Financial Aid Q's?

Wasn’t there a financial aid forum at some point?
Anyway, I have an FA question:
Stafford loans need to be repaid, and you have a 6-month grace period after finishing school to start repayment. What if you finish one program (say a Masters) and then move on to Medical school?
At the end of medical school you can get a three-year deferement for residency. What if you (say) graduate off-cycle from a school (say you’re in a jan or may caribbean class, and miss the match for most of a year)? If it’s more than 6 months, do you have to start repaying? What if you enroll in (say) another school program (say an MBA or something)?
I’m trying to decide if I should get some FA for my post-bac. I don’t really need it but the rates are so low I could invest the money (in something very safe) and make money on it.

I believe that once your grace period is up, you can get another education deferral but during this second deferral interest accrues and is added to your original loan balance. This can get costly if you defer your original note for a long period of time. Depending on the lender, original loans can be deferred while you are pursuing medical school, MBA, MA, and some lenders defer $ if you attend CE courses for credit at a CC or Univ.
Borrowing money to invest is not considered appropriate use of education loans (not sure if it constitutes a crime other than fraud since a borrower signs a note saying the the money is for school purposes).
Call your lender for specifics on deferment, etc.

Interesting question! I don’t have an answer to your specific question, but I will share with you my current situation: My daughter is in college, and as her parents, we had to take out a loan to help with her educational expenses. Payments on this type of loan begin after a specified time (I can’t remember exactly when) and I made the first payment when it was required. Subsequently, the lending institution found out I was in school, and I received a deferrment of payments on the loan before the 2nd payment was due. As long as I am enrolled in college, I will continue to be granted deferrment on payment of the money we borrowed to help my daughter. I would assume that if the loan was for a person’s own education, the same criteria would apply. If you have a period of time where you are not enrolled in school (after the 6-month grace period), I would assume you would need to make the monthly payments until you re-enrolled and received a deferrment.

I think you misunderstood the comment made about investing. A person can invest their own savings or extra income whereever they choose, and the money borrowed for education would be used for educational purposes. One needs to disclose to the financial lending institution all of their assets and liabilities in order to qualify for the educational loan. If the bank loans them the money, there wouldn’t be any fraud involved.

My assumption was that to receive student loan money one would have no assets. While reseaching Financial Aid for med school, I learned that many schools require liquidation of assets to cover expenses, and the balance of expenses remaining would receive approval for student loans, etc. Once all assets are liquidated and one receives student loan money only to create assets via investing is what I was referring to as “fraud.” I don’t know the specific situation of others, I was stating a general caution.

You don’t have to liquidate anything. In fact, the best asset to have is a home - home ownership assets aren’t factored into the FAFSA, cash from a home sale is.
The amount of (pertinent) assets you have is factored into the “efc” (expected family contribution) which reduces the amount of student aid you might expect to receive.

You can have assets and be approved for federal student loans.

Wow. This is VERY surprising to me (and encouraging since it means that I won’t have to sell my home). I’ll double-check the AAMC website (source of my info) on financial aid. They have info for “older students” that oulines how assets are handled (must use 'em before getting aid).
Regarding my personal situation, I don’t qualify for student loans for my own education (too much income) but do qualify to take out PLUS loans for my sons’s education expenses (which I’ve done). Unfortunately, I have too much personal debt to (easily) cover my own tuition…I could take out consumer loans/home equity loans but don’t want to go that route.

I wouldn’t rely on AAMC for financial aid info - thats not their job, they don’t provide loans, and their information may not be correct.
The very first thing to do is to fill out a FAFSA, and see where you stand. Then you can develop strategies to increase your loan amounts or find other sources.

Anita, I haven’t read the AAMC website on financial aid info but I can tell you that you absolutely, positively do not have to liquidate assets to qualify for financial aid. Along with my husband I own a home that is worth more than $500,000; in addition we have assets (not readily liquid but real) of several hundred thousand dollars. On paper, I’m rich. [Note: I am not really rich, just really old! The house has appreciated considerably and the other assets are mostly in 401(k) accounts and stock option stuff that have accumulated over many years.]
Anyway, I was able to get unsubsidized Stafford Loans for my entire medical school tuition and fees. When I completed the FAFSA (which asks for an accounting of stock held and liquid accounts, but does NOT ask you to account for retirement funds), my estimated family contribution max’ed out at $99999. All that meant was that the loans weren’t subsidized - there was never, ever any hint that I would not qualify for a Stafford Loan. If I had wanted to, I could have applied for private loans as well. Fortunately my husband was employed for most of my medical school tenure and so my living expenses were covered, and I did not need to borrow for the day-to-day stuff.

Okay, my interest was piqued so I looked up the AAMC stuff - click here. (go to III. Critical issues for non-traditional applicants.) The distinction is between federal aid (Stafford) and institutional (institution = your own school) need-based aid. I admit to only scanning this publication quickly, but it seemed 100% correct.

