not be touched.

 

[ShyRem]

For the FAFSA my husband has a mandated retirement account (being a government worker he didn't pay social security). He can't touch it without SUBSTANTIAL (as in almost 50%) penalty and it's not even really available to us. Therefore it didn't count AT ALL in the FAFSA. However, those funds were pre-tax contributions. I don't know about 401k and IRAs. My penny's worth of contribution for what it's worth.

 

[QofQuimica]

If anyone could address this question from experience, that would be great. I'm curious about how this is treated, b/c it doesn't make sense to me that these funds should be touched!

I wrote to one of the admissions directors that posts here on SDN and asked him about whether retirement accounts are considered as part of a student's assets for calculating financial aid. I'll let you all know what he says.

 

[albaniandoc]

I live in Bradenton, Florida. My wife and I purchased a home when I graduated from nursing school. The house has almost doubled in price since then thanks to Florida real estate. I think I am going to walk away from our house and use all that money to pay tuition in medical school. In the meantime my wife is doing an MBA and with her salary we can hopefully make a living. It is the best investment we ever made. I could graduate med school with no loans and with no house either.

 

[t33sg1rl]

After I filled out my FAFSA using my 2004 tax return, I was frankly terrified... I didn't make the big bucks, but I did work full-time before starting school. It turns out that even though the FAFSA people are mean student-eating ogres, financial aid offices assume an income of nothing while you're in school, and gives you just as much aid as a traditional student. Marriage complicates the picture quite a bit, because your spouse's income will definitely be considered, leading to a very substantial marriage penalty.

As far as income changing the ratio of subsidized and unsubsidized loans, that isn't true. As long as your unmet need (defined as total school budget, including living expenses, minus expected family contribution) is at least $8500, you will get the full subsidized $8500. Any need over $8500 will be filled with unsubsidized loans.

One thing to note on subsidized loans is that all federal loans have a 3% origination fee, so they aren't quite as free as we'd like to think.

 

[unfrozencaveman]

I have a fairly dumb question here-
In what form does the money from govt loans arrive? Do you just get money, or does it go as a credit towards your tuition? Do they track where you spend it?

I realize this is making me sound like I'm starting some sort of laundering operation-- I'm just wondering when it comes time to write some checks, where all this stuff is going to be coming from...

 

[Senor Fish]

It makes those in-state schools look real attractive, doesn't it?

The one common piece of advice I've heard from med students and admissions counsellors is: "don't even think about trying to work while attending med school". I guess I'm going to follow that advice, it will just be a scary number to owe when it is all over.

 

[FrkyBgStok]

my wife will be a CPA while i am in med school so she will make decent money and i will get more in loans to cover. and i can't live in an apartment with 2 kids so i will need to spend more (or go to DMU as it is in town) so I completely understand those concerns because they haunt my daily.

 

[osli]

As far as income changing the ratio of subsidized and unsubsidized loans, that isn't true. As long as your unmet need (defined as total school budget, including living expenses, minus expected family contribution) is at least $8500, you will get the full subsidized $8500. Any need over $8500 will be filled with unsubsidized loans.

My personal experience with the FAFSA to this point has been undergrad, not professional schools, so things may change there. When I addressed this concern to a FAFSA appeals specialist I was informed that I would still qualify for the maximum stafford loan allowed ($10,500 I believe), but my previous year's income would prevent me from receiving any subsidized loans.

So in that case at least, the income did affect the proportion of subsidized and unsubsidized. It didn't affect the maximum amount we were eligible for at all, just how much subsidized we were eligible for. An appeals form might have shifted a thousand or two to subsidized but it really didn't seem worth the effort.

This situation might change drastically for medical school. Is the maximum guaranteed to every student who asks for it, or do they give you as much as they determine you need?

 

[USAFdoc2be]

If you don't mind giving up time for the military in order to not have that debt there are 2 options....

HPSP scholarship, more threads on this elsewhere, but basically you apply for the scholarship and if they pick you up they pay for school and give you a stipend which after taxes I've heard is about 1050-1100 a month. After your residency you pay back 4 years, one for each they paid for.

USUHS which is the route I am going...Great deal for me, I get paid the same salary I am getting now as a 2Lt, plus a tax free housing and food allowance. It goes up if you have a dependant (spouse/kid). After residency you owe 7 years instead of 4 since you're getting paid to go to medical school. I'm planning on making the military my career and retire after 20+ years with a decent start on my retirement and then decide what I want to do.

