Actually there are loan repayment programs at NIH.
Awards are for one year and may be reapplied for if the individual continues to meet certain financial and other eligibility requirements.
WOWmom and texaspg,
Thanks.
We definitely can not afford that much per year. (I could not remember how much the school asked us to pay each year. It seems it is not the same every year.)
One of DS’s classmates seem to join ROTC or some program similar to that. I do not know how it works.
Not ROTC (that’s for undergrads). HPSP is for med students.
Several banks have “Residency and Relocation Loans” (you can google that term and find options). No clue what the amounts or terms are these days. Used to be practically free money - I got one literally weeks before the 2008 Banking crisis only to find out that my friends who applied for them 4 weeks after me got less than 1/2 of what I did, with a worse interest rate. Pediatrics residency programs are actually pretty generous and so I had hotel rooms paid for at probably 8 out of my 10 interviews (not the case in other specialties). I used a lot of the money to go to Australia in February of my 4th year.
That loan did not have a grace period so became due upon graduation, and unlike the federal loans were not eligible for an automatic forbearance. One could apply for a forbearance but had to meet particular income requirements that most residents would not meet.
Federal loans have a residency forbearance option that they are required to give you so long as you are in an approved training program. The form has to be renewed every year, but it is automatic. Interest gets rolled over into the principle yearly…which now that I’m out of training is super fun…
Is this institution loan (its term is listed in the following) better or worse than Federal Direct (i.e., unsubsidized Stafford) loans?
Interest Rate is high but interest is free while in school.
What is deferment? Is deferment worse or better than forbearance? Are they the same?
Is it quite challenging to repay this institution loan in 10 years? Suppose that 40% of all the loans are institution loans, is it better to repay the institution loans first because of its higher interest rate? (And pay the Perkins loans the last as its interest rate is the lowest.)
It seems to me it is like another moderate-sized mortgage (i.e., not like the mortgage for a house in a major city on the coast), except that its repay period is only about 10 (or 15 maximum) years.
Institution Loans:
Interest Rate is 7.5%
Co-Signer is required and must be a U.S. Citizen or Permanent Resident
Loan is interest free while you are in school
Grace period of 6 month
Up to 2 years of deferments while in residency
10 years to repay the loan
I look up some explanation of deferments of student loans (about Federal loans, not about institution loans) – So, I still do not know for sure whether the interest for that institution loans need to be paid by the student during the period of deferment (because this loan is an institution loan, not a federal loan, and the description below is for federal loans.)
But it seems deferments will not be worse than forbearance.
What happens to my loan during deferment?
During a deferment, you do not need to make payments. What’s more, depending on the type of loan you have, the federal government may pay the interest on your loan during a period of deferment.
The government may pay the interest on your
Federal Perkins Loan,
Direct Subsidized Loan, and/or
Subsidized Federal Stafford Loan.
The government does not pay the interest on your unsubsidized loans (or on any PLUS loans). You are responsible for paying the interest that accrues (accumulates) during the deferment period, but your payment is not due during the deferment period. If you don’t pay the interest on your loan during deferment, it may be capitalized (added to your principal balance), and the amount you pay in the future will be higher.
Student loans are very expensive and there are fees in addition. We paid for D’s med. school because she had tuition free UG. We used line of credit, which is significantly cheaper. Even if you cannot pay and your student will be paying, you may think about line of credit as alternative and then make them pay you back. But it all depends on the family situation. We thought that we would not need to withdrew from 401k, but we decided to buy a second home right before D’s graduation, so we ended up withdrawing from 401k. But after certain age you are forced to withdraw anyway. Again, depends on many factors, including your age as we can withdraw without penalty, we happen to be ancient.
Many med students take out fed Direct and Grad Plus loans. No med school loans are subsidized. Interest accrues right away.
For S, obtaining a “Residency and Relocation Loan” was easy for him. S applied over the phone to the local branch of the Bank of Mom and Dad. No credit check was needed. There were no loan fees, zero interest, and repayment was optional. Unfortunately if anyone wants more info from me about this loan I can tell you that you will not meet eligibility requirements.
Just a random thought adding to post 736 above ……” med students – provided they have a good/clean credit record – can borrow Grad Plus loans for up to a school’s published COA”. When S went away to college/med school, we gave him credit cards for emergencies and named him an authorized user on these cards. The result to my knowledge was that his credit record mirrored ours. In other words as we pay all bills on time and have high FICO score, he ended up with similarly good credit/clean credit record. The point I’m making is we never had to cosign on any med school loans.
@WayOutWestMom - thanks for the quick overview on the med school financing. D will definitely have to take out the direct loans. One thing someone else mentioned - third year is more expensive than the other years. Is this true at all schools? Is there a way to get the details of the costs for each year? I was multiplying the cost specified by 4, not taking into account any increases over the four years - but if one of the years is significantly more money, that would make a big difference.
To see what the annual COA will be, you (or your daughter) can look on a specific school’s FA website. Most will have a year-by-year cost breakdown.
MS3 tends to be more expensive because of things like USMLE fees. (Which are like $800-$1000 each.) Travel/lodging/meals for Step 2CS testing site. Some schools include an allowance for additional travel costs to MS3-4 clinical sites (this may include lodging if the site is far enough away from the school to make daily travel there impractical). Some schools have higher tuition for MS3 because clinical training costs more than didactic instruction. MS4 is less expensive because the number of mandated clinical rotations is usually lower than during MS3 and student are expected to spend time away from campus interviewing or doing audition rotations. (BTW, audition rotations are tuition free, but there are fees to apply for them and the student must shoulder any travel/lodging costs.)
