The med school offers Unsubsidized and PLUS loans. Is the PLUS loan parents’ loan? Do you parents take out a PLUS loan or avoid it? Thanks for sharing.
For medical school, there are unsubsidized Direct Loans which I believe are about $40,000 a year. Students in medical school can also take Grad Plus loans up to the cost of attendance. The parents don’t take out Grad Plus Loans. The med school students take out these loans, if needed.
Of course, parents are also free to help their medical school students via current parent income or parents taking out loans.
@WayOutWestMom I’m pretty sure I got this one right!
@thumper1 has it right.
Med students may be offered Grad Plus loans in addition to federal direct (Stafford) student loans.
Currently the maximum Stafford Loan for the Health Profession is $40,500/year, with an aggregate maximum of $224,000 (including any undergrad loans)
Med students may borrow up to the school published cost of attendance in Grad Plus loans. Grad Plus loans belong solely to the student-- no co-signer required. To qualify for a Grad Plus loan the student must have a clean credit report with no loan defaults or other adverse reports for the past 5 years.
(Students must have a credit score in order to be eligible for a Grad Plus. If your student has never had a credit card in their own name, or a lease, cell phone or utility account solely in their own name, they may not qualify for a Grad Plus loan.)
Grad Plus loans should be applied for at the same time a student applies for their Stafford loans.
It takes about 3-4 weeks for the loan request to be processed so your student should start the loan initiation process at least a month before their first day of med school orientation.
Your child’s medical school’s financial aid office will send information to the student on how to apply for both Stafford and Grad Plus loans as part of their FA package. Once the CTE date has passed and the student has committed to a single medical school, the loan information should be part of the student enrollment page at their chosen medical school.
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Actually, students don’t need any credit rating at all to qualify for Plus. They just can’t have adverse credit.
** To qualify for a Direct PLUS Loan, you cannot have an adverse credit history. A credit check is conducted on all Direct PLUS Loan applicants. Your credit history is considered adverse if your credit report shows that you are experiencing any of the following credit conditions:
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Accounts with a total outstanding balance greater than $2,085 that are 90 or more days delinquent as of the date of the credit report, or that have been placed in collection or charged off during the two years preceding the date of the credit report.
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Default determination during the five years preceding the date of the credit report.
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Bankruptcy discharge during the five years preceding the date of the credit report.
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Repossession during the five years preceding the date of the credit report.
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Foreclosure during the five years preceding the date of the credit report.
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Charge-off/write-off of a federal student aid debt during the five years preceding the date of the credit report.
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Wage garnishment during the five years preceding the date of the credit report.
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Tax lien during the five years preceding the date of the credit report.**
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Thanks for the correction!
The Grad PLUS loan has high fee and interest rate. Unless exhausting the unsubsidized loan, do not take out the Grad PLUS loan. Do you agree?
That’s fine…if you have another way to pay for these costs.
@kelsmom are the Grad plus loans eligible for the variety of repayment plans like the Direct Loan (e.g. income based repayment) and can they be consolidated?
@compiler there are some advantages to federally funded loans wrt to repayment that aren’t there for private loans…
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I strongly encourage Grad Plus loans over private loans unless a student has a family that can and will assist them with repayment if they can’t afford their payments. The majority of grad students with whom I dealt were responsible for their own debts. There is flexibility with a Grad Plus loan that doesn’t exist with private loans. All of the federal loan repayment plans are applicable to Grad Plus loans. The changes regarding capitalization of interest on the SAVE plan are beneficial for Grad Plus borrowers. Everyone thinks that they will be in a great position once they get their advanced degree, but life doesn’t always work that way. Having flexibility is important … and if things go well right away, repay the loan early & save the interest.
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I agree. But Grad Plus are better deal than private loans. You can defer interest payments on Grad Plus while in med school and residency (where the young physician may not making much money to pay for both their living expenses and their loan payments). Also, I believe they are eligible for a wide variety of repayment options like income-based repayment and PSLF.
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An aid office will process all unsubsidized loan eligibility before processing Grad Plus. The rule is to process the loan that provides the best terms for the student, first.
Keep in mind that right now (and we don’t know if it will change in the future), repayment is tied to income, and the balance is forgivable after 10 years of repayment while working in a qualified position, such as a non-profit or a medically needy low income area. For many med students borrowing the entire cost of attendance, this is the plan, especially if they will have long residencies/fellowships. Some surgical specialties could take as long as 7 years of residency/fellowship, which are usually done at non-profit hospitals, and hence qualify, with low payments because they’re not earning very much. Follow it up with three years as an attending working for the hospital, with three years of full payments, and then the rest is forgiven.
BUT, we don’t know if this plan will still be in place, 15 years from now! And med school applicants are making the decision to borrow all that money now, without the assurance that the program will still be valid 15 years from now.
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Yes. This was something I always brought up with my grad students. The nature of their particular degree lent itself to a high number going into PSLF eligible work. I encouraged them to assume that they would not be eligible for PSLF as they made borrowing decisions. It was important to keep borrowing to a minimum, because there was no guarantee that they would ever achieve the promised forgiveness.
As long as you can fully pay your daughter’s med school costs, then you don’t have to worry about taking out loans, right?
Our daughter attended UCSF. In her first year, she lived with a roommate, in a really tiny shared apartment where the bedroom would only hold bunkbeds, because it wasn’t wide enough to accommodate two beds- side to side. (It is San Francisco).
That roommate couldn’t afford to stay at the school because her parents had bad credit and couldn’t help.
From what I understand, the roommate could get her own credit for school fees, but the rents were so ridiculously high that she couldn’t afford to stay.
She had never had credit because she lived with her parents during her undergrad.
I don’t have all the details but she didn’t have the money. Our daughter had to quickly find a roommate and moved in with 6 roommates in a townhouse.
All of her new roommates were on loans, loans and loans.
Our daughter was the only one who was funded by her parents, which shocked the rest of her roommates.
Because she had attended an in-state UC, she saved us a lot of money and we put those savings to work.
As long as you have the cash to pay for your daughters medical school expenses including supplies then you won’t have to take out a loan.
PSLF has to be renewed periodically by Congress. Its existence is not a sure thing. And there has been considerable discussion in Congress about removing medical professionals from the list eligible participants.
It’s probably safer to assume that PSLF won’t be an option when your child graduates med school.
One of the issues with PSLF that trips many young physicians up is that even if you work AT a hospital as an attending, you may not actually work FOR the hospital, but rather a physician-owned or corporate-owned medical practice that is contracted with the hospital. That’s enough to disqualify you from PSLF. Even specialties like EM which is entirely hospital-based are now mostly corporately owned practice groups contracted to staff a hospital’s ER.
Also physicians who work directly for a non-profit entity typically are paid less-- sometimes much less-- than physicians working in private practice. In D2’s case the difference was approx. $120K/year in starting salary. (And that’s before any productivity incentives or RVU reimbursements she get from private practice.) Same specialty, same location, but different employers.
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My husband and I will need to take out the Parent Loans. What are those called? What type of credit / income do we need to be approved?
They are called Parent Plus loans. Here is information: Federal Student Aid. The link contains information about the loan and about qualifying. You don’t need excellent credit - you just can’t have bad credit. If you click on the hyperlink where it says adverse credit history, it explains.
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Consider this very carefully.
Are there no affordable options on the table?
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I guess the question is…how much in a Parent Plus will you need annually? Remember, this is your loan, and you will need to pay it back. If you borrow $100,000 over four years, your payments will be in excess of $1000 a month. Just FYI.