I've seen the threads where people complain about the military, but I love it and look at all the positives, like going to school free, serving those who protect our country and having a great network of people from school to work with for years. I have a lot of friends that are docs on the civilian side as I was a drug rep for a few years and they complain just as much as mlitary docs, but about different issues. Every side has advantages and disadvantages, but it's your attitude and how you look at your situation that matters the most. Making a lot of money is not as important to me as coming out of med school with less debt. If I was worried about that I would have stayed a drug rep and not joined the military. I remember one of my FP residents at UVA teasing us because we made more per hour than they did and had better cars 🙂

 

[xraygray]

USAFdoc2be,

Do you know when the deadline to apply for the HPSP is and how to go about doing this? I'm still not convinced this is the route I want to take but want to keep my options open. Thanks in advance.

XG

 

[Twitch]

If anyone could address this question from experience, that would be great. I'm curious about how this is treated, b/c it doesn't make sense to me that these funds should be touched!

The answer is no. As a matter of fact, retirement accounts and real estate are tax heavens as far as we are concerned. If you're pretty liquid it'd make sense to pay down your loan balance on the house *after* you've stuffed your 401k to the max. Personally I really like the 401k because it's like a tax free savings account that you can dip into penalty free when you're in med school. Additionally your money grows tax free (unlike a regular savings account) and ofcourse it's *pre-tax* money that goes in - a double whammy. Keep in mind that other than federal disclosure on FAFSA (for which the above is applicable), schools may require supplemental financial disclosure to issue non federal (or school specific/private) aid/grants. Talk to your accountant, school or read up on irs.gov.

 

[USAFdoc2be]

go to this website and it should have all the info you need on HPSP

http://ci.afit.edu/cimj/apply_scholarship.asp

 

[magic_drm]

The answer is no. As a matter of fact, retirement accounts and real estate are tax heavens as far as we are concerned. If you're pretty liquid it'd make sense to pay down your loan balance on the house *after* you've stuffed your 401k to the max. Personally I really like the 401k because it's like a tax free savings account that you can dip into penalty free when you're in med school. Additionally your money grows tax free (unlike a regular savings account) and ofcourse it's *pre-tax* money that goes in - a double whammy. Keep in mind that other than federal disclosure on FAFSA (for which the above is applicable), schools may require supplemental financial disclosure to issue non federal (or school specific/private) aid/grants. Talk to your accountant, school or read up on irs.gov.

Aren't you still penalized for taking money out of your 401K even if you are medical school? I thought there was both an initial penalty of some percentage up front and then income tax on the remaining amount. Of course if you are making nothing the tax amount would be refunded at tax time, but I thought there was still some penalty amount that would be lost?

 

[Beau Geste]

Aren't you still penalized for taking money out of your 401K even if you are medical school? I thought there was both an initial penalty of some percentage up front and then income tax on the remaining amount. Of course if you are making nothing the tax amount would be refunded at tax time, but I thought there was still some penalty amount that would be lost?

You can withdraw money from your 401k, but I believe there is a 20% withholding tax as well as a 10% early withdrawal penalty. I believe the only time this is waived is when you are disabled, have medical costs that exceeds 7.5% of your income, you have child support, or you are dead. There is a reason it's called a RETIREMENT account. You can't withdraw sans penalty until 60! (okay 59.5). Medical school is probably NOT a hardship defined by the IRS, because you can take out loans.

But, if you have a lot of $$ in your 401k, and the penalties aren't a lot to you, then go ahead. As a physician you'll be able to save much more.

 

[Twitch]

Aren't you still penalized for taking money out of your 401K even if you are medical school? I thought there was both an initial penalty of some percentage up front and then income tax on the remaining amount. Of course if you are making nothing the tax amount would be refunded at tax time, but I thought there was still some penalty amount that would be lost?

There is a way to avoid the early withdrawal penalty. when you're in med school, your income = 0 as you noted (excluding spousal income)

back to class for now.... I'll try to write more later

 

[Beau Geste]

If you receive any type of aid, your income does not equal zero. IF someone was considering tapping into the 401k resource, your best bet is to talk to your accoutant or other tax professional. The IRS is not as sympathetic as you think.

 

[Twitch]

There is a way to avoid the early withdrawal penalty. when you're in med school, your income = 0 as you noted (excluding spousal income)

back to class for now.... I'll try to write more later

Okay, done with classes for the day. Here is the deal. I had written at length about this last year or so when I was in a similar situation wrapping up my MBA.

