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Ultimate Guide to Student Loan Repayment for Doctors
Updated On September 10, 2022
Editorial Note: This content is based solely on the author's opinions and is not provided, approved, endorsed or reviewed by any financial institution or partner.
This ultimate guide to student loan repayment for doctors will help physicians know how to refinance medical student loans and conquer student loan debt.
Student loan debt for medical students is on the rise. According to the; Association of American Medical Colleges (AAMC), the average medical school debt is $200,000 for medical school graduates from the Class of 2021. When you combine that with undergraduate student loan debt, the numbers are even higher.
Medical Student Loan Refinancing Guide: Introduction
This student loan refinance guide for doctors covers the key aspects of how to refinance medical student loans and save significant money in the process.
Student loan help comes in many shapes and sizes – student loan refinance, student loan consolidation, student loan forgiveness as well as student loan deferment and student loan forbearance.
This medical student loan refinancing guide will explain how you can save more money with student loan refinance and pay off medical student loans faster.
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What is the best way how to refinance medical student loans?
One of the most frequently asked questions at Mentor Money is how to refinance medical student loans.The goal of this medical student loan refinance guide is to get you a better deal on your medical student loans so you can pay them faster and save money as you do it. Student loan refinance is also about getting you a lower interest rate based on your financial profile, and not just the same fixed interest rate that the federal government offers regardless of your financial profile.
There are multiple benefits to refinancing medical school student loans:
- Lower interest rate. Get a lower interest rate
- Lower payment. Lower your monthly medical school student loan payments
- Change loan term. Shorten or extend your medical school student loan term
- Fixed vs Variable. Switch from a fixed interest rate to a variable interest rate, or vice versa
- Simplify payments. Simplify your monthly student loan payment with a single student loan repayment
You can use the Mentor Money Student Loan Refinancing Calculator to calculate your potential savings when you refinance your medical school student loans. For example, let’s assume that you have $200,000 of medical school student loan debt at an 8% interest rate. When you use the student loan refinancing calculator for refinancing medical student loans, you can see how much money you can save. With a strong credit and income profile, let’s assume that you can refinance medical student loans to a 3% interest rate and the same 10-year loan term. With student loan refinance, you would save $59,440 and lower your monthly payment by $495 per month. The higher your medical school student loan balance, the more money you can save with medical student loan refinancing.
Sounds great, right? You are probably asking yourself a few questions
- Why can I save so much money by refinancing medical school student loans?
- What’s the difference between student loan consolidation and student loan refinance?
- What is the eligibility criteria for refinancing medical school student loans?
- Am I a good candidate for refinancing medical school student loans?
- Who are the best student loan lenders with whom to refinance medical school student loans?
Many people have never heard of student loan refinancing and did not realize it was even an option. That’s why we put together this Mentor Money Medical School Student Loan Refinancing Guide to help you understand the basics, navigate your options, answer key questions, provide the facts and help you through the medical school student loan refinance process.
Student Loan Refinance vs Student Loan Consolidation
When it comes to refinancing medical school student loans, it is important to understand the difference between student loan refinance vs student loan consolidation.
Student Loan Consolidation: Student loan consolidation, specifically direct loan consolidation, is offered by the federal government, and applies only to federal student loans. This means that you cannot consolidate private student loans with the federal government. As the name suggests, student loan consolidation means you combine your existing federal student loans into a single student loan called a Direct Consolidation Loan. The result is one monthly payment and one interest rate. The interest rate on your new consolidated student loan is equal to a weighted average of the interest rates on your existing federal student loans, rounded up to the nearest 1/8%. Therefore, with student loan consolidation, you cannot lower your student loan interest rate, and it is possible that your student loan interest rate will increase. Student Loan Refinancing: Student loan refinance, or private student loan consolidation helps you receive a lower interest rate on your existing federal student loans, private student loans or both. When you refinance medical school loans, a private lender can give you a new student loan, pay off your existing student loans and most importantly give you a lower interest rate. With student loan refinancing, you will have one monthly payment, one student loan and one student loan servicer. Therefore, in addition to a lower interest rate, student loan refinancing is an effective tool to organize and manage your student loans.
Your new student loan interest rate will be based several factors, which may include your credit score, track record of financial responsibility, income, debt to income ratio, monthly cash flow and ability to manage debt payments.
