Medical school loan terms is an unpleasant subject which needs to be visited as a medical student. Knowing the language of money, debt, and loans is essential to remaining financially healthy.
You want to be knowledgeable and have some idea of what the financial aid office or your lender is proposing when discussing the terms of your loans. In medicine you know the medical terminology and
you need to have a comparable understanding of medical school loan terms when it comes to your money.
Amortization: spreading your loan repayments out over a period of time. When you choose your repayment option you will typically receive an estimated repayment or amortization schedule to match your chosen repayment option.
Capitalization: process of adding accrued and unpaid interest back to the original principal amount borrowed, thus increasing the principal balance owed.
Deferment: time when a borrower may defer or delay repayment. You must contact your medical school loan servicer for a deferment, and the deferment is for one year at a time.
Direct Loan Consolidation: consolidation program offered by the Federal government through the Direct Loan Program.
Equal repayment: repayment plan where you make payments in the same amount (including the principal and interest) each month, for the duration of the loan.
Federal Loan Consolidation: consolidation program offered by banks and other lending institutions.
Fixed Interest Rate: interest rate that is fixed and will not change during the life of your loan.
Forbearance: process where a borrower may either 1.) make reduced payments 2.) delay payments altogether for a specified time period, generally 6 months to one year. You will have to contact your loan servicer to initiate the forbearance process. Please note the interest on your loans during forbearance accrues and interest if not paid during forbearance will be capitalized at the end of each forbearance period.
FDSLP: Federal Direct Student Loan Program (FDSLP) or Direct Lending, is a loan program operated via the government where you borrow Federal Stafford Loans directly from the Federal government.
FFELP: Federal Family Education Program (FFELP), is the process where you borrow Federal Stafford Loans through banks or similar lending institutions.
Grace: period of time where you are not required to begin repayment. Grace periods are loan specific and once used in it's entirety you may not use the grace period again for that particular loan. Please note you do not have to apply for grace.
Graduated repayment: repayment plan where your payments increase periodically or at preset dates during the repayment term, regardless of changes in your income.
Holder: the organization that own's your loaned or holds the paper, basically the entity who you owe repayment to. Holders may change because some lenders sell your loans to other lenders.
Income-sensitive repayment: these plans allow for incremental increases in payment, but payments will increase as your income goes up; however you must payoff your loan within 15 years.
Lender: the organization that provides the money for your medical school loan. Lenders may be a bank, credit union, a school, the federal government, etc. Lenders are who you initially owe repayment, so they are also the holder of your loan at this point.
New Stafford borrower: borrower whose first Stafford Loan disbursement was made on or after July 1, 1993 (most likely all of us visiting DoctorPremed).
Old Stafford borrower: if you had an outstanding balance on a GSL Program Loan as of July 1, 1993, and did not pay off your balance in full prior to taking out a new Stafford Loan after this date (very few of us).
Prime Rate: the rate banks use in pricing short-term commercial loans to their most creditworthy customers. This index is used to calculate the interest rate on some private loans.
Secondary Market: an organization that specializes in buying student loans, making them the loan's holder.
Servicer: organization hired by a lender or holder to provide loan servicing functions and to work with you if you have repayment issues. Overtime, the loan servicer will become the most important organization to you for your student loans.
Single Holder Provision: a provision where FFELP borrowers who have Stafford loans held by one holder must first contact the holder for a consolidation loan and if the lender does not offer consolidation, only then can you shop for another consolidation lender.
Subsidized loans: loans that are interest free to you during school, grace, and other authorized deferment periods. Examples are the Federal Subsidized Stafford, Federal Perkins, Primary Care Loans, Loans for Disadvantaged Students, Health Professions Student Loans, and some institutional loans.
Unsubsidized loans: loans that accrue interest from the date of disbursement and if there is unpaid interest it will be added back to the principal through a process called capitalization. Examples include Federal Unsubsidized Stafford, Federal SLS, Federal PLUS, Health Education Assistance Loans (HEAL), private loans, and some institutional loans.
Variable Interest Rate: interest rate that varies throughout the life of your loan. This rate is usually tied or indexed to a government rate and if your loan is variable interest rate, the rate changes quarterly or annually every July 1.
This list of medical school loan terms is a starting point to get you ahead on the path to paying for medical school. Again, medical school loans should not be a starting place, rather your last resort when it comes to paying for your medical school education.