Turning A Nursing School Loan Into Financial Health
Doug Smith

Defined Tag: Nursing School Loan.

A nursing school loan can be one of the most expensive types of student loans. A newly graduated nurse can become discouraged at the mountain of student loan debt that has accumulated. When transitioning from medical school to the working world, making nursing loan payments on top of rent, car payments, food and other living expenses can seem impossible.

One cure for high nursing school debt is to consolidate the medical school loans. In 2005, interest rates for nursing student loan consolidation were less than 3%. Compare that to the original interest rates of about 8% for federal nursing student loans and 18% or higher from private lenders! It is easy to see that consolidating all your nursing education debts makes financial good sense. New nurses can literally save thousands of dollars over the term of the consolidated loan, while they work towards career goals such as becoming a Registered Nurse or R.N.

Consolidating also locks in a low annual percentage rate (APR) on the nurse's school loans. The original college loans may have had provisions that allowed the interest rate to fluctuate, for example, as the prime lending rate rose or fell. That could increase the amount of the monthly payments. Rolling all nursing school debts into a single low interest loan means one payment that never changes.

There is typically a window of opportunity or enrollment period during which nursing graduates are allowed to apply to consolidate. If you miss that deadline, you may have to wait until next year to apply. By then, loan rates may have increased. If you do make the deadline for the current year, the consolidated nursing student loan rate may not be the absolute lowest available. Expect it to be in the range of a weighted average of the existing nursing loans.

For example, assume a nursing student has these university loans: Loan 1 for $50,000 at 8% interest, Loan 2 for $25,000 at 6%, and Loan 3 for $25,000 at 12%. That's a total of $100,000 in debt. The weighted average would be 50,000/100,000*8% + 25,000/100,000*6% + 25,000/100,000*12% = 8.5%. This is less than the average interest rate of 8.67%. The interest number is rounded up to the nearest one-eighth of a percentage point.

Shop around for the lowest fees and interest rates. Many banks, credit unions, and even the federal government want to refinance your student loans. They are willing to offer competitive deals to keep your monthly payments low and manageable. Some refinancing lenders will even rebate you up to 1% of your loan for paying on time, and even offer you a slightly lower interest rate as a further incentive to pay promptly. Federal nurse loan consolidations can be spread out up to 30 years, although you should try to keep the term as short as possible, to avoid paying excess interest.

There is a cure for the sick feeling you get when you graduate and see the debts you have accumulated. Thorough research and shopping for the best rates will ensure that your nursing school loan has low payments that fit your budget.

Copyright 2008 by Doug Smith. All Rights Reserved Worldwide. Unauthorized Duplication Prohibited. Not Intended As Professional Advice.