Since the federal government does not refinance student loans, you can think of student loan refinancing as a form of private student loan consolidation – meaning that you refinance with a private student loan company rather than the federal government, with the primary goal to save money and lower your monthly payments. When you refinance your student loans, your new lender pays off your existing student loan and issues you a new private student loan. The goal is to lower your overall interest rate so you can save money on student loan interest costs.
You can compare how much money you can save with medical school student loan refinancing with this helpful student loan consolidation vs refinancing calculator.
Why do you receive a lower interest rate when refinancing medical school student loans?
As you can see in this medical student loan refinancing guide, refinancing medical student loans helps you receive a lower interest rate. Once you know how to refinance medical student loans, you will see why this is the case.
Unlike a federal student loan in which every borrower receives the same interest rate, private student loans are credit-based, which means that your credit history, income and credit score may impact the interest rate on your new student loan. Private student loan companies use different underwriting models to determine qualifications and interest rates.
When you were a medical school student, you likely had a limited credit history and income. Now that you are graduating, pursuing a residency or are working, your credit profile and income profile likely have improved. Plus, you likely have a more established, financial track record.
You can expect that the stronger your financial profile and demonstrated financial responsibility, the lower your student loan refinance interest rate will be. The good news is that some private student loan lenders enable you to have a qualified co-signer (such as a family member), who will assume financial responsibility for your student loan and can help you obtain approval for your student loan application based on their financial profile. The stronger the income profile and credit profile of your qualified co-signer, the lower the interest rate can you receive.
Why Refinance Medical School Loans?
Now that this student loan refinance guide for doctors has showed you why you can receive a lower interest rate and the difference between consolidating medical student loans and refinancing medical school student loans, let’s now discuss why to refinance medical student loans.
The primary reason to refinance student loans is the potential to receive a lower interest rate than your existing student loans. It’s likely that the interest rates on your federal and private student loans are higher than the interest rate you can now receive by refinancing medical student loans. If you have PLUS Loans, your interest rate can be even higher. Now that you are graduating or have graduated and have an income (or job offer) and can demonstrate steady employment, private student loan lenders are likely to offer you a lower interest rate than your current types of student loans. One downside of refinancing student loans is that you lose federal student loan protections such as income-driven repayment options, Perkins Loan cancellation, public service loan forgiveness, teacher-student loan forgiveness, student loan deferment and student forbearance programs, among others. So, if you think you will need these benefits for your federal student loans, then you should check for eligibility to see if you qualify before refinancing medical school student loans. However, if saving money on your student loans is your top priority, then student loan refinance for medical school loans may be your best option.
Income-Driven Repayment Plans
Federal student loans offer benefits that are not offered by private student loan lenders such as income-driven repayment plans, which allow the borrower to make student loan payments based on income. For example, a graduated student loan repayment plan enables the borrower to make low monthly payments at the beginning of the student loan repayment period and increase the student loan payments over time as the borrower’s income increases. Other income-driven repayment programs for borrowers with high debt-to-income ratios allow the borrower to make small monthly student loan payments, and then any remaining principal can be forgiven after 20 or 25 years. These student loan forgiveness programs such as PAYE or REPAYE enable you to pay a lower monthly payment and then have your student loans forgiven after 20 or 25 years. These income-driven repayment plans can be beneficial to lower your monthly student loan payments and provide flexibility, particularly if you have a lower income in the beginning of your career. The downside is that with a lower student loan payment, interest still accrues, or accumulates, on the principal balance. That means even though you are making a monthly payment for student loan repayment of your medical school student loans, your student loan balance may increase over time. This is called negative amortization. So, even though the monthly student loan payment is lower, you may end up paying more for your student loans because of the interest costs.
Student Loan Forgiveness
While this medical school student loan refinance guide focuses on student loan refinancing, federal student loans can offer student loan forgiveness benefits as Public Service Loan Forgiveness and Teacher-Student Loan Forgiveness for borrowers who work in qualifying roles in these professions. If you work in either of these professions, you may want to check whether these benefits apply to you before your refinance student loans. In the Mentor Money Public Service Loan Forgiveness Guide, you can learn that public service student loan forgiveness for qualified borrowers who work in a qualified public service role and make 120 payments (10 years of monthly payments).
