A&M 350Z

dchengmd

To say that is very very bad advice I take acception. You should obviously be able to see the difference b/w credit card debt and school loans. I have no cc debt and unlike yourself have been fiscally responsible throughout medical school, but my point is that using a few extra grand of student loan money to subsidize the additional cost he needs for the Z would change the payments of student loan repayment by maybe twenty bucks when spread over 30 years. Did I say go out and charge the cost on a credit card? Heck no. By all means dont do that. But with current Federeal loan interest rate of 2.5% its hard to argue a slight amount to keep your sanity.

FormulaRx

As an aside I by no means lived extremely frugally but also did not go all out. Try to keep a happy balance. Thats what I did and would change it for the world. Being AOA and getting to pick a great residency is in large part because I kept my sanity. Do everything you can to stay balanced.

A&M 350Z

dchengmd

Oh by the way interests rates will stay low this and will probably decrease as they are based on the 30 day T-bill which is continuing to decrease and election years typically have little affect on the T-bill.

shimz350z

this is a dilema because you are going to be in debt for a while....i totatally agree with everyone here but I always have this one variable come to mind. "You just don't know when death is knocking on your door." For sure you're going to pay off your "increased " debt with your type of occupation. But in the end it's what makes you happy.

i'd get it...if I really wanted it that bad...if it was really going to make me happy/better person. If not I would wait...by that time the skyline, and other great cars will be offered...but like i said..."you just don't know when death is knocking on your door."

dchengmd

You can take exception all you want, but I stand by my advice. Yes, I do know the difference between credit card debt and student loan debt, and to call ME fiscally irresponsible just because I racked up debts in medical school and as an intern is assuming an awful lot on your part. For your information, most of that money was used to pay off expenses of daily living and nothing extravagant.

Second - I'm not sure what you're advocating here, but from your statement above it sounds like you're recommending using student loan disbursements to pay for non-educations expenses like a car, which is not only ridiculously stupid, but also illegal. And where did you get the notion that it's just a 'few extra grand'? The last I saw, the minimum price of a 350Z was at least $26,000. That is a LOT to tack on to an existing loan of $50,000 or more, and like I said, you're committing fraud if you do so anyway.

And where exactly are you going to get a 2.5% loan for a car without any credit history or decent salary? Again - if you think using student loan money to buy a car is OK, then you're not fiscally irresponsible, you're just a criminal. No two ways about it.

Nothing wrong with the above. If you can afford it, go for it. But why put yourself into more debt if there are other alternatives out there, like public transportation or cheaper cars to buy? There's nothing wrong with waiting until you're more able to handle the debt.

You're AOA, good for you. Congratulations. But if you're advocating using educational loan money to buy a car, then it's painfully obvious that you need more education in ethics.

dchengmd

Uh, wrong. I don't know where the heck you're getting this information, but it's flat out incorrect.

How exactly are interest rates going to keep going down when they're already as close to zero as we can possibly go? Also, T-bills are not the only determinant of interest rates. Show us some sources for your information, please.

A&M 350Z

You are correct it is illegal to use loan money to buy a car. I am not saying he should take out an extra 30 grand for a car. But it is not illegal to use loan money for ordinary living expensives (including transportation expenses) like you yourself said. If he was to sell his two cars and use that and the money he has saved his payments maybe low. Another consideration is to lease the car, which has its inherent advantages and disadvantages.

The 2.5% obviously is student loan interest. Any yes that is precisely how it is determined. The following is from Sallie Mae. Look it up.

"Interest rate:
During in-school, grace or deferment, rate based on 91 day T-bill rate + 1.70%.
During repayment periods, based on 91 day T-bill + 2.30%.
Capped at 8.25%.

Here is the link http://www.salliemae.com/apply/borrowing/stafford.html

Sorry if I implied you were irresponsible financially but we must each determine our own comfort level with debt. It was you who said you charged 10 grand on CC debt. If it was for ordinary living then you could have easily got that covered with student loan money. That is totally legal.

A&M 350Z

heres a link to the T-bill forcast:

http://www.forecasts.org/3mT.htm

You will see it is low and is trending that away. It has not increased much over the last 6 months. Some interest rates are not soley depedent on the t-bill BUT student loan interest rates ARE.

ranger5oh

ALWAYS REMEMBER: The payments last way longer than the excitement of a new car!

Definitely words to live by. I say wait.

dchengmd

Wrong, wrong, wrong. Federal Stafford and other subsidized loans are disbursed to you for the sole intent of paying for your tuition. That's why they are called EDUCATIONAL loans - they are to help you pay for the education that you are otherwise unable to pay for. NOTHING ELSE. That is why the government pays the interest on the loans during your schooling and for 2 years after you graduate, and why the interest rate is maintained at a low rate. If the money you were given was for living expenses or a car, then they wouldn't be called education loans, but general-purpose or auto loans.

Using the money you are given to pay or subsidize your tuition for other purposes is a serious abuse of the educational loan system. Just because you are given this money doesn't mean you are entitled to use it to help you purchase a new car, house, computer, or anything else. Give Sallie Mae a call and ask them yourself if you like.

