Medical School Loans

D is offered the following loans:

  1. Federal unsubsidized loan $40,500
  2. Federal Graduate Plus Loan $43,621

As far as I know, the interest rates on these loans are 5.84 and 6.84% and both loans can be borrowed concurrently.

Has any one took this kind of loan before? If the payback is after graduation how much total balance and monthly payment will that be? Can a newly minted doctor afford such a payment? I assume the student can borrow this on their signature without parents co-sign, even though we have to file Fafsa. If so, what is the purposes to know about parents financial condition?

D1 and D2: Federal direct unsub–yes; grad plus–no. (Although D1 and D2 have classmates who have.)

That depends on the total amount borrowed over the course of med school plus any accrued and capitalized interest;, the annual interest rate (Fed Direct interest rates float and are readjusted every July 1) and what repayment plan your D chooses to use. Students have the option of consolidating their total federal direct loans after graduation. They are allowed to consolidate loans ONCE without incurring a penalty.

There are a variety of repayment plans, including Pay As You Earn (PAYE), Income-contingent repayment (ICR), income-based repayment (IBR), graduated repayment and extended (25 year) repayment, as well as the standard 10 year repayment option.

See: https://www.aamc.org/services/first/first_factsheets/112294/loan_repayment_choices.html

There are also some repayment for service programs offered by the National Health Service Corp and by some states. The programs are for primary care fields only.

Federal Direct and Grad Plus do not require a parent to co-sign. Some med schools (privates in particular) ask about family finances in order to assess an required family contribution.

Wow, a 25 year option! It’s like a mortgage, if you start paying at age 30, it’s likely you will take that loan to the graves.

Given the current market, those rates are high. You might be able to get a much better rate with a private loan for some fraction of the amount needed. Best case scenario is legislation will bring down federal rates after 2016 election.

Remember, this is fed guaranteed student loan without parents co-signing.

If I were to get an HELOC, the rates are much lower.

No more “guarantees”, the loans are direct and the government is making tons of money on them with the Grad Plus loans being the most profitable. The government’s cost on those is a spectacular -40.62%! The cost difference between that and the private market is enough to merit some serious number crunching before you decide the best choice.

http://www.cbo.gov/sites/default/files/cbofiles/attachments/44198-2014-04-StudentLoan.pdf

Ok, my misunderstanding.

But how can a jobless student borrow money on their own signature?

For the most part they can’t, but a few private lenders might take a risk on a medical student. Your D probably won’t be able to borrow the full amount of the cost of her medical education but she may be able to a borrow a limited amount.

One thing to remember about private loans–they’re not eligible for government sponsored repayment options like service-for-repayment programs or public service loan forgiveness.

The other caveat to private loans is that they rarely include things like grace periods and forbearance options that the government loans allow.

My own situation would have been impossible to exist without the chance to put my loans on forbearance, after refinancing and choosing an extended graduated payment plan, my monthly payments would have been ~25% of my PGY-6 monthly net income. Obviously had I spent 6 years paying down the loans before they had the chance to accrue ~ 40k in interest, then yes, my monthly payments would have been lower, but given the salary I earned as an intern, the % of monthly income would have likely been very similar.

Artloverplus, I’m going to send you a private message with more details about payment post graduation.

@bigredmed

Thank you so much for the advice. We got settled with D’s finance for the school and all of your advice are very helpful. Thank you all.

Actually, the “estimated COA” by the school is 80K/year, thus the loan offers, but we think we can get by with only about $60K/year.

For anyone else out there looking at this and freaking out, Texas has this dialed. Son is in second year and all in is able to live on $32,000 per year because Texas wants their medical students to stay in state in an attempt to keep future doctors there. He should come out with less than half the loan amount of other state’s new doctors. We live in CA but we LOVE TX for this! The state subsidizes all of the medical schools so the tuition is low for all vs. it being a scholarship arrangement.

An update on the actual COA for D after her completion of the first year.

I can foresee the COA for the first TWO YEAR of med school is not more than $62000/year, that is tuition, room and board, books and other. The tuition is about $50K, all the others is around $1000/mo, that is in CA, of course we are not talking about Westwood or San Francisco. That COA does not include Summer expenditures, since she is renting a regular apartment, it is on a yearly lease. All summer she won’t be staying at the apartment, so in addition to the rent and util, she has to pay for the intern expenses.

The third and fourth year will be rotating, so we won’t have a leased apartment, I suppose the living expenses will be higher. Any idea what that will be?

She knows about http://rotatingroom.com/ right?

Or she can do what D1 did when she had an out of town rotation—

She literally camped in the national forest. In a small tent. For 4 weeks. With her dog. She showered in the physician’s locker room before her shift, cooked her breakfast/dinners over a one burner camp stove.

^^ Perhaps it will be cheaper to buy a used camper and drive around. And take the couple live off Google’s parking lot, maybe hospitals will allow them to park there.