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Student Loan Refinance-ers who has best offers recently (March 2019)?

Home Student Loan Management Student Loan Refinance-ers who has best offers recently (March 2019)?

  • Avatar CFEonline 
    Participant
    Status: Physician
    Posts: 99
    Joined: 09/05/2018

    Essentially the title here, I searched around and didn’t find a lot of recent things on the forum, there is this post from the main site under recommended section: https://www.whitecoatinvestor.com/student-loan-refinancing/ Is that being actively updated? (no comments section to ask there)

     

    First Republic is an option for me at this time, so I was leaning that way, but just looking around to see what else is out there. The current quotes there were

    5 year: 2.7% for $3,500 minimum account balance, 2.2% for 10% of principal in account (0.5% discount), 1.95% for 20% of principal in account (0.75% discount).

    7 year: increase by 0.8% from 5 year for each tier

    10 year: increase by 1.6% from 5 year for each tier

    15 year: increase by 2% from 5 year for each tier

    While I’m all for the lowest rate, I calculated what the difference 10% of principal would make for me in a 2.5% high interest savings account and come up only $74 short of how much I would save in interest over 5 years of payments at 1.95% vs 2.2%, probably worth that price for liquidity.

     

    One thing about First Republic is they are all fixed loans, looking at that table from the post I don’t see lower rates with any of the variables but would be curious about that as an option

     

    The sign up bonus or cash back, etc, while nice, seems rather negligible in big picture compared to rate.

     

    Our loan burden is ~65% of projected annual income, so after a 30-40% retirement savings rate, taxes, and living expenses hopefully will knock this out in ~3 years but planning on 5 in case of unanticipated circumstances.

     

    Has anyone seen rates better than these, or those in the table from the bottom of the linked post?

     

    Also, I want to calculate out how much interest I pay total if say I did the 10 year rate but overpayed at the 5 year monthly payment rate, to see what the cost of having that flexibility is. Does anyone know a good excel formula for that? I have used the FV formula for retirement savings, but this is kind of opposite of that.

    #201510 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4263
    Joined: 05/13/2011

    Yes, that is the main place we update every time rates/terms change.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #201514 Reply
    Avatar Tim 
    Participant
    Status: Accountant
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    Joined: 09/18/2018

    Splash has a $2000 (120 days) if you refinance by 3/31.
    Might want to pick up $500/mo for 4 months and the pick your best rate.

    #201522 Reply
    Dreamgiver Dreamgiver 
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    Status: Physician
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    Joined: 03/09/2017

    Rates are so dependent on individual circumstances that you really don’t know exactly what you’ll get until you apply anyway.

    #201562 Reply
    Liked by Zaphod
    Avatar Dr.Blue 
    Participant
    Status: Resident
    Posts: 13
    Joined: 06/05/2017

    Any update on First Republic Bank? I hear they have a limit for 300K total loans? My wife is graduating from fellowship and none of the jobs seem to qualify for PSLF. Also we have a newborn so she will unlikely be able to work full time anytime soon. Luckily I had no student debt but hers is near 600k due to the interest from 6 years of training (started at 360k). Thinking of doing First Republic and would I refinance the remaining balance with another lender? This whole process seems like a joke as she had made 55 qualifying payments for PSLF but there are no good qualifying jobs as a NICU doc. Hope to refi and knock this out in 3 years.

    #209384 Reply
    Avatar CFEonline 
    Participant
    Status: Physician
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    Joined: 09/05/2018

    I think if First Republic seems like the best option currently, the WCI page (linked above) is probably the most useful resource I found and seemed accurate. I just looked through my communications with FR regarding the $300k limit. That rings a bell that it is there, I couldn’t find anything written though. I would get in contact with them and I’m sure they could go over your situation and options, they are quite helpful and responsive, that is purportedly their reason for offering these rates is to draw you in and develop  a banking relationship. I wonder if you and your spouse could each refinance 300k with them (I am reading between the lines both of you are physicians)? I don’t believe they will refinance for residents/fellows though. They either want to see a letter from an employer with guaranteed salary, or several pay statements of a pay grade they find acceptable for the loans you are refinancing. I believe they would refinance her loans under your name, however, if you fit those requirements. They also will go over your financial house including other debts, savings, credit score, etc, and I gather would not accept the application if there were concerns there.

