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Hi All,


How does one most effectively finance Dental school expenses (tuition+living). From what I have read so far it seems that people are taking out LOCs. Although banks generally offer lower rates on LOCs vs traditional loans, I still feel that it may be very difficult to pay off the ever-increasing monhtly compounded interest. Are there other forms of financial aid that one can apply to (e.g. government loans/bursaries)? Any advice is appreciated :)

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Hi All,

How does one most effectively finance Dental school expenses (tuition+living). From what I have read so far it seems that people are taking out LOCs. Although banks generally offer lower rates on LOCs vs traditional loans, I still feel that it may be very difficult to pay off the ever-increasing monhtly compounded interest. Are there other forms of financial aid that one can apply to (e.g. government loans/bursaries)? Any advice is appreciated :)

The interest is added to your loan. So you don't really have to pay it while you are in school. There's also OSAP.

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Also, although LOC interest starts accumulating immediately once you use it, it commonly has lower interest rates than govt loans.

Therefore it could be beneficial to use your govt loans first until you are done school and then pay off govt loans with your lower interest rate LOC.

 

Although this is potentially variable between provinces and banks.

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Also, although LOC interest starts accumulating immediately once you use it, it commonly has lower interest rates than govt loans.

Therefore it could be beneficial to use your govt loans first until you are done school and then pay off govt loans with your lower interest rate LOC.

 

Although this is potentially variable between provinces and banks.

http://www.forbes.com/sites/davidmarotta/2015/07/26/how-quickly-should-i-pay-my-student-loans/#6af5abd81c1a

 

 

 

This forbes article suggests:

 

"If you have graduated with student loans you are probably anxious to leave those loans behind you and get on with your life. The best way to accomplish this is to pay the minimum and start saving and investing toward your future financial security."

RepaymentNetWorthProjections.jpg

Thoughts?

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Investing while repaying is certainly an option if people are interested in that sort of thing. I know very little of investments and have always been nervous of the risks involved (however minimal they may be).

 

But what people do with their money is up to them, I only mentioned my first comment to plant a seed that govt loans may not be the best thing to try and pay back.

 

Currently I have govt loans and a LOC. My LOC has an interest rate of "prime" but starts accumulating immediately. My govt loans don't accumulate until school is over but then has an interest rate of something like prime + 2 or 4 or something. Therefor using govt loans during school while there is no accumulation and then paying those off after school with your LOC with lower interest rate could save you interest accumulation.

However you decide to pay off your LOC is up to you. Using one of the methods from the Forbes article would be viable whether you are paying the LOC or the govt loans.

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Remember though that there is a tax benefit to the interest on your government student loan. So the effective rate could be less than prime depending on your tax bracket.

That is correct, you will get a tax credit on the interest you pay on the government student loan. The interest relating to the LOC will not be tax deductible.

Generally, after you graduate, you should repay loans which generate non-deductible interest as soon as possible, IE LOC.

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That is correct, you will get a tax credit on the interest you pay on the government student loan. The interest relating to the LOC will not be tax deductible.

Generally, after you graduate, you should repay loans which generate non-deductible interest as soon as possible, IE LOC.

 

Student loans from the bank are 2.7% interest. Government loans are 5.2% interest. Even after the tax credit it still makes sense to pay off the higher interest government loan.

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Student loans from the bank are 2.7% interest. Government loans are 5.2% interest. Even after the tax credit it still makes sense to pay off the higher interest government loan.

 

quite true - the tax savings aren't really worth it - and the DON'T scale with income - they are used as a tax credit, not a deduction.

 

That pay minimum and invest the difference chart above is making a lot of assumptions - including the insane ha notion of constant investment returns. That in the long term is not a bad idea at all but the implication that there is zero risk or volatility is a bit silly I think.

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Not sure how much your tuition is costing but my federal + provincial student loans have covered not only my tuition, but also my living expenses also. and those are interest free! gotta exhaust government loans before even thinking about using that LOC.

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Not sure how much your tuition is costing but my federal + provincial student loans have covered not only my tuition, but also my living expenses also. and those are interest free! gotta exhaust government loans before even thinking about using that LOC.

Lemme guess you're from Alberta?

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you can use LOC to pay off your OSAP, it does make a whole lot of sense as you the interest on your LOC is primarily 2.7% (Prime) while OSAP is somewhere around 5% (or slightly even higher). Few of my buddies (2-3 year DDS) bought expensive cars though...not a good move unless bank of mom and dad is there and abundant, I am getting off point, the bulk of the matter is, if you DON'T spend the money on extravagant items and have money left after 4th year, note: this also depends on where you attend dental school, it makes sense to pay off your Government loans from your LOC 

 

 

ALSO: exhaust OSAP or other governmental bursaries funds DURING school as you will NOT pay any interest on them while your in school but you pay interest on you LOC as quick as you take out funds 

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you can use LOC to pay off your OSAP, it does make a whole lot of sense as you the interest on your LOC is primarily 2.7% (Prime) while OSAP is somewhere around 5% (or slightly even higher). Few of my buddies (2-3 year DDS) bought expensive cars though...not a good move unless bank of mom and dad is there and abundant, I am getting off point, the bulk of the matter is, if you DON'T spend the money on extravagant items and have money left after 4th year, note: this also depends on where you attend dental school, it makes sense to pay off your Government loans from your LOC 

 

 

ALSO: exhaust OSAP or other governmental bursaries funds DURING school as you will NOT pay any interest on them while your in school but you pay interest on you LOC as quick as you take out funds 

 

I think that is correct on all points :) 

 

Most meds/dents do use the LOC to pay off the government loans if possible when interest starts being charged as the interest charged is vastly more on the gov loan vs the LOC. 

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Remember though that there is a tax benefit to the interest on your government student loan. So the effective rate could be less than prime depending on your tax bracket.

 

Can you elaborate on this a bit more?

 

 

also if you do pay off your gov student loans with your LOC

how does it work in terms of your tax bracket?

(sorry if i'm asking stupid questions, I'm clueless when it comes to finances.....)

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Can you elaborate on this a bit more?

 

 

also if you do pay off your gov student loans with your LOC

how does it work in terms of your tax bracket?

(sorry if i'm asking stupid questions, I'm clueless when it comes to finances.....)

 

shamelessly stealing a quote on this, ha! :

 

The tuition amount is a nonrefundable tax credit used to reduce the amount of tax payable. All eligible tuition fees are added together, then multiplied by the lowest federal tax rate percentage for the current tax year to determine the amount of the credit (John Pacheco)

 

So your tax rate is not relevant to this at all - doesn't matter how much you make or how much income tax your pay. Tax credits don't scale with income tax rate - tax deductions do though (things like your RRSP deductions). 

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