Should I Consolidate My Loans During Medical School?
As lucrative as going to med school is, these students have to deal with a significant financial burden. The top universities in the field have serious fees and these get covered completely by scholarships rarely.
According to data by the Association of American Colleges, 79 per cent of the med school graduates have a debt of at least 100,000 dollars. The median debt has gone up by three per cent over the past few years to currently stand at 175,000 dollars.
If you’re considering medical education, a student loan will have to be factored in towards the university financials. Chances are that you’re looking for opportunities to minimise that debt. Loan consolidation has been gaining some popularity lately but is it the best possibility? Keep on reading to find out.
What is Loan Consolidation?
Before moving on to exploring the pros and cons, it’s important to have a clear definition of loan consolidation.
Debt or loan consolidation refers to brining all of your student loans together into a single one. A new loan is taken out, it’s used to pay for the outstanding debt and you’re left with making payments on this new loan.
As you can see, loan consolidation can simplify things. Instead of having to make five individual monthly instalments, you’ll be left with a single one. Convenience is a great advantage but how about financial benefits? Is loan consolidation a good idea for the students that want to bring the amount of money they have to repay down?
Federal Student Loan Consolidation
Some federal loans come with borrower benefits that could potentially be lost after the consolidation. Thus, consolidating federal loans in a single one should take place only after you’ve talked to a financial advisor about the possibility.
A number of federal loans are provided with loan cancellation benefits, relatively low interest rates, discounts and principal rebates. These benefits will ultimately bring down the cost of repaying the loan. If you consolidate the federal student loans, you may end up having to repay a larger amount of money,
Types of Loans that can be Consolidated
If you want to move forward with the possibility, you’ll be happy to find out that numerous types of student loans can be consolidated. These include direct subsidised loans, unsubsidised loans, federal Stafford loans, supplemental loans for students, health education assistance loans and federal nursing loans among various others.
Private loans obtained from an educational institution or a private entity are not eligible for consolidation.
Loans that are taken by parents on behalf of their children attending medical school can’t be transferred and consolidated with other student loans. Thus, all debt should be in your name and you need to have the respective types of student loans in order to opt for consolidation.
The Benefits of Student Loan Consolidation for Medical Students
So, why should you consider consolidating student loans? Here are some of the main benefits that you’re going to enjoy as a consequence of the decision:
- There will be just one bill to pay, which decreases the risk of skipping a payment or committing any other mistake.
- If the repayment plan is a favourable one, the monthly instalments could be reduced.
- A consolidated loan could come with a more favourable interest rate than the original ones.
Is Loan Consolidation the Best Option for Medical Students?
Loan consolidation could be financially-favourable but you have to be careful about reviewing the terms and conditions.
It’s generally not considered a good idea to consolidate different student loans that have varying interest rates. The new loan will obviously come with interest rates that are higher than some of the original ones. As a result, you may end up spending more.
The repayment period is another very important factor to consider. The longer the period is, the more money you’ll have to give back. These periods can usually range between 10 and 30 years. If possible, opt for the shortest period to avoid additional expenditure.
Finally, take a look at the agreement to figure out whether the interest rate is fixed or if it can be adjusted by the financial institution. A variable interest rate means that changes could occur several times per year, which is far from the best option for a person in debt.