Here’s Creighton’s COA break-down:
http://www.creighton.edu/financialaid/costofattendance/cost/medicalschoolcostofattendance20152016/
Here’s UCSF’s COA breakdown:
https://finaid.ucsf.edu/newly-admitted-students/cost-attendance
Your son’s med school federal loans will accrue interest during deferment because they are UNsubsidized loans. The government only pays the interest on subsidized loans during deferment.
And both Ds got a student credit card not linked to any parental account when they went off to college thru our credit union. I think the initial limit was $500, but it eventually rose to the max allowed $2000. So they both had their own independent credit rating since they had managed their own credit since they were 18.
Having good credit is important also for things like renting an apartment without a co-signer or getting the utility company to authorize services to a rental unit. (Otherwise the utilities often want a substantial deposit against a possible future default.)@WOWMom, Thanks.
DS also got his own credit card as well as his own checking accounts, both not linked to our accounts, before he went off to college. His limit was also $500 then. Not sure about his limit now.
The credit card seems to be most convenient when checking in at the machine near the airport ticket counter. He also purchased his tickets using his own credit card, rather than using our joint credit card. (I think it could help build up the credits because he traveled relatively frequently in college. (Occasionally, he would use our joint credit card when he had a concern that the amount may be over his limit. Also, when buying things at Amazon Prime.)
Here is actually a question which I do not the answer. I heard of two conflicting opinions: One opinion is that it is better for the student to get his/her own credit card as soon as possible, so that his/her credit could be built up over the years. The other opinion is that it is better for the S/D to use the same credit card so that the usually high credit scores of parents could be “transferred” to S/D.
Which one is correct? (assuming that in both cases, the balance is alway paid off on time, i.e., the balance is zero.)
Actually, I also heard that in order to build up credits fast, it helps to have accrued some debts and then pay it off over a period of several years. For example, when the young person buys his/her first car, it is better not to pay cash – rather, borrow some car loans and then pay it off gradually over the next 3 or 4 years. I think when we bought our first car, we used this “trick” because we knew we eventually would need a better credit when we buy a house.
The money and credit issues are important for med school students because they often have accumulated quite a significant debt (say, over $100K) in their 20s and 30s. We do not want them to end up paying a high interest rate for, say, their mortgage (or even a car loan) in the future.
Our D has a great credit score simply from sharing a credit card with us. She used this to get one on her own without any hopes of employment soon (just started med school in fall, lol).
@mcat2: I do not know what is better, just what worked for us and S. S was able to obtain student loans and sign leases without need for cosigners probably because his credit history mirrored ours. Although he is still authorized user on our cards, we have taken our credit cards from him. He obtained a credit card in his own name when he started med school and is building on that. As he is still an authorized user on ours, he probably continues to get plus of our history (or I guess minus if we become delinquent).
There are special mortgage programs for young physicians which do not consider student loan debt (and so don’t trigger higher mortgage rates).
D1’s student loan debt didn’t trigger a higher interest rate on her car loan when she bought a new car after she graduated from med school. All the CU (and the car dealership) asked to see was signed contract from her employer showing her job start date and first year salary. She got the same car loan rate that was offered to everyone else.
Thanks again.
.
Even though we are pretty sure that DS could possibly get a “low or even zero interest rate” loan from the bank of mom and dad in a couple of ways, we are reluctant to do so. In the future, once he is married, we want his family finance to be as independent of ours as possible. After all, future DIL grew up in another family. We do not want DS’s family to have a burden to pay us back.
I know his loans from other sources than bawill be more costly the current way. I am not sure whether it is “good” for us not to “help” him in this. Does any other family have a similar concern?
Actually, I do not know the size of their combined student loan debt and do not try to learn about it. This reminds me of a post by a CCer who is a physician (Hubba’sDad?): He had paid for his son’s full cost of his med school education, and he semi-jokingly said he secretly wished that his son would not meet some girl who had accumulated tons of student loans!
Yes there are! Beyond just ignoring the student loan debt, they also have other benefits -
- if you’re a new attending a signed contract is taken as evidence of income rather than the meager resident/fellow salary
- most banks do not require a down payment if the mortgage is under a certain amount (most are 500k for physicians in residency or within a year of starting practice, up to 650k if “established” - and only a 5% down payment for mortgages larger than those limits).
- no PMI
You still have to have modest credit scores to qualify.
I close on my first home this month and used one of these programs. My rate is pretty decent - probably not as good as it would have been with a traditional mortgage and down payment but we’re happy with the way things have gone.
" He had paid for his son’s full cost of his med school education, and he semi-jokingly said he secretly wished that his son would not meet some girl who had accumulated tons of student loans!"
-This is definitely a concern. So far not applicable to D’s situation and we hope that it will continue this way. The other parents also paid up the student loans
Thank you Bigmedred for the information on special mortgage programs for young physician. I have forwarded to my D. She did not pursue buying a house, since she thinks that she may move after residency. She did not have to move at all after graduating.
I wonder if anybody heard about special car loans for young physicians? This is looming in a near future. D’s car is over 10 y o. It is her very first car that we bought for her and she put some significant miles on it.
Re: special mortgage/car programs for young physicians: before jumping into either one, I would encourage young MDs to let their ego swollen heads that developed upon being handed an MD degree to subside before taking on new debt.