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Step 1: Know What You Borrowed, Know From Whom You Borrowed, and Know
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 of 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 for managing your student loans is knowing exactly what
kind 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. In general, many would consider it wise to try and qualify
for deferment on subsidized loans since there is no interest cost to the
borrower during the deferment period. The most familiar subsidized loan
for medical students is the Federal Subsidized Stafford Loan. Subsidized
loans which residents may have borrowed during medical school include:
- Federal Subsidized Stafford Loan
- Federal Direct Subsidized Stafford Loan (loan funds borrowed directly
from the federal government through Direct Lending)
- Federal Perkins Loan
- Health Professions Student Loan (HPSL)
- Primary Care Loan (PCL)
- Loans for Disadvantaged Students (LDS)
- Some institutional loans (check your promissory note or ask your financial
aid officer)
Unfortunately, in many cases, the majority of student borrowing comes
from unsubsidized loans.
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 residents may have borrowed during medical school
include:
- Federal Unsubsidized Stafford Loan
- Federal Direct Unsubsidized Stafford Loan
- Health Education Assistance Loans (HEAL, these loans are no longer
made)
- 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 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 get a better understanding of the parties that
may be involved with your student loans. In all honesty, you could probably
skip this section as long as you know who your loan servicer is. However,
you may see other names or references on lender correspondence and information
you received at your senior loan exit interview, 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
in the list of players which follows. 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 Federal 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 Program. In the case of institutional loans, the lender is your school.
In the case of the Federal 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 HEAL loans and 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". The guarantee
agency may be completely transparent to the borrower.
Secondary Market
Secondary markets are companies that buy loans from lenders. In essence,
they become the holder of the loans, as we referenced earlier.
Servicer
The servicer is without question the most important player or 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
for contacting them, and you may actually be able to track your student
loans on their Web site. 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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