We originally ran this guide on refinancing medical school loans back in October 2013. This post was my first announcement to readers that refinancing medical school loans was actually possible again after years of not being able to do it. Since that time I’ve run at least a dozen posts on the topic but this one is still very popular so I’ve updated it over and over again for over 6 years now. In preparation for republishing it in 2020, I went through and cleaned it up and added some new information.
The High Cost of Student Loans
One of the things I feel the worst about for current students, residents, and new attending physicians is that not only do they have a much higher amount of student loan debt, but they are paying a ridiculously high amount on it. Federal loans were, until recently, offered at a minimum of 6.8%, with many students having a majority of their debt at 7.9%! I find it completely unfair that I can get a mortgage for less than the rate of inflation, and dump it in the case of bankruptcy, but you can’t get student loans from the government for twice that AND they can’t be discharged in bankruptcy.
Thankfully, Congress and the President have provided a little bit of relief with a bill in 2013 that tied interest rates to Treasury rates. So now, instead of 6.8%, you’re paying 3.6% plus the 10-year treasury rate at the time the loan is made (with a cap at 9.5%), which is currently a total of 6.08%. Direct PLUS loans are down from 7.9% to 7.08% (4.6% plus the 10-year treasury rate.)
Student Loan Refinancing Rates
Perhaps the biggest difference between coming out of school in 2003 like me and coming out in 2010 or so, is the issue with refinancing rates. My classmates refinanced their medical school loans at rates as low as 0.9% after graduation in 2003. That’s about as close to free money as you’ll ever get. In 2010 you could still consolidate your government student loans, but when you do that they simply take an average of all your loan rates, rather than giving you a lower rate. It’s nice to consolidate I suppose, but it doesn’t save you any interest.
New Student Loan Refinancing Options for 2020
It’s kind of funny to look back at this section of the post. When I wrote it back in 2013, the “new lenders” were SoFi (now the big kid on the block and one of the oldest refinancing companies) and DRB (which rebranded a while back as Laurel Road). At the time I wrote, “I hope to see more competition in this financial marketplace, but it’s possible that both of these companies will just go away. Neither of them is exactly a household name.”
Now many of these companies are household names and it doesn’t look like they’re going anywhere any time soon. Rather than being the new kid on the block, SoFi and Laurel Road are now the trusted old blue chips. In fact, there are now half a dozen or so other options that are helping hundreds of white coat investors refinance their loans.
Each student loan refinancing company is unique, but the bottom line is that you should apply with several of them and, assuming the service you receive is adequate, take the one that offers you the lowest rate. In order to sweeten the deal, I’ve arranged with each company to give you cash back ($200-1000) if you refinance through the links on this page.
SoFi – These guys refinance more loans than anyone else. The company has seen a lot of changes over the years, but now they have a whole plethora of financial products including investing, mortgages, neo banking, personal loans, etc.
Laurel Road– Despite the name change, I’ve been partnering with them for longer than any company on this site. They work hard to make sure you are eligible for their best offer that you qualify for.
CommonBond– Also a company that has been around for a long time with lots of volume and low rates. Borrowers love their social mission.
Earnest– One of the big four lenders as far as volume, people like the fact that you can really personalize your loan terms, picking the term, variability, and interest rate until you find an option that works for you.
Splash– Plagued by higher interest rates for many borrowers for a few years, in late 2019 they became very competitive rate-wise and now lots of white coat investors are using them every month.
Credible– Their claim to fame is that they are the Orbitz or Kayak of student loan refinancing. With one application, they shop you around to multiple lenders (although many of those on this page aren’t on their site).
LendKey– LendKey uses hundreds of great credit unions like Navy Federal to find you the best deal.
First Republic– First Republic often has the lowest rates around, but you have to live close to one of their branches because they really are looking for a personal relationship with you.
ELFI– These guys are known for low rates and low minimum amounts (they will refinance as little as $15,000) and high (i.e. no) maximum amounts. They will also refinance parent loans.
Figure– One of our newer partners, they offer fixed rates only and an Amazon card instead of cash, but their claim to fame is that thanks to their technology and automation they can get you refinanced faster than anyone else.
Brazos– They only lend in Texas, but if you’re in Texas, might as well include them in your search. They will refinance as little as $10,000.