Note financial aid in the form of federal student loans does not constitute income that can be taxed. Theoretically a federal loan is money the govt. lends to you that you pay back (in most cases) - wouldn't it be odd that if they tax this student loan as income? On the contrary you can write off the interest you pay on student loans, but that will be later. For the present instance, here is what you can do. Goto irs.gov and pull up the publication that deals with higher education expenses (pub 25??) and feel free to even call their 800# and ask them about a provision to withdraw money from your retirement account penalty free as it relates to higher education expenses. There is also a provision for first time home buyers (limited to $10k or something - check it out on irs.gov).

The financial instrument you use is critical here. As you know the various types of retirement accounts aren't the same. So a Roth has different benefits than a 401k vs a simple IRA. If you're sitting on a IRA then it's trivial. If you're nest egg is a 401k then you need to roll it over to an IRA. You need a broker/admin for this. Charles Schwab, would work so would a countless others. The bad thing about Charles is (was?) they require you keep atleast $50 in the account or they charge some silly fees. Shop around and you could probably save yourself the $50 as well. Another benefit of rolling it over is that if you have worked for several employers you can roll it all into one place and spread out your funds across mutuals funds, bonds or whatever ticker you fancy. Clearly the interest earned is tax free since you're sheltered in retirement provisions. Now when you're in medical school (after the school has awarded you financial aid) you tap into your rollover IRA. The broker/admin will send you a form (I think it's 1099 or something - it's about early withdrawal from a retirement account). They send a copy of this form to the IRS as well to notify them that you've dipped into your retirement. When you file your 1040 make sure you state that the funds were used for higher education expenses (there is code for this - look at it in the higher ed pub). Make sure you save copies of your tuition paid, books, room and board and such. As long as you're attending half time you can use it for tuition. If you're attending school full time (which you will be for med school) you can also use the money for room & board. Keep in mind that when you withdraw money from your rollover IRA - it's out in the open and no longer protected by retirement provisions - i.e. subject to income tax. However, in medical school you're not making any money and hence you're tax bracket will be lower than it is right now (even if your spouse works). If you're single and/or have no other source of income then all that can be taxed would be the amount that you withdraw from your retirement. If you're frugal and don't crack open the nest egg too far/deep (each year), you could slide under the federal poverty line (for income) and pay little (if any) in income tax.

As someone pointed out - run this over with your accountant or if you're more of a do it yourself kinda guy (like me) read up the pub on irs.gov (really the verbal passages on the MCAT don't seem that bad afterwards )

 

[Twitch]

You can do a more comprehensive search but here is the first one that popped up when I searched IRS.gov:

Source: http://www.irs.gov/publications/p970/ch09.html

"Generally, if you take a distribution from your IRA before you reach age 59½, you must pay a 10% additional tax on the early distribution. This applies to any IRA you own, whether it is a traditional IRA (including a SEP-IRA), a Roth IRA, or a SIMPLE IRA. The additional tax on an early distribution from a SIMPLE IRA may be as high as 25%. .........However, you can take distributions from your IRAs for qualified education expenses without having to pay the 10% additional tax . You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax."

 

[Doctor Bagel]

I have a fairly dumb question here-
In what form does the money from govt loans arrive? Do you just get money, or does it go as a credit towards your tuition? Do they track where you spend it?

I realize this is making me sound like I'm starting some sort of laundering operation-- I'm just wondering when it comes time to write some checks, where all this stuff is going to be coming from...

Your lender gives the money to your school. The school then deducts your tuition and either gives you a check for the remaining money or direct deposits it into your bank account. It's really streamlined. Normally, money is dispursed twice a year, so you get a big lump sum at the start of each semester. I'm curious if it's dispursed three to four times if you have a quarter system.

 

[Beau Geste]

You can do a more comprehensive search but here is the first one that popped up when I searched IRS.gov:

Source: http://www.irs.gov/publications/p970/ch09.html

"Generally, if you take a distribution from your IRA before you reach age 59½, you must pay a 10% additional tax on the early distribution. This applies to any IRA you own, whether it is a traditional IRA (including a SEP-IRA), a Roth IRA, or a SIMPLE IRA. The additional tax on an early distribution from a SIMPLE IRA may be as high as 25%. .........However, you can take distributions from your IRAs for qualified education expenses without having to pay the 10% additional tax . You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax."

Ok, but a 401k is not an IRA. Obviously we need to consult an accountant.

