Government loans

[Guest nby]

With government loans, you have to start paying months after you finish your education. That is all fine and clear for most degrees, but for medicine, does this include your residency like the bank loans? Ie. will I be paying the gov.t back their loans on my meager resident's income?

[Guest therealcrackers]

You will. Often the banks take a look at this, though, and will offer lines of credit high enough to be able to consolidate your debts after you have graduated.

 

1) If you pay your government loans directly back to the government, the interest you pay on them counts as a tax credit at about 16%. Usually the rates you pay are at prime + 4%.

 

2) If you pay your government loans back by consolidating them on your line of credit, you lose that tax credit, but you're paying a considerably lower rate of interest, usually prime. (So there is more potential to make principal payments as opposed to just paying the interest). You may also not be required to make principal payments until after your second year of residency or beyond.

 

If you crunch the numbers, it makes better financial sense to consolidate your debt if the prime interest rates are less than 8% (the tax advantage is less) --- but you're still going to have to make payments on your debts on a resident's salary... that's the nature of the beast.

[Guest Qwigley]

I've heard rumors that after you graduate some of your gov student loans can possibly be forgiven (if you have accumulated a sufficient amount). Is there any truth to this? I'm at UofA now and I know Alberta has pretty good provincial gov student loans. I'm not sure if this loan forgiveness I've heard of is for provincial or federal student loans. Does anybody know anything about this?

[Guest therealcrackers]

It usually happens one year after the school year --- you get a notice from the lender saying x amount has been forgiven. Usually it's less than $2000 per year... small in comparison to your tuition, but still a reasonable amount of money you don't have to pay back!

[Guest Qwigley]

How do they determine what will be remitted? Is this "x amount" a percentage of your total loan? I've heard that there is a certain amount of loan that you will pay back and the gov forgives anything above that amount. I heard this a classmate, not someone who has had any loans remitted and I don't think that person know for sure.

 

Also, does this loan forgiveness come from both levels of gov or just one?

[Guest satsumargirl]

I can't remember the details since it's been 2 years since I consolidated my loans.

 

But the "loan forgiveness" is what they used to call it.

Now it is called the "Ontario opportunities grant" or something like that. I'm not exactly sure what the difference is. When I went through undergrad I was in the transition....so part way through is when the change happened. But as far as I can see it didn't change anything.

 

So the gov't has a determined max amount that at student can get into debt per school year (it's around $7000 for 8 months I think). So if you qualified for the max OSAP for 8 month period (around $9000 I believe, unless that has changed....it's been 5 years since I've had OSAP), what happens is they "forgive" the difference.

So if people pay their loans off entirely when they graduate (I never really understood how people who do this qualified for OSAP in the first place), they get a check in the mail. If you are going to pay your loan off over several years, what happens is the government calculates the amount to be forgiven and pays it to the banks to pay down your loan before you even consolidate it.

 

All this happens automatically, you don't need to apply for it or anything.

[Guest Ian Wong]

Floating back to the top.

 

Ian