Refers to a) the interest rate and b) the capitalization policy on your student loans.
The interest rate is what the lender charges you to use their money.
The capitalization policy refers to how often the lender adds any accrued and unpaid interest on unsubsidized loans back to your principal.
Interest Rates on Federal Loans *Variable, changes every July 1 based on the 91-day treasury bill, capped at 8.25% 8.5% fixed 8.5% fixed Graduate PLUS Loans 4.21% variable 3.61% variable Stafford Loans* (disbursed 7/1/98 - 6/30/06) 5.0% fixed 5.0% fixed Perkins Loan Fixed rate based on weighted average interest rate of underlying loans rounded up to nearest one-eighth of a percent (capped at 8.25%) Consolidation Loan 6.8% fixed 6.8% fixed Stafford Loans (disbursed on or after 7/1/06) Forbearance/ Repayment In school, Grace and Deferment
The method most residents use to get this deferment will no longer exist after July 2009.
Used to be based on a ratio of your federal loans in repayment to your income
You may qualify for this deferment on your consolidation if you have “0” income (after graduation, before residency begins)
Your lender may allow you to add your other federal loans into the deferment when they come up for repayment, if you already have your consolidation in deferment– even though it will be after July 2009
Loan Repayment Timeline Forbearance (pay INTEREST ONLY) or Repayment 10 years 6 month grace In Deferment UVA Loans 10 to 30 years Economic Hardship Deferment possible for first year, then Forbearance or Repayment In Deferment Consolidation 10 to 25 years Economic Hardship Deferment possible for first year, then Forbearance or Repayment In Deferment Grad PLUS Economic Hardship Deferment – if eligible, to 6/2010 Possible “Grace,” Forbearance or Repayment Varies – check prom note In Deferment Private Loans 10 to 25 years Forbearance or Repayment 6 month grace In Deferment Stafford Loan Repayment Residency School
Consolidated after first year (4.75%), interest capitalized
Interest on consolidation capitalized at graduation
Interest on Med 2-4 6.8% loans capitalized at end of grace
Total interest accrued on Unsubsidized Loans at graduation/end of grace = $12,819
Residency: 1 year of hardship deferment, 2 years of forbearance
Interest accrued on Unsubsidized Loans year 1 = $3,727
Interest accrued on all loans year 2 = $8,650
Interest accrued on all loans year 3 = $9,204
All interest capitalized at the beginning of repayment
Borrower makes no voluntary or early payments
TOTAL LOAN AT REPAYMENT: $155,400
So, just how bad could it be? $1,750 $54,576 $209,976 $964 $191,648 $347,048 *Plus accrued interest from previous page. Extended 25/30 Years $121,000* Standard 10 Years $121,000* Total Repayment Cost Additional Interest Cost Monthly Payment
Only federally insured loans are eligible for Federal Loan Consolidation.
You may include Stafford, Stafford Direct, Graduate PLUS, and Federal Consolidation Loans. Graduating students may also include Perkins.
You may NOT include UVA Institutional Loans, GATE or other private educational loans.
WHY CONSOLIDATE? If you have already consolidated, then all of your loans are already at a fixed rate. However, you are eligible to consolidate if you have any unconsolidated loans, and you may consider it if it appears that rates will be going up. Check the new rates every May. At this point, the only lender you can consolidate with is Direct Loans.
Write your lender/servicer and let them know you are graduating and the date of graduation.
Get set up with a password to access your student loan account on line and then bookmark the site.
Get your loan records in order before PGY-1 orientation.
Commit to keeping good records and open your mail.
Update your contact information with your loan servicer(s) and with your medical school.
Mark your calendars with dates to complete deferment/forbearance/consolidation, etc.
SUPPORT DURING RESIDENCY Contact your UVA Medical School Financial Aid Counselor. We remain committed to helping you navigate the murky waters of student loan repayment throughout residency… Good Luck in Your Medical Career!