All of these companies have been great partners helping white coat investors save interest, get cash back, and enjoy better customer service than the federal loan servicing companies ever provided.
Reasons Not To Refinance Student Loans
Remember that when you refinance your medical school loans, they are no longer eligible for the Income-Driven Repayment programs (lower payments with a taxable forgiveness option after 20-25 years) or the PSLF program (tax-free forgiveness after 10 years). So don’t refinance federal loans until you’re absolutely sure you won’t be going for loan forgiveness.
If your effective rate under REPAYE is lower than the rate you can refinance to, you probably shouldn’t refinance either, although you might be able to lower your payments thanks to some great resident programs.
Here are my recommendations on refinancing vs REPAYE:
- If you have private loans, refinance them now as long as the rate you can refinance to is lower than what you now have.
- If you are going for PSLF and are single or part of a single-earner family, use REPAYE until you finish training then switch to PAYE.
- If you are going for PSLF and part of a dual-earner family, get some professional advice about your student loans.
- If you anticipate refinancing your public loans after residency, weigh your effective rate under REPAYE against the rate you can refinance to and take the lower one.
The Mortgage Option
One of my favorite student loan refinancing options involves a mortgage. If you can somehow turn a high-interest, non-dischargeable in bankruptcy, non-deductible (for most attendings) student loan into a low-interest, dischargeable, deductible mortgage that can be a great deal. I suppose, however, it does increase your risk of losing your home. [With the new tax laws HELOC interest is only deductible when used to purchase or upgrade a home, so it really doesn’t work for this use anymore. – ed]
Unfortunately, those who have big fat student loans don’t generally have any home equity, and by the time you get some, the student loans may be gone. But given how much homes have appreciated the last few years, this may be an option for some.
But if student loan refinancing is right for you, get off your duff and get this important financial chore done, then get busy living like a resident to pay them off. Even if you have already refinanced, you can do so again (and if you go to a different company, you can even get another cash back bonus). There is no break-even period since there is no cost to you to refinance.
What do you think? Have you refinanced your student loans? How? Who did you use? Are you happy with it? Comment below!
With DRB, what are your thoughts on the variable versus fixed interest rates?
Please correct me if I’m wrong: I make a regular 2k-3k overpayment monthly on my loan (I’ve got approx 70k left). So, I dont really care the duration of the refinance as I plan to have it paid off in the next 2-3 years correct?
Thanks for everything.
I’d do the variable rate and pay it off ASAP. You’ll be done in a couple of years it sounds like. Even if interest rates rise dramatically it won’t hurt you much.
If you are going to pay off the balance of your loans that quickly, the variable rate probably makes the most sense.
Does anyone know if your parents have their house paid off, if they could do the mortgage option for you? Would that be safe? My parents are in between on taking 200k investment at any interest rate, but I’m only 2 years from finishing residency.
Man, it seems like I’m one of the few people in my med school class that doesn’t have their parents paying for their education. Just from interest alone, by the time I finish residency I’ll be about 450k in the hole. It’s ridiculous.
What are your living expenses like?
College: 10,000+15,000 living expenses=100,000 after 4 years.
Med school: 35,000+15,000 living expenses=200,000 after 4 years.
Yes, add your interest…
…did you pay for all of your college expenses? You can pay back loans during residency and live for less than 15,000 without hardship. I live on 10,000 a year but most don’t live as frugally as I do, I recognize.
Man, I am bummed for you but happy to hear I am not the only one in this boat.
And I go to a state school
Do you have a referral link for sofi? Would like to hook you up. Your site is fantastic, thanks so much! Also, how risky do you think a 10 year variable rate would be? I like that SoFi caps just below 9% max. I can afford that should it happen but DRB’s 18% is too risky for me.
Make sure when you compare DRB to SoFi, you look at the actual rate SoFi offers you and not just the cap. Even if SoFi’s cap is lower, their rate is probably going to be much higher than DRB, making it less less attractive than the DRB rate. Note that DRB’s rates are the actual rates offered, as opposed to SoFi’s which are a range of rates, so it is quite possible that the actual SoFi rate will be much higher than what DRB is offering. It also might be worth comparing the floating rate SoFi offers to DRB’s fixed rate.
