Government (Student) Loans - Several Questions Related to Strategizing Funds

[Sleepywood]

There are lots of topics dedicated to LOCs, but I felt this question deserved its own thread with the focus being largely on government loans. I figure others may be in my boat with some of these questions (or may feel inclined to ask related questions, which I wouldn't personally mind), so I hope this thread is appropriate.

My understanding is that the process for incoming medical students that need funding is to apply for both government loans and a LOC. By applying for student loans, one can benefit from bursaries; then, the LOC is used to cover whatever the student loan does not. Then, at some point down the road, students pay off their student loan using their LOC, as this ultimately saves the most money in terms of interest/repayment (is my understanding correct?)

My questions are:

1. When do students typically repay their student loans for medical school - upon graduation? 2 years after graduating (grace period?) Earlier?

2. I am fortunate to be entering medical school with ~10k saved from my job. It is currently in my chequing account and isn't bringing me any benefits other than providing a generous immediate-access emergency fund (should I ever need it). Will keeping my money where it currently is impact the amount of student loan/bursaries I will receive?

2.5. If yes to the above, what are some recommendations on what to do something with this money? I have not yet decided on what to do with it longer term (put it in a TSFA, pay off something, use it on some purchases for school such as a new laptop...ect), but I find myself pushing off my student loan application in the event that it will. I currently have no concept of which of these options will hurt/help my student loan application (if applicable). 

3. I currently have ~20k in student loan debt from undergrad. My payments are on pause due to COVID. Is there any reason I should pay this off anytime soon? My payments did begin this past November, but were put on pause for COVID, and will remain on pause while I'm in medical school without interest owed.  I am not sure if my grace period will reset upon graduation from medical school.

4. I also have ~20k in LOC debt from undergrad (this being the last of my debt - no CC debt/mortgage/ect). This has interest, but I am still within my grace period (~10 months of 2 years given the pause with COVID), and the grace period will be put on pause again once I start back into classes. I'm wondering if paying this off within the next four years would be of any benefit. More specifically, I guess my question is: would the calculation to perform to evaluate this be a comparison between: (i) the interest this undergrad LOC would accumulate if left alone for four years (duration of med school), versus (ii) the interest my medical school LOC would accumulate if I paid off my undergrad LOC once my medical school LOC became available? Like my student loan grace period, I'm unsure how my undergrad LOC grace period is treated upon graduation from medical school (will it reset? or pick up where it left off? I'm guessing the latter)

Thanks!

[brattatat]

Since student loans don't have any interest while you are in school, I would use that entire amount first before touching my LoC. Once the grace period is about to run out, you can pay the loan amount with your LoC. This saves you a bunch of years in interest payments on the loan value amount across the years. 

[frenchpress]

30 minutes ago, brattatat said:

Since student loans don't have any interest while you are in school, I would use that entire amount first before touching my LoC. Once the grace period is about to run out, you can pay the loan amount with your LoC. This saves you a bunch of years in interest payments on the loan value amount across the years. 

Agreed, but before one pays down all of their student loan they should think about whether they may have residency training sites / electives that might make them eligible for loan forgiveness. Really only applicable to family med residents with rural electives (with a minimum of 400 hours per year), but it’s worth a lot (up to $8000/yr federally). If you pay down the loan you can’t apply retroactively.

https://www.canada.ca/en/services/benefits/education/student-aid/grants-loans/repay/assistance/doctors-nurses/eligibility.html

BC (and presumably other provinces) has a provincial equivalent for the provincial portion of the loan. Also, BC no longer has interest on their portion of student loans, so I depending on your LOC interest rate and size of loans, it’s not necessarily worth it to pay off - need to figure out your interest first.

[insomnias]

1 hour ago, Sleepywood said:

There are lots of topics dedicated to LOCs, but I felt this question deserved its own thread with the focus being largely on government loans. I figure others may be in my boat with some of these questions (or may feel inclined to ask related questions, which I wouldn't personally mind), so I hope this thread is appropriate.

My understanding is that the process for incoming medical students that need funding is to apply for both government loans and a LOC. By applying for student loans, one can benefit from bursaries; then, the LOC is used to cover whatever the student loan does not. Then, at some point down the road, students pay off their student loan using their LOC, as this ultimately saves the most money in terms of interest/repayment (is my understanding correct?)

My questions are:

1. When do students typically repay their student loans for medical school - upon graduation? 2 years after graduating (grace period?) Earlier?

2. I am fortunate to be entering medical school with ~10k saved from my job. It is currently in my chequing account and isn't bringing me any benefits other than providing a generous immediate-access emergency fund (should I ever need it). Will keeping my money where it currently is impact the amount of student loan/bursaries I will receive?

2.5. If yes to the above, what are some recommendations on what to do something with this money? I have not yet decided on what to do with it longer term (put it in a TSFA, pay off something, use it on some purchases for school such as a new laptop...ect), but I find myself pushing off my student loan application in the event that it will. I currently have no concept of which of these options will hurt/help my student loan application (if applicable). 

3. I currently have ~20k in student loan debt from undergrad. My payments are on pause due to COVID. Is there any reason I should pay this off anytime soon? My payments did begin this past November, but were put on pause for COVID, and will remain on pause while I'm in medical school without interest owed.  I am not sure if my grace period will reset upon graduation from medical school.

4. I also have ~20k in LOC debt from undergrad (this being the last of my debt - no CC debt/mortgage/ect). This has interest, but I am still within my grace period (~10 months of 2 years given the pause with COVID), and that will resume once school starts back up. I'm wondering if paying this off would be of any benefit. My question is: would the calculation to perform to answer this be a comparison between: (i) the interest this LOC would accumulate if left alone for four years (duration of med school), versus (ii) the interest my medical school LOC would accumulate if I paid off my undergrad LOC once my medical school LOC became available? Like my student loan grace period, I'm unsure how my undergrad LOC grace period is treated upon graduation from medical school (will it reset? or pick up where it left off? I'm guessing the latter)

Thanks!

A lot of these depend on your province.

1) Canada student loans and some provincial student loans begin to require repayment within 6mo of graduating. The rest require repayment after finishing residency. LOCs generally require repayment starting 2yrs post-residency/fellowship

2) Depends on the province.

2.5) Some provinces won't count it if it's in a TFSA

3) No

4) If you can afford to pay it off, it might be worth it, but that depends on you comparing the cost of paying it off (med LOC interest) vs not paying it off (undergrad LOC interest)

[brattatat]

41 minutes ago, frenchpress said:

Agreed, but before one pays down all of their student loan they should think about whether they may have residency training sites / electives that might make them eligible for loan forgiveness. Really only applicable to family med residents with rural electives (with a minimum of 400 hours per year), but it’s worth a lot (up to $8000/yr federally). If you pay down the loan you can’t apply retroactively.

https://www.canada.ca/en/services/benefits/education/student-aid/grants-loans/repay/assistance/doctors-nurses/eligibility.html

BC (and presumably other provinces) has a provincial equivalent for the provincial portion of the loan. Also, BC no longer has interest on their portion of student loans, so I depending on your LOC interest rate and size of loans, it’s not necessarily worth it to pay off - need to figure out your interest first.

That's very interesting, I haven't heard of residency loan forgiveness before, thank you for bringing this up!