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Newbie here, should I refinance my student loans?

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  • Newbie here, should I refinance my student loans?

    Hi there,

    I was wondering if somebody could clarify the pros/cons of refinancing my student loans. In summary, I graduated IM residency in July 2019, am currently doing a hospitalist year, and will start cardiology fellowship this July. I've used this year's salary to aggressively pay down my loans. I currently owe ~$300,000, of which $50,000 is interest and the rest principal. This is federal loan @ 7%.

    I am just now stepping out of my shell and learning about refinancing, and was quoted around 4.5% by Sofi. Since my pay will drastically go down for the next three years, I was worried about not making the payments if I were to refinance now. However, having now learned that they accept a minimum of $100/month while in training it seems an appealing option (I still plan on paying as much as I can, it's just nice knowing I won't be held to an amount I can't pay monthly during fellowship).

    It seems like the ideal option is to rapidly pay off the interest of my current loan (which I am on track to do before July) and then refinancing so that the current outstanding interest doesn't capitulate and I get stuck paying a lower rate on a higher principal. Does this make sense or have I misunderstood some crucial component? Thank you for your help!

  • #2
    Have you asked them if you refinance now with your current income will they then change you over to the $100/month training payment when you start your fellowship?

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    • #3
      Originally posted by CordMcNally View Post
      Have you asked them if you refinance now with your current income will they then change you over to the $100/month training payment when you start your fellowship?
      No, I haven't. Are you suggesting they would not offer me the minimum since I've gone out of training for one year?

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      • #4
        Originally posted by Cardsonthetable View Post

        No, I haven't. Are you suggesting they would not offer me the minimum since I've gone out of training for one year?
        thats what we are wondering....

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        • #5
          Originally posted by Peds View Post

          thats what we are wondering....
          I see. I'll need to ask them.

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          • #6
            Originally posted by Cardsonthetable View Post

            No, I haven't. Are you suggesting they would not offer me the minimum since I've gone out of training for one year?
            Technically you're not in training if you refinance now.

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            • #7
              You are correct that if you refinance now the current interest will become part of the principle on the new loan. You'd have to do the math to see if paying off the interest while still at the higher 7% rate is better than refinancing to the 4.5% now and essentially paying that same amount towards the principle instead.

              You should be able to refinance to that $100/mo payment once you start fellowship, and they may be able to do it now if you have your acceptance information. The other option would be to refinance now to get the 4.5% rate, and then again once you start fellowship. There are a few companies that offer the $100/mo to residents and fellows, so if SoFi doesn't play ball, shop around.

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