Paying UG loans while in Med School?!

[Beamer128]

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So I just got off the phone with AES who handled the private loans I took out for undergrad....apparently I can't defer these loans while in medical school since there's a 48 month deferment limit (which was exhausted while I was enrolled in undergrad). I have no idea what I should do...I owe 33K total on these private loans. The customer service representative did say that the loan I took out in 2005 has an additional 12-month period of deferment available, and that a 365 day hardship deferment as a last resort is also available. My options, as I see it, are:

1) exercise the 12-month deferment during M1 (while trying to pay for the rest of the balance on the other parts of the loan) and then exercise the 365-day hardship deferment during M2. For M3, I will take out a little extra in private loans and pay off the balance.

2) Take out a little extra in private loans for M1 and pay off the balance now

What do you guys suggest? It's really hard for me to believe that any person who takes out private loans during UG has to pay for them during medical school...am I getting wrong info? 😕

 

[AliveNkickin]

Did you get a federal backed loan or an alternative loan?

 

[Beamer128]

Did you get a federal backed loan or an alternative loan?

This was an alternative loan to supplement the federal loans I received as financial aid.

 

[AMDFAO]

Not all alternative/private (non-federally backed) loans may be deferred for as long as the borrower requires. At some point in time the bank starts losing money in the deal so they are very aware of when that will happen and work everything around when you'll be paying it back. I'm not sure what particular lender you used but they call the shots. I'm also totally befuddled as to why undergrad FA offices don't feel it's important to point this out to you before you borrow it but lot's of schools don't...
It would be unlikely that your med school would allow you to borrow extra to pay off these loans. In the world of federal lending there is a 900 page manual and one of the regs addresses consumer debt and other loans, including educational ones. The reg is very specific in stating that I may not allow you to borrow to make payments or pay these loans off.
My suggestion to you would be to work out a best case/worst case plan for the next 4 years. How much will the minimum payment be when you will be required to actually make payments? And starting when? It sounds like you can push it out another 2 years so it may be the last 2 years of med you'll be writing checks for.
Is your family aware of all of this? If not, nows the time to talk it over. Can they make the minimum payment those last 2 years for you? Some families can and some can't. If your parents are willing to help you out over med school the 4 years, can you decline all that and just ask they make the minimum on the alt loan for the 2 years? I've had a few kids in the exact situation you described and instead of having their family help with tuition and living expenses, the kid borrowed it all and the parents put small bits of money aside to make the payments for her when she couldn't defer it any more. Her parents were just as surprised as she was that there was a payment due and it couldn't be deferred, chances your parents will be as well.
If the family thing is not an option, I would be looking into what the budget of your school looks like. How much for the non-billable can you be funded? Money you have allotted for room, food, personal, travel and books are largely up to you to decide how to spend the money. My kids have about $700 for food and personal and $760 for rent. Can you subsist on $1260 and put the other $200 away to help make your payments year 3 and 4? With some good planning now, you can hopefully avoid tragedy later. I would also suggest you speak to the FA person at your med school and ask their advice. The one thing they can't do is find you another loan to pay this one off (which is most likely what they will hear you asking in their mind) and if that's what you get, redirect the conversation. They don't want you to sink either but won't have a magic bullet.
Good luck.

 

[Beamer128]

Not all alternative/private (non-federally backed) loans may be deferred for as long as the borrower requires. At some point in time the bank starts losing money in the deal so they are very aware of when that will happen and work everything around when you'll be paying it back. I'm not sure what particular lender you used but they call the shots. I'm also totally befuddled as to why undergrad FA offices don't feel it's important to point this out to you before you borrow it but lot's of schools don't...
It would be unlikely that your med school would allow you to borrow extra to pay off these loans. In the world of federal lending there is a 900 page manual and one of the regs addresses consumer debt and other loans, including educational ones. The reg is very specific in stating that I may not allow you to borrow to make payments or pay these loans off.
My suggestion to you would be to work out a best case/worst case plan for the next 4 years. How much will the minimum payment be when you will be required to actually make payments? And starting when? It sounds like you can push it out another 2 years so it may be the last 2 years of med you'll be writing checks for.
Is your family aware of all of this? If not, nows the time to talk it over. Can they make the minimum payment those last 2 years for you? Some families can and some can't. If your parents are willing to help you out over med school the 4 years, can you decline all that and just ask they make the minimum on the alt loan for the 2 years? I've had a few kids in the exact situation you described and instead of having their family help with tuition and living expenses, the kid borrowed it all and the parents put small bits of money aside to make the payments for her when she couldn't defer it any more. Her parents were just as surprised as she was that there was a payment due and it couldn't be deferred, chances your parents will be as well.
If the family thing is not an option, I would be looking into what the budget of your school looks like. How much for the non-billable can you be funded? Money you have allotted for room, food, personal, travel and books are largely up to you to decide how to spend the money. My kids have about $700 for food and personal and $760 for rent. Can you subsist on $1260 and put the other $200 away to help make your payments year 3 and 4? With some good planning now, you can hopefully avoid tragedy later. I would also suggest you speak to the FA person at your med school and ask their advice. The one thing they can't do is find you another loan to pay this one off (which is most likely what they will hear you asking in their mind) and if that's what you get, redirect the conversation. They don't want you to sink either but won't have a magic bullet.
Good luck.

