If you’re paying down a stack of student loans from your time in medical school, it might make sense to refinance your debt.
Refinancing your medical student loans could replace your federal and private loans with a single loan at a lower interest rate, saving you money on your monthly payments and dramatically reducing the amount of interest you’ll pay over the life of your loan.
Whether refinancing makes sense for you will depend on a variety of factors, including what type of loans you have, how much you owe, your current interest rates, and even where you’ll be practicing medicine.
When You Should (and Shouldn’t) Refinance Your Medical Student Loans
You want to make sure refinancing your medical student debt makes financial sense before applying for a new loan. You can use this chart to help you decide, but here are a few common scenarios you may face.
When Refinancing Medical Student Loans Is a Good Idea
As you finish medical school, you may have several student loans, federal and private. Deciding whether it makes sense to refinance depends on the type of loans you have.
With private loans, the calculation is fairly simple: It’s about the rate you’re paying. If interest rates have decreased since you first took out your loans, or if you’re in a better financial position, refinancing your private medical student loans likely makes sense. A lower interest rate means a lower monthly payment and less total interest costs over the life of the loan.
With federal loans, the decision can be a bit more tricky. That’s because federal loans offer attractive options like income-driven repayment plans, forbearance and deferment periods, and loan forgiveness programs. Paying off your federal student loans with a private lender means giving up those benefits.
Still, you may want to consider refinancing your federal student loans if you’re unable to afford your student loan payment even under an income-driven repayment program. You may also want to refinance your federal student loans as your income rises in your medical career. As your required payment increases, your effective interest rate may start to exceed what you can find in the private refinance market.
Credible makes it easy to compare student loan refinance rates from multiple lenders.
When Refinancing Medical Student Loans Isn’t a Good Idea
You’ll likely want to hold off on refinancing medical student loans if you have federal loans in an income-driven repayment plan. Federal loans are eligible for the Public Service Loan Forgiveness (PSLF) program, which may allow you to cancel your loans after 10 years of full-time employment for the government or a nonprofit. Refinancing your loans will end your eligibility for this program.
Refinancing also likely doesn’t make sense if you’re in the early years of an income-driven repayment program. While a resident, your earnings will likely be low enough that your required payment will be affordable. In this case, refinancing your loans could lead to a higher payment. You’ll want to wait until your income rises to the point where a private refinance loan is a better deal.
Refinancing your private student loans probably won’t make sense if the interest rates you’re offered are higher than the rates on your current loans. Refinancing at a higher rate will lead to higher payments and more interest paid over the life of the loan.
How to Get a Lower Interest Rate When Refinancing Medical Student Loans
The interest rate you’re offered on a medical student loan refinance will hinge heavily on your credit score. Your credit score is a numerical gauge of your likelihood of repaying a loan, and the higher your score, the safer a bet you’re considered. Credit-rating agencies take a number of factors into account when calculating your score, including:
- Payment history, or how frequently you make required payments on time.
- Total debt, and the credit you use compared with the amount you have available.
- Length of credit history, including how long you’ve had accounts open in good standing.
- New applications for credit, with frequent credit applications lowering your score.
Take Care of Your Credit
Raising your score can help you get lower interest rates when refinancing medical student loans. These steps could help improve your credit standing.
- Make all your payments on time, every time.
- Pay off credit card debt.
- Avoid applying for new loans.
It may also be worth your while to request copies of your credit reports and scour them for errors. You’re owed a free copy of your reports from each of the credit-rating agencies each year, and you can request them using a site like AnnualCreditReport.com.
Look through the reports for incorrect balances, or other errors like payments wrongly reported as delinquent. If you see a mistake, you can dispute the information with the credit-rating agency and have it corrected. Cleaning up incorrect information could quickly boost your score to where it ought to be.
Comparison Shop for the Best Medical Refinance Loans
Once your credit score is in the best shape possible, shop around with multiple student lenders to find the best rates and APR for your situation. To get the lowest possible rate, you can also opt for a shorter loan term—but be aware that shorter terms translate to higher monthly payments. You can also look into autopay discounts, which some lenders offer for signing up for automatic payments, or discounts for holding some other type of bank account with the company.
Credible makes it easy to see student loan refinance rates from multiple private student loan lenders.
How to Refinance Medical Student Loans
Every lender’s process will be slightly different, but several steps are common when refinancing medical student loans.
