Graduate School
Medical School/Healthcare
Student Loan Refinancing

Should You Refinance Student Loans After Medical Residency?

June 15, 2020

Congratulations! You’ve graduated from medical school and completed your residency. You are most likely earning substantially more than you were as a medical resident. If you are focusing on paying down your student loans now that you are earning more, you might be wondering whether refinancing your student loans following residency is a good idea. In many cases, it can be a smart move. But there are important things to consider when deciding whether to refinance following medical residency.  


By Caroline Farhat


In 2018 the average student loan debt for a new medical graduate was $196,520. With the average medical resident salary of $61,200 per year in 2019, it may seem impossible to chip away at the debt balance. But after residency when the average salary for a family physician is $239,000, paying off your student loans can become much more manageable. But once you start thinking about your other financial priorities such as purchasing a house, starting a family, or saving for retirement, suddenly the loans seem like they will never be fully paid off. To combat this, refinancing student loans after you complete your residency can be a great way to reduce the loan amount you owe, making it easier to pay them off more quickly.  


What to Consider When Deciding Whether to Refinance After Residency

Here are the factors to consider when deciding whether to refinance your student loans after medical residency.


Student Loan Forgiveness

If you completed your residency at a non-profit hospital and think you will continue to work for a non-profit or government entity, you may be eligible for student loan forgiveness. If you have federal loans and are considering entering the Public Service Loan Forgiveness (PSLF) program, refinancing your federal student loans to private loans would not be a good option for you since private loans are not eligible for forgiveness under that program. With only 46% of medical graduates planning to work towards student loan forgiveness, this may not be a big factor for many, but it is something to be aware of. The PSLF requires 120 on-time payments while you work in a qualifying non-profit organization or government entity. Only certain federal loans and payment plans qualify for the program. Once the criteria are met, the remaining balance of your student loans is forgiven. At this time, taxes would not be owed for the forgiven amount, however, legislation is frequently introduced to change the program terms. 


Your Loans During Residency

How did you handle your student loans during your medical residency? Did you put them in deferment or forbearance? Did you already refinance them? If your loans were in deferment or forbearance they most likely accrued interest, meaning you will be facing more debt to contend with. Although the balance may seem intimidating you may be able to stop the high interest from accruing by refinancing and qualifying for a lower rate. If you have already refinanced, you may qualify for a lower interest rate now since you have increased your income.


Your Financial Goals

Your financial goals and timeline are factors that will determine if refinancing after residency is a smart decision for you. Will you continue to live like you are in residency and be able to use your additional income to quickly pay off your student loans? Or is it your financial goal to purchase a home once your residency is completed? If you have other financial goals you want to focus on in addition to paying off your student loans, refinancing would be beneficial to save you extra money per month. Retirement savings is important to focus on since new physicians may be in their 30s when they finish residency. Refinancing earlier and having extra money to save for retirement while you are still young allows you to catch-up on your retirement savings and take advantage of compounding interest.    


In addition, refinancing can allow you to shorten the length of your loan. This will not only save you in interest costs over the life of the loan, but it also helps you pay off your loans faster.  


Your Current Financial Status

When deciding whether now is the time to refinance, take into account your financial status. Do you have a strong credit score and a good credit history? These are just some factors that are analyzed by lenders to determine your interest rate on a new loan. Lenders usually require a minimum credit score in the 600s, at ELFI the minimum required score is 680. But if you are looking to score a lower interest rate you want a credit score in the high 700s. Lenders will also want to see three years of good credit history. If your finances need a little improvement, refinancing right after residency may not be a good time because you may not see much savings. However, a financially prudent cosigner may be able to help you qualify for a lower rate. If you are already rocking a high credit score and strong credit history, refinancing after residency could save you money now. 


Your Current Income

If you are now earning a physician’s salary, instead of your medical resident salary it may be a great time to refinance. When you apply to refinance student loans, your debt-to-income ratio is calculated and helps determine your interest rate. The lower your ratio the better. All your debt is taken into account, including mortgage, car payment, student loans and credit cards. Most lenders will require a ratio of 50% or lower to qualify for refinancing. 


For example: if your debts are student loans of $2,000 per month, mortgage of $3,000 per month, auto loan of $500 per month, and credit cards of $200 per month, your total monthly debts are $5,700 per month. If your monthly income is $14,000 per month your debt to income ratio is $5,700/$14,000 = 40.7%.  


