Medical Student Loan Consolidation Options

There are two primary options for medical student loan consolidation: federal and private. Federal consolidation programs tend to be cheaper, but they are available to a lower percentage of people. Private consolidation options are far more flexible, but they will be the more expensive option of the two. Depending on your personal situation, you will find one option more favorable than the other.

Federal Loan Consolidation

The federal option works best for students who have taken federal student loans across undergraduate and graduate school. Some medical students will not have loans from undergraduate school, and these people will have fewer loans to consolidate and a lower expense to consolidation. However, today, most students will have loans from both parts of their education. If these loans were taken through a federal loan program, then the federal consolidation option is best.

In order to qualify, you must have loans in good standing. This means you have made payments on the loans for at least 12 months. These 12 months can be during the time you were attending school and still under loan debt, and you will have a better chance of consolidation if you were at least making payments along the way. The main benefit to this option is there are absolutely no penalties to consolidate. All you need is loans across terms in good standing and proof you can continue to make payments after the consolidation. This is not difficult for medical students as they are on a direct path to a high-paying career.

Third Party Consolidation

Consolidating with a third party is best for students who have private student loans. These may include tuition for graduate and undergraduate education, living expenses and even credit card debt. Through private consolidation, you are taking out a new loan from another third party lender to pay off your existing loans. This new, large loan will replace all of the smaller debts, and you will be making only one payment each month. This option is very flexible, and it also allows you to consolidate debt incurred from tuition and living expenses together.

The main downside to third party debt consolidation is the expense - both financial and personal. Private loans tend to have higher interest rates. This means your new consolidation loan may still be expensive despite the fact it is much easier to pay than the other loans were. You will also be charged a fee by your previous lenders to pay off the private loans early. This means you new loan can be even larger than your old loans were combined.

The personal expense of third party consolidation comes from the negative report it adds to your credit score. Instead of getting a boost from paying off the other loans, you will see a credit deduction because you broke contract with the lenders. Federal loan consolidation does not result in this same penalty. As a medical student, you may be seeking another loan immediately in the future, such as a home or business loan and the loss of some credit will make your future loans more expensive.

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