Decide whether you should refinance. This isn’t always an easy decision. If you have any federal loans, you likely want to maintain special features like income-based repayment plans or loan forgiveness opportunities. With private loans, you’ll want to know whether you may qualify for a lower rate than you currently pay.
Check your credit score. Many private student lenders have minimum credit scores you must meet to qualify for refinancing your student loans. Request copies of your full credit reports and see where you stand.
Shop around. Most lenders will allow you to get a rate quote using only a “soft credit pull”, which won’t affect your score. You can get quotes from multiple lenders to see what rates you’re offered. Also, compare any fees or other refinance costs lenders charge—the best medical student loan refinance lenders won’t charge fees.
Fill out an application. Once you’ve settled on a refinance lender, follow its instructions on how to fill out a full application. You may need to provide documentation of your income, assets, or other financials.
Pay off your existing loans. Your refinance lender will give you instructions on how to satisfy your current loans, leaving you with just the one refinanced loan. Your lender may take care of this step for you.
Start paying your new loan. Your loan servicer will give you instructions on when to begin paying your new loan. Keep paying your old loans until you’re notified that they’ve been satisfied.
How Much Can I Save by Refinancing?
Medical students tend to have much more debt than people with only undergraduate loans. The average medical student graduates with about $246,000 in debt, and nearly one in five carries $300,000 or more. That’s compared to about $31,000 for people completing a bachelor’s degree.
Refinancing student loans can save any borrower thousands of dollars in the long run—and it’s even more important for medical school graduates. Even a small difference in interest rate can add up to a large difference in monthly payment and total interest paid over the life of the loan. For example, refinancing $200,000 in medical school debt from 5% to 4% over 20 years would knock more than $100 off your monthly payment and save nearly $26,000 over the years you repay the loan.
You can use a refinance loan calculator to see how much you could save.
Refinancing Medical School Loans During vs. After Residency
During your medical residency, you’ll be making a lot less money than you will once you begin your career in earnest. That means you might not have as much money for student loan repayment. But some student lenders have special programs designed to aid up-and-coming doctors during their residency years. Refinancing during your residency can make you eligible for these programs.
Refinancing after residency, when you’re officially a physician, gives you the advantage of a larger income and, potentially, a better credit score to help you qualify for lower interest rates.
You may choose to refinance with a lender with resident-friendly policies while you’re in that stage of your career, then go through the process again with a different lender later on once you’ve built up a better credit history.
Medical Student Loan Refinancing FAQs
Can you refinance your federal and private loans together into one loan?
You can’t refinance federal student loans into a new student loan, but you can refinance both federal and private loans with a single private student loan. But be careful before refinancing a federal loan. Doing so will end your eligibility for special federal programs, like income-based repayment and the possibility of loan forgiveness.
Can you consolidate medical school loans?
You can consolidate multiple federal student loans into a single Direct Consolidation Loan, which simplifies your payments but doesn’t necessarily net you a better interest rate. And you can use a new private student loan to refinance and consolidate other private student loans and your federal loans.
Can you refinance medical school loans multiple times?
Yes, you can refinance medical school loans multiple times. It may be worth looking into refinancing any time you qualify for a lower rate and thus a lower payment.
Will refinancing hurt your credit score?
Refinancing your medical student loans is likely to have a mixed effect on your credit score. Your score may drop temporarily because you’ve replaced older accounts with a new loan, reducing the average age of your accounts. And the hard credit pull that occurs when you apply for a new loan may also affect your score in the short term. But refinancing at a lower rate could help your debt-to-income ratio and boost your score. The most important determinant of your credit score is your payment history, so making your payments on time, every time, should help your score in the long run.
Is it difficult to refinance medical student loans?
Generally, refinancing medical student loans isn’t difficult. Many student lenders have deep expertise in this area and will have experts on hand to help you through it. You’ll likely be able to fill out a short form online to start the process.
Check your medical student loan refinance rates with Credible. Credible generates accurate rates in two minutes and makes it easy to compare rates.
[Editor's Note: We're getting closer to presenting the winners of the 2021 WCI Medical School Scholarship Contest! Thanks to Credible and their long-time relationship with WCI supporting the scholarship and helping physicians save money. Thank you for supporting those who support this site and especially the scholarship. 100% of proceeds go to the scholarship winners.]