Truth about deferrals during residency? Help me out here!

Discussion in 'Financial Aid' started by Twiki, Apr 6, 2004.

  1. Twiki

    Twiki Member
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    I spent half the day yesterday on the phone with 3 different people from Wells Fargo, and I got a different answer from each and every one of them!

    I have a considerable amount of debt from med school (my school is a very expensive one), including federal loans as well as a hefty chunk of alternative loans. In addition, I have approximately $10,000 undergraduate loans, about half of which are alternative "collegiate" loans. For some reason, they disbursed the loans such that I have many. many different loans (even though many are the same type), and all are in different statuses....some in deferment, some in "in school". It's a confusing mess.

    So here is my concern: My spouse and I are in the process of purchasing a house. When I called Wells Fargo and asked them to please send our mortgage officer my loan info, the representative freaked out at me, and said "Well, now here is your SITUATION (emphasis on situation)....You are going to be expected to start repayment of two of your alternative loans in June. You will go into repayment for two of your other loans in December.

    I interrupted him, and said, "But I'm starting residency in June. I plan to defer my loans during residency. Can't I do that?"

    He said, "Oh, really? Well, that might apply to your federal stafford loans, but you will still have to start paying your alternative loans for which you've used up your grace period." (I used up my 6 month grace period for my undergrad loans between the time I ended undergrad and started med school.)

    He also asked me: "Well, just how much are you going to be making in residency?" I replied that 40 thousand was pretty standard, and that was what I was going to be making. "What!? Forty thousand?! (as if that was a lot of money!) I'm not sure you will even qualify for economic hardship! In any case, you've used up your grace period on many of these loans. I might be able to get you a two month deferal for one of these, but that's it." (Two months? Is he kidding? What good will that do me?!)

    Basically, this guy was making it sound like there was no way in hell I should be applying for a mortgage, because my financial "situation" (as he put it) was in shambles. Never mind that I have perfect credit, no balance on my credit card, etc. It's just student loans. Which until now, I was pretty sure I could defer!

    Then, my cell phone cut out, and I was disconnected from the loan officer from hell. I explained to the next lady I was connected with that I had just gotten cut off from my conversation with the other guy, and I summarized what he had told me. I said "Is this really true?" She said no, that guy didn't know what he was talking about. She said that there are deferment options for all of my loans. I got off the phone somewhat relieved, but still unsure, because now two people from the same company had told me basically opposite stories.

    I called back to see if another person would tell me the same thing. They said something similar to the first guy...that some of my undergrad loans had to be repaid because the grace period was used up. But then, they also said that I might meet economic hardship status, in which case, I didn't necessarily have to pay it right away.

    I am very confused and worried. Bottom line: Can't I defer ALL of my loans during residency, including my private/alternative undergrad ones? Does anyone have any experience with this? I need a solid answer...and obviously the nincompoops at Wells Fargo don't have it.
     
  2. Twiki

    Twiki Member
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    Just an addendum:

    I forgot to also mention forbearances. I understand that this is also possible, but I am unsure if the loan officers I spoke with understood that I was willing to take this route as well. I don't care if the interest continues to grow on some of these loans. The point is, I can't afford to be in repayment at this time if we are trying to buy a house!
     
  3. Kalel

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    Defferrment is not possible during residency, but it is possible during fellowship. Residents forebear on their loans by demonstrating that monthly payments will be so much greater then their income (don't know the exact number, but everybody qualifies). The difference between forbearance and defferment is that the interest rates for your staffords is slightly higher during forbearance (it's your repayment interest rate, which is currently 3.25 unless you consolidate during your 6 month grace period, in which case it's only ~2.85, which is the same interest rate that you would have if you deferred). Anyways, the whole mortgage house-buying thing uses a different formula to qualify you for loans, I suspect that you will have to speak with a loan officer in person (showing him or her your financial aid stuff) to see if you can qualify. You should also speak with a financial aid debt counselor at your school about consolidation and to confirm the stuff that I have told you too (I'm not 100% sure about it, it's just what I remember being told off the top of my head), it should be part of your standard exit interview.
     
  4. From what I understand from talking to my financial aid office, you have to start paying back your loans within 3-6 months after graduation. I wasn't aware that you were able to defer all of them (especially the federal ones!) until after residency. (Even if you could, the interest accruing would be significant!)

    On a different note, you have all these loans out, but somehow have no credit card debt and are looking to buy a house? I don't quite understand that...sorry, my mind can't quite compute that. :)
     
  5. ophtho1122

    ophtho1122 Member
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    You can defer all your federal loans, stafford and perkins, during residency. You have a 6 month grace period on your staffords and 9 month on perkins. After the grace period, you can defer based on economic hardship for 3 additional years. After the 3 years, you consolidate, which makes it a new loan, and defer for 3 more years based on economic hardship.
     
  6. mpp

    mpp SDN Moderator
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    optho1122 is correct. However, the eligibility for deferment depends on your income and your monthly loan payment. Here is a link to an economic hardship deferment calculator.
     
  7. mpp

    mpp SDN Moderator
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    I should add that "Buck Rogers in the 25th Century" was the first movie that I got to go to with my friends and no parents. I think I was only 9 at the time. Do parents let their kids go to movies by themselves at age 9 these days?

    bidibidibidi
     
  8. willow212

    willow212 Senior Member
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    I agree with ophtho1122 and mpp that you can defer Federal loans during residency for 3 years if you qualify for economic hardship deferment.

    However, I also have some alternative loans from Citibank, and they do not allow deferment. Instead, they will allow a one year forbearance with no increased interest rate, I think. Every alternative loan company will have their own policy, so I would check with your specific alternative loan company and ask them to send you the policy in writing.
     
  9. Twiki

    Twiki Member
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    Thanks for all your replies, folks. What I was really worried about were the private loans...I have several and these were the ones that I was told I need to start repayment on (by one person, at least.) As far as asking Wells Fargo for the policy in writing, that's a good idea. All of my loans are through Wells Fargo, and I have been unable thus far to find any solid information about deferral/forbearance of these particular alternative loans. The info on the website is pretty darn vague. So, in general, the economic hardship deferral will not apply to private loans? Am I understanding that part correctly?

    Blade, sorry I'm a little confused by your response. Most people I know who are starting residency somewhere new decide to buy rather than rent because it makes financial sense, especially with the interest rates this low. Even with a buttload of student loans. And I don't have credit card debt because I think it's generally a bad idea to carry a balance. Or did you mean that as a tongue-in-cheek?:confused:

    PS: Yes, Buck Rogers rocks!
     
  10. willow212

    willow212 Senior Member
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    Maybe you could ask specifically (though it sounds like you've tried already) if your private loans are eligible for economic hardship deferment.

    If Wells Fargo is anything like Citibank, the private loans are NOT eligible for economic hardship deferment, only for forbearance (and you'll want to know exactly how many years are allowed and what income restrictions etc. qualify you for forbearance).

    Best of luck!
     
  11. RasputinDO

    RasputinDO Senior Member
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    I don't know if it's the same loan you have, but I just finished filling out my alternative loan app and it's through Wells Fargo. It looks like on there app that they allow you 5 years of deferement for a loan that was taken out during undergrad and then a 6 month grace period. Seven years as long as your in school or residency for deferment. I'm not sure about forbearance.
     

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