Questions about loans with no credit

[papito22]

I am going to (gratefully) be getting my BS with no undergrad debt at all. However, I'm going to have to foot the bill for med school all on my own. I've never had to borrow money so I have no credit at all.

I know you can borrow money from the government to pay for med school, but is there a limit to how much you can take out? Say if tuition at your school is 40,000 and you only need to borrow about $5000 for expenses.

Also, would it be better to open up a credit card and try to build up a little credit or is it better to just have no credit?

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[trs88]

Not sure if you were planning on it, but do not pay your tuition with a credit card. Just fill out a fafsa and you'll be fine, those loans don't care about your credit. I say it is good to have a credit card but you have to be cautious with how you use it. I treat mine exactly like a debit card and if you asked me at any time during the month how much and what I put on my card, I could give a really good estimate.

 

[MightBeACylon439]

If you make it to interviews they undergo a financial aid presentation, they talk about getting loans and such. Most are in the same position as you OP, you'll be fine.

I would always recommend opening up a credit card to build your credit. HOWEVER, this can be a double edged sword. If you don't stay on top of it, it can be really bad for you. However, if you use your credit it card for something you already budgeted for- say fuel for your car, and you STAY ON TOP OF YOUR PAYMENTS it can end up being a very beneficial situation.

 

[kalat]

I wrote about this in another post some time back. There are two types of federally available loans for medical students: Federal Direct Loans and Federal PLUS Loans. The Federal Direct Loans (~5-6% interest) do not take into account EFC or credit history and will cover up to an aggregate amount of $224,000 with a maximum of $40,500 per year. Federal PLUS Loans (~6-7% interest) do not take into account EFC but do take into account credit history. However, Federal PLUS Loans have no aggregate limit for borrowing. There are also private loans and other types of credit (i.e. credit cards) which are not recommended unless you have no other choice due to the very high interest rates.

Essentially, you need to look at the school tuition and your projected cost of living if you intend to support yourself entirely on loans. For example, if you are at a school that costs $40,000 per year you need to observe the yearly maximum for Federal PLUS Loans; you will only be able to take out an additional $500 per year in living expenses before meeting the $40,500 per year limit. If you require more money for living expenses (e.g. another $19,500 per year) you will need to take that amount out of the Federal PLUS Loans or another source. Remember Federal PLUS Loans require credit information so you will need to build some credit to not require a cosigner or other condition for these loans. The last thing is some aid packages may vary by school so you need to read the financial aid documents made available by that school (usually on their website).

Keep an eye out for other ways to pay for school as well including programs like the health professions scholarship program (HPSP) through the army, navy, or air force, and the national health services corps (NHSC) among others. These programs aren't for everyone, but if you find you're a good fit for them they can provide some wonderful benefits and opportunities including 100% of your tuition paid along with reasonable living expenses (last time I checked over $2,000 per month). Usually schools will also distribute this information as well during tours, interviews, and/or orientation. Be sure if you find yourself interested in this programs to learn about them thoroughly as they require contractual obligations that cannot be broken without serious consequences.