At SoFi, we’ve written a lot about how to decide between a variable or fixed rate loan, regardless of who you’re borrowing from. Whether you’re trying to decide which is right for you http://bit.ly/16cDxmW or assessing whether a variable loan will result in greater savings http://bit.ly/1b79Mrv we’ve done the analysis so you can make the decision that’s best for you.
No, I don’t have any financial relationship with SoFi. Good idea though. I’ll contact them to discuss it. See my comment below about variable rate loans.
What are the risks of doing this? I consolidated all of my dental school debt through the government so now I have $400,000 of debt at a fixed 7.5% interest. It seems like a no brainer to go over to SoFi for a 4.99% rate. Whats the catch? There has to be some hidden risk involved….
I hear you there. This seems too good to be true.
The catch is that almost nobody actually qualifies for the lowest rates. My husband is a Ph.D engineer making 115K with 65K in federal loans and a credit score 780-800. We have no other debt. We would like to be able to afford the downpayment on a house before we are 80 and would like to avoid paying an extra $30K in interest over 10 years on the federal loan standard repayment plan. (Unfortunately, tech industry jobs are almost exclusively located in areas with very high housing costs). I called SoFi, and they said he would most likely qualify for their “typical” fixed rate loan; that is, the one with a 6.4% interest rate. They said that the only people who qualify for the lower rates are those who have been employed at their present job at least five years. 6.4% still isn’t that great of a rate. We’ll apply with DRB and try to get their 5.25% fixed interest rate loan first.
Yes, the “teaser rates” are annoying, aren’t they. It’s so depressing seeing people trying to refinance knowing that those who graduated with me in 2003 have their loans refinanced at 0.9-1.9% fixed. Those guys aren’t rushing to pay that back very quickly.
You lose some of the protections found in federal loans (e.g., IBR). Also, there are some credit/income requirements that you will need to pass for both DRB and SoFi. Otherwise, it is a great deal. DRB’s rate are even better than SoFi’s, though, so check them out.
I don’t think it’s too good to be true. I can’t understand why no one jumped on this earlier. There’s a lot of distance between what a bank can borrow money at (mine pays me less than 1%) and what your non-dischargeable in bankrupty student loans are at. The only catch as mentioned is you lose access to IBR/PSLF. DRB only does these loans for professionals and SOFI only does these loans if you attend a qualifying institution.
Do you happen to know the income requirements for DBR?
It depends on the size of the loan and your other outstanding liabilities (ie mortgage). The best thing to do is call/email the bank to discuss your personal situation.
[email protected]
203-669-4140
It is true that SoFi does not offer borrower protections identical to those of federal loans. If our borrowers find themselves in an unfavorable situation, we determine the best way to leverage our community and be of assistance during their time of need. Our career service benefits go beyond deferment or forbearance in times of unemployment and help borrowers find their next position. It is a common myth that federal loans are always preferable to private options – checkout this and 4 other myths about refinancing student loans: http://bit.ly/1bfdegt
I got the final 100k of my med school loans refinanced through SoFi last year at 4.29%, finished paying them off 2 days ago. It. Feels. Awesome.
There is no catch, but I may have gotten a lower rate as an attending (I had been practicing for 2 years before getting into gear and knocking out my loans). Regardless, it’s worth seeing what you are offered and saving some money to pay your loans off faster. Good luck!!
On DRB’s website, it says that you can do a hybrid approach and do partial variable and partial fixed. Does anyone know about this?
My situation: I’m looking at $275k in student loan debt. Would it be unwise to do a variable rate 10 year plan? The rate could potentially cap at 18% (ridiculously high), but the LIBOR hasn’t gotten above 1% in the last 5 years, and hasn’t risen above 6% in the last 20+ years.
DRB will let you split that into 2 separate loans, one fixed and one floating, using the amounts you choose. They do this for people in your position with larger loans who want to take advantage of the low floating rates, but want to limit their exposure to rising rates. Call them or email them and they will walk you through how to do this.
There’s obviously a risk any time you use a variable loan. You’re running the interest rate risk rather than bank. That doesn’t mean it’s not a good idea though. As long as you can afford the possibly higher payments you are likely to come out ahead in the end. I have a well-to-do friend with a variable mortgage where the rate changes every month. It’s been 1% for the last couple of years. That’s pretty nice.
