A Doctor’s Guide to Student Loan RefinancingFebruary 14, 2020
As a doctor, you likely racked up a significant amount of student loan debt to finish your education. According to the American Medical Association, 79% of medical school graduates have $100,000 or more in student loans.
Blog by Kat Tretina
Kat Tretina is a freelance writer based in Orlando, Florida. Her work has been featured in publications like The Huffington Post, Entrepreneur, and more. She is focused on helping people pay down their debt and boost their income.
However, carrying six figures of education debt isn’t as dire for you as it can be for someone working in another field. As a doctor, you likely have a relatively high salary. In fact, the Bureau of Labor Statistics reported that the average salary for family and general practitioners is $211,780.
With your education and income, you’re a prime candidate for student loan refinancing. And, refinancing your debt can help you save money and pay off your loans early.
Why you should refinance student loans after medical school
When you have such a large amount of student loan debt, interest charges can have a significant impact on your balances. Over time, interest charges can add thousands to your loan cost.
Unfortunately, the interest rates on medical school loans can be quite high. Even if you qualified for federal Grad PLUS Loans, you can face steep rates. As of 2020, the interest rate on Direct PLUS Loans is a whopping 7.08%.
To put that rate in perspective, let’s say you had $100,000 in student loan debt at 7.08% interest and a 10-year repayment term. Your monthly payment would be $1,165 per month, and by the end of your loan term, you will repay a total of $139,825. Interest charges would cost you over $39,000. Pretty scary, right?
When you refinance medical school loans, you may qualify for a loan with a lower interest rate. Or, you can extend your repayment term if you want a more affordable monthly payment. Depending on what option you choose, the savings can be significant.
If you refinanced your loans and qualified for a 10-year loan at 4.5% interest, your monthly payment would drop to $1,036 per month. However, you’d pay just $124,366 over the length of your loan. By refinancing your debt, you’d save over $15,000.
How to refinance medical school loans
You can refinance your medical school loans in four simple steps:
1. Find out if you meet the eligibility requirements
First, make sure you meet the eligibility requirements to refinance student loans. As a baseline, you must:
- Have earned a bachelor’s degree or higher from an approved college or university
- Be a U.S. citizen or permanent resident
- Be at the age of majority — 18 years old, in most states — or older
- Have a good credit history
- Have a minimum credit score in the upper 600s
2. Consider asking a cosigner for help
If you’ve just started practicing, you may not have established your credit history yet, or you may not be making much money. If that’s the case, consider asking a cosigner for help. A cosigner is a friend or relative with good credit and income who agrees to sign the loan application with you. If you don’t make the minimum payments on time, the lender will go to the cosigner for them, instead.
While a cosigner isn’t required, adding one to your application can improve your chances of qualifying for a loan and getting a low interest rate.
3. Get a rate quote
Next, get a rate quote to see what kind of terms you can qualify for. With ELFI’s Find My Rate tool, you can get an estimated rate in just a few minutes without any impact to your credit score.*
4. Submit your loan application
Once you find a loan that works for you and your budget, you can move forward with the application.
You’ll need to provide your personal information, as well as information about your loans and employer. You’ll need to have your recent pay stubs or W-2 forms on-hand, and you’ll have to submit a copy of your government-issued identification, such as a driver’s license.
Once you complete the application, ELFI will review your information and will contact you with a decision. Until you find out you’re approved and the loan is disbursed, keep making the payments on your existing debt to avoid late payment fees and penalties.
5 other options for managing your loans
Refinancing student loan debt can be a great way to improve your finances, but it’s not for everyone. If you decide that student loan refinancing isn’t a good fit for you, there are a few other options for managing your debt:
1. Federal income-driven repayment plans
If you have federal student loans — such as Grad PLUS Loans or Direct Unsubsidized Loans — you may be eligible for an income-driven repayment (IDR) plan. With IDR plans, your loan servicer will extend your repayment term and reduce your monthly payment. Your new payment is dependent on your loan balance, income, and family size. Depending on your situation, you can significantly lower your payment amount.
You can apply for an IDR plan online.
2. Public Service Loan Forgiveness
If you work for a non-profit hospital, organization, or government agency, you may qualify for Public Service Loan Forgiveness (PSLF). With PSLF, the government will forgive your remaining loan balance after making 10 years’ worth of qualifying payments while working for an eligible employer.
However, not many people will meet the PSLF criteria. In fact, 99% of PSLF applicants were rejected last year.
To prevent any issues, use the PSLF Help Tool to find out if you meet all of the qualifications for loan forgiveness.
3. State student loan repayment assistance programs
Depending on where you live, you may be able to get some help with your debt through state student loan repayment assistance programs. Some states offer healthcare professionals money to repay their loans in exchange for a service commitment to work in a high-need area.
For example, doctors who live and work in Kansas can receive up to $95,000 to repay their student loans. In return, you must agree to work in an approved facility in a health professional shortage area.
To find out if your state operates a student loan repayment assistance program, visit the Association of American Medical Colleges’ website.
4. Locum tenens work
Another option is to take on locum tenens work. With this approach, you fill in for another physician on a temporary basis. Some terms can be for just a few days, while others can last for months.
Why is this a good idea? It can be lucrative. Qualified professionals can earn large bonuses, which you can use to make lump sum payments on your debt.
You can find locum tenens work — and sign-on bonuses — on the American Academy of Family Physicians’ website.
5. Live like you’re still in your residency
Now that you’re no longer in residency, it may be tempting to spend some of your new income on a larger apartment or a better car. However, it’s a good idea to continue living like you’re still in residency to limit your expenses. By keeping your living costs low, you can free up more money for debt repayment.
Managing your student loans
As a healthcare provider, you likely have a substantial amount of debt. If your student loans are causing you stress, refinancing your medical school loans can be a smart way to manage your debt. Use the student loan refinance calculator to find out how much you can save by refinancing your student loans.*
*Subject to credit approval. Terms and conditions apply.
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