Question about private loan

[lunalight]

I took out a private loan for $8000 to help me pay for my last year of undergrad because I couldn't get enough federal financial aid to cover all of my expenses since I messed up pretty bad the 1st time I tried college. At the time it seemed like the only thing I could do, but now I'm realizing I could have made a BIG mistake.

I just graduated and will start my MPH this fall. I do not have to pay as much in tuition now (fewer hours and cheaper cost per hour) and I work full-time so I do not need all of the graduate loan money being offered to me.

My question is: should I take out the rest of the federal loan money to pay off the private loan?

I'm applying to med school this cycle and don't want to get totally screwed at some point while in med school or residency. As it is, my full-time job is *just* enough to pay for my day-to-day expenses plus a little to save for emergencies, etc. Any advice would be greatly appreciated (DrMidlife especially since it sounds like you may have experience in this area!)

Thanks in advance

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[DrMidlife]

You're not using federal loans to pay off a private loan, because that would be fraud. You might be using your earnings to pay it off.

$8k is not particularly horrifying. That's about $100/mo payment at most.

Make sure you have all your paperwork for the private loan (and for all loans or credit offerings, forever amen kumbaya). You need the master promissory note. If you can't find it now, you won't find it when you need it. So find it or get it now.

I personally would choose to pay off that private loan, because it likely has a variable interest rate and relatively draconian terms (and probably makes money for a commercial bank that played a role in the mortgage crisis and global economic meltdown). But I'd also get it gone because of my experience in trying to keep up with how loans are sold from lender to lender, with each change of hands resulting in harrowing errors and time-consuming hard-pursued solutions. You may have the right to an in-school deferral according to your MPN (master promissory note) but you may have to fight to get that deferral.

Federal loans are subject to exactly the same pain, but are much more tightly regulated and standardized.

There's also math you can do, to see if the private loan interest rate is a better deal than what you'd get with a federal loan. If your MPH cost of attendance is more than about $20k, you're into GradPlus, which is 7.9%. That's high.

Best of luck to you.

 

[lunalight]

Thank you!!

I'm definitely going to get rid of as much of that private (sallie mae) loan as I can before starting med school. I pretty much knew what I was walking into when I signed up for the loan, but I didn't want that to stop me just before my last UG year. The interest rate is variable, but currently lower than the federal loan rate. I've been paying the interest every month. I just don't want this to become a giant pain in my rear later when I don't have time to deal with it.

My COA for my MPH is over $20k but I only need ~$4000/semester for tuition, so thankfully I don't have to worry about grad plus!

Thanks again DrMidlife!