It might not be clear from his comments, but readers should be aware that AA works for DRB so I’d consider his comments authoritative since he works in the field, but obviously biased toward his own company. I don’t mean to out him (especially since DRB has supported this site through the purchase of advertisements), but I consider full disclosure of financial conflicts of interest on this blog very important in maintaining the trust of readers.
If I had student loans I would be refinancing them through one of these two companies as soon as possible. I hope even more competitors enter this niche area, further driving down student loan rates.
I’m planning to refinance my loans with DRB. (I don’t work for them.) If anyone has a referral link, please post it as I’d like to give someone a referral bonus.
No referral program with DRB but I do appreciate your support of those who support this website.
I’m working on a referral/affiliate program with SoFi.
I emailed DRB about a concern that I had, and turns out it is valid. With a federal student loan, if you pass away unexpectedly then your debt is forgiven. However, with a loan from DRB if you pass away the debt is assessed to your estate and your spouse gets stuck with the debt. I don’t plan on dying any time soon, but there is no way my wife could ever pay off my $400k of dental school debt if I passed unexpectedly. As much as I would love to refinance and a get a lower rate, for that reason I don’t think I can do it unless they come up with a solution. I have not emailed SoFi yet, but I am sure it is the same with them too.
Thank you for that comment. I hadn’t thought to ask that question. You definitely have to weigh the interest savings against that risk. Keep in mind that with a big loan like that you might be able to buy an extra $400K 5-10 year life insurance policy with the interest savings and STILL come out ahead with refinancing.
For example, if your average loan is 7.5% on $400K, and you can refinance at 5.5%, then that’s $8K per year in interest savings. A $400K 10 year level premium term insurance policy for a healthy 30 year old male is only $133 per year.
Agreed on using term insurance to cover your estate in the case of death. Regarding covering yourself in the case of disability, you can do something similar with disability insurance. In fact, some disability insurance providers offer an add-on specifically for paying down student loans in the event you become disabled and can no longer work in your field. The costs for this is also small relative to the savings from a lower rate on your student loans.
Thanks you for the responses! I already have a great disability policy. I will just need to bump my life up a little. I am seriously considering this. I really want that lower rate, it will probably save me 100k or so over the life of the loan.
I think everyone should be considering it. If I had loans I’d have already done this with one of these two companies. Refinancing is pretty close to a no-brainer for the vast majority of med school graduates from the last 5-10 years.
The lenders probably don’t want to talk about this much, but these private student loans are probably easier to discharge in bankruptcy too according to this guy:
http://www.huffingtonpost.com/steve-rhode/some-private-student-loan_b_3652935.html
I wouldn’t count on it, but if they’re not going to let them disappear at your death like federal student loans, they can’t expect to get the special bankruptcy protection. That’s why they have relatively strict underwriting criteria.
Hi Brian, Elizabeth from SoFi here. As long as your wife is not a co-signer on your loan, your student loans would be forgiven if you passed away. Feel free to reach out to our customer service team directly with any questions like this: 855-456-7634.
According to DRB, they can refinance loans in all 50 states. SoFi can do it in 40 states and is planning to expand.
https://www.sofi.com/refinance-loan-eligibility/
WHI, any recs for a good provider for disability insurance? Want to purchase befor graduating residency soon!
I recommend an independent agent who can sell you a policy from any company. You’ll notice two who advertise on this blog if you glance at the banner ads in the left column. I’d trust either if I were in the market for disability insurance.
Regarding the variable rate, there is no cap to how much it can go up from year to year (with an overall max of 18 percent).
Is there any way I can see how historically the variable rate has changed? Could I potentially be paying 10 percent come next year?
Check this site out which shows historical 3 Month LIBOR going back to 1986:
http://www.macrotrends.net/1433/historical-libor-rates-chart
As you can see we are at historic lows, and we have been that way for a while. In addition, there are times when LIBOR makes big jumps over a one year period, so your question is a valid one. My advice is, if you are considering the variable, don’t try and predict when rates will move, and by how much, think about what it would mean for you if they do move-will you be able to handle higher monthly payments (ie. do you expect your salary to increase over time) and/or might you be in a position to prepay a portion or the whole loan if rates go up? If the answer is yes to these questions the variable could be a good choice and good way to save money. If not, it may not be worth the risk.
Another thing to consider is splitting your loan into part fixed and part floating to mitigate some of the interest rate risk of all floating.
