Transcript - MedEd Money - Student loans or lines of credit - What’s the difference?

May 15, 2018


Henry: Hi, I am Henry Annan, and this is Leah Aulenlach from MD Financial Management and we’re here to talk money.

So, Leah as you know lots of medical students are in debt.

Leah: Yes.

Henry: And lots of them have student loans and lines of credit.

Leah: Yes.

Henry: So, what is the difference between a student loan and a line of credit?

Leah: So, a student loan is something that you get from the government and they allocate it based on your current financial need and they usually give it to you in two allotments. One at the beginning of the school year and one-half way in the middle and you apply every year. A line of credit is a borrowing solution that you get from a bank or a financial institution. It is you go in one time and they give you a set amount and you use it as you need it. So, one comes from the government and one comes from the bank.

Henry: Hmmm, I see. So then what’s the benefit of a student loan?

Leah: The benefit of a student loan is it is interest free and no payment is required until you’re done med school. The line of credit, interest starts accumulating as soon as you draw money from it.

Henry: Okay. So then what would be the benefit of a line of credit then?

Leah: The line of credit is the flexibility and the ease of use. So, you only have to pay for what you borrow and if you don’t need all of it you don’t have to use all of it. Whereas the student loan is given to you all in one lump sum.

Henry: Okay, okay, well this is really informative. Thank you so much Leah.

Leah: You are very welcome Henry

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