    #209473 Reply
    Avatar Dr.Blue 
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    I think if First Republic seems like the best option currently, the WCI page (linked above) is probably the most useful resource I found and seemed accurate. I just looked through my communications with FR regarding the $300k limit. That rings a bell that it is there, I couldn’t find anything written though. I would get in contact with them and I’m sure they could go over your situation and options, they are quite helpful and responsive, that is purportedly their reason for offering these rates is to draw you in and develop  a banking relationship. I wonder if you and your spouse could each refinance 300k with them (I am reading between the lines both of you are physicians)? I don’t believe they will refinance for residents/fellows though. They either want to see a letter from an employer with guaranteed salary, or several pay statements of a pay grade they find acceptable for the loans you are refinancing. I believe they would refinance her loans under your name, however, if you fit those requirements. They also will go over your financial house including other debts, savings, credit score, etc, and I gather would not accept the application if there were concerns there.

    Click to expand…

    Thanks for the tip. We are both physicians but I don’t have any student debt under my name. I was always told to keep student debt separate so I am not sure I would be comfortable refinancing the loans under my name. Our plan was to have her salary go fully to the loans and I would chip in also so we can knock it out early. Wouldn’t having the debt in my name also impair our ability to get a home loan or anything of the sort? Will contact the bank today and see if there is any flexibility for the 300k limit or we might just split it with 2 lenders. Unless anyone has any tips for a neonatologist to find a PSLF eligible job in southern California…. 🙂

    #209486 Reply
    Avatar CFEonline 
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    I am not sure I would be comfortable refinancing the loans under my name

    Click to expand…

    Very understandable, you would be putting yourself out there and quite vulnerable if you get hit with the big D.

    However, if you do not get divorced and it allowed you to refinance at a better rate, it may be worth considering as it would save you at least $6k each year (assuming a rate of 2% vs 4% or so = $300,000 * 0.02, potentially more depending on what other lenders would offer). I am not sure how the underwriting for home loans works and whether that is done jointly or you can just have your individual credit score analyzed. If the former I would think it wouldn’t matter. However, I would be hesitant to go into more debt with a mortgage with that kind of student loan burden, as it would currently be adding ~$42k of interest to the balance every year (assuming rate of 7%), and even if you refinanced to 2% on 300k and 4% on the other 300k, which is probably a very best case scenario, there is $18k of interest to annually to chug through before you can really start dropping the balance. Instead, I would consider treating it like a financial emergency, really slamming away at it with all you’ve got for a couple years to get the balance and thus interest to a more manageable level, including the money that might otherwise go to a 20% down payment.

    #209489 Reply
    Avatar Dr.Blue 
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    Joined: 06/05/2017

    I am not sure I would be comfortable refinancing the loans under my name

    Click to expand…

    Very understandable, you would be putting yourself out there and quite vulnerable if you get hit with the big D.

    However, if you do not get divorced and it allowed you to refinance at a better rate, it may be worth considering as it would save you at least $6k each year (assuming a rate of 2% vs 4% or so = $300,000 * 0.02, potentially more depending on what other lenders would offer). I am not sure how the underwriting for home loans works and whether that is done jointly or you can just have your individual credit score analyzed. If the former I would think it wouldn’t matter. However, I would be hesitant to go into more debt with a mortgage with that kind of student loan burden, as it would currently be adding ~$42k of interest to the balance every year (assuming rate of 7%), and even if you refinanced to 2% on 300k and 4% on the other 300k, which is probably a very best case scenario, there is $18k of interest to annually to chug through before you can really start dropping the balance. Instead, I would consider treating it like a financial emergency, really slamming away at it with all you’ve got for a couple years to get the balance and thus interest to a more manageable level, including the money that might otherwise go to a 20% down payment.

