Hi again,
I’m curious about student loan deferrals. As I mentioned in my introductory post (which hasn’t gotten much love) I’ll be graduating from law school with approx. $20k in debt. I read up about loan deferrals on Stafford and Plus loan and my impression is that while you are enrolled in school, you aren’t required to pay (i.e. don’t default on) your loans. If I began taking pre-med classes immediately after my graduation would I be eligible for a deferral on those loans? Moreover, does the interest continue to run on the loans from one program if you begin a different program?
Thanks!
No, you generally don’t have to start paying back your loans as long as you are still enrolled in school. There might be some credit hour requirements (like at least 1/2 time status), but I’m not totally sure. You should ask a financial aid advisor.
Interest will probably continue to accumulate on them unless you make quarterly interest payments.
We are currently going through this with my SO transitioning from a program that was not what it was made out to be and trying to get into a program that will get him where he needs to be and he wanted to get a forbearance on his loans so that he isn’t having to pay while still attending school and only working part time, I don’t know if it’s the same in every state, but I would assume since it’s Federal based lending that the rules are the same everywhere, anyway what we were told was that as long as he was enrolled in school at least 1/2 time he could defer his loans. I’m not a financial aid person though…so of course check with the experts but as always where there is the will one will find the way.
I do think interest accrues though, but we thought that a small price to pay.
My understanding is that 1/2 time course enrollment entitles you to defer student loan repayment, although interest continues to accumulate.
However if you have any spare income it’s not a bad idea to pay down the loan a little, since the interest will compound. If you have any other debts, i.e. credit card and car loan, those should be payed off first. I wouldn’t recommend going into med school with a credit card balance.
When I enrolled in grad school 1/2 time or more, I was eligible for deferment of my undergrad loans. I suppose it depends on the specific loan, but mine continued to accumulate interest while being deferred. They did offer me the option of paying off the extra interest, but I was usually too broke to do so.
I agree with ttraub regarding the credit card balances. I tried that with grad school and it was not pretty. I had to drop out of full time and go part time to pay off the credit cards. While that’s an option for the PhD, I get the impression part-time status is frowned upon for med school.
Interest accrues on the loans whether deferred or not, except for during grace period which is typically the first 6 months post graduating.
DO not underestimate how much and how quickly that can add up on $20 even if you are paying a low interest rate.
One suggestion might be: pay at least the interest on the loans monthly.
Have you ever thought about consolidating? I just recently consolidated all of my undergraduate and graduate loans which has made things a lot easier. Furthermore, my consolidation loan is now back in deferment because I am going back to school this summer to complete a 2nd BA in Biology. The interest rate is locked in which is great. By the way, I am talking about federal loans, not private. Private loans are a whole other ball game which I am glad I am not a part of! Hope this helps a little.
Slambo:
I am carrying huge debts due to bad advice and my own mismanagement and I have been out there working for more than a decate - but I also am a gun slinger when it comes to this stuff and a hundred grand is not that much money right now, really the returns are horrible on cash - hence cash is cheap. Heck, I could have paid my loans after one big real estate deal I closed…and I stupidly did another deal - the gun slinger thing.
What you need to do:
You MUST determine if your loans are subsidized or unsubsidized, it is critcal. See, for me, I stupidly took out unsubsidized loans, but I will play victim here because I was young and stupid, and got poor advice the financial counselers; Frankly, I don’t think they knew the difference looking back on it. So, if anything goes wrong, including unemployement - I am in I.T. so I have been mostly unemployeed over the past 5 years - you are responsible for the interest on an subsidized loan.
If your loans are subsidized and bad things happen, e.g. you lose your job, the Feds pay the interest.
Unsubsidized and return to school - you pay interest
Subsidized and returning to school - feds pay interest
Got it?
You must be mindful of this if you consolidate, because if you wind up in an unsubsidized circumstance, the interest is added to the principle and amortized…and you wind up paying interest on the interest and you can build up your principle very quickly.
My original loans of 50K are now 80K…and I have paid out close to 30K in payments - but it’s the timing of when you pay and if you wind up having to take forebearances - the interest adds up quickly.
But…what has changed is that interest is now fully deductible, and that was not always the case. In my good years, along with mortgage interest, my tax returns have been huge. This year my state/fed refund was 15K. Remember, writeoffs only help those who have high cash flow and if you can get through all this you should have good cash flow, even if you go PCP.
If the fear of dept worries you, well…you better get used to it. I have two good friends who now practice, and even though their cash flow is much improved (300k and 400k) they have to manage more costs and make sound business decisions. I am in my 40s and just starting to figure out just how tough it is to manage money. I am going into medicine for the stability and sense of belonging to my community - I don’t think medicine will solve all of my money problems. If I.T. had been more stable, really, I would probably be close to being retired now and thought I could have at the end of the 90’s. Managing money takes a lifetime of experience and good common sense, and it’s never too late to start.
Don’t let the loans scare you, but understand the different packages and plan accordingly, something always goes wrong and don’t make the same mistakes I made.