Medical School Loan Consolidation
Medical school loan consolidation means that a private company or the federal government pays off the loans you have from other lenders, leaving you with one lender and one monthly payment.
private and federal loans, you should consolidate these separately as you will generally get a better deal consolidating your federal loans.
Private companies. Private banks offer loan consolidation. Be careful to review the
terms of the repayment.
Variable interest rates. Often private loans have variable interest rates, meaning that the rate can change over time, as often as every three months. Also check to see if there is a cap on how high the interest rate can go (usually there is not, whereas there is a cap of 8.5% with
federal loan consolidation).
Long repayment periods. Repayment periods can range from 10 or less to 30 years. Be careful and verify if there are any prepayment penalties (charges you for paying off your loan early.
Terms vary between lenders. These loans will vary greatly based on the company offering them, so be very careful when entering into these agreements.
For an overview of private loan consolidation, click here
Federal Government.You can also consolidate your federal loans through the federal government.
Fixed interest rate. This program has the advantage of having a fixed interest rate and a cap of 8.25%.
- are also multiple repayment plans available, including standard repayment (fixed payment for 10-30 years), graduated repayment (payments of at least interest accrued that month, increasing payments over time), extended repayment, income contingent (payment based on family size and income), and income-based repayment (based on family size and income and have a financial hardship). For more information about these plans, click here.
Deferment and forbearance. You can defer payment on federal loans for significant periods of time thanks to deferment and forbearance opportunities. Be aware that once you consolidate your loans, the terms for these are different. Details can be found on this page, question #3. This means that you can often defer payment of loans through your residency if you need to do so.
- Pay as You Earn/Income Based Plans. The federal government has new payment programs that allow you to increase your payment as your income goes up. This can mean paying more interest over time, but definitely eases the burden of the loan payments. The other big benefit is that your loans are forgiven after 20 years of payments!
- Loan Forgiveness. If you are on a pay as you earn/income based plan, if you end up working at a non-profit job when you graduate (which includes government, academic and even Kaiser), your loans are forgiven after 10 years of payments!
For more information about federal loan consolidation, click here.
To Summarize: Medical school loan consolidation is a good option in order to make your payments more simple. If you are going to consolidate your private loans, review the terms of repayment very carefully. Consolidating your federal loans is probably a good idea, especially if you have not yet started paying loans off. However, make sure you understand how consolidation will affect your deferment and forbearance options. For a good review of medical school loan consolidation by the AAMC, click here.