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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. 

 

Conclusion

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.

 

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.

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Man refinancing his student loans to a longer term
2020-09-23
Should You Refinance Student Loans to a Longer Term?

If your student loan payments are becoming overwhelming, it could be time to consider refinancing. When you refinance your student loans, you’ll not only have the option of consolidating multiple loans into one monthly payment; you’ll also have the chance to change your student loan repayment term.   When you take out private loans, you have the option of choosing to repay them over a short period of time or a longer period. We’ve compiled the pros and cons of both, as well as some situations in which a longer student loan repayment term might be the right fit for you.  

Is it time to refinance your student loans?

Refinancing your student loans is a great way to lower your interest rate and earn financial freedom more quickly. You can refinance both private and federal loans, and if you’re tracking a multitude of payment dates and timelines, consolidating your loans through refinancing can be a great way to simplify your financial life and work toward becoming debt-free.   You can refinance your loans as many times as you’d like, so even if you’ve already refinanced once, it never hurts to explore new lenders! Now is an especially good time to refinance your student loans, as interest rates have recently dropped as a result of the COVID-19 pandemic. As of September 18, 2020, student loan refinancing rates are as low as 2.39% for variable interest rate loans and 2.79% for fixed interest rate loans.   If you think now is the right time to refinance your student loans but you’re not sure, keep reading for more insights. We’re here to support your journey toward financial freedom and applaud your researching smart money moves!  

Signs it might be time to refinance your student loans:

  • You think you could earn a better interest rate. If interest rates recently dropped or your credit score has gone up, research your options to see if refinancing could be the right choice for you.
  • You have mostly private student loans. If your loans are through private lenders, now could be the time to consider refinancing, as you won’t risk losing any federal benefits.
  • You need more financial flexibility. If your student loan payments are keeping you from accomplishing other financial goals, refinancing could help by lowering your interest rate and extending your student loan repayment term. To learn more about the pros and cons of a long student loan repayment term, read on.
 

What happens when you change your student loan term?

A student loan repayment term calculates how long you have to pay back your loans in full. ELFI, for example, offers varying repayment terms for student loan refinancing.   When you consolidate and refinance your student loans, you’ll have the opportunity to change your student loan repayment term. This is especially useful if you’ve taken out several loans with different amounts and timelines.  

Choosing a longer term for your student loans

Opting for a longer student loan repayment term means you will pay more in interest over time. Each monthly student loan payment, however, will have a lower balance than if you had opted for a short repayment term.   If you're looking to accomplish several financial goals, like saving for a down payment on a house or purchasing a new car, lengthening your student loan repayment term may give you the flexibility you need to work toward those goals. Be advised, however, that if you do opt for a long student loan repayment term, the total amount you’ll pay in interest will go up. At the end of the day, the right student loan repayment term for you depends primarily on your long-term financial goals.

It might be time to refinance your student loans to a longer term if:

  • You want the financial flexibility of a lower monthly student loan payment
  • You’re expecting a drop in income and need to lower your monthly expenses
  • You’re having difficulties keeping up with your current student loan payments
 

What about shortening my student loan repayment term?

If none of the above scenarios apply to you and your most pressing question is “how can I pay off my student loans faster?” then a short student loan repayment term could be right for you.   Unlike a long student loan repayment term, you’ll make larger monthly payments but will pay less in total interest. Opting for a short student loan repayment term is the right choice for borrowers who have the financial flexibility to make larger monthly payments for a short period of time.   Learn more about short student loan repayment terms in our recent blog, “Choosing the Right Student Loan Repayment Term.”  

Refinancing student loans with ELFI

Ready to explore your student loan refinancing options with ELFI? Great! We’re excited to help. In addition to potentially lowering your interest rate and choosing a new student loan repayment term, when you refinance with ELFI, you’ll also work directly with a Personal Loan Advisor who will help provide a seamless, personalized refinancing experience.   Don’t take our word for it. Check out recent customer reviews on Trustpilot! If you’re ready to explore potential interest rates by refinancing with ELFI, check out our Student Loan Refinance Calculator.*  
  *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.
Medical School Graduate working in a top city
2020-09-15
The 10 Best Cities for Medical School Graduates

Graduating from medical school is just one milestone in the quest to become a physician. Your next step is likely a residency, and for some, the process may also include a fellowship and board certification.   Regardless of where you ultimately end up, though, it’s crucial to take your time when deciding where to start that process. To help you narrow down your list of options, we looked at HospitalCareers.com to get an idea of the best cities for medical school graduates.  

Determining Best Cities for Medical School Graduates

It’s difficult to create a definitive list of the best cities for medical school graduates because the right city for you may depend on your field of expertise, your personal preferences and several other factors.   But in its list, HospitalCareers.com provides a comprehensive view of what’s important to medical graduates. That includes cities with the best hospitals and job markets, places with a relatively low cost of living and more.  

