What should we do about our undergraduate Perkins/Stafford loans?

[Fumoffu]

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If we're attending medschool, the subsidized loans get extended after medschool right? I mean we don't need to make interest payments during medschool?

Should we bother consolidating or leave it as is? If we should consolidate, what are some firms that will do so.

Thanks.

 

[k's mom]

This is a great place to get basic advice, but you need to have a SIT-DOWN (NOT over-the-phone) talk with a financial aid officer at your school. Discuss the differences between deferment and forebearance, and keep in mind that there is an aggregate total for how much federal student debt you can take out. Some students with high undergraduate debt (or debt from previous graduate training) find themselves up a creek during 4th year of medical school if they are no longer eligible for Stafford loans. $40,000 in private loans is NOT a pretty thing...especially if you want to do something crazy during residency like buy a house or have a life.

Good luck!

 

[evescadeceus]

What is the aggregate total for how much federal debt you can take out?
(Some undergrad financial aid offices are worse than unemployment or welfare, no point is asking there.)

 

[box29]

I believe the aggregate max on federal staffords, both subsidized and unsubsidized for medical students is $189,125.00. This includes all federal stafford loans from undergrad as well.

 

[mpp]

There's no point in consolidating right now since the rates for the coming year are even lower than this year. Consolidating will also put your loan into repayment (for which you may be allowed some deferrment but that depends on the consolidating company). It's probably best just to let it ride unless rates are set to go way up the following year. You will always have some time between when the new rates are announced and when they are put in place to consolidate.

 

[evescadeceus]

So this $189,125 figure means that anyone who is carrying $35,000 or more in undergrad federal debt, who is also planning on borrowing $38,500 for each year ($154,000) has no access to federal loans for travel interview expenses during 4th year, and must get a private loan to do this, correct?

(Sigh) Sometimes it really does seem that this whole med school process is stacked against students from a modest background. I don't think $35,000 undergrad debt is unreasonable. I had no idea I was going to hit the federal aid ceiling just by going to med school.

Or is this common for a lot of folks? You just have to keep your credit clean, because many people are at the federal aid ceiling by 4th year, and have to apply for private loans to interview out of state? Feedback would be great.

 

[mpp]

I don't think there are any federal loans available like you describe. The $189,125 limit is for Stafford loans only...not Perkins or other type of federal loans.

 

[flighterdoc]

There's no point in consolidating right now since the rates for the coming year are even lower than this year. Consolidating will also put your loan into repayment (for which you may be allowed some deferrment but that depends on the consolidating company). It's probably best just to let it ride unless rates are set to go way up the following year. You will always have some time between when the new rates are announced and when they are put in place to consolidate.

Plus, you only get to consolidate once in your lifetime - better to wait 'til you're done.

 

[ewing]

There's no point in consolidating right now since the rates for the coming year are even lower than this year. Consolidating will also put your loan into repayment (for which you may be allowed some deferrment but that depends on the consolidating company). It's probably best just to let it ride unless rates are set to go way up the following year. You will always have some time between when the new rates are announced and when they are put in place to consolidate.

well, for my unsub. staffords, i get charged interest while i'm in school regardless and now i'm in grace, which means i lock in at a lower rate. besides, what's all of this talk about only being able to consolidate once?

 

[John Deere Gree]

I know with some loans you can only consolidate once, but I dunno about the Fed. Stafford loans. However, like the above posters said there is no reason to consolidate right now with interest rates decreasing to another all time low for this fiscal year (July 1, 2004-June, 30, 2005). Once you do consolidate though you must repay almost immediately, which can be a problem if you are still attending school.

However, you can make interest payments on your loans (which I do). My lender sends me a bill every once in a while and says here's how much interest has accumulated and if I want to pay it off I send in a check, if not, the interest will compound and I'll ahve a larger payment once I'm off deferement.

 

[mpp]

However, you can make interest payments on your loans (which I do). My lender sends me a bill every once in a while and says here's how much interest has accumulated and if I want to pay it off I send in a check, if not, the interest will compound and I'll ahve a larger payment once I'm off deferement.