Yes, 2.5% is a good interest rate, to be used for money loaned for your EDUCATION. That is why these benefits exist (low interest rate, subsidized interest payments, interest rate cap). If these loans were meant for anything else, you would see a large number of people committing fraud by milking the federal educational loan system to buy whatever the hell they wanted, like houses, cars, boats, and other things.

Yes, these are excellent rates - FOR MONEY FOR YOUR EDUCATION. People would kill to get an auto loan with a variable 2.5% interest rate and an 8.25% cap. That's why these loans aren't for cars OR living expenses. Again - go ahead and call Sallie Mae if you don't believe me.

[QUOTE]Here is the link http://www.salliemae.com/apply/borrowing/stafford.html/QUOTE]
This link says absolutely NOTHING about what this money can be used for - mainly because it assumes that you're taking out these loans to PAY FOR SCHOOL. Not for anything else.

Wrong again. So are you saying that if my definition of 'ordinary living' means being able to drive a Ferrari 360 before I graduate from med school, it's my right to get more from my Stafford Loan to cover it?

If not - then what's the distinction between that and buying a Z or an Accord or a Civic? And who makes that distinction? Face it - your reasoning above is flawed, and what you are suggesting is tantamount to fraud. Prove me wrong by showing me educational loan terms stating otherwise.

DrVolkl

You may want to take into consideration that you may not get thru school....I wouldn't dig a hole you can't get out of. Not to be mean or anything, but you could:
fail out
get in an accident in your Z

You would then be stuck with a Z payment while trying to figure things out. Not a good position to be in at all.

You're a young student, you don't need a 30k car. You'll get more respect driving a paid off vehicle...trust me. When you get out, as it has been stated, you'll be able to get a whole load of cars, and the Z will be revamped by then. You can thank me later if you hold off.
I drove an old Explorer thru school...worth not having extra payments or being stuck with a 96 Mustang Cobra (the car I wanted back then). Think about that!

A&M 350Z

Not to drag on the discussion but just to clarify for those who may be going to college or graduate school. School cost is divided into direct and indirect costs. Direct being tuition and fees, indirect meaning costs incurred since you are not working. The loans you are speaking of are subsidized but not all federal loans are subsidized. There are unsub federal loans with the same interest rate. If Stafford loans are for tuition only then how come my tuition is only 6500/yr but total average indebtness at my school is 80,000 worth of stafford loans. You should check out what federal money can be used for, basically anything defined as cost of attendace. For him to pay for a Z with only federal aid would be wrong, but he said he is going to pay for a portion of it. Plus its not like somebody is getting turned down for aid because he took it. Anybody who is eligible gets federal loans.

Plus if you did not use any loan money to live on in school while living in Chicago then I dont know how you got by. I doubt anybody could work through medical school. I would of had to live on the streets if I did not use financial aid to live on.


"Cost of Attendance
(COA) The total amount it will cost a student to go to school—usually expressed as a yearly figure. It’s determined using rules established by law. The COA includes tuition and fees; on-campus room and board (or a housing and food allowance for off-campus students); and allowances for books, supplies, TRANSPORTATION, loan fees, and, if applicable, dependent care; costs related to a disability; and miscellaneous expenses, including an allowance for the rental or purchase of a personal computer. Also included are reasonable costs for eligible study-abroad programs. For students attending less than half time,* the COA includes only tuition and fees and an allowance for books, supplies, transportation, and dependent- care expenses. Talk to the financial aid administrator at the school you’re planning to attend if you have any unusual expenses that might affect your cost of attendance. "

Direct costs: Charges established by the college: tuition, room, and board (on-campus student housing and meals).

Indirect costs: Expenses controlled to some degree by the student; personal expenses, books, and transportation. Your college may be able to provide guidelines on typical indirect expenses at their campus.

Check out: http://www.studentaid.ed.gov/student...tant-terms.htm

or call sally mae. I can 100% guarantee I am correct.

dchengmd

Oh, so as long as he pays for a portion of a new Z, it's OK to use federal Stafford money to pay for the rest of it. Right. So exactly how much of your own money do you have to put down in order to legitimize using student loan money for the rest? I can't seem to find an amount or percentage listed in the guidelines. Help us out here.

So if I put $10,000 down on a Ferrari, I should be entitled to use my student loans to pay for the rest? And if not, why not?

I don't care if you can't imagine how I got by in medical school - I did, and I certainly didn't do it by defrauding the government into paying (partially or otherwise) for a new sportscar.

You are taking the definition of 'transportation' too liberally. I'm willing to bet that if you went and talked to your financial aid administrator at your school and asked him/her about the legitimacy of use of your loan funds, you'd get some very strange looks. These loan funds were never meant to give you extra money for extravagances. PERIOD.

I'm sorry, but nobody NEEDS to drive a brand new $30000 sports car as a medical student or otherwise. And using any portion of a student loan to do it and then to try to justify it as "necessary transportation" is downright foolhardy and unethical to say the least.

Like I said before, I stand by my statement and repeat that your advice is truly poor. Besides, if you are that financially insolvent as to require $50000+ in loans to finance your education, why in the world would you want to tap off that loan to pay for an expensive and unnecessary sports car when there are perfectly good and cheaper alternatives out there?

