Home equity loan to finance medical school

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Skarlo
Posts: 8
Joined: Sun Mar 29, 2020 3:11 am

Home equity loan to finance medical school

Post by Skarlo »

Hi all- I have been lurking these forums to improve my financial knowledge and recently decided to create an account to seek some guidance. For context, I'm currently an undergrad matriculating to a T5-10 medical school next year; I am interested in pursuing surgical subspecialties or EM. I do not have any loans from undergrad.

For medical school, I'm looking at 100-200k of Direct Unsubsidized Loans (pending adjustments to my financial aid package/scholarship matching), likely at a ~6% interest rate. My parents offered to take out a home equity loan to help me finance my education (we own an apartment we do not live in, I assume this would be the collateral) at a lower interest rate. I am immensely grateful to them as this certainly seems like it could save me a lot of money, but was curious whether this is a wise decision? Also, is it likely that ongoing events with covid/the economy may result in lower interest rates?

Like some other students pursuing medicine, I'm not the most financially savvy (working on it), so I wanted to consult you all for input. Thanks in advance!
mhalley
Posts: 8694
Joined: Tue Nov 20, 2007 6:02 am

Re: Home equity loan to finance medical school

Post by mhalley »

I think it’s too risky. Things can go wrong. You could not make it through med school, make it through and not match, etc. they could lose their job or tenant and thus their apt. With the virus, people can’t be evicted for nonpayment in many locales. There is no reason you couldn’t take out the loans and have them paid off within 5 years of becoming an attending. 200k for 5 years at 6% is 32k. Not worth the risk to your parents imho. You should be making 300k plus, so five years is being lackadaisical at paying off the debt.
https://www.whitecoatinvestor.com/how-t ... n-2-years/
potatopancake
Posts: 38
Joined: Fri Jul 13, 2018 4:38 pm

Re: Home equity loan to finance medical school

Post by potatopancake »

My parents offered to do this when I entered med school. I strongly considered it before deciding to take out the federal student loans. I would encourage you to take out direct loans. There are favorable repayment plans during residency. Any surgical subsp. will be able to crush those loans quick. EM, picking up some extra shifts, will also finish off those loans within a few years of finishing residency. Your parents can help in other ways, which will be great during medical school. Food, laundry, support, a vacation from your parents are going to mean more to you than a home equity loan. Good luck! Enjoy the ride!
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