Funding medical school

WayOutWestMom
Tue, 07 Mar 2017 04:50:31 +0000

IMO, your d should apply her federal student loan toward her tuition first, not her living expenses. Her tuition & fees are fixed expenses but her living expenses are not. She should try to minimize the amount she takes out in Grad Plus loans since the terms of those loans are less favorable. (higher origination fee and higher interest rate)

Ok, this is how it works. Her federal student loan (I assume this is what you’re calling DirectMed) will be disbursed twice a year. One-half of the total amount of the DirectMed loan will be paid directly to school at the beginning of each semester. If there are funds left over after her tuition & fees are paid, your D can either accept the leftover money and use it to pay her living expenses or she can return the unused funds to the lender within 15 days of the date the school receiving the loan. Returned funds will be credited to her loan’s principle. However, if she does return part of the loan, she cannot get the money back at some later date during the semester. She has to wait until the next disbursement date when she will receive the other 50% of the amount originally offered to her.

For example:

Total DirecMed loan offered – $40K
Semester #1 disbursement --$20K
Let’s say $17K goes to cover tuition & fees. Your D has the option of keeping the $3K leftover or returning it to the lender. Let’s say she returns it.

Total loan disbursement for semester #1 =$17K

Semester #2 disbursement – $20K
Tuition & fees = $17K. Your D decides to keep the remaining $3k to pay her summer living expenses

Total loan disbursement for semester #2 =$20K

Total loan disbursement for Year #1 =$37K

So, no it doesn’t work like a home equity line of credit. She can’t take additional amounts out whenever she wants.

For the Grad Plus loan, she can specify exactly how much she wants to borrow each year.