Your loans were not granted to you so you could enjoy life as a student. I'm surprised this even needs to be mentioned, as a normally responsible person would understand this already.

And I'm pretty sure you never consulted your college/university on their typical indirect expense guidelines. I challenge you to call them up and ask.

Your guarantee means nothing. Guess what, I myself used to have loans thru Sallie Mae and just called them at (888) 272-5543 and asked. And what they told me was pretty much what I said above.

A&M 350Z

Well regardless of our disaggreament, you should probably avoid commenting on my personal finances which you know little about. I only commented on what you disclosed, I however have not disclosed any of my financial matters. I only include what the average indebtness of my school not myself. My situation is quite different if we must get into it. I certainly dont appreciate any accusations of my defrauding the government because as I said before my financial situation is quite different.

Lets be gentlemen here, I apologized for your misunderstanding me by thinking I accused you of being fiscally irresponisble. If you really wish to continue the childish name calling. Should we start comparing board scores next?

Actually I am quite certain that most schools would agree with the below indirect costs as it taken from federal information. Many people even use financial aid to take care of their children. Not that I am condoning that either. A Ferrari is quite different than a Z. And atleast you have conceeded that other expenses besides tuition only (as you previously stated) can be used for other needs as long as considered a cost of attendance. No not purchasing a 30 grand car though.

My whole point was, like I said originally, I would not get the Z unless he is at the end of 3rd year or a 4th year. In which case he would not use 30 grand but maybe a small amount that would be considered reasonable to a prudent individual. For instance my school lists annual transportation costs for students to be around 4 grand. Something in that ballpark may help out.

ranger5oh

JEEZUS.. EVERYONE CALM DOWN. If he wants to spend his money on it, let him. AND STOP FREAKING OUT ABOUT THE LOAN MONEY!

thanks, im now off my soapbox... next.

dchengmd

Yes, you commented on what I disclosed by automatically assuming that the debt I racked up was due to financial irresponsibility. Pot, kettle, black.

Let me get this straight. You're apologizing for ME misunderstanding you? Thanks, but I didn't ask for that. That's quote pompous on your part.

Hey, if you want to compare board scores, bring it on. Remember, this wasn't my idea.

That was my point exactly. Yes, a Ferrari isn't the same as a Z, but so far you haven't given any way to discern between the two. What you consider 'prudent' is totally subjective - which is why I brought up the example in the first place. Why do you condone using loan funds to buy a Z, but not a Ferrari, Lamborghini, or a Benz? What exactly differentiates between any of these purchases?

Like I said, what is 'prudent' and 'reasonable' for one may be outrageous for another, so I'm wondering exactly how you think the government should decide. MY whole point was that even if it may be legal, there are serious ethical issues with doing this, especially when these funds (supplied by taxpayers) are supposed to be for someone's education, not for a fancy car. Calling it 'required transportation costs' for one's education is simplly misleading, and you are doing nothing but using semantics as a loophole to get around the original intent of these loans.

Which could go towards public transportation, a used car, or an economy car. Using this money to buy a more expensive and unnecessary car when you're strapped enough to need to borrow money for your education is simply ridiculous.

FormulaRX

WOW! I never planned this post to turn into a lengthy in-depth discussion like this but it is much welcomed. I have learned a lot from you even though I originally decided before I even posted this topic on waiting until I graduate to buy a dream car...I just wanted to hear what you guys had to say about it and what was said it much appreciated. Thank you very much. I'm not stupid which is why I am not digging myself into a deeper hole by satisfying a current want of an exciting car, which will probably not be as exciting when I actually am faced with the additional payments and when I start running into problems later on. Thanks for all of the advice though!

dchengmd

FormulaRX:

No problem. Good luck with your studies.

stopgo

Or... you could let the military pay all your medical school tuition and a modest stipend while drawing a regular paycheck for weekend drills. That might free up sufficient funds for a Z.

I mention this with only half a smirk. For any professional student (i.e. law or medical), there're some serious benefits to consider by letting Uncle Sugar pay you to go to school.

Scott

jtree007

I would (actually still a student and this is what I did), Save up your money.... Work as off you had a car payment about what the Z would cost... place that money in a savings or money market account. DON"T spend that money on anything unless it is a true emergency... Don't over work to the point that grades suffer either. When you have made enough money go buy your car... You don't get instant gradification, but you will be in good finical standing at all times and will not be at risk of falling behind on a car payment and you can avoid going in to Credit card debt trying to buy mods for the car... much better that way.. might miss a little fun at first, but it is far more enjoyable to drive a car that you actually own! The sooner that you get in the habit of saving money and controlling your spending (not saying that you are not already) the sooner that you can start enjoying what you own rather then stressing out on what you owe, or how you are going to pay for everything...


I am working on a way to save for a new (well new to me) 4runner in a few years... my "beater" (well compared to my Z), a 94 4runner with 161,000+miles is not going last amore then a few more years before it is going to need some significat work on it at 30,000+ miles a year that I put on it

ml2316

skip school and buy videogames and beer with my loan money. (i'm responding to the subject line only)