William D. Ford Federal Direct Loans: Direct Loans, both subsidized and unsubsidized, are administered by the U.S. Department of Education. Using the income and asset information provided on the FAFSA, the financial aid office determines your eligibility and notifies you of the types and amounts of Direct Loans for which you qualify. The interest rate on these loans is adjusted each July 1 while the student is in school, and during the grace period and when the loans are in repayment. The Direct Loan borrowing limits and interest rates are available for review.
Direct subsidized loans are awarded to students with financial need. The federal government pays the interest on subsidized loans while the student is enrolled at least half time, during the six-month grace period (after graduation or withdrawal from school), or during authorized periods of deferment. For graduate health professions students, the annual maximum borrowing limit for Direct subsidized loans is $8,500; the aggregate borrowing limit is $65,500.
*IMPORTANT NOTE for 2012-2013 Academic Year: The federal Budget Control Act of 2011 passed by Congress eliminates in-school loan interest subsidies for graduate and professional students effective July 1, 2012. The Act also contains provisions that eliminate Direct Loan repayment incentives. More information is available on the campus financial aid Web site.
Direct unsubsidized loans are not based on financial need or income. The terms are the same as for Direct subsidized loans; however the student is charged the interest on the loan beginning the day the loan is disbursed. Students can choose to pay the interest while they are in school or capitalize the interest (add the unpaid accumulated interest to the principal balance) until repayment begins. For graduate health professions students, the aggregate borrowing limit for Direct subsidized and unsubsidized loans combined is $224,000.
Direct unsubsidized Graduate Plus loans are available for graduate and professional students who need to borrow funds beyond the federal subsidized and unsubsidized loan limits. The Direct Grad Plus loan has a fixed interest rate of 7.9%, no annual or aggregate borrowing limits (other than cost of attendance less other financial aid received). While credit checks are required to be eligible for the Grad Plus, the credit criteria are less strict than those associated with private student loans. Furthermore, if you do not meet the credit requirements for a Grad Plus, you may still obtain the loan with an endorser (cosigner) who does meet the credit requirements. If you would like to accept the Direct Grad Plus loan that was offered in your financial aid package, complete the online application at StudentLoans.gov. The online application authorizes the federal government to complete a credit check. In addition to the application, students must complete an online master promissory note (MPN), also available on the StudentLoans Web site.
Here is a loan comparison chart to help you consider the significant variables when choosing between the Grad Plus loan and a private loan (description below). A private loan may be less expensive depending on your credit score and whether the variable interest rate will increase before you complete repayment of the loan. If you would like to accept the Grad Plus loan that was offered in your aid package, complete the online application. The online application authorizes the federal government to complete a credit check. In addition to the application, the students must also complete an online master promissory note (MPN).
Federal Perkins Loan: The Perkins Loan is a 5% fixed-interest rate loan, subsidized during enrollment. Annual loan amounts may be limited because of demand and limited funds. Repayment starts nine months after graduation or withdrawal from school and may be extended over 10 years. Additional deferments are possible for temporary total disability or volunteer service in private, non-profit organizations, VISTA or the Peace Corps. Some teachers of students from low-income families and full-time teachers of children with disabilities may also qualify for partial loan cancellation.
Federal Primary Care Loan: The Primary Care Loan is a low-cost subsidized federal loan available to medical students committed to a primary health care practice. The interest rate is 5% and begins to accrue following a 12-month grace period after you cease to be a full-time student. The loan is eligible for deferment during medical residency. You must continue to practice in a primary health care field for 10 years (including the years in residency) or until the loan is repaid in full, whichever comes first. If you fail to fulfill the service obligation, the outstanding loan balance will be computed at an interest rate of 7% from the date of noncompliance, compounded annually.
Federal Loan for Disadvantaged Students: Usually awarded in the fall of each year, this is a subsidized, 5% fixed-interest rate loan made available through the U.S. Department of Health and Human Services (DHHS). The loan includes a 12-month grace period before repayment and is eligible for deferment throughout medical residency. Awards are made to medical students with the lowest combined parent and student contributions (PC and SC) based on the federal needs analysis calculation. Students must come from an economically-disadvantaged background (low income level tables are published annually by DHHS), and/or are considered by the admissions committee to have come from a disadvantaged background (criteria determined at the time of admissions review).
Private Loans: Student tuition and fee increases, budget cuts and borrowing limits can make it difficult to finance the total cost of your attendance. Please consider the following before applying for a private loan:
- Family Nurse Practitioner and Physician Assistant students who do not qualify for loans through federal loan programs should speak with a health system financial aid officer to obtain approval before applying.
- Graduate and medical students who need to borrow funds beyond the federal subsidized and unsubsidized loan limits may choose between the Direct Grad Plus Loan and a private loan.
- All other students should review the loan programs available for their individual program of study and contact their respective financial aid office with questions before applying (e.g., dual-degree students enrolled in their graduate studies will work with the campus graduate financial aid office).
- The selection of a private student loan provider is entirely your choice. Be aware that some private lenders may require repayment during enrollment. When applying, use school code 001313-72.
Loans for Medical Residency Application, Interview, and Relocation Expenses: The U.S. Department of Education has ruled that reasonable expenses related to medical residency applications and interviews can be considered "educational expenses" and therefore funded with financial aid. This ruling allows the financial aid office to award federal funds specifically for residency application and/or interview costs.
Final-year medical students may request up to $2,500 in federal loan funds by completing the Residency Application Expenses funding request form and submitting the form to the health system financial aid office for review. Depending on the student's remaining aid eligibility, funding could be in the form of additional Direct Loan borrowing, but could also include a Direct Graduate Plus Loan or a private loan. At the conclusion of the student's interviews, he/she may request an additional $2,500 (for a total of $5,000) by providing a second request form along with documentation of all expenses incurred.
Students who need to borrow funds in excess of $5,000 will need to pursue a private loan to cover those costs. Some private lenders have developed loan programs specifically for final-year medical students who incur residency application, interview, and relocation expenses. Private loans may require certification by the financial aid office, and tend to be more expensive than federally-guaranteed loans. For a chart of residency loans available from some private lenders, click here. The selection of a private lender is entirely up to the borrower.
Both the Grad Plus and private loans require a credit review and loans will be approved for those who are deemed credit-worthy. If the loan application is denied, the student may appeal the lender's decision by addressing all derogatory issues appearing on the credit record. (The student may also want to appeal based on her/his future earnings potential.) Another alternative would be to ask someone with good credit to endorse (cosign) the loan--perhaps a parent or relative.
- Borrow wisely and do not borrow more than you need. Calculate your expense estimates carefully. Seek advice from past graduates and current residents who have been through the process. Do not overspend. Some students believe they deserve a higher standard of living than when they were students, and they may buy a new vehicle or travel, for example. Remember that as a resident, your take-home pay will not be much more than what you were living on while in medical school.
- Interview expenses: If your goal is a residency position in a particular geographic location, you may save on travel expenses by planning some of your fourth-year electives in that area during the fall and winter terms. If you are able to coordinate your electives with this in mind, and can document expenses that exceed the "transportation" portion of your student expense budget, you may qualify for additional financial aid. Talk with a financial aid officer to learn more.
- Relocation expenses: Ask yourself these questions when planning your relocation: When will I receive my first paycheck? What will my living expenses be for the period following graduation until my first paycheck? Will I need to make a security deposit on an apartment or to establish utilities? What supplies will I need to purchase in order to make the move? Other expenses to consider may include insurance premiums, automobile registration in a new state, health care premiums or expenses, and household supplies.