If you want to see how much you could save by refinancing, use our Student Loan Refinance Calculator to get a custom calculation of your potential savings.* You can also see how shortening the loan term could help pay your loans off faster and save you more interest over the life of the loan. 



For many physicians, refinancing student loans after residency will be advantageous. But be sure to consider your own circumstances and finances to determine what would be most beneficial for you. Either way, having a plan to tackle student loan debt is always a good start!



*Subject to credit approval. Terms and conditions apply.


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Woman thinking about using credit card to pay down student loans
Should I Pay Student Loans with a Credit Card?

Paying off student loans can be a challenging process, so it’s natural to look for creative ways to accomplish your goal. One question some student loan borrowers have asked is whether they can use a credit card to pay student loans.    Technically, it is possible, but it’s generally not a good idea. Here’s what you should know before you try it.  

Can You Use a Credit Card to Pay Student Loans?

Unfortunately, making monthly student loan payments with your credit card isn't an option. The U.S. Department of the Treasury does not allow federal student loan servicers to accept credit cards as a payment method for monthly loan payments.   While that restriction doesn’t extend to private student loan companies, you’ll be hard-pressed to find one that will offer it.   That said, paying off student loans with a credit card is technically possible through a balance transfer. Many
credit cards offer this feature primarily as a way to transfer one credit card balance to another, and if you’re submitting a request directly to your card issuer, that’s typically the only option.   However, some card issuers will send customers blank balance transfer checks, which gives you some more flexibility. For example, you can simply write a check to your student loan servicer or lender and send it as payment. Alternatively, you can write a check to yourself, deposit it into your checking account, and make a payment from there.   Balance transfer checks often come with introductory 0% APR promotions, which give you some time to pay off the debt interest-free. That said, here are some reasons why you should generally avoid this option:  
  • Once the promotional period ends, your interest rate will jump to your card’s regular APR. The full APR will likely be higher than what your student loans charge.
  • Balance transfers come with a fee, typically up to 5% of the transfer amount, which eats into your savings.
  • Credit cards don’t have a set repayment schedule, so it’s easy to get complacent. You may end up paying back that balance at a higher interest rate for years to come.
  • Credit cards have low minimum payments to encourage customers to carry a balance, which could cause more problems. 
  • You won’t earn credit card rewards on a balance transfer, so you can’t count on that feature to help mitigate the costs.
  So if you’re wondering how to pay student loans with a credit card, it is possible. But you’re better off considering other options to pay down your debt faster.  

Can You Use a Student Loan to Pay Credit Cards?

If you’re still in school, you may be wondering if it’s possible to use your student loans to pay your credit card bill. Again, technically, yes, it is possible. But there are some things to keep in mind.    The Office of Federal Student Aid lists acceptable uses for federal student loans, and private student lenders typically follow the same guidelines. Your loans must be used for the following:  
  • Tuition and fees
  • Room and board
  • Textbooks
  • Supplies and equipment necessary for study
  • Transportation to and from school
  • Child care expenses
  If you incur any of these expenses with your credit card, you can use student loan money to pay your bill. However, if you’re also using your credit card for expenses that aren’t eligible for student loan use, it’s important to separate those so you aren’t using your loans inappropriately.   Also, the Office of Federal Student Aid doesn’t list credit card interest as an eligible expense. So if you’re not paying your bill on time every month and incurring interest, be careful to avoid using your student loan money for those expenses.  

How to Pay Down Your Student Loans More Effectively

If you’re looking for a way to potentially save money while paying down your student loans, consider student loan refinancing   This process involves replacing one or more existing student loans with a new one through a private lender like ELFI. Depending on your credit score, income, and other factors, you may be able to qualify for a lower interest rate than what you’re paying on your loans right now.    If that happens, you’d not only save money on interest charges, but you could also get a lower monthly payment.    Refinancing also gives you some flexibility with your monthly payments and repayment goal. For example, if you can afford to pay more and want to eliminate your debt faster, you can opt for a shorter repayment schedule than the standard 10-year repayment plan.    Alternatively, if you’re struggling to keep up with your payments or want to reduce your debt-to-income ratio, you could extend your repayment term to up to 20 or even 25 years, depending on the lender.    Keep in mind, though, that different refinance lenders have varying eligibility requirements. Also, just because you qualify, it doesn’t necessarily mean you can get more favorable terms than what you have now.   However, if you’re having a hard time getting approved for qualifying for better terms, most lenders will allow you to apply with a creditworthy cosigner to improve your odds of getting what you’re looking for.   Before you start the process, however, note that if you have federal loans, refinancing will cause you to lose access to certain programs, including student loan forgiveness and income-driven repayment plans. But if you don’t anticipate needing either of those benefits, it won’t be an issue.  

