16 November 2011

In this third article in our series “Accreditation Matters,” we deal with the financial challenges you may face when attending a health sciences institution that is not currently accredited. In general, two important challenges may affect you:

• Not having access to federal student aid, which leads to private student loans
• Keeping federal student loans you may have in good standing during school

Private Student Loans

In general, private student loans tend to have less favorable terms and conditions when compared with federal student loans. These loans are also  based (at least in part) on credit.  However, if you have to borrow through private student loans, there is no reason you cannot do so responsibly.

Consider asking the following questions when choosing a private loan. Pay special attention to the questions that apply to borrowers considering a second health sciences degree, especially one with advanced training such as a residency program:

1. What are the credit requirements and is a creditworthy cosigner required?  Will I get a lower rate and lower fees with a creditworthy cosigner?  When can my cosigner be “released” from any obligation on my loan?
2. What is my rate, is it fixed or variable (expect the latter), when does it change (if variable), and is there a maximum rate? 
3. How often do you capitalize the interest? 
4. What are my repayment options and are there discounts for paying on time? 
5. What are my postponement options if I pursue another degree, especially one with advanced training such as a residency program?

The recently established Consumer Financial Protection Bureau may be able to help with your decisions about private student loans.  They help consumers understand how their loans work before they borrow, including students who borrow private student loans.  Check out their website at www.consumerfinance.gov/students/knowbeforeyouowe.

Keeping Federal Student Loans in Good Standing 

If you have federal student loans borrowed prior to matriculating in your health sciences institution, they will not be eligible for the “in-school deferment” until your school is accredited.  However, you still have some options for keeping them in good standing:  

1. You may be eligible for a repayment option called Income Based Repayment (IBR), which is designed to allow borrowers to repay their eligible loans at 15% of their discretionary income.  Depending on your program, you may have minimal—if any—income while enrolled, and may have minimal payments during school under IBR, possibly as low as $0.
2. Should IBR not be an option, consider asking your loan servicer for forbearance. Forbearance is similar to deferment in that it allows borrowers to postpone payments while protecting their credit, but eligibility may be more flexible.  Interest does accrue during forbearance, but that is better than becoming delinquent on your student loans.

Finally, remember what we said in the earlier article on How to Finance Your Health Sciences Education:

1. Talk to the important people in your life and ask for help. This is more important than ever, especially since you will not be eligible for federal student aid. 
2. Start investigating sources of financial aid early. Talk with your Financial Aid Office or designated representative at your school about options. 
3. Grants and scholarships beat student loans any time, all the time. Just because your school is not accredited does not mean they do not have grants and scholarships you may be eligible for.
4. Remember to budget wisely and borrow responsibly. Control what you can control, such as living expenses, and don’t obsess about the rest.

This article was written by Paul S. Garrard, President and Founder of PGPresents, LLC; a 27 year veteran of student financial aid and higher education.