    Click to expand…

    Thanks again. We had have been keeping an emergency fund in the event PSLF didn’t work out and may just use that also. We aren’t in a rush to get a mortgage right now as we are living rent free. But in the event we had to move closer to my wife’s job as she is an acute setting while I can commute more as a psychiatrist we may need a place of our own eventually. From what I understand if you do a joint mortgage application it will take account the lower of the 2 credit scores so we wanted to just put a mortgage application under mine. I’ve been a long time reader on these forums and the podcast. Have been maxing my roth ira as a trainee, maxing 403 and 457 plans for the past few years and plan to continue to do so. Her total balance after interest is 520k. So I think we will go try for the First Republic for the $300k and get on the 5 year plan for the 1.95 or 2.20 rate if we qualify and the remaining 220k we will use money from savings account and brokerage account liquid assets and clear it within the year. If we do indeed get the low First Republic rate I fail to see the benefit of paying it down faster than the 5 year term as a simple Ally savings account gets a better rate than the loan.

    #209513 Reply
    Avatar CFEonline 
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    Joined: 09/05/2018

    My apologies I think I provided more unasked for advice than you were looking for. I’m glad you are on top of this and have a plan, I think that looks good.

     

    If we do indeed get the low First Republic rate I fail to see the benefit of paying it down faster than the 5 year term

    Click to expand…

    I think you are probably right here. If you plug it into a calculator at 2.2% interest and pay over 3 vs 5 years you only save ~$7k in interest, at the expense of $80k in extra payments in those first 3 years. I would probably only overpay on that rate after maxing out all tax advantaged space and taking care of all other expenses, but probably before I would fund a taxable account. This is a nice calculator I found useful when deciding on how to refinance to see the difference in total interest paid and monthly payments for various rates and terms https://studentloanhero.com/calculators/student-loan-payment-calculator/.

    I use the 2.2% interest rate because I think the cost of keeping 20% instead of 10% principal in the bank is too high. Doing the math (slightly more difficult but overall more robust calculator https://www.bankrate.com/calculators/college-planning/loan-calculator.aspx), if you went with the 2.2% rate (for keeping 10% of principal on hand) and applied the additional 10% of principal you would need to keep on hand for the 1.95% to the loan balance instead before refinancing to bring it down to $270,000, and kept the same monthly payment you would have otherwise done at the 5 year rate for $300,000 at 1.95%, you actually end up saving $1,261 in interest costs. So you’re better off just dropping the principal 10% and having the slightly higher rate, with the caveat that in order for this to work you have to overpay the minimum payments for the $270k to line up with what you would have been paying at $300k.

    If you plan to keep that extra cash on hand regardless as an emergency fund, I think the 2.2% rate still makes sense. When I compared the 1.95% to the 2.2% interest, the difference in 10% to 20% principal required to be kept as cash on hand in the bank could earn nearly the same amount in a 2.5% high yield savings account as it would save by dropping that rate. It fell short by a bit, < $100, but I think that’s a fair price for liquidity.

    I didn’t bother calculating the numbers for the 2.7% rate for the $3,500 minimum account balance, but I suspect the scales would favor the lower rate at that point. This calculator can show you exactly how much to expect from a high interest savings account for a given interest rate with a given principal https://www.bankrate.com/calculators/savings/simple-savings-calculator.aspx.

    #209558 Reply
    Avatar Dr.Blue 
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    Status: Resident
    Posts: 13
    Joined: 06/05/2017

    My apologies I think I provided more unasked for advice than you were looking for. I’m glad you are on top of this and have a plan, I think that looks good.

     

    If we do indeed get the low First Republic rate I fail to see the benefit of paying it down faster than the 5 year term

    Click to expand…

    I think you are probably right here. If you plug it into a calculator at 2.2% interest and pay over 3 vs 5 years you only save ~$7k in interest, at the expense of $80k in extra payments in those first 3 years. I would probably only overpay on that rate after maxing out all tax advantaged space and taking care of all other expenses, but probably before I would fund a taxable account. This is a nice calculator I found useful when deciding on how to refinance to see the difference in total interest paid and monthly payments for various rates and terms https://studentloanhero.com/calculators/student-loan-payment-calculator/.

