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5 Ways to Reduce Medical School Debt

August 2, 2016

According to the Association of American Medical Colleges, 2015-2016 figures show that U.S. medical students with medical school debt have, on average, $180,723 of medical school-related debt (in 2019 the average is $196,520).This debt comes from public and private medical schools with median, four-year costs of $232,838 and $306,171, respectively. Medical school graduates, both those accepted or failing to find acceptance into a residency program, usually have a tough time repaying these loans, as yearly residency stipends (or income) are estimated to begin around $52,200 and end around $58,100 for the first and fourth years of residency. It is not until medical residents graduate from residency and move onto their first clinical or hospital job (usually as old as age 30) that they begin to earn what is considered traditional physician wages. However, along with these wages comes the ability — and requirement — to repay larger sums of their hefty student loan debts.

 

Updated December 12, 2019

 

Unfortunately, student loan debt associated with a medical school will likely continue to rise, but there are ways to battle these ever-increasing costs, thereby ensuring that these hard-earned degrees remain a good investment and continue to attract quality applicants.

 

Expert Recommendations to Effectively Repay Medical School Loans:

 

1. Apply the Sign-On Bonus Towards Loans

Many healthcare agencies, clinics, and hospitals offer physicians sign-on bonuses when hired. An easy way to significantly reduce medical school loan debt figures — and the associated interest — is to apply all or a good portion of this bonus towards student loan repayment. For instance, a lump sum of $25,000 could help reduce the interest amount as well as remove an entire year’s worth of loan payments. Keep in mind that some portion of the sign-on bonus may need to be used to pay for moving expenses (if separate moving expense coverages are not negotiated), any licensing or certification expenses, or simply saving for future tax payments.

 

2. Consider the Practice Area/Negotiate Loan Repayment

According to the Association of American Medical Colleges, a number of states offer loan repayment programs when medical professional contracts to work in underserved areas — medically underserved or simply rural areas. With a variety of loan repayment opportunities available, it is important to look for a program that meets a physician’s geographic and service-oriented goals. For example, physicians who are interested in helping medically underserved areas, which may include larger cities, may want to look into programs such as the National Health Service Corps. On the other hand, physicians who are interested in practicing in a rural area should look into state-specific rural health partnerships, some which may offer a stipend (in addition to the residency income) during residency. To receive this extra income, without repayment, applicants must agree to work in an assigned area after residency and for a certain amount of time. Physicians aiming to work in other areas may still be able to negotiate some contractual form of loan repayment along with the sign-on bonus — just be sure to ask!

Learn More About Education Loan Finance for Business

 

3. Join the Military for Residency or as a Practicing Physician

The Navy is known to offer its medical residents a four-year annual grant of $45,000, in addition to residency income. This grant, used each year during a four-year program, effectively pays off $180,000 in debt in a relatively short amount of time, especially when compared to medical residents in the civilian world. Additionally, the military pays a stipend of more than $2,000 a month (for 48 months) for living expenses on top of an average resident salary of $50,000 per year. In return for this financial assistance, physicians will owe service to the military, which may include 3-5 years of active duty and several years in the reserves.

For practicing physicians (those who have graduated from residency), the Navy offers significant sign-on bonuses ($220,000-$400,000), all of which depend on qualification, the physician’s specialty, and service requirements. For more information, review the details on the Navy Financial Assistance Program (FAP).

 

4. Consider Student Loan Refinancing Programs

Holding multiple student loans, both private and federal, can be confusing and expensive. Refinancing medical school loans into one refinanced and consolidated loan offers a great opportunity to reduce interest rates, monthly payments, or terms. For the best offer from a lender such as Education Loan Finance, be sure to keep all forms of credit in good standing: make regular payments and never default on student loans. Furthermore, applicants with a higher credit score are more likely to be offered lower interest rates with the refinanced loan, thereby saving thousands over the life of the loan.

 

5. Live Like a Resident

During residency years, physicians learn to live on very little. To quickly reduce and pay off medical school loans and gain financial independence, physicians should consider creating a budget that is more typical of a resident. Once a physician starts making significantly higher wages, if he or she continues to live on a resident’s budget — and with very little unnecessary expenses — he or she will likely be able to pay off medical school loans much faster, which means they can finally start saving for vacations, investments, and possibly [early] retirement.

 

Need Help Managing Medical School Debt?

The team of lenders at Education Loan Finance is specialized in working with college graduates who have accumulated higher amounts of debt – particularly medical professionals and physicians – to pursue advanced degrees. Education Loan Finance’s personal loan advisors will be happy to assist you in choosing a repayment plan that best aligns with your financial goals. Contact an Education Loan Finance representative today by calling 1-844-601-ELFI.*

 

10 Facts About Student Loans That Will Save You Money 

 


 

*Subject to credit approval. Terms and conditions apply.