 

[cosmicstarr]

The financial instrument you use is critical here. As you know the various types of retirement accounts aren't the same. So a Roth has different benefits than a 401k vs a simple IRA. If you're sitting on a IRA then it's trivial. If you're nest egg is a 401k then you need to roll it over to an IRA. You need a broker/admin for this. Charles Schwab, would work so would a countless others. The bad thing about Charles is (was?) they require you keep atleast $50 in the account or they charge some silly fees. Shop around and you could probably save yourself the $50 as well. Another benefit of rolling it over is that if you have worked for several employers you can roll it all into one place and spread out your funds across mutuals funds, bonds or whatever ticker you fancy. Clearly the interest earned is tax free since you're sheltered in retirement provisions. Now when you're in medical school (after the school has awarded you financial aid) you tap into your rollover IRA. The broker/admin will send you a form (I think it's 1099 or something - it's about early withdrawal from a retirement account). They send a copy of this form to the IRS as well to notify them that you've dipped into your retirement. When you file your 1040 make sure you state that the funds were used for higher education expenses (there is code for this - look at it in the higher ed pub). Make sure you save copies of your tuition paid, books, room and board and such. As long as you're attending half time you can use it for tuition. If you're attending school full time (which you will be for med school) you can also use the money for room & board. Keep in mind that when you withdraw money from your rollover IRA - it's out in the open and no longer protected by retirement provisions - i.e. subject to income tax. However, in medical school you're not making any money and hence you're tax bracket will be lower than it is right now (even if your spouse works). If you're single and/or have no other source of income then all that can be taxed would be the amount that you withdraw from your retirement. If you're frugal and don't crack open the nest egg too far/deep (each year), you could slide under the federal poverty line (for income) and pay little (if any) in income tax.

Thanks for all the detail, Y_Marker. I was previously told that I could use my 401k for qualified educational expense, but I was unaware of the IRA rollover requirement. This really helps.

 

[Beau Geste]

ok, I didn't read the previous posts... I see what you are saying now Y-marker. That's what I get for trying to work while catching up with SDN!

 

[medworm]

I could graduate med school with no loans and with no house either.

I hate to say this, but you're ALL nuts to throw so much money, including your house onmywayRN, at med school. 😛

I've basically decided that if med school costs too much (let's hope I get into some place cheap!) and the "forces of nature" (family, finances, etc.) are horrific, I'm not going.

Good luck!

 

[laurafinn]

I hate to say this, but you're ALL nuts to throw so much money, including your house onmywayRN, at med school. I've basically decided that if med school costs too much (let's hope I get into some place cheap!) and the "forces of nature" (family, finances, etc.) are horrific, I'm not going.

Are you sure? It seems like you've already invested so much in applying to med school. Why quit now? Plus, it's not like you won't make the money back once you're practicing.

I'm one of those people who is going into massive debt to go to school (and not even med school, but vet school). I do think it's worth it, since vet med feels like a calling. I've never not had to struggle financially (and luckily, I'm not that keen on expensive toys or keeping up with the Joneses), so I figure I might as well do something I love. I'll probably always worry about money on some level, but you have to worry about something, right?

 

[medworm]

Well, I didn't say I was quitting PRONTO. 😛 I will still go through the application year, but I'm definitely not reapplying if all else fails. I spent the past year studying exclusively, having no life, disorganized and harried, and getting sick from stress. (I basically compacted all of premed, the coursework, the volunteering, and studying for the MCAT, into year. Plus I had emotionally-taxing problems with my s/o.) Sure I loved learning, but I also realize that I can't ignore my body's needs for sleep and a circadian routine. Only in the past two months after the MCAT and secondaries did I go back to a life of normalcy where I actually have free time and enjoy the time off to the fullest. I didn't have to rush through a meal or speed through traffic. And I didn't have to haul all my textbooks around everywhere. It would only be worse once I get into med school.

Anyway, I'm writing this b/c I want to show a different viewpoint. I think there are other SDNers with similar experiences and would appreciate reading this. I have no regrets becoming a premed, and I will have no regrets leaving it if and only if the "forces of nature" didn't work out. It's definitely not voluntarily, yet it's also not involuntarily. Does that make sense?