How does refinancing affect your credit score (if at all)? Once you do so with DRB or SoFi, is the loan still considered “good debt” (or at least “could be worse debt” as I like to think of it) like student loans or a mortgage, or does it become a private consumer loan? Brian’s comment above re: leaving DRB loan debt to your spouse if you die makes me think the loan could lose all benefits of being a student loan (including how it is viewed by potential creditors). Other than losing IBR and PSLF benefits, this would be the one remaining thing keeping me from refinancing.
As an aside, I just started a 6 year urology residency and as far as I can tell I won’t be eligible to refinance until after I get out- is this true?
No, it is still a student loan. But I’m not sure why you think that somehow helps your credit score. “Type of credit” only makes up 10% of your score. Pay your bills on time and your credit score will be adequate to do anything you need it for.
You don’t want to refinance as a resident, because you probably need the lower IBR payments.
Thanks for the clarification, that is helpful. By using credit score, I was meaning to get more at how my debt is viewed overall, rather than the actual raw score. My wife and I recently took out a mortgage on our first house. When I was initially shopping around, one of the first banks I spoke with quoted me at around 4%. After they realized my debt was all student loans, the quote dropped to somewhere in the high 2’s. Needless to say, I didn’t move forward with this lender, but I do believe the type of debt you carry matters more than the 10% that merely goes into calculating a credit score. There’s a human element to it, too.
Thanks for writing this blog. I find it extremely valuable and feel fortunate I was able to come across it early on. I’m looking forward to keeping up over the coming years.
Anyone have any luck financing with DRB? They’ve give me the cold shoulder since I submitted my application a month ago. I got approved from SoFi for a variable rate in the mid 4% (no explanation why I didn’t get the more competitive rate – I pay all my bills on time but have a lot of debt and my credit score is in the 700s). Wondering if this whole process is too good to be true…
Thank you for sharing your experience. Why not call SOFI and ask why you didn’t qualify for the better rate? Also, I wouldn’t be surprised to see the ball dropped. As the word gets out about these companies refinancing student loans, I expect them to see pretty rapid growth that may even overwhelm their relatively small staff. Since it is worth so much money to you to get a refinance, I’d bug them enough that they can’t ignore you. They may tell you they’re not willing to refinance you for some reason, but “the cold shoulder” shouldn’t be an option.
I was informed by DRB that they have contacted the above commenter and “worked out this issue.” Due to privacy issues, they didn’t feel comfortable mentioning that here and it wouldn’t be appropriate for them to share the details with me or on the internet. Kevin may share the details about how it was worked out if he feels so inclined.
I was able to reach someone from drb over the phone who was helpful. I was a little frustrated that my emails weren’t returned but it seems to be working out now. I did contact sofi and received this response:
SoFi considers a variety of factors when making lending decisions about your student loan refinance application. Decisions are based on your personal circumstances at the time of application and include, but are not limited to: Credit, income, work experience as well as debt burden capacity analysis.
I had a similar experience as the previous poster. Submitted an application over a month ago to DRB. Several emails and phone calls later, haven’t heard a word. When I call their number, I get a secretary that transfers me to voicemail. Can’t get in touch with anyone that can talk to me about my application.
I know they follow this thread, so hopefully they will contact you soon. If they ask me for your contact information, would you like me to pass it along?
Definitely pass it along. I’d like to do business with them so I’m hoping I hear from them relatively soon.
He just emailed me so I’ll send your info to him. That was fast, no? I guess they’re pretty backed up.
Thanks for the help WCI. They did get back to me and yes, that was quick! I’m looking forward to working with them. Thanks again.
Jake-I apologize for the experience you had with DRB and hope we can rectify the situation quickly. As was mentioned previously, DRB has seen a strong response to this refi loan, and our staff has been bit a stretched. We will certainly be in touch quickly to resolve your issue.
In addition, please note we are adding more staff to the team to make sure nothing like this happens again. We are very excited about working with and investing in White Coat Investor members as well as other health professionals, and will ensure that our service matches up to the service levels you deserve.
Thank you for the response, looking forward to working with you.