10. Rochester, Minnesota

For many healthcare professionals, the primary pull of Rochester is that it’s home to the No. 1 hospital in the country: the Mayo Clinic. The city also has a relatively small population of just under 120,000, which could make it more manageable for medical graduates who aren’t used to a big city.   The city’s cost of living is 94.1% the national average, making it a solid choice for new graduates who are gaining their financial footing. Plus, according to medical professional networking service Doximity, the nearby Minneapolis metropolitan area has one of the highest average physician salaries in the country at $369,889.  

9. Jacksonville, Florida

While Rochester, Minnesota, is home to the Mayo Clinic headquarters, the medical center has a campus in Jacksonville, Florida. Jacksonville is a much larger city, with a population of more than 900,000. But you won’t have to worry about dealing with the cost of a larger city — Jacksonville’s cost of living is even lower than Rochester’s at 93.5% the national average.   Despite being a low-cost area, medical graduates don’t have to go anywhere to enjoy one of the top 10 physician salaries in the country. According to Doximity, it’s $338,790. What’s more, the city has the fifth-smallest gender wage gap between male and female physicians.  

8. Durham, North Carolina

Durham, North Carolina, has one of the lowest average physician salaries in the nation at $266,180. But for graduating medical students, working at one of the best university hospitals in the nation, Duke, can be incredibly appealing. The medical center is ranked nationally for 11 adult specialties and nine children specialties.   Also, like Rochester and Jacksonville, Durham has a relatively low cost of living at 95.2% the national average, which means your salary will go further than most areas in the U.S. The city of Durham is home to roughly 280,000 people.  

7. Boston, Massachusetts

Boston isn’t just known for being the capital of higher education in the U.S. It’s also home to some of the most well-known medical centers in the country, including Brigham and Women’s Hospital and Massachusetts General Hospital.   The former is ranked No. 12 overall in the nation, while the latter ranks in the top three hospitals in the nation for psychiatry, diabetes and endocrinology, and rehabilitation.   The only reason to think twice about Boston is its cost of living, which is 162.4% the national average. Also, its average physician salary is relatively low, at $305,634. The city’s population is just under 693,000.  

6. Nashville, Tennessee

Nashville is one of the most culture-rich cities on our list, especially if you love music. It’s also home to another excellent university hospital, Vanderbilt University Medical Center, which ranks nationally in seven adult specialties and 10 child specialties.   The city’s cost of living is 101.4% the national average, which isn’t a deal-breaker but is something to consider. That said, the average annual physician salary is on the high end at $337,914. The Nashville-Davidson area is home to more than 670,000 people.  

5. Austin, Texas

Austin is the fastest-growing big city in America, which means a lot of opportunity. Its population is just short of 1 million people, which also makes it one of the largest cities on our list. And according to U.S. News & World Report, it ranks as the No. 1 place to live in America.   Some of the largest hospitals in the city include St. David’s Medical Center, which was the first health system in the state to be recognized as Employer of the Year by the Texas Workforce Commission, and Cornerstone Hospital of Austin.   The city’s cost of living is 119.3% the national average, which could be a non-starter for some. Also, the average salary for physicians in Austin is relatively low, at $299,297.  

4. Oklahoma City, Oklahoma

Oklahoma City isn’t known for its world-renowned hospitals. Its healthcare industry, however, is among the fastest-growing in the city, with an expected 30% jump over the next 10 years. This means a lot of opportunity for recent medical graduates.   What’s more, the state’s capital has one of the lowest cost of living on our list at 85.4% of the national average. According to Salary.com, the average physician salary in the area is $254,195, which is low compared to the other cities on our list but compared with many cities with high costs of living, your money could go further here.   Oklahoma City is home to 655,000 residents.  

3. Salt Lake City, Utah

Salt Lake City’s average physician salary of $351,300 ranks No. 11 in the country, making it an ideal destination for many medical graduates. It’s also an excellent choice if you enjoy outdoor adventures.   The state of Utah has one of the nation’s lowest unemployment rates, which means you won’t have too much trouble finding a job. Even during the coronavirus pandemic, the state’s unemployment rate sits at 4.5% for July 2020, compared with 10.2% overall in the U.S. However, the city’s cost of living is 118.9% the national average, which could be a deal-breaker.   Despite being the state’s capital, Salt Lake City has only 200,000 residents.  

2. San Antonio, Texas

San Antonio is the largest city on our list, with more than 1.5 million residents. Despite its size, the city has a cost of living that’s just 89.4% of the national average. That said, the average annual salary for physicians is also relatively low, at $276,224.   In terms of stability, roughly 18% of San Antonio residents work in healthcare or bioscience, making the city a safe bet for recent medical school graduates. Some of the best medical centers in the city include Methodist Hospital-San Antonio, Baptist Medical Center and University Hospital-San Antonio.  

