The road to becoming a doctor is a long and expensive one. After 4 to 5 years of undergraduate studies, 4 years of medical school, and 3 to 7 years of residency, many graduates are well into their 30’s before they earn a doctor’s income. Residency does come with a paycheck, but the average Resident Physician makes $58,803 a year, according to glassdoor.com
. It's hard to imagine much of that is applied to medical school debt.
Americans owe a total of $1.6 trillion in federal and private student loans
and newly-minted doctors carry a good portion of those loans, carrying an average of $179,000 in medical school debt
, six times more
than the average graduate.
Student loans can be a financial and emotional burden, even for doctors, and consolidating and refinancing those loans can be a relief on both fronts. With consolidation, you can roll multiple loans into one, leaving you with a single monthly payment. This simplifies repayment. Refinancing means agreeing to new and different terms of your loan with the goal of getting a better interest rate or term. Better rates and terms can make medical school debt more manageable.
Why Now is the Time to Refinance
Monthly principal and interest payments on student loans can bury many borrowers. A lower interest rate can help you save thousands of dollars over the life of your loans. Better rates also mean you can pay down that medical school debt faster, also helping you pay less in the long run.
The importance of refinancing now is that you can start saving immediately. Depending on what you qualify for through private lenders like ELFI1
, you could lower your interest rate, have a single monthly payment, lock in a fixed interest rate, and more. All helping you to enjoy the fruits of your hard work faster.
Another reason to refinance now is that the Federal Reserve Board lowered interest rates twice already this year. This federal interest rate applies to banks—it’s the amount of interest they charge each other to lend federal reserve funds. The benefit for you, as a borrower, is that the less interest banks pay, the less you can potentially pay.
Refinancing Federal vs Private Loans
In our blogs, we regularly discuss the difference between private student loans and government student loans
. Keep in mind, the differences between these loans come back into play for refinancing.
Regardless of your initial loan type, when you refinance your medical school debt, you take out a new loan with a private lender
– ideally at a meaningfully lower interest rate. With this new private loan, you can lose access to federal benefits like:
- Income-driven repayment plans
- Ability to pause payments through deferment and forbearance programs
- Loan forgiveness programs
ELFI has a team of Personal Loan Advisors who can help you decide if refinancing makes sense for your situation. As always, we encourage borrowers to look for student loan refinancing loan options with no origination fees or application fees first.
Downfalls to Refinancing Medical School Debt
Other than losing out on federal borrower benefits, refinancing your loans might not make sense right now. If you already have a low-interest loan, you might not see much savings. To see what you can save, use ELFI’s savings estimator tool
Additionally, some banks charge fees that could potentially offset any interest savings. With ELFI, you’ll never pay:
- Application fees
- Origination fees
- Prepayment penalties
Finally, if you’re still in your residency or fellowship, it might make sense to wait until you have a higher income or better credit score, both of which will impact the interest rates available to you. Or you might considering having a cosigner to help you achieve an even lower rate.
Other Options to Payoff Medical School Debt
While refinancing can lower your monthly payments and get you a better interest rate, there are other options for lowering your medical school debt.
Consider overpaying your monthly amount. This option isn’t realistic for all borrowers, but if you’re savvy enough to live simply or lucky enough to apply a spouse’s paycheck, you can quickly pay down that medical school debt. Some graduates might even have the option of taking out a zero-interest (or ultra low-interest) loan from relatives or friends. Once the student loan is repaid, you can put the excess funds toward other debts or investments.
Understanding Your Loan Refinance Options
It is important to explore all your options when opening an initial student loan. It's equally as important to explore the best refinancing options for reducing your medical school debt. If you need help navigating those options, contact ELFI
. As pioneers in the space, our management team has over 30 years of expertise in student loans and student loan refinancing.
Subject to credit approval. Terms and conditions apply.
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