Federal Student Loan Consolidation For Graduating Medical Students
Yes, your student loans. If you're like many med students you've got well over $100,000 in student loans -- kind of like having mortgage, but without the house.
Here's the good news: your federal student loans are some of the cheapest and most flexible debt you will ever have. And, there are tools available to help you fit your student loan payments into your lifestyle and career goals, rather than the other way around.
One popular student loan debt management tool is the Federal Student Loan Consolidation Program. The government established the Federal Student Loan Consolidation Program specifically to help graduates better manage their student loan payments, particularly in the early years as they begin their careers. Read more about the Federal Student Loan Consolidation Program here.
A popular strategy for medical students is to consolidate around the time they finish school, particularly during periods of rising interest rates, and concurrently apply for deferment or forbearance of their consolidation loan payments during residency. Medical student borrowers are generally eligible for deferment or forbearance for two to three years for residency training. During periods of deferment or forbearance, the borrower is not required to make loan payments but the interest due is added to the principal balance of the loan (except that the government pays the interest on the subsidized portion of the consolidation loan during deferment but not during forbearance).
By consolidating their federal loans, graduating students can combine their multiple federal student loans into one federal loan with a single monthly payment and lock in a single, historically-low fixed rate on their loans (currently as low 4.75%, and the fixed rate can drop even lower to 3.5%, after taking into account additional benefits offered by many consolidation lenders).
There are additional benefits to consolidation beyond locking in a low interest rate. With a consolidation loan, students can also reduce their monthly payments by hundreds of dollars a month by extending the repayment term to up to 30 years (the repayment term on federal Stafford loans is 10 years).
Students can also choose from various "graduated" repayment plans that reduce monthly payments even further in the early years of the loan. Of course, stretching out payments means paying more interest over time, but a federal consolidation loan can always be repaid early without penalty.
Even those happy with their current payments can benefit from consolidation by directing their monthly savings elsewhere. Taking consolidation savings and paying off higher interest rate credit cards or private student loans will save money immediately.
Click here to sign up for Vault's no-obligation loan consolidation service.
Ask Vault's Expert
Have questions? Please drop Vault's expert, Peter Wilkniss, a line at firstname.lastname@example.org. Peter holds a BA in Economics from the University of Virginia and a JD/MBA from Columbia (with tons of student loans!). He practiced law at Wachtell, Lipton, Rosen & Katz in New York, and held senior financial management positions on Wall Street, before helping start and run a student loan company.