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A career as a medical physician can be rewarding but costly. The latest survey by the Association of American Medical Colleges (AAMC) found that 83 percent of medical school graduates from the Class of 2021 are leaving school with $100,000 or more in total educational debt. Additionally, 69 percent of graduates had medical school debt of a median amount of $200,000.
Temporary relief is available to federal student loan borrowers. The Department of Education extended the federal student loan payment forbearance and interest freeze through May 1, 2022.
However, some borrowers might still be looking for ways to reduce their six-figure medical loan debt through refinancing. For example, those with private student loan debt might seriously consider this option, since private loans aren’t covered under the federal administrative forbearance.
If you believe that refinancing medical student loans is the right choice for you, learn more about these four lenders.
Splash Financial
The refinance medical student loan through Splash Financial is only available to medical interns, residents, and fellows. You must be participating in a residency or fellowship at the time of application to be eligible for a medical student loan refinance.
The lender also caps monthly payments to $100 for a maximum period of 84 months. This period includes the timeframe you’re in residency and six months after your program ends.
Splash Financial offers fixed and variable interest rates and a 0.25% auto pay discount.
Earnest
Earnest offers medical student loan refinancing through fixed- and variable-rate loans. Earnest offers fixed and variable interest rates and their lowest available rates include a 0.25% interest discount after signing up with auto pay.
Your refinance application must be for at least $5,000 unless you live in California, in which case refinance loans must be at least $10,000. Currently, Earnest doesn’t serve borrowers who reside in Kentucky and Nevada.
SoFi
SoFi provides refinance loans for practicing physicians as well as for resident or fellow borrowers. Available terms range from five to 20 years, and borrowers can sign up for autopay to receive a 0.25% discount on their refinance rate.
The minimum amount required to refinance medical student loans through SoFi is $10,001, however, this might be higher in some states.
Residents and fellows can pay a minimum monthly payment of $100 during their program for up to 54 months.
College Ave
Medical physicians, dentists, pharmacists and veterinarians can refinance $5,000 to $300,000 in medical student loans through College Ave.
The lender offers fixed- and variable-rate loans, as well as a 0.25% interest discount upon enrolling in auto pay. College Ave also offers 11 refinance loan terms, between five and 15 years for repayment.
When to Refinance Medical School Loans
You can refinance medical school loans as soon as funds are disbursed. However, that’s not always the best strategic move as making payments while you’re still in medical school can be challenging.
Consider refinancing after graduating from school, and only if you’re confident that you won’t pursue federal loan forgiveness programs, like Public Service Loan Forgiveness (PSLF).
Be aware that physician borrowers with federal loans can enroll in the Revised Pay As You Earn (REPAYE) repayment plan which keeps your payments at 10 percent of your discretionary income. This alternative repayment strategy reduces your monthly payment while also offering valuable interest subsidies that can lower your federal loan debt over time.
If you’ve graduated from medical school and aren’t pursuing loan forgiveness, calculate your effective interest rate through REPAYE to see whether your refinance rate offer is more competitive.
Borrowers who are in residency
If you’re entering residency or are a current resident, you’ll want to again consider whether a path toward loan forgiveness is in your future. If you’re unsure about pursuing loan forgiveness, consider only refinancing your private student loans during your residency or fellowship program. This way you can maximize the benefits of the active federal loan payment pause while saving money on your privately held loans.
Questions to Answer Before Refinancing Medical Student Loans
Will you ever work in public service or a nonprofit?
If you don’t have strict expectations to only practice medicine in the private sector, consider keeping an open mind about working in public service or with a nonprofit organization.
According to the AAMC survey, 47 percent of 2021 medical school graduates planned on entering a loan forgiveness or repayment program.
If you might work in government or at a nonprofit employer while making at least 120 qualifying payments toward your federal student loan debt, you’ve already met two key factors to pursuing PSLF. By refinancing, the federal loans you borrowed toward your medical education become ineligible for loan forgiveness.
Do you have private student loans?
If you already have private student loans that don’t qualify for federal benefits, refinancing can help you lock in a lower fixed interest rate (and you can refinance more than once). You can also choose to shorten your loan term to pay off your medical student loans faster, or extend your term for lower monthly payments.
If you have a spouse, are they a high earner?
Assuming PSLF isn’t a part of your repayment strategy, the REPAYE approach mentioned above might be an option worth exploring. However, REPAYE includes your spouse’s adjusted gross income when calculating your monthly payment.
If your spouse has a significantly higher salary, you might no longer qualify for the lucrative interest rate subsidy. In this scenario, it might be worth exploring refinancing options to secure a lower interest rate.
The Bottom Line
Whether refinancing medical student loans is the right decision for you depends on many factors. Ensure that you don’t plan on accessing federal loan forgiveness if you’re thinking about refinancing your federal student loans.
If private student loans are the only type of debt in your refinancing equation, always compare a handful of private lenders to find the most competitive offer you’re eligible for.