Unsubsidized Stafford loans are available to anyone regardless of need. Subsidized Stafford loans are available based on the EFC (estimated family contribution) as calculated by the FAFSA (Free Application for Federal Student Aid). In other words, you can qualify for a subsidized Stafford based only on the information you submit on your own FAFSA - you do not need to report real estate or retirement holdings or get your parents to also submit a FAFSA (these are things you will have to do if you want to get institutional aid). My first year of med school, I had two kids in college and as a result my EFC was much lower than the 99999 I talked about in my previous post… I received the full $8500 subsidized Stafford first, with the remainder as unsubsidized.

If you want to qualify for need-based institutional aid (like scholarships) you will need to go through a whole lot more hoops to show that you qualify. No matter how old you are, your parents will also have to complete a FAFSA. Your retirement accounts, real estate, and other assets will all be factored into the institution’s assessment of your “need.” You may be found not deserving of need-based aid because of your home or your retirement savings.

HOWEVER, the thing to do in this instance is definitely not liquidate your important assets, it’s to just suck up the fact that you won’t get grants, and borrow the money via Stafford loans. The interest rate on these things is so ridiculously cheap right now that it would be crazy not to borrow. As Rick noted, if you’ve got your own positive cashflow or liquid assets, you’re better off borrowing the government’s cheap money and using your own money to invest at a higher rate of return in the meantime.

I mentioned having kids in college. The system is set up to understand that a student may have dependents - on my FAFSA, I was able to note that I had college-student dependents. However, the system doesn’t understand the concept of “parent of college student who is also a student.” My sons’ FAFSAs did not have anywhere for me to note that I was also a student. During the year when I did qualify for a subsidized Stafford, the EFC calculated from the boys’ FAFSAs was substantially greater than that from my FAFSA (because my FAFSA accounted for three students in the family, whereas theirs only accounted for two). Go figure.
I would presume that if you fill out the stuff for institutional need-based aid for your college kid, you’d have the opportunity to point out that the college kid has a parent in med school. I didn’t attempt to go this route with my kids, so I don’t know how that would work.

You should qualify for any and all unsubidized loans regardless of your salary.
When I applied for my loan for fall I owned a home worth $520,000, we own two vans and stock. No one ever said I have to liquidate anything. And I have gotten $8500 in subsidized loans as well as the unsubsidized amounts. The loans will total (GULP) $50,000. I was able to get all that I needed and wasn’t affected by my husband’s 6 figure income. So I guess unless you make a huge salary and own millions of $$$ worth of stuff, you should have NO problems securing the loans. I would strongly urge you to call and talk to someone about this.
I used Northstar (T.H.E) and they have been hugly helpful. Their web site is You should also call the school that you are interested in adn talk with their financial aid director. They will be able to best lead you down the correct path.

Amy… one question. Did you send in financial information for your parents? This will be impossible for me so I am a bit concerned.

Jill, you do NOT need to submit information on your parents to qualify for a Stafford loan, subsidized or unsubsidized. You only have to submit parental information if you are applying for institutional aid, such as grants from your school.

Thanks Mary. I guess I missed that point. One more question… does anyone have a rough idea what the current subsidized interest rate is on the stafford loans?

Thanks for the good info, everyone! I haven’t applied for financial aid for med school but will do better research before I do. Good point about the AAMC site not being in the business of financial aid. My plan to work weekends during med school was based on my belief that I wouldn’t be able to get much/enough money for school. Sometimes thinking about the cost of med school makes me feel like the little boy, Paul, in The Rocking Horse Winner (one of my favorite stories, btw).


Sometimes thinking about the cost of med school makes me feel like the little boy, Paul, in The Rocking Horse Winner (one of my favorite stories, btw).

Oh, this is a great post to read right before bed.

Stafford interest rate is something like 2.8%. The rate is the same whether it’s subsidized or not; the difference is in who is paying it! While you are in school, the government is paying the interest that accrues on your subsidized loan; on the unsubsidized loan, interest is accruing and YOU will have to pay it eventually but not until you are out of school.
Note that even after you’re done with school, you still can defer payment further - residency is considered “hardship” because of the low salary and you can apply to further defer paying off your loans for three additional years. Plus there is a grace period immediately after graduation of 6 months before you are supposed to start repayment - 6 mos. grace period + 3 years deferment means I won’t start repayment until November 2007, by which time I will hopefully have a better-paying job.
Anita, the AAMC stuff on money is actually very good; they’ve got a vested interest in making sure students and physicians watch out for their money. I would definitely recommend their material as a good start in learning more about money and med school.

Mary, thanks for the info.
Given a hypothetical, say someone graduates from a caribbean school “off cycle”, i.e. instead of graduating in April (from a class starting in say september) they graduate in September (from a class starting in January). That would be a 6+ month gap between graduating and starting residency (in July). Is it possible to get a longer than 6-month deferment in this case?