I have had a number of questions recently about student loan management. None are long enough for their own blog post, but all are worth discussing here.
How Much Is Too Much Debt?
A bunch of pre-dental and pre-medical students over at the Student Doctor Network wrangled me into a discussion on when medical or dental school no longer makes sense as an investment. I've talked about this before, but that was long ago and at a time when student loan refinancing wasn't available. Basically, the question is does it make sense to go half a million bucks into debt in order to get a job that pays $120K or even $200K?
Surely there is a ratio where it no longer makes sense. It is one thing if you have a bunch of scholarships or your parents are paying a bunch of money for your education. I guess I don't have a problem with a dentist expecting an average income of $120K a year paying $400K for an education, as long as he doesn't have $400K in debt upon graduation. I think a good general rule is that your student loans should never be more than 2X your expected average career salary, and preferably much closer to 1X. However, this isn't a cut and dry question that can be dealt with via a simple rule of thumb. Just because some dentists settle for a $120K income doesn't mean you have to. On the medical side, while it may not make sense to take out $450K in loans to be a pediatrician, that doesn't mean you couldn't handle that as an orthopedist.
Basic Approach to Student Loans
I am referring more and more people every week to get student loan specific financial advice. I am also often asked for a good book or reference on the subject, but don't really have one that is up to date enough to recommend. However, a lot of people just need a basic overview of the key principles. Here they are:
The basic approach is this:
- Minimize how much debt you take out. Use other resources, get scholarships, work, and choose the least expensive schools that can help you reach your goals.
- Try to take out the most favorable debt possible. That might mean taking out a little more as an undergrad so you can take out less as a grad student, spreading parental assets out over all 4 years to avoid private loans, or having more mortgage debt and less student loan debt. It also means not taking out the loans until you absolutely need them, and maybe even then delaying them a year with a 0% credit card.
- If someone has to borrow for school, it should usually be the student even if the parent can borrow on better terms. Otherwise, disability/life insurance on the student should be taken out to at least partially protect the parent.
- Upon entering residency, decide between REPAYE and student loan refinancing. This is complicated given recent changes and the most likely time you will benefit from professional advice. As a general rule, lean toward REPAYE.
- Upon completing training, decide either to go for PSLF or refinance the loans (if you have not already.)
- Live like a resident until the debt is gone.
Credible
I brought on a new refinancing company recently as a blog sponsor. They're called Credible. The coolest part about Credible is that they allow you to apply with multiple companies with a single application. There are downsides, however, in that most of the best/most active refinancing companies aren't on their list of companies. Plus, of the ones that are (such as CommonBond,) you get a better deal by going directly to their site via my links, where you get a $300 cash bonus that Credible isn't currently offering (yes, I'm working on it.) At any rate, more options are a good thing so take a look if you're in the market for a refinance. Credible is also partnering with WCI to provide private medical/dental/graduate school loans. Same principle- one application, multiple lenders. Obviously you probably want to max out your federal loans first. [Update: You can know get a $350 cash bonus by refinancing with Credible. They do have some bigger lenders now (Citizens Bank, Purefy, CollegeAve). -ed]
Lend Key
Lend Key is also a newer refinancing company to the site. They are somewhat similar to Credible in that they work with multiple credit unions to find one that will refinance your loans. I'm a big fan of credit unions as their structure often makes for attractive rates and fees on loans and other financial products. I'd love to hear about your experience with Lend Key in the comments. 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.
How Much More Do I Pay To Refinance As A Resident
Four years ago, you couldn't refinance student loans at all. Even as recently as a year ago, you couldn't refinance student loans as a resident without a contract in hand. This year, Laurel Road and Link Capital started refinancing loans right as you walk out of medical school. However, a few readers called “foul” as they felt they were getting a bait and switch with the rates. They saw that these companies offer rates as low as 1.9% variable (awesome ATTENDING financials, 5 year term), but weren't getting anywhere near that. So I asked the companies what the deal was. Here's what they said.
Laurel Road doesn't disclose their exact pricing matrix to the public because it is proprietary and fluid but their pricing is based on the applicant's credit and risk profile, and that applies to residents as well. A signed contract gets you attending rates and you can even still get the $100 payments until you start working. But if you just started residency, your rates would be at the higher end of the published range. They can be lowered if there is a high-income co-signer. So if the 5 year rates are 1.9%-4.08% variable or 3.50-5.25% fixed, then you should expect your offered rate to be close to 4% variable or 5% fixed if refinancing as a resident. If you're looking at a 10 or 15 year term, rates would be higher.
Link Capital does not offer residents a variable interest rate. The fixed interest rates start at 4.75%.