Student Loan Deferment and Student Loan Forbearance
Most federal medical school student loans allow you to postpone making medical school student loan payments due to financial hardship. The most common benefits are student loan deferment (during which student loan interest does not accrue) and student loan forbearance (during which student loan interest does accrue). Most private student loan companies do not offer student loan forbearance but do offer some form of student loan deferment, including monthly payment postponement and help finding a new job if you lose your current job. That said, many student loan refinancing lenders today offer some form of payment plan if you face economic hardship. You can check out the latest rates and reviews from the top student loan lenders to learn more.
Where Can I Refinance Student Loans?
When it comes to refinancing medical school student loans, you can learn more about student loan lenders who can offer student loan interest rates starting as low as 2-3%. With Mentor Money’s comparison tools, you can compare the latest student loan rates, loan terms, qualification criteria, student loan refinancing reviews and more.You can also use the Mentor Money Student Loan Refinancing Calculator to calculate how much money you can save when you refinance student loans.
Plus, if you sign up for autopay with your student loan refinancing lender, you can earn a 0.25% discount on your student loan interest rate, which adds up to big savings over the course of your student loan.
Flexible Student Loan Repayment Terms
If you want to know how to refinance medical school loans, it’s helpful to know that student loan refinancing lenders offer borrowers multiple options for student loan repayment, with terms ranging typically from 5 to 20 years. You also will have an opportunity to choose between fixed and variable interest rates. If you want to pay off student loans and get out of debt as quickly as possible, then you will want to choose a shorter-term option (such as 5 years or 10 years).
While you will save on student loan interest costs (compared with a 20-year student loan, for example), your monthly interest costs will be relatively higher than with a longer-term student loan option. However, you may be able to save money depending on how much money you save with your new student loan interest rate.You can compare your monthly payment and total payment depending on your chosen student loan term for medical school student loan refinancing by using our student loan payment calculator.
Am I A Good Candidate To Refinance My Student Loans?
When you first borrowed your medical school student loans, you may have had both a federal student loan and a private student loan. Your federal student loan is likely at the same high rate as everyone else’s, since the federal government offers the same fixed rate to all borrowers. If you have a private student loan, it likely has a high interest rate. This is because when you borrowed that loan, you were in school and you may have had a limited credit history, which meant that your student loan company deemed you a higher credit risk.
Now, you may have graduated, become employed, and developed a stronger credit history. As a result, you may be able to qualify to consolidate and refinance your existing federal student loans and private student loans into a new private loan with a lower interest rate.
If your goal is to obtain a lower interest rate, lower your monthly payments, switch from a variable interest rate to a fixed interest rate (or vice versa), or change the loan term to a longer to shorter number of years to repay your loan, then you may be a good candidate for refinancing medical school student loans.
Do Federal Student Loans Offer the Lowest Interest Rates?
This is a major misconception. As noted in this student loan refinancing guide for doctors, federal student loans often are higher than the interest rates you can receive Particularly for through refinancing medical school student loans. Why? The federal government does not “underwrite” student loans based on the individual borrower. Rather, each borrower gets the same interest rate – regardless of your income, financial profile or credit score. If you score high in these categories, then you are essentially overpaying for your student loan and may be able to obtain a lower student loan interest rate through a private student loan company. This is why student loan refinance with private student loan companies has become such a popular solution for student loan repayment for medical school student loans.
Can I Combine My Federal Student Loans and Private Student Loans When Refinancing Medical School Student Loans?
One of the keys of how to refinance medical school student loans is knowing that you can combine federal and private student loans when refinancing medical school student loans. You also may be able to refinance student loans that you previously consolidated with the federal government through the U.S. Department of Education (e.g., Direct or FFEL) or a private student loan company.
With refinancing medical school student loans, you can decide to only refinance private student loans and leave your federal student loans outstanding. One reason is if you plan to pursue public service loan forgiveness or another income-driven repayment plan. When refinancing medical school student loans, you lose most flexible student loan repayment plans and other protections connected with a federal student loan. That said, some student loan companies offer flexible student loan repayment plans, including student loan deferment and student loan forbearance if you have economic hardship during student loan repayment
What Will My Monthly Payments Look Like When Refinancing Medical School Student Loans?
Hopefully lower than what you are currently paying! You are in the driver seat – so you should consider a student loan that fits your personal and financial needs. Your monthly payment is primarily a feature of your interest rate, loan term and loan amount.
