Need help understanding interest rates

[paisley1]

Mpp, paean, anyone else who is knowledgeable about med school loans, I am a bit confused about interest rates.

I understand that loans originated after July 1st qualify for the new interest rate reduction (on Federal Stafford loans). Does this mean that this new interest rate will be fixed for the life of the loan? Or, does it vary from year to year? I'm assuming the interest on Federal Subsidized loans is determined after graduation (not after the loan originates)?

I'm confused and would really appreciate some help. I'll also contact me FAO tomorrow but would like to know what y'all think.

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[mikeaparker]

The rate is not fixed until you consolidate after graduation or residency etc.....

<a href="http://www.dlservicer.ed.gov/helpcenter/calcint/help_currentintrates.asp" target="_blank">http://www.dlservicer.ed.gov/helpcenter/calcint/help_currentintrates.asp</a>

Mike

 

[paean]

Wow, I'm flattered.

The interest rate on federal subsidized loans varies from year to year. If you are in school, the variation won't affect you because the federal gov't pays the interest. When you start repaying your loans, the interest will be at the rate set for the year you enter repayment, and the second year of repayment the interest rate will change to the rate set for that year, and so forth. For UNsubsidized loans, the interest rate varies, and while you are in school, if affects you because the interest that accrues changes every year with the new interest rates.

If you want to lock in a fixed interest rate (and we all do this year because the interest rate is at a historical low), you will need to consolidate your loan(s). If you are in school, the only way to consolidate is through direct loans <a href="http://www.dlservicer.ed.gov" target="_blank">www.dlservicer.ed.gov</a> The rules for consolidating are sort of convoluted, but they are all on the website, so if you read carefully, you can determine if you are eligible. To get the most benefit, you shouldn't consolidate until after all you loans are disbursed for the upcoming school year.

 

[paisley1]

Thank you very much for the info. I think I've got it all straightened out now (emphasis on "I think"!). I may consolidate my federal unsubsidized loan at the end of the 2002-2003 school year. Depending on what the interest rates will be like for successive years, I may or may not consolidate at the end of those years.

I previously thought about consolidating my federal subsidized loan as well, along with the unsubsidized loan, but I guess it would start accruing interest right away (or soon) if I did that? If you don't my asking, what are your plans paean?

 

[paean]

Actually, if you consolidate while in school, the federal gov't continues to subsidize your interest while in school and your six month grace period. And, you don't lose your grace period like you do if you consolidate right after graduation. Pretty neat, huh?

Right now I expect to start Case Western in August, unless Yale (unlikely) or UCSF (more possible) decide to take me off their waiting lists.

 

[trouta]

I believe though that once you consolidate a given loan you cannot consolidate it again. So, if you are planning to consolidate all your loans upon graduation you might not be able to consolidate that loan you are thinking of consolidating your first year. Since Im not sure, you might want to look into it before you consolidate.

 

[paean]

Trouta, that is true. You only consolidate any individual loan once. That doesn't preclude you from consolidating other loans in the future. The reason to consolidate while still in school is to lock in the low interest rate on the loans you have out before June 31, 2003 (the last day of current interest rate). The loans you borrow subsequently to consolidating can be consolidated at a later dat if you want, but as you said can't be consolidated with the laons you have already consolidated. I'm more concerned about saving money than the possibility of having two or three loans after I am all finished, and have consolidated all my loans. I'd much rather pay three bills than an extra $50-100 a month.

 

[mlw03]

I just received my Master Promisory Note. Nowhere was a specific interest rate mentioned. I'd like to get some idea of what my monthly payment will be. Does anyone know where I can find this information?

Also, and I think the answer is yes, but you start repaying your med school loans once you begin residency, right?

 

[IsoGirl2707]

Wow, I'm flattered.

The interest rate on federal subsidized loans varies from year to year. If you are in school, the variation won't affect you because the federal gov't pays the interest. When you start repaying your loans, the interest will be at the rate set for the year you enter repayment, and the second year of repayment the interest rate will change to the rate set for that year, and so forth. For UNsubsidized loans, the interest rate varies, and while you are in school, if affects you because the interest that accrues changes every year with the new interest rates.

If you want to lock in a fixed interest rate (and we all do this year because the interest rate is at a historical low), you will need to consolidate your loan(s). If you are in school, the only way to consolidate is through direct loans <a href="http://www.dlservicer.ed.gov" target="_blank">www.dlservicer.ed.gov</a> The rules for consolidating are sort of convoluted, but they are all on the website, so if you read carefully, you can determine if you are eligible. To get the most benefit, you shouldn't consolidate until after all you loans are disbursed for the upcoming school year.

So is it wiser to consolidate before July1, 2004 if you are graduating medical school or should one wait until after July1?

Also, since Direct loans are the only loans that allow you to consolidate while in school, if you have Direct Loans and other loans (i.e. from Sallie Mae, etc), could you consolidate those other loans under the Direct Student Loans you already have while in school/before you graduate? (I hope this makes sense!!! )

 

[mpp]

I would wait to make your decision until after May 31...the day that the new interest rate will be announced. Then you have until July 1 to consolidate under the old rates (if its lower) or wait until after July 1 to consolidate under the new rates. But move quickly since it takes a few weeks to get all the consolidation stuff together (unless all your loans are Direct Loans).

The only difficult decision would be if your loan goes into repayment during this time. The interest rate for repayment is higher than when you are in school and during the grace period. When you consolidate the consolidation rate will be the current weighted average of all the loans.

 

[....]

Trouta, that is true.

Trouta is dead. this thread is 2 yeas old