I think I'm making the best of the situation and looking on the positive side of rejection, of everything else I have to gain back in life. 😉

 

[sweetdoc]

Hi all,

Assuming I'm accepted into medical school, I was considering buying a small home/townhouse. Is it feasible to get a loan for a home and still get loans to help pay for medical school.

sweetdoc 😕

 

[.edu-MD]

Hi all,

Assuming I'm accepted into medical school, I was considering buying a small home/townhouse. Is it feasible to get a loan for a home and still get loans to help pay for medical school.

sweetdoc 😕

My advice would be to buy your house/get your mortgage BEFORE you take out any student loans. I say this for two reasons:

1) It would be difficult/impossible to secure a mortgage if you don't have a steady income/job (which you wouldn't in med school). Your student loans will be factored into your debt when applying for a mortgage.
2) The process of buying a house is expensive and will decrease your cash on hand. Since a first home is not counted as an asset on FAFSA, this will make you more "needy."

I'm assuming you're on your own here of course. If you have a spouse/SO/parents who will co-sign for a mortgage I presume things would be easier.

 

[sweetdoc]

Thanks for the tip!

sweetdoc

 

[rgerwin]

Hello, I have a question about the EFC. I'm sure this is posted somewhere, but I haven't found it. By the time I apply for financial aid, I'll be 27, married, no real assets, not a large income, etc etc. Basically, a good candidate for aid. However, my father earns a decent salary, and I've heard that his income will be included in my aid. Now, he has two younger children with his 2nd wife, and is putting them thorugh college in a few years, and does not contribute anything to me. Hasn't in a long long time, and my mother has no income to speak of. SO, how will this affect my EFC? Does anyone know?

Thanks!

 

[scpod]

My advice would be to buy your house/get your mortgage BEFORE you take out any student loans. I say this for two reasons:

1) It would be difficult/impossible to secure a mortgage if you don't have a steady income/job (which you wouldn't in med school). Your student loans will be factored into your debt when applying for a mortgage.
"

Actually, I know a couple in med school who bought a house last year. They live entirely off of their loans. He was an RN before med school and had a modest down payment. She's never had a job at all. They have two kids. It CAN be done. With the extremely low rate of dropouts in med school and low loan default rate, there are a bunch of lenders out there who are ready to get you "hooked" into loans early in life.

 

[rgerwin]

Right, but do you know anything about how my EFC will be affected by my father's income? Also, are there loans that will give you more than the cost of education>

Thanks

 

[medblue]

Right, but do you know anything about how my EFC will be affected by my father's income? Also, are there loans that will give you more than the cost of education>

Thanks

hi! i'm 33 and i was told that i didn't have to input my parents income. i don't think you have to input it if your filing independant. i could be wrong though ?

 

[medblue]

so this may be an inappropriate place to ask this question but.............

how do you know how much you will qualify for. the post above stated $8500 subsidized and everything else unsubsidized. is the max for unsubsidized $8500 also?

if so, how in the heck do you pay for medical school does that even put a dent in tuition??? are there other sources out there that are willing to loan you money (ex. private loan) ???

i'm seriously concerned about paying for school 😱 (3 year old at home)

 

[blee]

Every med school interview I attended included a financial aid presentation, which is a good place to ask questions.

$8500 sounds about right for federal subsidized loans. I believe the annual federal borrowing limit is $39000 or so, with unsubsidized loans making up the difference. After that, you can apply for loans offered by the medical school and private banks.

Financial aid packages typically comprise grants, (potentially) scholarships, and loans.

 

[medblue]

ok. that sounds great! thank you!!! 🙂

 

[roboyce]

My advice would be to buy your house/get your mortgage BEFORE you take out any student loans. I say this for two reasons:

1) It would be difficult/impossible to secure a mortgage if you don't have a steady income/job (which you wouldn't in med school). Your student loans will be factored into your debt when applying for a mortgage.
2) The process of buying a house is expensive and will decrease your cash on hand. Since a first home is not counted as an asset on FAFSA, this will make you more "needy."

I'm assuming you're on your own here of course. If you have a spouse/SO/parents who will co-sign for a mortgage I presume things would be easier.

I don't mean to be an ass, but this is terrible advice.

1. It is very easy to secure a mortagage without any current income. In fact, there are mortagages designed especially for these circumstances. You will, of course, most likely pay a higher interest rate, as you are considered at greater risk for default, but given most of our prior limited credit histories and lack of substantial earnings, you're not going to get the lowest rate anyway...and no, I'm not talking about interest only mortagages or anything like that. Talk to your local bank. You could also have your parents co-sign or use a guranteed VA loan if you qualify.

