>>Mike
Loans are an unfortunate consequence of many graduate programs. The vast majority of us do not have 120K or more to pay for PA School in full. I know I sure didn’t! At the time I knew absolutely nothing about student loans. What I did know was working during PA school wasn’t an option. We all worked too hard to get into PA School to be distracted by a part time job while trying to learn everything there is to know about medicine in a 2-3 year period of time. I thought to myself if I could make it through Organic Chemistry I certainly could figure out the basics of Student Loans. The self teaching process began …
The first thing I realized was Subsidized Student Loans were no longer an option. Subsidized loans are reserved for DEPENDENTS with “financial need.” Unfortunately any graduated student is no longer categorized as a dependent, we are all INDEPENDENTS, leaving us with only two federal options: Unsubsidized Student Loans and Grad PLUS loans. Now who cares? What’s the difference anyway!?
The difference is that unsubsidized loans accrue interest from the time they are dispersed. Meaning day ONE of PA School you will be accumulating interest on that loan. Don’t worry! You won’t have to pay a dime until after you graduate BUT that loan balance is increasing exponentially day by day.
For example if you have a 6% interest rate on a 120K loan, day one that loan balance is 120,000.00 Day 2 it becomes 120,007.00, now interest is multiplied on that new amount NOT on the original 120K, this goes on day after day, with interest increasing exponentially!
Out of sight out of mind right?? … well yes until you graduate and reality sets in. Interest rates are fixed on these loans, meaning they will not change based on the economy, federal reserve ect. which is a check in the positive column. At the time this blog is written the rates are currently 6% not too bad, but it’s not over yet… you will also pay a loan origination free of 1.07% at the time of disbursement. We will do a deep dive into how interest rates affect your loan amount, how to combat interest and the fees associated with loans in a separate blog. For now we will stick to the basics.
Unsubsidized Federal Loans are available to everyone regardless of credit history and there are no requirements to document “financial need”…so another check in the positive column. The interest rates are good compared to private loans and you are granted a 6 month grace period after PA School before your first payment is due...nice. The last and most important thing to know about an Unsubsidized Loan is that you are only given $20,500 per year max! I was shocked when I found this out. How am I going to pay for the other 40 thousand dollars per year!? The answer is Grad PLUS loans.
Grad PLUS loans are federal loans that cover the cost of attendance minus any other financial aid (ie Unsubsidized Loans, grants, & scholarship). The interest rates are higher for Grad PLUS loans, currently 7% at the time of this blog. The loan origination fee is also higher at 4.26%. Just like your unsubsidized loans you accrue interest starting your first day of PA school. Grad Plus loans will also require a credit check however your credit score does not need to be perfect. You only have to be concerned if you have had a significant infraction on your credit history such as bankruptcy OR have no credit at all. Some of us may find that we have no credit and this can be an issue. One easy way to start is to open ONE credit card and set your “auto pay” to pay in full every month. This will ensure that you never miss a payment and that your credit score is maximized.
Those are the basics of PA School Loans. In the future we will talk about Private Loans vs Federal Loans, other options on how to pay for PA School, the best ways to pay off student loans and much more!
Let us know if you have any questions! Good luck on your first steps to a great career!