The Ace of Spades Posted May 22, 2011 Report Share Posted May 22, 2011 Hi, I was wondering what everyone's take on this is. I understand that student loans come interest-free while in school, while a professional student LOC starts accumulating interest immediately. Also, the limit on LOCs is 150k - 200k, while StudentAidBC has a limit of 50k - not enough to completely cover the cost of my medical education + living expenses. Do most people apply for both? I don't know a lot about finances, but it seems to me like the smartest thing to do is to max out the student loan before I start using a LOC. Is there an order in which I should apply to each program? If I apply for and receive a student loan first, does that lower the amount of credit that the banks will allow me? Or vice versa, will applying for a LOC first lower the loan that the government is willing to provide? I'll be heading to the banks on Tuesday to discuss this in person, but any advice from you guys would be wonderful! Link to comment Share on other sites More sharing options...
tyler123123 Posted May 22, 2011 Report Share Posted May 22, 2011 You sir are correct. It's best to get both, but use your student loan first since it is interest free. Link to comment Share on other sites More sharing options...
PhoenixFlare500 Posted May 22, 2011 Report Share Posted May 22, 2011 Hi, I was wondering what everyone's take on this is. I understand that student loans come interest-free while in school, while a professional student LOC starts accumulating interest immediately. Also, the limit on LOCs is 150k - 200k, while StudentAidBC has a limit of 50k - not enough to completely cover the cost of my medical education + living expenses. Do most people apply for both? I don't know a lot about finances, but it seems to me like the smartest thing to do is to max out the student loan before I start using a LOC. Is there an order in which I should apply to each program? If I apply for and receive a student loan first, does that lower the amount of credit that the banks will allow me? Or vice versa, will applying for a LOC first lower the loan that the government is willing to provide? I'll be heading to the banks on Tuesday to discuss this in person, but any advice from you guys would be wonderful! The government won't look at your LOC as far as I know, how much you get from them is determined by other things. The banks will definitely give you the full 200k, unless I suppose you've had pretty terrible credit rating. Also a LOC only starts accumulating credit when you spend money out of it. Like right now I have one with a 200k limit but I haven't touched it yet (once temporarily), so there's no interest on it. Link to comment Share on other sites More sharing options...
psychoswim Posted May 22, 2011 Report Share Posted May 22, 2011 I'll be getting a little over 12k student aid from QC (3.5k as a loan). But I'll also apply for a LOC at my bank so that it's there if needed once the 12k is gone. Link to comment Share on other sites More sharing options...
The Ace of Spades Posted May 24, 2011 Author Report Share Posted May 24, 2011 Has anyone had any luck with MD Management as opposed to a LOC from a major bank? Link to comment Share on other sites More sharing options...
rmorelan Posted May 24, 2011 Report Share Posted May 24, 2011 Has anyone had any luck with MD Management as opposed to a LOC from a major bank? In what way? Their loc seems to be similar to others I think Link to comment Share on other sites More sharing options...
rmorelan Posted May 24, 2011 Report Share Posted May 24, 2011 Most people i knowmax out the student loans first and then go into the loc The interesting part is at the end as the student loans often have an interest rate higher than the loc during repayment. People seem to move all loans to the loc then to get the best of both worlds if they can Link to comment Share on other sites More sharing options...
PhoenixFlare500 Posted May 24, 2011 Report Share Posted May 24, 2011 Most people i knowmax out the student loans first and then go into the loc The interesting part is at the end as the student loans often have an interest rate higher than the loc during repayment. People seem to move all loans to the loc then to get the best of both worlds if they can I don't know if this is true or not, but one of the administration staff said getting a government loan and paying off your student loan with that after graduation may also lessen the interest you accumulate. But I don't know if this is true. Link to comment Share on other sites More sharing options...
NAD(P)H Posted May 24, 2011 Report Share Posted May 24, 2011 Most people i knowmax out the student loans first and then go into the loc The interesting part is at the end as the student loans often have an interest rate higher than the loc during repayment. People seem to move all loans to the loc then to get the best of both worlds if they can Consolidating the credit makes little sense in the long run, since government student loans are not taxable, whereas an LOC is. The small amount in difference between the two interest rates (prime vs. prime+2.5%) doesn't come close to the money you'll be saving on taxes if you lengthen out the time you take to pay the government student loan (18-30% potential income tax). Link to comment Share on other sites More sharing options...
