- name: medical school private loan
- interest rate: 7.9% or more (varies with lender and credit score)
- interest type: unsubsidized
- maximum repayment term: 10 – 25 years (varies with lender)
- grace period: varies with lender
- maximum loan amount: tuition and living expense
Pick This Loan Last
Private loan is the last resort, after you maxed out on your government school loans. It is like the fat kid in dodge ball — last choice, last pick.
The main reason why it should be your last resort is because it is usually the most expensive among the school loans. Its interest rates are the highest. In addition, private loans do not have the benefits that government loans offer, such as eligibility for the Income-Based Repayment program and forgiveness programs.
If you attend medical school in the US, a private loan should make up a small percentage of your total school loans. Remember, last resort!
Comparing Various Government Loans to Private Loans
See below for comparisons between the various medical school loans:
* Grace Period (period right after graduation when you don’t have to pay anything back)
- Primary Care Loan: 12 months
- Perkins Loan: 9 months
- Stafford (subsidized and unsubsidized) Loan: 6 months
- Grad Plus Loan: none
- Federal Consolidated Loan: none
- Private Loan: varies with lender
* Maximum Repayment Term
- Primary Care Loan: 25 years (10 year minimum)
- Perkins Loan: 10 years
- Stafford (subsidized and unsubsidized) Loan: 10 years
- Grad Plus Loan: 25 years
- Federal Consolidated Loan: 30 years
- Private Loan: 10 – 25 years (varies with lender)
* Interest Rate
- Primary Care Loan: 5%
- Perkins Loan: 5%
- Stafford (subsidized and unsubsidized) Loan: 6.8%
- Grad Plus Loan: 7.9%
- Federal Consolidated Loan: weighted average of federal loans consolidated
- Private Loan: 7.9% or more (varies with lender and credit score)
As you can see, the private loan is the most expensive. At best, the interest rate is like the Grad Plus. And at worst, it is more expensive and cannot be forgiven. And unlike most government loans, the interest rate for private loans depends upon your credit score. If you have been late with loan payments, defaulted on debt in the past, and ruined your credit score, it will really cost you now.
Avoiding Taking Out Private Loans
Visit the medical school loan forgiveness / repayment programs and scholarships section on some other ways you can get money for school.
If you are still interested in private loans, check out some options listed by finaid.org.
Remember, the financial decisions you make now (especially regarding loans) will affect you for the next 10, 20, or 30 years. Make sure you borrow wisely.
This article is part of the Medical School Loans series. Click on the link if you want more tips and hints about borrowing money smartly.