1. Cleveland, Ohio

Cleveland sits atop our list for a few reasons. First, it’s home to the Cleveland Clinic, which has been ranked the second-best hospital in the country behind the Mayo Clinic. Second, the city boasts five large hospitals, which employ more than 100,000 people combined. That’s more than 25% of the city’s population, which sits at about 381,000.   Finally, Cleveland has the lowest cost of living on our list of the best cities for medical school graduates — it’s an impressive 72.6% of the national average. One thing to keep in mind is that the average physician salary in the city is $312,448. But considering the low cost of living, that salary will go further than most of the top salaries in other cities.  

How to choose where to live when you graduate from medical school

Making the decision on where to live after you leave medical school can be challenging. Depending on the residency process and other requirements for your field, your options may be limited based on your specialty. If you have multiple options, though, it’s important to take your time and research all of the factors that are important to you.   For example, consider the quality of the healthcare system, as well as the opportunities that might be available to you. Also, look at average salaries in the area and how they compare with the cost of living. Finally, remember that you not only have to work in one of these cities, but also live. Think about your personal preferences and the quality of life you’ll be able to enjoy in each place to make a decision.  

Additional Sources

 
  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.
Man contemplating which student loans to refinance in 2020
2020-09-10
Which Student Loans Should You Refinance in 2020?

With interest rates favorable to student loan borrowers, right now can be a great time to refinance. But not all loans are created equal. In fact, it may be better to wait to refinance certain types of loans. Keep reading to find out which student loans you should refinance in 2020.    By Caroline Farhat  

Refinancing Rates at All-Time Lows. Should You Refinance?

Refinancing interest rates for student loans are at an all-time low in history. This is due to the Federal Reserve lowering interest rates in response to the COVID-19 pandemic. When the Federal Reserve lowers interest rates, this impacts rates that lenders will use on loans that you borrow. This change affects private student loans with variable interest rates and any new loan that you want to take out, including refinancing rates. This makes it an ideal time to refinance if you have certain loans.      As of September 8, 2020, student loan refinancing rates are as low as 2.39% for a variable interest rate loan and 2.79% for a fixed interest rate loan. If you refinance now you could potentially be saving thousands of dollars over the loan term because you will be able to lock in a low interest rate. This will also save you on your monthly payment.   

Example of Savings When Refinancing

Here is an example of how much can be saved by lowering your interest rate:    If you have $60,000 in student loans and an interest rate of 9% with 10 years remaining on your loan term, your estimated monthly payment would be $760.00. If you took advantage of the low interest rates now and qualified for a fixed rate of 3.76% you could save as much as $159.00 per month and over $19,000 in interest over the remaining 10 years.    To find out your possible savings, use our
Student Loan Refinance Calculator* where you can put in your specific loan numbers to obtain an estimate of the amount of savings for your specific situation.   So now that you see how beneficial it can be to refinance student loans, which ones should you try to refinance in 2020?   

Considerations for Refinancing Federal Student Loans

Federal student loans are currently benefiting from the protections provided by the CARES Act and the subsequent Executive Order signed on August 8, 2020. The benefits provided include: 
  • 0% interest - Right now federal loans are not accruing any interest because of the lowered interest rate. This means the loans are not increasing and can actually be paid off faster if payments are made while the interest rate is 0%.
  • Administrative forbearance - This means no payments are due during forbearance. Payments are set to resume in January 2021. 
  • During the administrative forbearance, payments that you would have made during this time but are not required to make, still count towards forgiveness for loans in the Public Service Loan Forgiveness program. 
  All of these benefits are set through December 31, 2020, making it more ideal to wait until 2021 if you want to refinance any federal student loans. If you have federal loans and were to refinance them now, you would lose these federal benefits. During this time if you have a federal student loan it is best to use the money that you would normally be paying on your loans to save for an emergency fund, pay off other high interest debt, or use it to make a lump sum payment on your loans when payments resume.    

Best Student Loans to Refinance in 2020

The loans that would be best to refinance now in 2020 include:  

Private Student Loans

If you obtained private student loans in the early 2000s you could have an interest rate as high as 9%. Refinancing older student loans would greatly benefit from the much lower interest rates. Even if you have newer student loans with a lower interest rate than 9%, with rates so low you may be able to refinance with a shorter term length and still be able to see savings and cut time off your student loan.    Here is how that could work: with a student loan balance of $60,000 with 18 years remaining at 7% interest you would be paying approximately $489 per month. But if you refinance the loan and qualify for a rate of 4.07% you could save an estimated $43 per month, over $25,000 in interest, and cut your loan term down to 15 years. That’s saving you time and money on your student loans!  

Variable Interest Loans

If you have a variable interest rate loan, you may also be experiencing the benefits of the interest rates being lowered. However, just as rates can be lowered, they can be raised. If you want the security of knowing your rate cannot go up, now would be a good time to lock in a low fixed interest rate.    

Bottom Line

Refinancing is a great way to save money on your loans. Knowing the current student loan environment is helpful to determine the best financial move for you now. With the current CARES Act, refinancing only your private student loans and not your federal student loans may be the most financially savvy move you can make this year.  
  *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.