1 December 2010

As you think about pursuing a health sciences career, questions about how to pay for your health sciences education may not be far behind.  In considering your options to pay for school (and there are many), you may also want to consider not only the impact your credit may have on your ability to get student loans, but also on how repaying your student loans in a timely way can positively impact your credit and your credit score.  The latter can have a tremendous impact on your ability to secure financing to help start your practice or buy into an established practice after you graduate, not to mention your ability to get a mortgage, buy that new car you may need, and even get car insurance.

Consider the following as you think about how your credit can impact your health sciences career:

Credit Ready and Credit Worthy

First, Federal Stafford Loans (one of the main loan programs many health sciences students use to help pay for school) are not based on credit.  However, for some students, Stafford Loans may not be enough.  Therefore, there are two terms you should be familiar with:

Credit Ready means you have no credit history or your credit history has no adverse items such as 30 and 60 day late payments.

• Federal Grad PLUS Loans are based, in part, on a borrower being Credit Ready.

Credit Worthy means your lender is going to dig deeper into your credit history, perhaps looking for a minimum credit score and a debt-to-income (DTI) ratio that indicates your current income is enough to sustain loan payments.

• Private loans, including some private loans designed specifically for health sciences students, are based on your being Credit Worthy.  SPECIAL NOTE: Remember to always exhaust your eligibility for federal loan programs before applying for a private loan.

A lender making private loans may use a combination of credit ready and credit worthy requirements when determining not only your eligibility for a private loan, but also the interest rate for the loan and any origination or other fees you may be charged. 

Important Changes in the Credit Card Industry

Second, recent changes in the credit card industry help us better understand the impact credit card debt has on our decision-making:

• If you are under 21, you cannot be issued a credit card without an adult cosigner on the account or unless you can prove you have enough income to repay the card debt.
• Your credit card company will no longer allow purchases that exceed your credit limit, unless you choose to “opt in” to such an arrangement.
• Your monthly credit card statement must include information showing you how much you have paid to date in interest and fees during the current year.
• Your statement must also include information on the monthly amount required to pay off your existing balance in three years, plus the consequences of making only the minimum payment each month.

These changes may actually help force you to stick to a budget by limiting your spending and providing some serious reminders about how costly credit card debt can be.

Credit Cards and Financial Aid

Finally, remember that consumer debts, including credit card payments, cannot be added to the cost of attendance at your health sciences school should you apply for financial aid.  When the Financial Aid Office determines how much money you will need and what kind of financial aid you are eligible for, they can only include those expenses directly related to your degree program, such as tuition and fees, books and supplies, and living expenses.  Therefore, be sure you pay off any consumer obligations, including credit card balances, in full before you matriculate.

For more information on credit and the recent changes, you may find the following Web sites helpful:

• www.annualcreditreport.com -- Only government approved site where you can get a free credit report
• www.MyFICO.com/crediteducation -- Provides information on credit and credit scores
• www.bankrate.com -- Click on the Debt Management tab at the top of the page for free and objective information on credit