2. While the home equity of a primary residence is not considered on the FAFSA, you will most likely not have much equity in the house anyway after such a short period of time. Therefore, with the exception of your downpayment, you're really not "hiding" that much money. Also, some institutional based aid does take into account your home equity. If there's anything I've learned in talking with the various finaid offices, it's that it's nearly impossible to shield money (legally) from their prying eyes.

3. DO NOT RUSH to buy a house before you apply for finaid your first year. You could very well end up dissatisfied with your selection and/or contractually obliged to a very unhealthy financial arrangement. First of all, unless you are familiar with the area around the school, you could end up buying in a bad neighborhood. Don't be afraid to rent for the first semester in order to give yourself a little time to get acquainted with the housing opportunities in the community. Talk to students and professors about where they live. Some schools even have special listings in their finaid offices. Investigate local lenders that may give you preferential treatment because of your affiliation with the school. Line up potential roomates that might take some of the burden off that mortgage. Sure, you might not be able to deduct your home equity from your first year financial aid package, but remember, you reapply for aid every year. I'd gladly take a small hit the first year to be more confident in my ulitmate decision than to rush to buy in order to save a few bucks for one year. Plus, until you get that initial finaid package from the school, you really don't know what you can afford. Certainly if a scholarship came through, you might be able to upgrade, but if you only received minimal support, that studio apt starts looking more attractive.

Just my two cents...

 

[.edu-MD]

1. It is very easy to secure a mortagage without any current income. In fact, there are mortagages designed especially for these circumstances. You will, of course, most likely pay a higher interest rate, as you are considered at greater risk for default, but given most of our prior limited credit histories and lack of substantial earnings, you're not going to get the lowest rate anyway...

I wouldn't agree that most non-trads have limited credit histories. It's the traditionals that have limited credit histories. Those who have been out of school and working for a while would likely have a fairly lengthy history. Anyone who's used a credit card or had any type of loan on which they've had to make payments (say a car) for more than a few years would have several years worth of records. Even some utility companies report payment histories so if you were renting but paid your own electricity for example you could have a fairly lengthy history.

Anyhow, I'm only speaking from the experience my wife and I had last year in trying to buy. Neither of us had any marks on our credit histories (both FICA scores >750). We went through a mortgage broker and had a heck of a time trying to secure a mortgage with just 10% down. We thought we had one but a few weeks from closing apparently the bank reneged. I'd had an income for many years (albeit low). We both had new jobs lined up (my wife's was a residency) in a new state and that was the reason we were moving. Despite this security of actually having jobs, the >$200k student loans that my wife had apparently made the banks balk (I had no debts at the time). Maybe it was the guy we went to (who we wouldn't recommend to anyone after the ordeal we experienced!). I can only offer my story and advice based on our experience. Call it terrible if you will, but I think people should realize that just because you or your spouse is a physician resident doesn't mean all banks will be throwing money your way. Obviously, many people don't have any problems because we know people who didn't (as well as some of the posters in this thread). But we did. I just people to know that.

As for shifting cash into the principal of your home as a way to lower your cash balance, I was speaking only of FAFSA. As for individual school's policies, I can only speak of the two I've been accepted to and neither seems to include the equity of a first home as an asset, at least not in any of the supplemental paperwork I've come across yet. So if we actually had any available cash, this option would work for us. But it's not like we're swimming in money now...

 

[Miliwen]

Sorry, not trying to hijack the thread, but this is on topic, sort of.

Currently I am renting the apartment above my parents home. They own it. Rent is dirt cheap (around 1/3 - 1/2 of normal cost) and I don't have much expensices other than my debt (I am attempting to kill it).

Now for the questions. I don't have a degree yet. I plan on going to UConn in a year or two. UConn is about 15k/year for me. So lets say, at the end of my process, i owe 75k or 80k. I do not have the money to pay for this. My question is, how should I handle loans? I do not plan on working during med-school, but at the same time, I need money for my undergrad. My fiance (spelling is fun!), will work, but most likely 20-30 hours/week so she could spend more time with our daughter. I am going to try to work 30 hours a week my first 2 years at UConn. But after that, I need to goto Storrs (UConn's main campus) which is about a 30-45 min drive each way for me. So working 30 hours and driving to Storrs 4 days a week is going to be very rough on me.

So, the question is, should I take out a loan to live off of for 2 years, and then try to find more money for med-school. Or would it be better to struggle for 4 years and then take out loans to live off of for med-school? If this seems at all confusing, I am sorry. I have a million and a half things running through my head right now. Thanks in advance

-Scott