Should You Refinance Medical School Loans?


When You Should and Shouldn’t Refinance Medical Student Loans. (iStock)

Student loan refinancing involves swapping out your current loan for a new loan with a lower interest rate.

These private loans offered by lenders, banks and credit unions can be a great asset for medical graduates, who average over $ 215,000 in student debt. Contact Credible to see compare student loan refinance options.

While refinancing can be a useful strategy for someone looking to pay off their medical debt, it’s not necessarily the right choice for everyone.

To decide if refinancing is a good option, you need to consider the type of loans you have, assess your repayment options, and compare rates.


Understanding Your Medical School Loans

There are two types of medical school loans: federal and private.

Medical students can access a handful of federal financial aid options, including student loans for health professions, unsubsidized direct loans, and PLUS loans.

Although an adverse credit history can affect your access to a PLUS loan, federal student loan rates are generally fixed and are not affected by your credit score.

Private medical school loans are offered by lenders, with rates based on your credit score, the length of the loan and whether you go for a variable or fixed rate.

Some private lenders offer specialized plans for medical students, allowing you to adjust payments during residency.

Reimbursement options

The repayment of federal student loans is generally more flexible, with features such as grace periods and forbearances.

They also offer the following advantages:

  • Income Based Repayment Plan: You can reduce your federal loan payments by extending the repayment term, depending on your income.
  • Student loan remission: Through the Public Service Loan Forgiveness Program (PSLF), student debt is eligible for forgiveness after 120 qualifying monthly payments with employment in a nonprofit or government organization. There are several additional federal reimbursement programs and scholarships for physicians.

Federal and private borrowers can also save money by refinancing medical school loans.

Use an online tool like Credible for comparing student loan refinancing rates from multiple lenders at once without affecting your credit score.

When Is Refinancing Medical School Loans A Good Idea?

If the situations below look like you, you may want to consider refinancing:

1. You have high interest private loans: If you have private student loans, refinancing could save you a lot of money. Use an online tool like Credible to display a rate table that compares the rates of several lenders at once.

2. You are not eligible for loan cancellation programs: If you don’t qualify for government loan cancellation programs, perhaps working in a private medical office rather than a non-profit organization, refinancing might be best.

3. You have a stable income and healthy credit: Swapping a federal loan for a private loan means losing benefits like income-tested repayment and forbearance. Make sure you are financially stable before making this move. Likewise, remember that refinance rates are based on credit.


When refinancing is not recommended (and alternatives to consider)

While refinancing is a good option in the above cases, it does not make sense to refinance in the scenarios below:

  1. You have low interest federal loans: With the exception of PLUS loans, federal student loans almost always have the lowest rates.
  2. You have the right to forgiveness: If your federal loans could be canceled, refinancing might not be worth it.
  3. Your student loan payments are on hold: As an extension of the CARES law, federal student loan repayments are frozen until September 31, 2021, with an interest rate of 0%.

In addition to refinancing your medical school loans, here are some alternatives to consider:

  • Standard payment plan: For federal loans, your best bet is probably to meet the standard 10-year payment term.
  • Income Based Refund: If you’re struggling to keep up with your payments, income-based repayment is a viable option. Just know that extending the term of your loan will increase interest.
  • Consolidation: Federal student loan consolidation gives you a fixed interest rate based on a weighted average of all your rates. With private loans, consolidation is based on your credit and loan terms rather than your current rates.


Wondering how much you could save by consolidating or refinancing your student loans?

Use a online student loan refinance calculator to get an idea of ​​what your new monthly payments might be.

Refinance your medical school loans when it makes financial sense

Whether you’re an intern, resident, or student, it’s important to take a step back to assess your student loan repayment plan.

Depending on the type of loans you have and your career plans, refinancing may make sense.

Weigh the pros and cons of refinancing medical school loans, and carefully consider the benefits of federal student loans before refinancing them to private loans.

If you’re curious about how much you could save by refinancing, use an online tool like Credible to get prequalified student loan refinance rates without affecting your credit score.

Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.

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