 

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2020-10-20
Engineering School Student Loan Refinancing

Student loan refinancing is a fantastic option in many high-earning professions, and engineering is no exception. Most engineering students pursue bachelor’s degrees, and the average engineer’s student debt falls roughly in line with the national average of $35,173.    While engineers work hard to earn their degrees, the payoff is oh, so worthwhile. The average entry-level salary for engineers is $57,506, and the average salary across all experience levels is $79,000. This varies by the type of engineering you choose, as well. Big data engineers are among the highest-paid in 2020, with a median salary of $155,000.   Engineering students are often top candidates for student loan refinancing because of their low debt-to-income ratios. Here are a few more things you should consider refinancing your engineering student loans:  

Benefits of Student Loan Refinancing for Engineers

Student loan refinancing is a strategy that can help engineers better manage and pay off debt. When you refinance your engineering student loans, a private lender will “purchase” your debt from your original lenders. You can request rate quotes from several different lenders, then refinance with the one that offers you the most competitive rate. Decreasing your interest rate means you’ll pay less over the life of the loan.   Here are just a few of the benefits of student loan refinancing for engineers:
  • Ability to consolidate student loans into one monthly payment
  • Option to choose between fixed and variable student loan refinancing interest rates 
  • Chance to earn a lower interest rate, potentially lower than federal student loans 
  • Opportunity to change your student loan repayment term
  To see how much you could save by refinancing your engineering student loans with Education Loan Finance, try our Student Loan Refinance Calculator.*  

How to Refinance Engineering Student Loans

Refinancing your student loans is normally a quick and simple process, and you can apply in minutes at home. If you’re curious about the process of refinancing, take a look at our student loan refinancing guide.   Researching lenders has very few downsides. Most lenders prequalify applicants using a soft credit check, which won’t hurt your credit score. Just know that before you can officially refinance your loans, your lender will likely need to do a hard credit check.   Here are the next steps to take if you’re thinking about refinancing your engineering student loans:
  • Figure out which how much or which loans you’d like to refinance. 
  • Make sure you meet student loan refinancing eligibility requirements.
  • Shop around and compare pre-qualified rates from multiple lenders. 
  • Submit an application to refinance your student loans 
  • Finalize the loan application by reviewing the loan terms & signing the documents provided by the lender. 
 

Alternatives to Pay Off Engineering Student Loans

If student loan refinancing doesn’t seem like the right fit, you have plenty of alternatives to explore. From student loan assistance to student loan forgiveness, engineers may qualify for a variety of repayment options.  

Student Loan Forgiveness for Engineers

  Select engineers may qualify for Public Service Loan Forgiveness (PSLF). If you do qualify, you’ll make payments for a specified amount of time, normally 10 years, then the remaining balance will be forgiven. You will, however, still have to pay taxes on the forgiven amount.   Here are a few ways in which engineers may qualify for Public Service Loan Forgiveness:
  • Working in areas of national need could provide up to $10,000 in loan forgiveness over five years of service
  • Working for a non-profit, government agency, or other eligible employers could provide loan forgiveness after 120 payments (10 years)
  • Working as a teacher could provide up to $17,500 in loan forgiveness if working at a low-income school or other eligible agencies
  If you aren’t sure which is right for you, research student loan refinancing vs. PSLF. While both may help decrease your debt, it’s important to know how they compare before taking the next steps.  

Income-Based Repayment Plans

If you don’t qualify for Public Service Loan Forgiveness, you may also choose to pursue an income-based repayment plan. These types of plans set a monthly payment as a percentage of your income. Income-based repayment may be a good fit for entry-level engineers who are still working toward higher salaries.   Here are a few types of income-based repayment plans available to engineers:
  • Pay-as-You-Earn (PAYE): PAYE plans are based on a percentage of your adjusted gross income and family size. They are available to individuals who borrowed after 10/1/2007, or those who received eligible Direct Loan disbursements after 10/1/2011.
  • Revised Pay-As-You-Earn (REPAYE): REPAYE plans are similar to PAYE plans, but do not have date restrictions on the loans. They do take your state of residence into consideration, however.
  • Income-Based Repayment (IBR): IBR plans require you to be experiencing financial hardship. If you qualify, they are based on a percentage of your adjusted gross income and family size.
  • Income-Contingent Repayment (ICR): Many individuals who can’t qualify for PAYE or IBR plans apply for ICR. These start as a percentage of your adjusted gross income, then grow as your income grows.
 

