Stafford plus private loans

[anoncurious]

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I was wondering if someone could help me elicit some of the negative repercussions of the following loan strategy:

My medical school will cost about 33K/yr including living expenses. Given that private loan rates are so low right now, instead of taking out all 120K in stafford loans, I was thinking of taking some out in private loans as well.

I would obviously take the full 8500 subsidized/yr, and then would take out some additional money in unsub loans (6.8% interest) and then more in private loans (lower interest?). The advantage of this is that private loans right now (I assume) are at a much lower rate than the stafford loans, however when rates start going up, I can work on paying back the private loans first since the stafford rates are fixed.

Would this be a wise move? I would appreciate any advice on any of the implications and repurcussions of such a strategy, or any alternative strategies that would seem reasonable.

I know that private loans are based on credit scores/etc, but I assume that I will be eligible: I am coming straight out of college into med school, but I think I have a pretty good credit score (don't know what number exactly, but was approved for a 14K credit card at my current bank, so its above whatever threshold they set for that).

 

[GeraldMonroe]

No, it would not be wise.

Federal student loans have a higher interest rate, but the rate is fixed, and comparable to the long term interest rate of the private loans offered to the most favored borrowers.

Federal loans offer more flexibility in repayment, such as the new income based repayment program. As long as you're in school, you can defer paying on the loans, and the interest is not compounded. Both federal and private student loans cannot be canceled in bankruptcy, so private loans do not have an advantage there.

During residency, your private loans would come due for repayment, while there are ways to forbear paying on federal student loans. In fact, you could get in serious trouble this way, because federal loans suck up 15% of your income above poverty, and private loan repayment would eat another chunk out of that. $40k a year is a fairly limited income, and mandatory loan repayments could leave you with very little to live on.

I may be wrong about this, but I think that loan repayment programs offered by the various health services and non-profits will only repay federal student loans.