ECross Posted May 24, 2011 Report Share Posted May 24, 2011 Did anyone or is anyone planning on applying for a LOC at more than one bank and then deciding which one to go with? I'm kind of wanting to check out different banks but from what I understand applying for these things is a hit on your credit rating so I'm hoping to minimize that. I can't really afford to apply one at a time and see if I run into trouble because I'm leaving town pretty quickly and I was just wondering if anyone else has done the same thing? Link to comment Share on other sites More sharing options...
hking03 Posted May 24, 2011 Report Share Posted May 24, 2011 Did anyone or is anyone planning on applying for a LOC at more than one bank and then deciding which one to go with? I'm kind of wanting to check out different banks but from what I understand applying for these things is a hit on your credit rating so I'm hoping to minimize that. I can't really afford to apply one at a time and see if I run into trouble because I'm leaving town pretty quickly and I was just wondering if anyone else has done the same thing? Yes, applying for various LOC's will ding your credit rating... not too much, but they add up over time. I wouldn't recommend applying for them all... why don't you just contact the various banks- td, rbc, bmo, scotia and mdfinancial and ask what they offer. It's all pretty much the same with some slight differences- like rbc gives full access to 200k, scotia has a prime interest rate throughout repayment and includes residency and fellowships as a "no payment" period much like when in med school. As long as you haven't messed up your credit you'll get approved almost anywhere... they want your business, it just depends who you want to work with. Link to comment Share on other sites More sharing options...
HBP Posted May 24, 2011 Report Share Posted May 24, 2011 Consolidating the credit makes little sense in the long run, since government student loans are not taxable, whereas an LOC is. The small amount in difference between the two interest rates (prime vs. prime+2.5%) doesn't come close to the money you'll be saving on taxes if you lengthen out the time you take to pay the government student loan (18-30% potential income tax). You're acting like the interest is 100% deductible. It's something like 15%... no reason to pay 50-75% more interest on the loan. Link to comment Share on other sites More sharing options...
bloh Posted May 24, 2011 Report Share Posted May 24, 2011 Consolidating the credit makes little sense in the long run, since government student loans are not taxable, whereas an LOC is. The small amount in difference between the two interest rates (prime vs. prime+2.5%) doesn't come close to the money you'll be saving on taxes if you lengthen out the time you take to pay the government student loan (18-30% potential income tax). That makes no sense at all. As an example, paying an extra 2.5% on a loan of 200,000 is 5,000$ per year. You are not deducting 100% of that 5000$ from your income; the tax exemptions are nowhere near close to the full amount. Link to comment Share on other sites More sharing options...
ECross Posted May 24, 2011 Report Share Posted May 24, 2011 Yes, applying for various LOC's will ding your credit rating... not too much, but they add up over time. I wouldn't recommend applying for them all... why don't you just contact the various banks- td, rbc, bmo, scotia and mdfinancial and ask what they offer. It's all pretty much the same with some slight differences- like rbc gives full access to 200k, scotia has a prime interest rate throughout repayment and includes residency and fellowships as a "no payment" period much like when in med school. As long as you haven't messed up your credit you'll get approved almost anywhere... they want your business, it just depends who you want to work with. Awesome, thanks! I have good credit so hopefully won't be a big deal I was just curious because I'm kind of in a hurry to get everything settled. Thanks again!! Link to comment Share on other sites More sharing options...
NAD(P)H Posted May 24, 2011 Report Share Posted May 24, 2011 That makes no sense at all. As an example, paying an extra 2.5% on a loan of 200,000 is 5,000$ per year. You are not deducting 100% of that 5000$ from your income; the tax exemptions are nowhere near close to the full amount. Where is this $200 000 loan coming from? Student loans max out long before that. Sure, you can't deduct 100% of the interest, but the way it was explained to me is contradictory to what you're saying. Link to comment Share on other sites More sharing options...
hking03 Posted May 24, 2011 Report Share Posted May 24, 2011 Where is this $200 000 loan coming from? Student loans max out long before that. Sure, you can't deduct 100% of the interest, but the way it was explained to me is contradictory to what you're saying. I believe bloh is referencing 200k from the student loc that the banks offer at prime. Assuming you use 50k in student loans over 4 years and 150 k of your LOC and add them together you would have a 200k LOC at prime versus 150k at prime and 50k at prime + 2.5 or 5% (fixed) that you can use as a tax deduction. I've heard that the general consensus is to consolidate at the lower interest rate as soon as you go back into repayment status with gov student loans as the savings from the lower interest rate outweigh the tax deduction opportunities from your gov student loans. Link to comment Share on other sites More sharing options...