State Student Loan Assistance Programs

Engineers are highly valued in the professional world. Some states and private organizations have created student loan repayment assistance programs for STEM professionals, with the goal of encouraging students to pursue these careers.   If you’re an engineer looking for student loan assistance, here are a few examples of state-driven programs you may be eligible for:
  • Harold Arnold Foundation
  • Wavemaker Fellowship
  • North Dakota DEAL Loans
 

Employer Student Loan Repayment Assistance Programs

Some employers provide student loan repayment assistance as a job benefit, which operates similarly to a 401(k). You designate a certain dollar amount to your student loan payments each month, and your employer matches your contribution up to a cap amount. These types of benefits can help improve employee retention rates while supplying necessary financial aid.  

Refinance Your Engineering Student Loans with ELFI

If you’re ready to refinance your engineering student loans, ELFI can help. By refinancing your engineering student loans with ELFI, you’ll enjoy benefits including:
  • No application fees 
  • No origination fees
  • No penalty for paying loans off early
  • If approved for refinancing, ELFI has a referral bonus program
  Ready to get started? Learn more about student loan refinancing with ELFI and apply today: https://www.elfi.com/student-loan-refinancing/.*  
  Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no­­­ control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.   *Subject to credit approval. Terms and conditions apply.
Current LIBOR Rate
2020-10-19
Current LIBOR Rate Update: October 2020

This blog provides the most current LIBOR rate data as of October 19, 2020, along with a brief overview of the meaning of LIBOR and how it applies to variable-rate student loans. For more information on how LIBOR affects variable rate loans, read our blog, LIBOR: What It Means for Student Loans.

 

What is LIBOR?

The London Interbank Offered Rate (LIBOR) is a money market interest rate that is considered to be the standard in the interbank Eurodollar market. In short, it is the rate at which international banks are willing to offer Eurodollar deposits to one another. Many variable rate loans and lines of credit, such as mortgages, credit cards, and student loans, base their interest rates on the LIBOR rate.

 

How LIBOR Affects Variable Rate Student Loans

If you have variable-rate student loans, changes to the LIBOR impact the interest rate you’ll pay on the loan throughout your repayment. Private student loans, including refinanced student loans, have interest rates that are tied to an index, such as LIBOR. But that’s not the rate you’ll pay. The lender also adds a margin that is based on your credit – the better your credit, the lower the margin. By adding the LIBOR rate to the margin along with any other fees or charges that may be included, you can determine your annual percentage rate (APR), which is the full cost a lender charges you per year for funds expressed as a percentage. Your APR is the actual amount you pay.

 

LIBOR Maturities

There are seven different maturities for LIBOR, including overnight, one week, one month, two months, three months, six months, and twelve months. The most commonly quoted rate is the three-month U.S. dollar rate. Some student loan companies, including ELFI, adjust their interest rates every quarter based on the three-month LIBOR rate.

 

Current 1 Month LIBOR Rate – October 2020

As of October 19, 2020, the 1 month LIBOR rate is 0.15%. If the lender sets their margin at 3%, your new rate would be 3.15% (0.15% + 3.00%=3.15%). 

 

Current 3 Month LIBOR Rate – October 2020

As of October 19, 2020, the 3 month LIBOR rate is 0.24%. If the lender sets their margin at 3%, your new rate would be 3.24% (0.24% + 3.00%=3.24%). 

 

Current 6 Month LIBOR Rate – October 2020

As of October 19, 2020, the 6 month LIBOR rate is 0.25%. If the lender sets their margin at 3%, your new rate would be 3.25% (0.25% + 3.00%=3.25%). 

 

Current 1 Year LIBOR Rate – October 2020

As of October 19, 2020, 2020, the 1 year LIBOR rate is 0.35%. If the lender sets their margin at 3%, your new rate would be 3.35% (0.35% + 3.00%=3.35%). 

 

Understanding LIBOR

If you are planning to refinance your student loans or take out a personal loan or line of credit, understanding how the LIBOR rate works can help you choose between a fixed or variable-rate loan. Keep in mind that ELFI has some of the lowest student loan refinancing rates available, and you can prequalify in minutes without affecting your credit score.* Keep up with the ELFI blog for monthly updates on the current 1 month, 3 month, 6 month, and 1 year LIBOR rate data.

