If your school participates in Direct Loans, read no further, you have no choice of lender, and have to accept the gov't not-so-great terms. If your school doesn't use direct loans, you will have to choose a private Stafford lender (all Stafford loans are guaranteed by the gov't, which makes them appealing to lenders). If you are planning on borrowing to cover most/all your costs, choose carefully. The difference between different lenders can be as much as $10,000 throughout the life of your loan. Things to look for:
Are there originations/guarantee fees?
Are there "rebates" like the one SallieMae offers?
Are there interest rate reductions, when do they kick in, how much, etc.?
Do you only get incentives (rebates, interest reductions, etc.) if you pay every single payment on time?
When does the lender capitalize interest?
You all took algebra, and hopefully pre-calc or stat, so you should be able to figure out the exact cost of your loan, and how much different ones will save you.
The best lender I found so far (I went to about 12 lenders' websites recommended by different FAOs) was T.H.E. <www.northstar.org> which is much cheaper than MEDLoans/SallieMae. In general interest reductions help you a lot more than rebates.
If you choose a lender who charges fees, EVEN IF YOU GET THE FEES BACK IN REBATES, you accrue interest on the fees until you enter repayment and get the fees rebated. That means that paying 3% and being charged interest on money you never saw and then getting 3.5% back 4 to 7 years later (will you defer during residency?) is a lot more expensive than no fees in the first place.
The single most important thing to look at is the interest rate once you enter repayment. While it is capped at 8.25%, some lenders figure it differently, which means you will always be paying 8.25%, while others will have you pay less during economic times like today. The next (or maybe this is more important) is to choose a lender that will capitalize interest only once, right before you enter repayment. Most recommended lenders do this, but be very careful, or you could be paying far more that the $10,000 possible difference I mentioned above. Capitalization means that they all accrued interest to your principle, which means that you are now paying interest on interest. All lenders capitalize, the question is when, and how often.
Above all, talk to the people in financial aid. If you can't figure out how to calculate the total cost of a loan, they should be happy to show you. An okay rule of thumb, assuming you enter repayment after 3 years of residency, and take 10+ years to pay off the laon, is that you will have to pay (in todays dollars, I can't predict the influence of inflation) about 3 times what you initially borrow. Kind of staggering, isn't it?