    I use the 2.2% interest rate because I think the cost of keeping 20% instead of 10% principal in the bank is too high. Doing the math (slightly more difficult but overall more robust calculator https://www.bankrate.com/calculators/college-planning/loan-calculator.aspx), if you went with the 2.2% rate (for keeping 10% of principal on hand) and applied the additional 10% of principal you would need to keep on hand for the 1.95% to the loan balance instead before refinancing to bring it down to $270,000, and kept the same monthly payment you would have otherwise done at the 5 year rate for $300,000 at 1.95%, you actually end up saving $1,261 in interest costs. So you’re better off just dropping the principal 10% and having the slightly higher rate, with the caveat that in order for this to work you have to overpay the minimum payments for the $270k to line up with what you would have been paying at $300k.

    If you plan to keep that extra cash on hand regardless as an emergency fund, I think the 2.2% rate still makes sense. When I compared the 1.95% to the 2.2% interest, the difference in 10% to 20% principal required to be kept as cash on hand in the bank could earn nearly the same amount in a 2.5% high yield savings account as it would save by dropping that rate. It fell short by a bit, < $100, but I think that’s a fair price for liquidity.

    I didn’t bother calculating the numbers for the 2.7% rate for the $3,500 minimum account balance, but I suspect the scales would favor the lower rate at that point. This calculator can show you exactly how much to expect from a high interest savings account for a given interest rate with a given principal https://www.bankrate.com/calculators/savings/simple-savings-calculator.aspx.

    Click to expand…

    Another great detailed response. This is why I love this place! Learn a ton. I entered my zip code for First Republic bank and it looks like its outside their area. Total bummer, I am not sure exactly how far you have to live from a branch. I typed in my address to google maps and it is 24 miles from the nearest branch. Anyone have experience whether they make any exceptions?

    #210476 Reply
    Avatar CFEonline 
    Participant
    Status: Physician
    Posts: 99
    Joined: 09/05/2018

    They have arrangements with some CMGs to refinance regardless of location, so worth looking to see if they have a relationship with your employer.

    Looks like some folks have been able to get exceptions to the rule https://www.whitecoatinvestor.com/forums/topic/first-republic-bank-dont-live-close/

    #211534 Reply
    Avatar Dr.Blue 
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    Status: Resident
    Posts: 13
    Joined: 06/05/2017

    We looked up prelim rates from earnest, commonbond, laurel road and sofi suprisingly was the best. My wife is 3 months from finishing fellowship and has a job lined up and they gave a rate based on expected income which was very helpful in this stage for us. Commonbond was 2.99% variable and 4.14% fixed for 5 year term. For 5 year term we got 2.74% variable and 3.770% for fixed from sofi.  I think that comes out to around 11k difference in interest paid if we picked Sofi for a 400k refi if we stayed for the 5 years but not accounting for the changes in the variable rate. We will try to pay it off sooner than 5 years. Would you choose the variable or the fixed and why?

    #211580 Reply
    Liked by Tim
    Avatar CFEonline 
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    Joined: 09/05/2018

    I am not too sure about the fixed vs variable so take this with a grain of salt. I think I have seen others recommend variable. It would make sense to me that the interest rate is most important when the principal is largest. So even if your interest rate increased later if there is less principal the absolute value of the interest generated would be less substantial. I would just be careful not to get a variable rate if you don’t plan to pay it off in the next few years (I don’t know the math for where this would transition).

    #211898 Reply
    Avatar Tim 
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    Joined: 09/18/2018

    With variable check the frequency(mon,qtr,yr) and cap.
    Never take a variable for more than 5. If you think in a pinch you can accelerate the payoff, interest rate risk goes way down. No vacations put everything on hold.
    Only take variable if is an easy payment and you think you can pay it earlier. Once rates pop, you are basically stuck with only refinancing at higher rates.

    #211929 Reply

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