The Bottom Line

If you’re looking for ways to pay off your student loans more effectively, you may have wondered whether you can use your credit cards. While it’s possible, it’s generally not a good idea. Also, if you’re still in school, it’s important to be mindful of how you’re allowed to use your student loan funds, especially when it comes to making credit card payments.   A better approach to paying down your student loan debt is through refinancing. Take some time to consider whether refinancing your student loans is right for you, and consider getting prequalified to see whether you can get better terms than what you have on your current loans.
Woman taking notes in medical school
Should I Prioritize Tuition or University Name Recognition as a Medical Student

When you're considering how to choose a medical school, you'll likely find there's a big tradeoff.    Some schools offer far more name recognition -- but they can come at a much higher price. Others may not be as well-known as big-name universities, but their tuition fees may be far lower.    If you're deciding between applying to (or accepting an offer of admission at) either lower-cost medical colleges as well as more renowned academic institutions with higher fees, you'll have a tough choice to make. Asking yourself these three key questions could help you make the decision that's best for you.   

How much will my earning potential change?

Earning potential is an important factor in choosing a medical school. Paying for a more expensive school is ultimately a good investment only if the school's prestige increases your earning potential. And that's not always the case.   A lot depends on your desired area of practice and your location. If you plan to go into a specialized field of medicine and the costlier school tends to do a better job helping students to get placed in residencies within that field, it may be worth paying for. Or if you're working in a location where consumers tend to prioritize credentials when choosing a doctor, then your ability to get future business may depend on having that big name on your diploma.    To determine the potential return on investment of a more expensive medical degree, you can review factors such as residency placement rates of schools you're considering, job listings in your geographic location or chosen area of medicine, salary ranges in your desired field and employment statistics from each school. This data can give you a better idea of whether you'll actually end up better off if you graduate from the pricier academic institution.    

Will I get a better education?

Earning potential matters, but you also want to be the best doctor you can. To do that, you want to study under skilled professors and at a school that provides ample opportunities for enrichment. Of course, you don't necessarily need to go to the highest price school to make that happen.    When comparing a top university with a lower-priced school, look at factors such as the percentage of students from each institution who pass their medical board exams the first time, the number of graduates who match into residency programs, the school's accreditation, the percentage of students who successfully complete the program, the type of learning environment and the opportunities the school presents for research and extracurricular learning.   If the university with more name recognition is genuinely going to provide you with a better education and more opportunities to distinguish yourself within your field, you may decide it's worth paying extra for it. But if all it really has going for it is a recognizable name and there's little to suggest you'll leave better prepared to practice medicine than if you chose a lower-priced school, there's little reason to pay so much more just for bragging rights.   

How will my student loans affect my future financial situation?

When you're choosing a medical school, be sure to consider your financial situation. If you can afford to attend the more expensive school without having to go into a lot of debt, then the prestige may be worthwhile. If you have to borrow a lot of money, however, you need to think about how this will affect your future finances. The average private school medical cost can be much higher than lower-priced state schools. You could wind up with tens of thousands more in student loan debt if you make your school choice without taking tuition costs into account.    A high student loan balance after graduation can make it more difficult to borrow for other goals, such as buying a home. This is an especially big issue if you already have a lot of debt from earning your undergraduate degree.   When all is said and done, you shouldn't let the fear of student loan debt alone deter you if one school is genuinely a better choice. After all, even the average medical school cost can be quite high and leave you with lots of student loans. On the other hand, you also shouldn't avoid thinking about the amount you're borrowing until after graduation. Before signing on the dotted line, you'll need to evaluate just how much more debt you'll incur at a pricier school. Then, decide if the obligation will be worthwhile.  

