Tina_HP Posted April 19, 2012 Report Share Posted April 19, 2012 Hi. I am planning to apply to med school next year. I have OSAP loans from my undergraduate degree but I have saved some money during my graduate studies since I was living at home. Should I save that money to pay my tuition for medical school or should I pay back OSAP loans? Link to comment Share on other sites More sharing options...
future_doc Posted April 19, 2012 Report Share Posted April 19, 2012 On the assumption that the loans are interest free while you are a student, I would use these funds for tuition etc. Link to comment Share on other sites More sharing options...
Tina_HP Posted April 19, 2012 Author Report Share Posted April 19, 2012 On the assumption that the loans are interest free while you are a student, I would use these funds for tuition etc. The funds are interest free while I'm in school until the end of April 2012. There will be interest from May 1st, 2012 to September 2013. Hopefully I will get in next year and start September 2013 but for about year and a half the loans will be charged interest. Is it worth paying interest for 1.5 years? The loans add up to $27,000. Link to comment Share on other sites More sharing options...
future_doc Posted April 19, 2012 Report Share Posted April 19, 2012 If you pay 6%, the interest cost for 18 mo. will be about $2,400 - which you would save by paying the loan off. And you don't know for sure when you will get in. Assuming you will be on track, you will get money from OSAP interest free and part forgiven. The LOC at prime will take care of the shortfall. You cannot safely obtain an after tax return of 6% or more. On a cost vs benefit basis, I would pay it off with available funds, provided you don't need these funds for living during the waiting period. Best of luck! Link to comment Share on other sites More sharing options...
Tina_HP Posted April 19, 2012 Author Report Share Posted April 19, 2012 If you pay 6%, the interest cost for 18 mo. will be about $2,400 - which you would save by paying the loan off. And you don't know for sure when you will get in. Assuming you will be on track, you will get money from OSAP interest free and part forgiven. The LOC at prime will take care of the shortfall. You cannot safely obtain an after tax return of 6% or more. On a cost vs benefit basis, I would pay it off with available funds, provided you don't need these funds for living during the waiting period. Best of luck! Another option I have is to keep the funds and pay the interest for the first 6 months after which I could apply for repayment assistance and the government would pay the interest for the next 6 months. Would this be a better plan than paying it off since the funds would provide me a financial safety net for medical school? Link to comment Share on other sites More sharing options...
future_doc Posted April 19, 2012 Report Share Posted April 19, 2012 In that case, it would cost you about $800 in interest for the first 6 months. What you get in return is an interest free loan for the next 6 mo. So, for the first year, your effective int. would be cut in half. However, you need to realize that you won't need a safety net for med school. Why? Because you will have an LOC from a bank at about half the rate that you would be paying OSAP. Bottom line, I would pay down the loan asap unless you will need these funds prior to med school. Link to comment Share on other sites More sharing options...
Tina_HP Posted April 19, 2012 Author Report Share Posted April 19, 2012 In that case, it would cost you about $800 in interest for the first 6 months. What you get in return is an interest free loan for the next 6 mo. So, for the first year, your effective int. would be cut in half. However, you need to realize that you won't need a safety net for med school. Why? Because you will have an LOC from a bank at about half the rate that you would be paying OSAP. Bottom line, I would pay down the loan asap unless you will need these funds prior to med school. What does "int." mean? The LOC from the bank will charges interest as soon as you make a purchase and they will charge you interest while you're in med school for 4 years until you pay if off. With LOC you constantly have to make payments and there is no repayment assistance so if you default due to unexpected circumstances your credit is ruined. However, with the OSAP funding you don't get charged any interest while you're in school and you don't have to make a payment 6 months after you graduate. In addition the OSAP loans have repayment assistance so if I get into financial difficulty I have that option to apply. I am thinking I should pay off some of the loan (the Canada portion of the loan has higher interest at 5.5% while the Canada-Ontario has 4.5%). Should I just pay off the Canada portion of the loan which is around $3800 and pay off some but not all (pay off $7000) of the Canada-Ontario integrated student loan which is around $23200 ? Link to comment Share on other sites More sharing options...
future_doc Posted April 19, 2012 Report Share Posted April 19, 2012 int. = interest With the LOC, they just add interest to the capital loan as I won't be able to pay until I am in practice, but then there will be no problem to pay down the LOC. The interest rate is prime, less than 4.5%. You do not constantly need to make payments. Definitely in med school, you use OSAP for the reasons you state; and only use the LOC for the shortfall. Pay off that part of the loan that suits your comfort level. That is fine. So, you will be left with a loan of $16,200. And you will have money in the bank. Let's assume for purposes of an exercise, you never get into med school. If this were to be the case, askk yourself what you would do with the outstanding loan. And if you would pay it off, then I would suggest that you pay it off now, b/c you will always be in a positive cashflow position due to govt loans and your LOC. There would be no reason why you could not repay the LOC. Nobody is thrown out of med school for poor grades. I guess theoretically any of us could suffer an accident or severe disability such that we would have to leave med school, but if the debt were very substantial, bankruptcy would be the route, failing which the bank would have to come to acceptable terms or wait. Sure, credit rating would suffer. Step at a time and move according with your comfort level. Link to comment Share on other sites More sharing options...
