We originally ran this post way back in October 2013. This post was my first announcement to readers that refinancing student 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 subject, but this one still gets lots of search engine traffic 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.
One of the things I feel the worst about for current students, residents, and new attendings 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 now 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 Issues
Perhaps the biggest difference between coming out of school in 2003 like me and coming out in 2010 or so, however, is the issue with refinancing. My classmates refinanced their student 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 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
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). Rather than being the new kid on the block, these companies are now the trusted old blue chips. In fact, there are now half a dozen other options that have helped hundreds of white coat investors and a few newer ones too. Each 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, neobanking, 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.
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 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. You can refinance private loans at any time. 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.
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 or home equity loan, that can be a great deal, although I suppose it does increase your risk of losing your home. 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.
Back in 2013, I wrote there that “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. 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!