I write a lot about student loan refinancing. I know some long term readers, especially those who don't have student loans any more are probably sick of it. Frankly, it was a big pain for me to learn about student loan management myself, since I never really had any significant loans. But I keep writing about it for a few reasons.
First, it is immensely important to many readers. My email box and blog comments are one ongoing stream of student loan management questions. Second, the student loan issue is only getting worse with the rapid rise of tuition. It is now routine for me to run into docs who start their careers at $400K+ in loans. In fact, it wouldn't surprise me to learn that the AVERAGE dentist's student loan debt is rapidly approaching that mark. Third, too few doctors who should refinance their loans have done so. Since I have an affiliate agreement with most of these companies, I know exactly how many readers have refinanced their loans, and it is a tiny fraction of my readers, a large percentage of which should. I'm not sure why people are not refinancing. It can be a big pain to gather up all the paperwork and work through it. But when the benefit is literally tens of thousands of dollars of saved interest, it is more worthwhile than just about anything else I can write about for young doctors. It is so easy to “sell” the concept of student loan refinancing because it is a win-win-win. The reader saves thousands in interest and get a bonus of $100-500. I get some blog revenue. The refinancing institution makes a profit. The only real loser here is the taxpayer, since they lose a borrower who is almost sure to pay off their loans and is paying a very high interest rate. But even there, the government gets its money back to loan to another student who can go to school, which is the whole point of the government student loan program anyway.
The main caveat to student loan refinancing still applies:
IF YOU'RE GOING TO GET YOUR LOANS FORGIVEN, DON'T REFINANCE THEM.
Refinanced loans are not eligible for the Public Service Loan Forgiveness program.
Now, that said, let's move into what's new in the last couple of months in this rapidly changing marketplace.
LendKey is a fairly new player to the WCI site (previously CU Student Loans), so I don't have tons of feedback from readers yet. These guys are a little different in that they are a service that works with hundreds of different lenders, including some local to you, that may very well work to your advantage. They also have a unique feature in their “cosigner release” option, where it is easier to later get your cosigner off the loan. Their site states you can get a rate quote in 2 minutes. As a WCI reader, if you use the links on this page, you get an extra $300 in your pocket when you refinance with them. I suggest you put it toward the principle on the loan.
Perhaps the biggest news is that Laurel Road, which recently started refinancing student loans for residents, now has some competition. This new company, LinkCapital, also will refinance you despite the fact that you're a resident. Even better, they require less than the $100 a month nominal payments that Laurel Road does, with 1$/month payments. Both of these companies are now charging less per month to residents than most will pay under the IBR or PAYE program. Improved cash flow as a resident plus saving thousands in interest is pretty awesome. Like with most of these companies, if you die or become permanently disabled, your loan goes away. They do have a $450K maximum. If you refinance through the links on this page, not only do I make some money, but they'll give you an extra $400. Rates are competitive with longer term players (although nobody is really long-term in this market) like Laurel Road, SoFi, and CommonBond.
Not to be outdone, Laurel Road has gone one step further. Now you can even refinance as a medical student, but only as an MSIV who has matched. Granted, there aren't a lot of months between Match Day and the start of internship (102 days to be exact) but on a $300K loan, the difference between 6.8% and 2% is $14,400 in interest a year, so over those 102 days you could save over $4000 in interest. And of course, they'll still throw in an extra $300 for WCI readers who go through the links on this page.
The Other Guys
The other WCI advertisers are still refinancing student loans. Hundreds of WCI readers have refinanced with SoFi (Disclaimer), and dozens now with Common Bond. SoFi offers WCI readers $300* and Common Bond offers WCI readers $500 for refinancing through the links on this page.
I get occasional complaints about hassles from every company, but for the most part, readers are applying with multiple companies and taking the one giving them the lowest rate, as my business manager wrote when she recently refinanced her husband's grad school loans. Both Laurel Road and SoFi are Gold Level sponsors for the WCI scholarship, which I very much appreciate.
Update: I've also added Credible as a WCI partner. They're a little different from most lenders in that they let you apply with 9 different lenders (almost all different from those on this page) with a single application.
On a related note, I have often told people that if they can switch from the IBR program (payments = 15% of disposable income, 25 years until taxable forgiveness) to the PAYE program (payments = 10% of disposable income, 20 years until taxable forgiveness) that they should do so. Payments in both programs qualify toward the 120 payments required for Public Service Loan Forgiveness. However, it was recently brought to my attention that when you switch from IBR to PAYE, you're not actually going into PAYE, you're going into RePAYE, (Revised Pay As You Earn) which is slightly different. In general, it is better than IBR, but not as good as PAYE. The main features are:
- 10% of discretionary income (same as PAYE)
- 25 year taxable forgiveness for grad student loans (same as IBR)
- Only 50% of negative amortization is included (better than IBR and PAYE)
- No Married Filing Separately loophole (unlike IBR and PAYE)
- No cap on payments as an attending (unlike IBR and PAYE). This means if you're making a ton as an attending, your payments may be larger than the standard 10 year payment plan, possibly eliminating potential PSLF.
The bottom line is that if you wish to go from IBR to RePAYE, but sure you're not doing the Married Filing Separately thing and that you don't expect your required payments as an attending to be much higher than the standard payments. If so, you may wish to stay in IBR, even with the higher payments as a resident or fellow.
More Feedback Wanted
As always in the comments section I (along with future readers) would love to hear about your experience with each of these companies. Have you refinanced your loans? Why or why not? What company did you use? What rate did you get and why? Was the final rate the same as the initial estimate? Did you choose variable or fixed and why? What term did you choose? How big of a hassle was the process? Comment below!