Actually, this is incorrect. The interest is only capitalized once, when you finish you in-school deferment. You would pay exactly the same amount of interest by paying several payments during school or paying one lump sum at the end of school. Once your loan is in repayment, the interest will be capitalized like any other loan.

 

[LP1CW]

" Consolidating will also put your loan into repayment (for which you may be allowed some deferrment but that depends on the consolidating company)"

This is not true. If you have federal loans, stafford/perkins, you can defer as long as your are half time in school, this applies even after you have consolidated them. So, go ahead and consolidate now and you can still defer while in school. There is no limited deferment, half time is all you need.

 

[mpp]

I disagree. If you consolidate your loans with the federal government (and they have to be Direct Loans for you to do that) you are correct that there is no limit to in-school deferment. But if you use a private consolidation company, they are in effect paying off your federal loans and granting you new student loan which be under their terms which may not allow unlimited deferment. It might also disqualify you from other types of deferment such as hardship deferment during residency or forebearance.

See this thread for an example of someone having difficulty with this issue. Unfortunately I'm not sure what would be the best advice for this person.

 

[John Deere Gree]

Actually, this is incorrect. The interest is only capitalized once, when you finish you in-school deferment. You would pay exactly the same amount of interest by paying several payments during school or paying one lump sum at the end of school. Once your loan is in repayment, the interest will be capitalized like any other loan.

OK then explain to me why I get a bill about every few months that says here is the interest that has accured on your loan. Please send payment now or let this be added to your principle and we will continue to compound your interest.

With compound interest, the amount of interest will be added to the principle so the next time around the interest added on will include both the principle and the interest, not just principle alone. Therefore you are not paying the same amount, and that is why it is good to pay off the interest (or any part of a loan ASAP.

 

[mpp]

Well then it must be a different loan than a Stafford loan. I also get an annual letter about the interest accrued on Stafford loans but it says nothing about compounding it. Read it carefully and/or ask your financial aid office for help. Private loans are a different matter and they can do anything you agreed to when you signed up.

There is no compounding/capitilization on Stafford loans until they enter repayment. In fact there will be no capitlization even through deferment and grace period as long as they don't enter repayment. It's really a great deal if you can keep your loans out of repayment for as long as possible. Even if you have the money to pay the interest, keep that in a separate account and pay it as a lump sum when the loan finally enters repayment.

 

[LP1CW]

I contacted www.nelnet.net and they told me that if you have any federal loans (stafford and Perkins) and you consolidate them with them now, you can defer during your entire medical school period as long as you are a half time student and you can even qualify for certain forms of deferment during residency.

Call them yourself. 1.866.4CONSOL (1.866.426.6765)

 

[mpp]

Sounds like a good deal, if it is true. Again the conditions would require you to have Direct loans (since you cannot consolidate loans other than DirectLoans unless you are in repayment or grace period). Be sure to get everything in writing, including your deferment opportunities in the future.

 

[John Deere Gree]

mpp-

you mgiht want to check out this website to compute the interest and amount you will be repaying if you do not pay interest on your loans now. You'll notice that if you wait to pay off interest you will be paying more back later.

http://www.finaid.org/calculators/interestcap.phtml

 

[mpp]

That calculator is correct and is as I said above. If your interest is capatilized you will pay interest on that interest

However, while on in-school deferement, interest on Stafford loans is not capitalized until after you enter repayment (which is one of the choices on that calculator). Therefore paying all the interest in one-lump sum at the time the loan(s) go into repayment or paying the interest as it accrues are identical. That calculator will not show you this calculation since it does not have an option for the lump-sum interest payment.

Here is a link that explains how the interest is capitalized on Stafford loans.

 

[John Deere Gree]

I agree with everything you say. However I would rather pay little bits and pieces right now instead of trying to pay a huge massive interest rate dump 6 months after I leave school. (After figuring out all the payments and everything with my loans I would need to somehow find a way to pay $20K in interest 6 months after school. Sorry but residencies don't offer million dollar signing bonuses).

To each his or her own...