HBP Posted May 24, 2011 Report Share Posted May 24, 2011 The deduction value is VERY little compared to the extra interest paid on the student loan. Pay off your government loan with your LOC. /tangent Link to comment Share on other sites More sharing options...
rmorelan Posted May 24, 2011 Report Share Posted May 24, 2011 The deduction value is VERY little compared to the extra interest paid on the student loan. Pay off your government loan with your LOC. /tangent Yeah that was the generally feeling on things - with interest at prime (around 3%) the 2.5% rider on top for student loans is almost double the interest rate. The marginal tax rate on student loans is only 15% - if you do the math right now it makes sense to consolidate. Of course if the interest rate base would changet that is something to reconsider I guess Too bad at least the amount you had to pay for tuition wasn't considered a student loan for tax purposes - I know the rest can be used for living expenses etc, but the base amount would be nice. Link to comment Share on other sites More sharing options...
The Ace of Spades Posted May 25, 2011 Author Report Share Posted May 25, 2011 Just a heads up. I went to four different banks today (TD, Scotia, BMO, and RBC) and two of them said that they will decrease your available credit if you receive a student loan from the government. They both advised to apply for the LOC first and the student loan second. Link to comment Share on other sites More sharing options...
rmorelan Posted May 25, 2011 Report Share Posted May 25, 2011 Just a heads up. I went to four different banks today (TD, Scotia, BMO, and RBC) and two of them said that they will decrease your available credit if you receive a student loan from the government. They both advised to apply for the LOC first and the student loan second. interesting! Which ones? I mean most people are likely to already have a student loan prior to applying to med school. I did and it had no impact on the process at all. Never heard of it having an impact either with anyone else but rules change Link to comment Share on other sites More sharing options...
Jochi1543 Posted May 25, 2011 Report Share Posted May 25, 2011 Just a heads up. I went to four different banks today (TD, Scotia, BMO, and RBC) and two of them said that they will decrease your available credit if you receive a student loan from the government. They both advised to apply for the LOC first and the student loan second. ???? That's a new one! Link to comment Share on other sites More sharing options...
The Ace of Spades Posted May 25, 2011 Author Report Share Posted May 25, 2011 interesting! Which ones? I mean most people are likely to already have a student loan prior to applying to med school. I did and it had no impact on the process at all. Never heard of it having an impact either with anyone else but rules change It was Scotiabank and BMO. Mind you, these weren't medical loan specialists, just regular financial service agents. I will be contacting the specialists to confirm if this is true for this year. Link to comment Share on other sites More sharing options...
rmorelan Posted May 25, 2011 Report Share Posted May 25, 2011 It was Scotiabank and BMO. Mind you, these weren't medical loan specialists, just regular financial service agents. I will be contacting the specialists to confirm if this is true for this year. Yeah that is probably the problem - gezz if you don't get a med app specialist you always seem to wind up with some one that doesn't really know what is going on I just renegotiated my loan with scotia and none of that nonsense came up. Weird though that two banks said that - does make me suspicious Link to comment Share on other sites More sharing options...
hking03 Posted May 25, 2011 Report Share Posted May 25, 2011 It was Scotiabank and BMO. Mind you, these weren't medical loan specialists, just regular financial service agents. I will be contacting the specialists to confirm if this is true for this year. just had a meeting last week with the med specialist for scotia in vancouver. nothing came up regarding student loans or previous student loan debt. but.... they do require all of my pre-existing debt (other loc and cc) to be consolidated and it will take a chunk out of my 200k. kinda sucks, but i don't see it impacting me down the road as that other stuff was at a higher interest rate. i'm meeting with the manager on friday to do the app and i'm going to ask him to take the restriction off for the 50k max per year... we'll see what he says. Link to comment Share on other sites More sharing options...
rmorelan Posted May 25, 2011 Report Share Posted May 25, 2011 just had a meeting last week with the med specialist for scotia in vancouver. nothing came up regarding student loans or previous student loan debt. but.... they do require all of my pre-existing debt (other loc and cc) to be consolidated and it will take a chunk out of my 200k. kinda sucks, but i don't see it impacting me down the road as that other stuff was at a higher interest rate. i'm meeting with the manager on friday to do the app and i'm going to ask him to take the restriction off for the 50k max per year... we'll see what he says. yeah they did the same to me - makes sense, and it was't really a major deal. Let us know how that 50K limit thing goes, I know a lot people worry about that. For me it didn't matter - I mean 50K + 15-21K OSAP + bursaries etc was well over twice the amount they suggested I need. Still flexibility is flexibility! Link to comment Share on other sites More sharing options...
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