PhoenixFlare500 Posted April 19, 2012 Report Share Posted April 19, 2012 Do you not have the option of paying your current loan off as much as you can and then just taking out another interest-free loan once you get accepted into med? Link to comment Share on other sites More sharing options...
Tina_HP Posted April 19, 2012 Author Report Share Posted April 19, 2012 int. = interest With the LOC, they just add interest to the capital loan as I won't be able to pay until I am in practice, but then there will be no problem to pay down the LOC. The interest rate is prime, less than 4.5%. You do not constantly need to make payments. Definitely in med school, you use OSAP for the reasons you state; and only use the LOC for the shortfall. Pay off that part of the loan that suits your comfort level. That is fine. So, you will be left with a loan of $16,200. And you will have money in the bank. Let's assume for purposes of an exercise, you never get into med school. If this were to be the case, askk yourself what you would do with the outstanding loan. And if you would pay it off, then I would suggest that you pay it off now, b/c you will always be in a positive cashflow position due to govt loans and your LOC. There would be no reason why you could not repay the LOC. Nobody is thrown out of med school for poor grades. I guess theoretically any of us could suffer an accident or severe disability such that we would have to leave med school, but if the debt were very substantial, bankruptcy would be the route, failing which the bank would have to come to acceptable terms or wait. Sure, credit rating would suffer. Step at a time and move according with your comfort level. If I do get accepted to med school and I have savings, would that lower the amount of grant money (which you don't pay back) they give me with the OSAP application? Also if I have savings does that lower the chance of getting bursaries? Link to comment Share on other sites More sharing options...
Tina_HP Posted April 19, 2012 Author Report Share Posted April 19, 2012 Do you not have the option of paying your current loan off as much as you can and then just taking out another interest-free loan once you get accepted into med? I do have the option of paying it off now and then applying for another interest free loan from OSAP but it may not be enough to cover tuition and living expenses for medical school. So I was thinking I should keep the savings for medical school and not pay off the loans. However, because I have significant amount of OSAP the interest charges are going to be quite high so I'm thinking I should pay off some but not all of the loans. On the other hand if I do keep the savings for medical school, I would have to report the savings to OSAP and they probably would decrease the amount of loan and grant for medical school expenses. Medical schools will probably not offer a bursary if I have savings. So at this point I think it's better if I pay some of the loan but keep some as a safety net cause I don't know when I will be able to get a job. Link to comment Share on other sites More sharing options...
Real Beef Posted April 20, 2012 Report Share Posted April 20, 2012 Pay it off. There is no better feeling than not having loans. I had $60,000 worth of undergrad loans and I paid them off in 17 months after letting them hang around stressing me out for 4 years or so ... it happened with the help of a $20k scholarship and a whole lot of scrimping and saving but it was done. Currently I have no debt besides my mortgage ... my car is paid for, car insurance one year ahead, house insurance paid a uear ahead, no credit card debt, no LOC ... the peace you feel not owing anyone is priceless. Pay it off. You know what happens to people who have loans hanging around so long that they think it is a pet .... they get pregnant, decide they dont want to work full time, they want to buy a house and cant get a big enough mortgage .... the student loans just GET IN THE WAY. Pay them off, get them out of the way and start off fresh with new OSAP and LOC loans if/when you get into Med school. Debt like credit cards and LOCs are like snakes ... if you play around with them, try and be fancy with your calculations you get a BIG BITE from them when you least expect it .... that is when life throws you a curve ball. Beef Link to comment Share on other sites More sharing options...
future_doc Posted April 20, 2012 Report Share Posted April 20, 2012 I was thinking I should keep the savings for medical school and not pay off the loans. You will have more than enough from your LOC/ On the other hand if I do keep the savings for medical school, I would have to report the savings to OSAP and they probably would decrease the amount of loan and grant for medical school expenses. If the savings would result in a decreased payment from OSAP, then it is a no-brainer from my perspective to pay off the loan. Just keep a small safety net but if it will decrease what OSAP gives you, you won't be further ahead unless you actually have spent thesae funds by the time you apply to OSAP. Link to comment Share on other sites More sharing options...
1234 Posted April 20, 2012 Report Share Posted April 20, 2012 You should have zero liquid assets under your name going into medical school. It impacts your governmental funding, government write off, grant opportunities. UofT, for example, charges 20K tuition on paper. If you have no cash and no car, it costs a total of 7K after partial osap write off and a UofT grant. Link to comment Share on other sites More sharing options...
future_doc Posted April 20, 2012 Report Share Posted April 20, 2012 You should have zero liquid assets under your name going into medical school. It impacts your governmental funding, government write off, grant opportunities. UofT, for example, charges 20K tuition on paper. If you have no cash and no car, it costs a total of 7K after partial osap write off and a UofT grant. ^ There is your answer OP, given by others too, including Beef. Link to comment Share on other sites More sharing options...
JB. Posted April 21, 2012 Report Share Posted April 21, 2012 What if you're married? Do your spouses assets count as your assets too? Link to comment Share on other sites More sharing options...
JB. Posted April 21, 2012 Report Share Posted April 21, 2012 ETA: or is this where it's a smart decision to put your vehicle in your spouse's name? Link to comment Share on other sites More sharing options...
future_doc Posted April 21, 2012 Report Share Posted April 21, 2012 I would think your spouse's assets would not count. Link to comment Share on other sites More sharing options...
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