I just withdrew my application from DRB. Two months since my application and no progress. I emailed them again a week ago and nobody responded. You call their office # and get redirected to someone’s voicemail. Very poor customer service, I’d recommend avoiding DRB. I sent an application in to SoFi, and had someone calling me within 24 hours. SoFi’s rates look pretty comparable to DRB too. I probably would have gone with them originally but they were restricting their applications to graduates of schools to which they had alumni support. They have recently opened it up to include most schools (maybe all in the US, not sure). Anyway, they seem like a much better lender to do business with – just FYI.
This whole thing has made me wonder if DRB is even legit to be honest. I’ll be keeping a close eye on my credit report…
In response to the posting above, please note the following:
1. DRB is an FDIC insured bank in Connecticut. Please feel free to look us up on the below FDIC website.
http://www2.fdic.gov/idasp/main.asp.
Just type in our name in the “Institution Name” section. This should provide you comfort that we are an established and regulated institution.
2. As I mentioned in an above post, when we first launched this program for doctors, the response was overwhelming, and we were not able to provide the service and response time that our borrowers deserve. Since then, we have improved our processes significantly and hired a larger team to ensure all of our applicants receive the highest level of service. I will not comment on the specifics of the post above, but I will say that this type of experience is atypical for our borrowers. Right now, we respond to all email questions within 1 business day and have many more people available to answer and return calls during business hours.
3. We have already save hundreds of borrowers thousands of dollars each on their student loans and continue to do so every day. Our rates are by far the lowest in the country and lower than the competitors referred to on this site. For those of you who want the lowest rates in the market, I would suggest you apply to DRB, as we currently offer the best rates and are improving our service every day.
I just finished my refi w/DRB – they seemed reasonably responsive albeit the whole process took a while.
I ended w/a 2.99 variable. I’ll certainly be watching my credit and loan closely to make sure nothing suspicious goes on.
Please see #1 in my post above:
DRB is an FDIC insured bank in Connecticut. Please feel free to look us up on the below FDIC website.
http://www2.fdic.gov/idasp/main.asp.
Just type in our name in the “Institution Name” section. This should provide you comfort that we are an established and regulated institution.
I have to say i am losing interest in DRB. I applied around Thanksgiving and never heard anything. I called them a few weeks ago and was told I passed underwriting and I should hear from them soon. Still nothing. Then today I read on Yelp that you can’t link your outside bank account through the DRB website and that you have to use BillPay from your outside account to make electronic payments to receive the .25% discount.
I will not comment on the specific situation of the person in the above posting, but only reiterate that we have made tremendous progress on our service levels and responses times since Thanksgiving/December, so please be assured that if you are a current applicant or if you apply in the future, you will receive fast and reliable service (as well as some of the lowest rates in the country).
Regarding making automated/electronic payments, all borrowers are able to make automated payments, including both standard monthly payments and any prepayments, either through their current bank account, which can be linked to a DRB account, or through any BillPay system, whichever they prefer. All payments are received into a DRB bank account and then withdrawn/credited automatically against their loan. For those who have specific questions on the details of this process, please do not hesitate to call/email the bank.
AA’s statement about electronic payments is blatantly false. After 3 months of phone calls, long wait times, and never returned emails, I finally got all my paperwork and the loan approved. And now I was now told that in order to get the auto pay discount (0.25%) I have to open a DRB checking account to make the payment. I can’t use my regular (Wells Fargo) checking account.
I like where he says if you have questions to call/email the back. Has he tried doing this!! You’ll never get a live person and in the off chance that you do they will transfer you to a number that goes to voicemail. DRB makes the post office seem efficient.
A DRB checking account is opened automatically as part of the loan closing process (the checking account has no fees and no minimum balance). The DRB account acts as the borrower’s repository for all payments (both monthly and prepayments), and this account can be linked to another bank, certainly a Wells Fargo account, so that payments can be made electronically from that account. This process requires no additional application/work for the borrower and allows for automated payments from a checking account or an electronic bill payment system. DRB currently has many borrowers using this automated process without any issues. I implore you to please call/email the bank again if you have questions on this (203-309-3940 or [email protected]), and I am sure they will resolve your issues (faster than the post office would).
Does it make sense to only consolidate unsubsidized loans if these are the bulk majority and the government is still paying down interest on the subsidized ones for 2 more years? The unsubsidized loans are about $150,000 and the subsidized ones are ~$30,000
No, you don’t want to refinance subsidized loans currently being subsidized. Consider yourself lucky to have them. Nobody is getting them any more.