- Fixed Interest Rate. If you have a fixed interest rate, your monthly student loan payment will remain constant each month for the duration of your loan.
- Variable Interest Rate. If you have a variable student loan payment, your monthly loan payment may change each month based on the underlying benchmark such as 1 Month LIBOR.
- Shorter-Term Loan. If you have a shorter-term student loan (e.g., 10 years or less), your monthly payments may be higher than if you have a longer-term loan (more than 10 years) because you have a shorter period to pay off the loan.
- Longer-Term Loan. The longer the term of your loan (e.g., the number of years to pay back your loan), the more interest that will accrue over time and the more interest you will owe.
So, you should decide how much you can afford to pay now versus over time and find the loan product that works best for your personal and financial needs. And remember – most student loan companies offer up to 0.25% discount off your interest rate if you sign up for auto pay. The autopay savings can really add up.You can use this student loan refinancing calculator to calculate your new monthly payment so you know it will look like and can compare it to your previous monthly student loan payment.
What If I Want To Know How To Refinance Medical School Student Loans During Residency?
If you want to know how to refinance medical student loans during residency, then we’ve got you covered in this medical student loan refinancing guide. The goal of refinancing medical school student loans during residency is to lower your interest rate and/or monthly payment. While you are in medical school, your medical school student loans accrue interest and enter repayment six months after graduation. As a medical resident, you’ll have a relatively low salary and high student loan debt payments.
The good news is that you have a few options:
1. Defer your medical school student loans
During your residency or fellowship, you could defer payments on your medical school student loans. However, this option should be your last choice because it is expensive. If you defer payments on your medical school student loans, interest will still accrue. While you can defer federal student loans, you may not be able to defer private student loans. This deferral option is very expensive and potentially could cost you tens of thousands of dollars in extra interest payments.
2. Select an income-driven repayment plan for public service role
If you are interested in public service loan forgiveness, then you will need to enroll in a federal student loan repayment plan. Since your monthly payment will be lowered, interest will accrue and your student loan balance could increase during your repayment period.
3. Refinance medical student loans during residency Typically, you need have high income and low debt (known as a low debt-to-income ratio) in order to be approved for refinancing medical school student loans. However, having high income and low debt is not possible while you are a resident. The good news is that some lenders such as Laurel Road;will refinance medical school student loans for residents. Refinancing medical school student loans during residency can be a good option to lower your interest rate. The good news is that you can refinance your student loans again once you complete your residency and fellowship and have a higher income. Since refinancing medical school student loans has no fees and there is no limit on the number of times that you can refinance, you should consider refinancing medical school student loans again to get a lower rate after residency.
What Key Financial Terms Do I Need To Know When Refinancing Medical School Student Loans?
Principal: The original amount of money that you borrowed, plus any capitalized interest (from an origination fee). Term: Also known as the loan term, this is the amount of time that your student loan will be in repayment.APR: APR refers to the annual percentage yield. APR is the cost of borrowing and is listed as a percentage. APR includes the interest rate plus any origination fees, if any.
Interest: Interest will accrue on your student loans based on your interest rate.
Accrued Interest: The amount of interest that has accumulated on your student loan since your last student loan payment.
Capitalized Interest: This is when accrued interest is added to the principal balance of your student loan. This typically occurs after forbearance or another period in which you temporarily paused your student loan payments.
ACH Payment: ACH stands for automated clearing house and is used to make automatic payments for your student loans, which typically can result in a 0.25% discount on your interest rate.
Prepayment: Student loan prepayment means you pay more than the monthly minimum student loan payment. The good news is that there is no prepayment penalty for student loans so you can pay them off early anytime at no additional cost. Plus, you will save money in the form of interest costs when you prepay student loans. You can use this student loan prepayment calculator to see how much money you can save.
Origination Fee: When you borrowed your federal student loans, the federal government charged you an origination fee, which is an upfront fee for processing your application. The good news is that there are no origination fees when refinancing medical school student loans.
Deferment: This is when you postpone (temporarily) your student loan payments typically due to financial or other hardship. During this time, interest may or may not accrue. For example, if you have federal student loans, the federal government may pay interest on your Direct subsidized student loans, subsidized Stafford Loans or your Perkins Loans.
