Know your loans

The first step in your battle with student loans is to know your enemy! Most residents come out with some from of debt. This can be from several thousand to several hundred thousand. Many residents carry different forms of debt from different lenders and organizations. With all of the different types of loans, servicing organizations, interest rates and repayment terms it is really not surprising that so many young physicians have a difficult time efficiently managing their loans. In order to make the best decision in loan repayment you are going to first need to collect critical information about your loans.

You can find this information from the promissory notes from your loans. For many these have been circular filed or mixed in with notes from anatomy in a box somewhere in your parents' attic. If so, don't despair. There are other ways of finding the information.

  • If a recent graduate try your school loan office
  • For Sallie Mae services
  • For loans from Citibank
  • For private loans call the lending institution
  • For Institutional loans go to your individual institution.

Step 1. Find out information on your loans and fill in printable table.

Type of Loan - There are different types of loans based on the backing institutions. Knowing this is important because it determines the servicing organization and repayment options and most importantly whether the loan is subsidized or unsubsidized. Some common loans include:

Stafford Loans

1. Federal Direct Student Loan Program (FDSLP) or Direct Lending.

Students borrow Federal Stafford Loans directly from the Federal government rather than from banks or other lending institutions.

2. Federal Family Education Loan Program (FFELP).

Students borrow Federal Stafford Loans through banks or other lending institutions.

The major differences between the two are the source of the loan funds, the application process, and available repayment plans. With the Direct Loan Program, the funds for your loan are lent to you directly by the U.S. government. With FEELP Stafford Loans the funds for your loan are lent to you from a private lending organization such as a bank, credit union, or other lender that participates in the FFELP Program.

Note Stafford Loans can be subsidized or unsubsidized. You should check your specific loan.

Institutional Loans

  • Loans offered by your educational institution - These can be subsidized or unsubsidized.

Private Loans

  • From various lending institutions and organizations

 

 

Below are commonly used terms that you should be familiar with to understand your loan and make the decisions that work best for you.

Amount
This is the amount that you owe minus interest. It includes money which you received plus any additional loan origination or administrative or guarantee fees. This value is different from your the total cost of your loan.

Total Cost
This value is a sum of all the money you pay for a loan. It includes the money that you received, any additional one time starting fees and all interest paid on the loan.

Interest Rate
This determines how much of your payments actually apply to principle balance. It is usually measured in APR (annual percentage rate). APR is that rate at which you are charged yearly on your outstanding balance. A rate of 5.0% on a loan of $10,000 means you pay .05 times 10,000 = 500.00 in a year on the loan.

Interest Variability
A number of loans such as Stafford and HEAL loans have variable interest rates. The rate are determined by short term instruments such as the T-Bill, or the prime rate. These in turn are determined by the government based on economic conditions. Last years the Fed's cut interest rates which dropped variable student loan rates to the lowest they had been in 20 years. These rates can be capped, 8.25% for Stafford loans or uncapped as with HEAL loans.

Subsidized Loans
These loans are interest free during school, grace and some approved deferment periods. During this time there is no advantage to paying down loan principle.

Unsubsidized loans
These loans start to accrue interest from the time the loan is made. This interest is added back on to the loan amount through the process of capitalization. If you do not pay of the interest immediately you then pay interest on your interest.

Capitalization
This is the process by which accrued interest is added back to your original loan amount. The result is when you start paying back loans you will be paying interest on interest. This is something you should try to avoid.

Servicing agency
This is the entity you deal with when paying back your loans. Sallie Mae is the largest servicing agency of Stafford Loans.

Holder
The holder is the organization that owns your loan. Frequently this is different than the original lender. Sallie Mae can act as both the holder and the servicing agency.

Step2
Repayment options