Refinancing Your Student Loans With ELFI

If you’re concerned about student debt, or if you’re struggling to pay down large amounts of debt, student loan refinancing could provide the financial flexibility you need. To learn more about or to explore this option with ELFI, visit our student loan refinancing page.
Graduate student sitting in class
The Differences Between Undergraduate and Graduate Student Loans

If you are thinking about getting a graduate degree and you have undergraduate student loans, you probably have some familiarity with borrowing student loans for school. However, when you are deciding how to pay for graduate school, there are some key differences you should know that can help you save some money.   

Federal Graduate Student Loan Considerations

Interest Rates

Federal graduate student loans often have higher interest rates than federal undergraduate student loans. A higher interest rate results in more interest costs, meaning you are paying more money to borrow the loan. Interest rates can change annually, so it’s important to know the current rates when you’re considering taking out student loans.   The difference in interest rates can add up to thousands of dollars in interest over the life of the loan. When borrowing federal graduate student loans you want to be cognizant of only borrowing the amount you actually need since you will be paying a much higher interest rate on the loan.    


When applying for Federal Student Aid, you are required to fill out the FAFSA form, as you likely did for your undergraduate degree. The major difference is graduate students are considered independent students as opposed to dependent students, and therefore, your parent’s financial information is not needed. In addition, as an independent student, you may earn less than your parents, which could make additional financial aid available.   

Higher Borrowing Limits 

Federal graduate student loans have higher borrowing limits to cover the higher cost of tuition. For undergraduates, the maximum that can be borrowed depends on your year in school and whether you are a dependent or independent student, with limits ranging from $9,500 to $12,500 per year. Graduate students can borrow up to $20,500 per year in direct unsubsidized loans. There is no limit to how much can be borrowed in Grad PLUS loans, except for the cost of attendance.    These higher limits can be helpful when you need to cover all the expenses related to graduate school. However, this can lead to borrowing large loans at high interest rates that may be difficult to repay. Since graduate loans can be used to pay living expenses it is important to continue living on a budget and only borrowing the amount necessary.    

No Subsidized Loans 

With subsidized loans, interest does not accrue while you are in school. Unfortunately, that option is not available for federal graduate student loans. Your graduate student loan options include Direct Unsubsidized loans and Direct PLUS loans, which both begin accruing interest as soon as they are disbursed.   To avoid accruing more interest than necessary, be sure to minimize your graduate school expenses and loans. Also, if you are able to pay at least the interest costs while you are in school this will prevent you from having a larger total to pay back after graduation.   If you find yourself in need of greater financial flexibility, then consider student loan refinancing with a private lender after graduation. This option could decrease your interest rate and monthly student loan payment.  

Additional Graduate Student Loan Considerations

Financial Aid More Limited 

Undergraduates have several financial aid options based on need, such as the Federal Pell Grant, which in many cases does not have to be repaid.   Although grants and other forms of financial aid are sometimes available to graduate students, these options are more limited. Some financial aid options that may be available for graduate school include grants, scholarships, fellowships and federal and private student loans.  

Loan Fees

You may pay higher origination fees for federal graduate student loans versus undergraduate student loans. The origination fees are a percentage of the total loan amount you borrow. This fee will be taken out of your loan disbursement which lowers the actual amount you will receive, but the full amount of the loan is required to be paid back.    Some private lenders, like ELFI, do not charge an origination fee for loans, so be sure to consider that when comparing loan options.   

The Benefit of Private Graduate Student Loans

Private student loans may be more beneficial for graduate school than undergraduate student loans. That's because you may be able to score a lower interest rate on a private student loan if you have an excellent credit history. Private student loan interest rates are based on your income and credit history, so if you are looking to return to school while you are still employed, they may be a good option for you.  

Refinancing Your Graduate Student Loans

If you already have undergraduate and graduate student loans, student loan refinancing could help you to save money on your monthly payment and on interest costs. Refinancing is when you obtain a new loan to pay off previous student loans. You can refinance both federal and private undergraduate and graduate student loans.  

The Bottom Line

Understanding the differences between undergraduate and graduate student loans can help you make an informed decision about the best way to fund your education. If you have significant student debt, student loan refinancing could help you to save money and pay down your loans more quickly.