Thanks for the great response. I definitely was not expecting to have to pay this back so soon. So I understand that the school won't give me loans to pay this off, but is it possible to borrow extra from a second alternative loan to pay it off? I haven't received my financial aid package yet, but I think it's safe to assume that the total cost of education won't be covered in full, so I'm going to have to get a private loan to cover the difference anyways. I don't want to have to rely on my parents for assistance because they're close to retirement and they really need to look out for themselves.

 

[AMDFAO]

What you will most likely be able to do is secure a combination of federally backed loans (Stafford and GradPLUS) up to the schools cost of attendance (COA). Loans above the COA begin to be way trickier. Tradionally loans for education are to be used to meet the schools COA and are certified by the school. If your COA was $40,000 and you had $40,000 in Stafford and then applied for another $10,000 in an alternaitve loan, once I received the certification you'd have to choose since I'd be forced to cancel out something so the combo doesn't exceed the COA. I have seen a few kids who's schools gave them a list of loans they could borrow "on the side" but I can't see how anyone in my field can misinterpret the regs for federal loans and the combination of all resources not being able to exceed the COA but some schools do.
Contact your school and explain where you are and get a definitive answer to your question from them as to if they can help. Bear in mind, they may not be helpful in suggesting a lender to borrow above your COA to pay your old loan off. I have read postings about non-school certified extra loans and truth be told, I haven't really found them to be readily available. With the lender shortage, many are simply not doing them and the feds are cracking down on the entire industry and starting to legislate that area.
In short: call your school and at least know your options. We are less busy in the morning and it doesn't hurt to ask us how we are 🙂.
Also, I am not saying that your folks should pay it all back but to have a worst case plan in place: could they make the minimum monthly payments for 2 years (less the money you are willing to squirrel away over the first 2) if you will be short? I would imagine that during residency, you would be taking back the payments yourself and you wouldn't be working with the mindset that they would be helping for 6 years.
A private loan consolidation may help but understand the terms and if you may defer it. I'm not sure what the market looks like for private consols since I haven't needed to look into them for a few years.
Either way, the time to work this all out is now when you have the time to think about it rather than waiting 2 years to go into crisis mode. If you begin missing payments on that debt, you may discover that you won't be approved for your GradPLUS which unlike a Stafford has a credit check component and late or mised payments beyond 90 days would cause you to be denied. You could be approved with a co-signer (most likely your parent) and I think you'd all be better off not going that route.
I hope that made sense.

 

[AliveNkickin]

OP, did you find out what the minimum monthly payment is for your alt. loans? I'm very curious how much they expect with no income and attending med school. I will probably be in the same situation. Thanks

 

[Beamer128]

Well, what I did learn after speaking with another customer service representative was that I could defer the loans that I took out after 2004 for an additional twelve months because of some provision that allows these loans to be deferred for 60 months instead of 48; there's still isn't any deferment left on the loan I took out in 2003. I've decided to go ahead and defer the post-2004 loans for M1 (paying about 120/mo from savings that I've accumulated in the past year while living especially frugally so I can divert some of my financial aid towards this as well), use my 365-day last resort hardship deferment for M2, and then borrowing from the parents for M3/M4 (for 375/mo). I didn't ask about reducing the amount paid per month, I figured with a little cost-cutting I'd be able to afford the payments for M1.

 

[Beamer128]

Oh, I forgot to mention that these loans can be deferred during residency as well (1200+ days, I forgot the exact number).

 

[futuredo32]

Oh, I forgot to mention that these loans can be deferred during residency as well (1200+ days, I forgot the exact number).

Is that changing in 2009 to an income based repayment?

 

[Beamer128]

Is that changing in 2009 to an income based repayment?

I think the income based repayment applies to any loans (federal or alternative) taken out for medical school, but I'm not 100% sure on that. According to my promissory note, my UG alternative loans are eligible for deferment during medical residency/internship; given that this is a contract agreed upon by both parties (myself and the lender), I don't see how they can renege on that. Take a look at the promissory note you signed and see if this provision is in there.

 

[futuredo32]

I think the income based repayment applies to any loans (federal or alternative) taken out for medical school, but I'm not 100% sure on that. According to my promissory note, my UG alternative loans are eligible for deferment during medical residency/internship; given that this is a contract agreed upon by both parties (myself and the lender), I don't see how they can renege on that. Take a look at the promissory note you signed and see if this provision is in there.

Thanks, Beamer🙂. I was reading this thread http://forums.studentdoctor.net/showthread.php?t=544584 which made me kinda about paying loans back during residency. I consolidated my loans and at the time, it said I could defer(on the website). I don't think I really spent enough time looking at my promissory note to remember what it actually said.