An Ophthalmologist’s Guide to Student Loan RefinancingFebruary 26, 2020
Whether you have already achieved your dream of becoming an ophthalmologist or you are in the midst of your residency, the last thing you need to worry about is overpaying for your student loans. This guide will help you understand your different options so you can make the best financial decision for you and your future.
By Caroline Farhat
Ophthalmologists and Student Loans
If you are part of the 73% of medical graduates with student loans, you may be facing an average of $192,000 in medical school debt according to a 2017 report from the Association of American Medical Colleges. While in residency, an ophthalmologist in 2017 was earning about $55,000 on average, but after residency, the average salary for an ophthalmologist is about $366,000 — making student loan debt much more manageable.
Before looking into options available to you to help pay down your debt, it’s best to know the following information:
- The type of loans you have. There are different programs available to you based on whether you have federal or private loans.
- The balance of your loan, interest rate and term period remaining. With this information, it will be easier to determine what course of action can be the most beneficial for you.
Options To Pay Student Loans
So how do you tackle the six-figures of student loan debt you may be facing? Outlined below are the different options you have. Depending on your types of loans, you may be able to do a combination of the options to maximize your payments.
1. Loan forgiveness
There are state and federal programs that provide loan forgiveness or payments towards your loans depending on the types of loans you have and the sector of your work.
For federal loans one major program is Public Service Loan Forgiveness. This program forgives your remaining student loan debt after 10 years of qualifying payments while you work at a qualifying nonprofit hospital. There are specific requirements for this program including the type of federal loans, when you make payments for them to qualify and the payment plan you are on, so be sure to closely read the requirements!
For federal and private student loans there are numerous programs that provide forgiveness up to a certain amount or payments for working in underserved areas for a certain period of time.
The Association of American Medical Colleges has a helpful database with loan forgiveness programs to check out.
2. Make payments during residency
Some may think forbearance is the only option due to the lower salary during residency and the large payments due on the loans. However, this may not be the best option since interest continues to accrue during forbearance. For federal loans, income-driven repayment plans may be a better option since it could significantly lower your monthly payment. Although your payment may not fully cover the interest accruing it will at least cut down on the amount the loan is increasing.
3. Refinance student loans
Refinancing student loans can be a great option whether you have federal or private loans and especially if you have any variable interest rates on your loans. Variable interest rates are tied to the LIBOR rate and any changes to the rate could increase your student loan payment.
Refinancing loans can reduce your monthly payment and save you interest over the life of the loan. For example: Say you have $150,000 of student loans remaining with the average rate for graduate loans at 7.08% with 15 years left on the term of the loan. Your payment would be $1,355 per month. If you refinanced to a new 15 year term loan and qualified for an interest rate of 4.35%, your new monthly payment could be $1,136 per month saving you $219 per month and $39,408 over the life of the loan.
Check out our student loan refinance calculator to get a better idea of what you could be saving on your loans.*
There are many lenders that provide student loan refinancing. When comparing the best student loan refinance companies be sure to look for no application fees, no origination fees and no prepayment penalties. It’s also good to read reviews about the company to be sure they have good customer service.
At ELFI we never have application or origination fees and no prepayment penalty. You also receive a personal loan advisor to help with the refinancing process.
Different lenders have different requirements for refinancing. In general you need:
- good credit score: minimum in the 600s. At ELFI we require a minimum of 680.
- solid length of credit history. At ELFI we require at least 36 months.
- be a U.S. citizen of the age of majority.
- must have obtained a degree from an approved post-secondary institution.
- a minimum amount of loans you are refinancing. At ELFI you need a minimum of $15,000 in loans to refinance.
- financial documents, including W-2 and recent paystub.
4. Live like you’re a resident even after residency
Although your salary may be much higher after residency, it’s best to keep your expenses the same as when you were a resident. Create and stick to a budget based on your residency income and use all your additional income to put towards paying off your student loans. Not only will this help pay your loans off faster and save you interest in the long run but learning to live below your means will allow you to keep out of debt in the future and create a more stable financial future.
Becoming an ophthalmologist was hard enough. You should be incredibly proud of your accomplishment and not let student loan debt damper this exciting time. When you are facing six-figure student loans, it may seem difficult and never ending. But by researching options and making a plan you can tackle the debt effectively!
*Subject to credit approval. Terms and conditions apply.
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