Thoghts on this proposed variable interest rate?

[evescadeceus]

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What do you all think of this proposed variable rate on student loans? I think its going to add tens of thousands of dollars (possibly even more) to the overall cost of paying back medical school loans. I so hope this bill doesn't pass. Very low interest rates have made it possible for me to finance undergrad, but having to pay back at a variable rate over thirty years of a strong economy could double the cost of medical school. I'm ashamed to say it looks like some idiot from Ohio is sponsoring this bill (if I remember correctly from the AP article on Yahoo).

 

[Celestron2000]

👎 👎 👎

I keep checking this website for info, so I know whether I should consolidate my loans during my first year of med school...
Committee on Education and the Workforce

 

[tlew12778]

Actually it could work in both ways. If the interest rate goes up over the next 10 years, the ppl going to school then will be very glad to know that their rate can come back down. The ppl who consolidated in the 90s are now suffering bc they can't reconsolidate with today's low rates and fixed in their rates at 5+%.

Also, the loans that you get now (even if they are at a low VARIABLE IR) may end up being consolidated at a higher rate depending on what your IRs are over the next few years. Presumably the prime will go up (how much lower can it go without risking a Japan situation?) at some point.

So, I have mixed feelings about this. Fortunately all my loans have been consolidated at a fixed rate but I was lucky that the prime happened to be low when I did it.

 

[evescadeceus]

Here's a little more of my reasoning, just based on intuition, admittedly without an economics background to back it up. Folks who can pay back their loans in ten years might be okay with an adjustable rate fluctuating over the life of the loan. Folks who are going to have to amortize over twenty or more years are going to get burned (prehaps badly).

When you buy a house, I'm pretty sure you go with an adjustable rate mortgage when you're not going to be in the house very long (its a starter home, etc...). When you find that home you're going to be in for 15-20 years, you get a fixed rate.

 

[Vaccine]

I keep checking this website for info, so I know whether I should consolidate my loans during my first year of med school...

I was under the impression that we cannot subsidize while in school unless we take out Federal Direct Loans, which, unfortunately for me, are not offered by my school. Does anyone know for sure if this is true? I had hoped to max out my Stafford loans, put the extra $ into a high-yield CD so that interest accrued = interest earned, consolidate in summer 2006, then remove my stowed away cash to pay for my last two years. It doesn't look like I'll be able to do this, though, without Direct loans.

 

[ForensicPath]

I was under the impression that we cannot subsidize while in school unless we take out Federal Direct Loans, which, unfortunately for me, are not offered by my school. Does anyone know for sure if this is true? I had hoped to max out my Stafford loans, put the extra $ into a high-yield CD so that interest accrued = interest earned, consolidate in summer 2006, then remove my stowed away cash to pay for my last two years. It doesn't look like I'll be able to do this, though, without Direct loans.

I've been reading a little bit on consolidation. You can only consolidate once, so most people consolidate after they graduate to lock in a certain averaged interest rate. However, I think you can reconsolidate if you take out a new loan, but I am not sure how this works nor am I sure if you can/should consolidate during med school.

I've been using the following site to learn a little about finances so that I can make some sort of educated decision:
http://www.kiplinger.com/

 

[Celestron2000]

You can consolidate in med school if you have direct loans (I have some left over from undergrad); I don't know if it's possible to re-consolidate with additional loans later. Interest rates are definately going to go up, and in a year it may no longer be possible to fix your interest rate. This is why I am considering consolidating after only 1 yr of med school.