Forbearance: This is when you postpone your student loans (temporarily), but interest typically continues to accrue.
What Happens To Your Student Loan Interest Rate With Student Loan Consolidation?
This is the biggest difference between student loan consolidation and student loan refinancing. When refinancing medical school student loans,the goal is to receive a lower interest rate or better overall terms for your student loan repayment. However, with a Direct Loan Consolidation, your interest rate will be calculated based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8%.While most federal student loans are eligible for student loan consolidation – private loans are not. Also worth remembering – if you’re a parent with Parent PLUS loan, you cannot transfer that Parent PLUS loan to the student (now graduate) when he or she consolidates.
Do I Qualify For Student Loan Refinance?
To qualify for refinancing medical school student loans, you usually need to show a few things.
- You need to have graduated from a qualified degree program or university, which is typically a Title IV accredited school.
- You need to have a steady stream of income (or a written job offer)
- You need a history of financial responsibility.
Each lender has different criteria for eligibility.
Typically, eligibility criteria for refinancing medical school student loans include:
- Healthy credit
- Strong monthly cash flow
- Demonstrated financial responsibility
- Currently employed or have written job offer
- Degree from Title IV accredited university or degree program
Of course, eligibility criteria vary by student loan company, but this should give you a general framework. The stronger your financial metrics – for example, credit score, income, historical financial responsibility, current outstanding debt – the lower student loan interest rate you may be able to obtain.
Student Loan Refinance Process: How To Refinance Medical School Student Loans
How to refinance medical school student loans is one of the top questions we receive at Mentor Money. Now that you have made the decision to refinance your student loans, it is time to understand the process for refinancing medical school student loans. Over the past five years, the process for refinancing medical school student loans has been simplified considerably. Gone are the days of piles of paperwork, long wait times and bureaucracy.
So, what does the process for refinancing medical school student loans look like?
1. Easy Online Application Process
- All the student loan refinance applications are online and you receive a student loan interest rate offer for free with no impact to your credit score typically within 2 minutes
- The total refinancing medical student loans application takes 10-15 minutes to complete
- Co-signers can also apply online as well
2. Select Your Student Loan
- You can choose a fixed or variable student loan interest rate
- You can choose your loan term and decide how fast you want to pay off your student loan
- Typical loan terms are 5-20 years with medical school student loan refinancing
3. Submit Your Student Loan Documentation
- You can submit your student loan documentation online
- Some lenders will allow you to take a photo of your documents, or even submit via text
- Key documents may include your:
- Driver’s license or passport (or government issued ID)
- Transcript / Diploma to verify your degree
- Payoff statement from your current lender
- Monthly rentor mortgage statement
- Two most recent pay stubs or tax returns (or offer letter of employment)
4. Student Loan Lender Underwriting Review
- The lender will review your submitted documents and credit report
- The lender will apply its proprietary credit model to ensure that you meet all its underwriting criteria
5. You’re Approved!
6. Review Disclosures & Sign Loan Documentation
- Review truth in lending and other disclosure statements
- Sign your student loan documentation
7. Your Student Loan Is Disbursed
- If you refinance, your lender will issue you a new student loan and directly pay off your existing student loan from your existing lender
- If you borrow a new student loan, your lender will send the funds directly to your school
Top 10 Must Haves From Your Student Loan Company When Refinancing Medical School Student Loans
When you refinance medical school student loans, here are the Top 10 benefits:
- Lower interest rate
- Flexible loan terms
- Significant savings compared to existing medical school student loans
- Fixed and variable interest rates
- Dedicated and available customer service
- Ability to refinance federal and private medical school student loans
- Online application
- Forbearance options in case of economic hardship
- Autopay discount
- Other benefits
I am interested in refinancing medical school student loans. How do I sign up?
While it used to be a cumbersome process that involved mountains of paperwork and hours of your time, now in just two minutes, you could learn what your new student loan interest rate could be – for free and with no impact to your credit score. The reason your credit score is not impacted because lenders only do a soft credit check, which is not the same as a hard credit pull. To learn more about student loan refinance options, you can compare the latest rates to refinance medical school student loans.
Compare student loan refinancing rates and pay off medical student loans faster
Find a new student loan interest rate in only 2 minutes. Your credit score is not impacted when you view a new rate.
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Refinance With SoFi