 
 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

Woman struggling with student loan refinancing misconceptions
2020-10-16
7 Common Student Loan Refinancing Misconceptions

Refinancing is kind of like leveling up. After months or even years of working hard to become debt-free, you then gain access to a higher tier of borrowing - better terms, a lower interest rate or a smaller monthly payment. Many people have misconceptions about student loan refinancing, however, which keep them from taking advantage of the benefits that student loan refinancing has to offer.   If you're new to borrowing, it's easy to get scared of changing anything about your loan repayment process - even if that means losing out on the money that refinancing can save you. Here are some of the most common student loan refinancing myths - and what you need to know instead.  

Refinancing Student Loans Takes Too Long

Don't fall prey to the misconception that student loan refinancing is a lengthy, tedious process. In fact, refinancing student loans is usually very straightforward. You fill out an application and wait a couple of days for the lender to run your credit report and verify your personal information. Once that’s been completed, you’ll be presented with the refinance offers you qualify for.   The total length of time from beginning to end should take a couple of weeks. This also depends on how quickly you respond to questions from the lender and provide any additional forms or information they request.  

Student Loan Refinancing Has Expensive Upfront Costs

Unlike mortgage refinancing, student loan refinancing has no upfront costs like application or origination fees. That’s also why there’s no downside to applying for a student loan refinancing multiple times.   Plus, most lenders don’t charge a prepayment penalty, which is a fee for repaying the loan ahead of schedule. The only fee you’ll pay is the stated interest rate. You may owe a late fee if you make a payment after the due date, but that can be avoided if you set up automatic payments.  

You Need a High Income to Refinance Student Loans

While some lenders require that borrowers have a high income to qualify for student loan refinancing, others are more lenient. All lenders, however, care about the debt-to-income (DTI) ratio, which is your monthly debt payments divided by your gross income. Most lenders want a DTI percentage below 50%.   To calculate your DTI, add up your monthly debt payments including mortgage, car loan, personal loan, credit card payment and any other loans. Include a rent payment if you don't own your property. Then, divide that total figure by your gross or pre-tax monthly income.   If your DTI is below 50%, then you’re likely a good student loan refinancing candidate. If it’s higher, then you need to increase your income, decrease your monthly housing payment or pay down some of your debts  

You Need a Perfect Credit Score to Refinance Student Loans

Another misconception about student loan refinancing is that you need an excellent credit score to qualify, but lenders often accept borrowers with credit scores as low as 660. This is great news for young borrowers who haven’t built a strong credit history yet, or who ran up some credit card debt in college.   What may hurt your chances of being approved are any recent late payments, bankruptcies, defaults, liens or recent applications for other loans or lines of credit. Before applying to refinance your student loans, check your official credit report at AnnualCreditReport.com.   About one in five people have a mistake on their credit report, which can lead to an application being denied. Look at your credit report from all three credit bureaus - Experian, Equifax and TransUnion - and make sure you recognize all the accounts.   If you notice a mistake, file a dispute directly with each of the credit bureaus. It may take a few weeks to have it removed from your credit report. Make sure to follow up and verify that it’s been deleted.   You can check your credit score for free through a bank or credit card provider, or a service like Credit Karma. If your score is 660 or higher, you can feel free to apply for student loan refinancing.   You can increase your shot of being approved by applying with a cosigner. A co-signer is someone who agrees to assume legal liability for your debt if you stop making payments and default. The loan will also show up on the cosigner’s credit report.   Even if you can be approved to refinance by yourself, you may receive lower interest rates if you apply with a cosigner.  

You Can Only Refinance Once

A common misconception is that you have only one opportunity to refinance your student loans. In reality, however, there’s no limit on how many times you can refinance. Many choose to refinance every time the Federal Reserve decreases interest rates because they can get a better deal on their student loans.   The only thing that might affect how often you can refinance is your credit score. If your credit dips below a certain threshold, then a lender may not approve your application. Also, you may be denied if you lose your job or your income drastically plummets.  

You Refinance All Your Student Loans

Many borrowers have a mix of federal and private student loans and assume they have to refinance all those loans at the same time.   But borrowers can choose to refinance the loans they want. They can keep their federal loans as they are and only refinance their private loans. If they have a private loan with a low interest rate and one with a high interest rate, they can choose to only refinance the latter.   In some cases, borrowers may have a better chance of being approved if they only refinance some of their loans instead of all of them.  

Student Loan Refinancing is a Confusing Process

When you apply to refinance with ELFI, you’ll be matched to a member of the Personal Loan Advisor team. Every time you call ELFI, you can speak to that same person. This minimizes the confusion and frustration involved with the refinancing process.   As of 10/19/2020, ELFI has a 4.9 rating on Trustpilot with more than 1,200 reviews. More than 90% of those are five-star reviews. ELFI also has an A+ rating from the Better Business Bureau.  
  Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no­­­ control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.