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Step 1: Know What You Borrowed, From Whom You Borrowed, and Who Services
the Loans
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Step 1: Know
what you borrowed, from whom you borrowed, and who services the
loans. |
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Step 2: Know
the "relative cost" of your student loans. |
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Step 3:
Know your grace periods, deferment options, and forbearance options. |
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Step 4:
Know your "decision points" and keep a calendar.
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Step 5: Run the numbers before choosing a repayment option or consolidating your student loans. |
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Step 6: Commit
to keeping good records. |
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Step 7:
Keep a budget and know when you need the help of a financial professional. |
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Step 8:
Know and use your support systems. |
Topics in this Section
The first step to managing your student loans is knowing exactly what
types of loans are in your portfolio. This information should have been
provided for you at your senior loan exit interview, and may also be available
on your loan servicer's Web site. You can also check the National
Student Loan Data System (NSLDS) to track your Federal loans.
Regardless of source (Federal or state government, your institution,
various lenders, etc.), all of your student loans fall into two categories:
subsidized loans and unsubsidized loans.
Subsidized Loans
Subsidized loans are those that have no interest cost to the borrower
during school, grace, and any deferment period(s) for which the borrower
may qualify. The most familiar subsidized loan for medical students is
the Subsidized Stafford Loan. Subsidized loans which may have been borrowed
during medical school include:
- Subsidized Stafford Loan
- Perkins Loan
- Primary Care Loan (PCL)
- Loans for Disadvantaged Students (LDS)
- Health Professions Student Loan (HPSL)
- Some institutional loans (check your promissory note or ask your financial
aid officer)
Unsubsidized Loans
Unlike subsidized loans, borrowers are responsible for all interest that
accrues on unsubsidized loans, and interest begins to accrue immediately
upon disbursement with unsubsidized loans. Accrued and unpaid interest
on unsubsidized loans is eventually capitalized (added back to the principal
thereby increasing the total balance on the loan). Borrowers should contact
their loan servicer(s) or medical school financial aid officer if they
are unsure of the capitalization policy on their unsubsidized loans (see
Step #2 - Know the "relative cost" of
your student loans).
Unsubsidized loans which may have been borrowed during medical school
include:
- Unsubsidized Stafford Loan
- Grad PLUS Loan
- Other private loan programs
- Some institutional loans (check your promissory note)
In general, borrowers who want and are able to make voluntary payments
on their student loans during periods of grace, deferment, and in the
case of some loans, forbearance, will likely want to have these payments
applied against any unsubsidized loans they have in their portfolio. This
is addressed in more detail in Step #2 - Know the
"relative cost" of your student loans.
In addition to knowing what you borrowed, it is also important that you
know who you borrowed from, and perhaps most important, know who services
your student loans. The loan servicer is the organization you will be
working with throughout repayment, to whom you will be applying for deferment
and forbearance, and with whom you will be working when it comes time
to pick a repayment option.
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Players in the Student Loan Industry
Residents frequently complain that they do not know where their loans
are, who owns them, or to whom they actually owe repayment. The following
information may help you better understand the parties that may be involved
with your student loans. It's most important to know who your loan servicer
is, but you may see other names or references on lender correspondence
and information you receive so this section may help you sort out these
various organizations.
The original lender of your student loan(s) may have sold (or may eventually
sell) some or all of your loans to another lender, as will be explained
below. Lenders are required to notify you when this happens. The terms
and conditions of your loans should not change when your loans are bought
and sold.
Lender
The lender is the organization that actually loans you the money (the
actual source of the money), and to whom you owe repayment (at least initially).
In the case of the FFELP Stafford Loan, the lender is either a bank (or
other lending institution) or the federal government for students borrowing
their Stafford Loans "directly" through the Direct Loan (DL)
Program. In the case of institutional loans, the lender is your school.
In the case of the Perkins, Primary Care Loan (PCL), Health Professions
Student Loan (HPSL), and Loans for Disadvantaged Students (LDS), the lender
is also the school, on behalf of the federal government (these are called
"campus based loans" since they are administered by your school).
In the case of private loans, the lender is a bank or other lending institution.
Holder
The holder is simply the organization that owns your loan, and to whom
you owe repayment. In some cases, the original lender and the holder are
one and the same, and remain one and the same. However, as referenced
above, some lenders sell your loan(s) to other institutions to help free
up money to loan to other students. The new institution that buys the
loan is now the holder, and that is the organization you now owe.
Guarantee Agency
The guarantee agency is the organization that agrees to pay back your
lender should you ever default on your loan. You may have borrowed loans
that had some fees deducted against the principal amount you borrowed.
In general, these fees are set aside to cover the cost of any potential
defaults. In many cases, the guarantee agency also processes your loans
and sends the loan proceeds to your school's financial aid office. The
federal government reimburses guarantee agencies for defaulted loans,
hence the reference to these loans being "guaranteed".
Secondary Market
Secondary markets are companies that buy loans from lenders. In essence,
they become the holder of the loans, as noted above.
Servicer
The servicer is without question the most important organization involved
in your student loans, at least once you graduate. The servicer is the
organization the holder contracts with to work with you on repayment issues
including processing any deferment and forbearance requests, and who works
with you in repayment. This is called loan servicing. Your loan servicer
will likely provide you with a toll free number and a Web site to contact
them as well as to track your student loans. Should you not know who your
loan servicer is, contact your medical school financial aid officer. One
reminder about loan servicing; should you ever consider consolidating
your student loans, be sure you know who the loan servicer will be. This
is addressed in Step #5 - "Run the numbers" before choosing
a repayment option or consolidating your student loans.
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