Both companies allow you to refinance again upon residency completion. Refinancing with them in residency allows you to have lower in-residency payments ($100 with DRB and $75 with Link Capital) than you may have with IBR, PAYE, or REPAYE. Plus assuming the rates are lower than the loans you're refinancing, you're likely to save a lot of interest in the long run. Two caveats to be aware of prior to refinancing loans as a resident-
# 1 DON'T REFINANCE IF SOMEONE ELSE IS GOING TO PAY OFF OR FORGIVE YOUR LOANS. You don't want to refinance if you're going for PSLF.
# 2 Be aware that your effective interest rate during residency under REPAYE may be lower than the rates offered by a refinancing company due to the fact that REPAYE subsidizes half of the interest due. More details here. Resident refinancing isn't quite the no-brainer it is for an attending not working for a 501(c)3.
The Laurel Road Snafu
I had a few readers call “Foul!” last month on Laurel Road. Apparently, there was a computer snafu that was allowing residents who had refinanced to pay money directly to the principal on their loans, without even paying the accumulating interest. Obviously, that doesn't make any sense. Laurel Road eventually fixed the software issue that was allowing that. So if you got a few payments in during that time period, count your blessings, you weren't supposed to be able to do that under the terms of your loan. The way they were reporting the anticipated future (not actual) interest also confused a few people, so they'll likely make some website changes there to make it more clear.
Switching From REPAYE to IBR
Some astute readers have wondered if it is going to be possible in the future to switch back from REPAYE to IBR at residency graduation. That would allow the resident planning on PSLF to take advantage of lower payments in residency, but still be able to get maximal PSLF forgiveness. I'm still looking for clarification on this issue; if you have a good source, I'd love to hear about it. [Update: 1/13/16 – Jan Miller assures me that under current law you can switch between repayment programs once per year, but he worries, as you should, that law could change in the future-i.e. that once you're in REPAYE you're stuck in REPAYE.)
France isn't all fun and games
Just Do It!
Now, the more significant issue is there are still tens of thousands of attendings out there paying 6.8% or more on their student loans. You are not working at 501(c)3s. You'll have the loans paid off before you get any IBR forgiveness at 25 years, which is taxable anyway. REFINANCE YOUR DARN LOANS ALREADY! If you have $200K at 7% fixed, and change to 2% variable, that's $10K a year in after-tax money that goes into your pocket. I know from experience that pays for a very nice 14 days in France for two. Every year. Of course, YOU shouldn't spend it on that. You should be living like a resident and put that $10K toward your loans. Residents don't vacation in France.
Here are the links you need. All of them are affiliate links, which pay me if you use them. But for most of them, you get $200-550 cash back (put that toward your loans too) you wouldn't get if you went directly to their site.
New Bonus Disclosure
Earnest Welcome Bonus Offer Disclosure: Terms and conditions apply. To qualify for this Earnest Welcome Bonus offer: 1) you must not currently be an Earnest client, or have received the bonus in the past, 2) you must submit a completed student loan refinancing application through WCI link; 3) you must provide a valid email address and a valid checking account number during the application process; and 4) your loan must be fully disbursed. The bonus will be automatically transmitted to your checking account after the final disbursement. There is a limit of one bonus per borrower. This offer is not valid for current Earnest clients who refinance their existing Earnest loans, clients who have previously received a bonus, or with any other bonus offers received from Earnest. Bonus cannot be issued to residents in KY, MA, or MI.
“*Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. If you choose to complete an application, we will conduct a hard credit pull, which may affect your credit score. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Oct 10, 2020 and may increase after consummation.”
What do you think? How much is too much debt? What do you think is the best way to manage student loans? Have you refinanced your loans? Why or why not? Who did you use? Did you use Credible? How was the experience? Which lender did they end up pairing you with? Comment below!
Im a freshman in college right now and although my parents are trying to pay the 60k a year for my education i know inevitably i will have to take some student loans out. With college so expensive these days I can see my self being in a lump sum of debt! I appreciate the advice given in this article!
$60K a year for undergrad?! Wow! Generous parents.
Yea its those private universities that always cost the most! Sometimes i wonder if it would of been better to go to a state school for half the price and get the same education out of it.
I don’t wonder. I know it was better. 🙂
You CAN switch to different school…
Funny thing, the first thing we did last summer after paying off the student loans (despite being in PSLF)…take a two week vacation to France.
This comment is just a thank you note about student loans. Before I started reading WCI, I had some crappy financial advisor who had me paying the minimum on my 180k student loans, and investing 2000 a month in loaded mutual funds. When I finally smarted up, I fired him, sold my funds and paid off all my loans within 3 years of finishing residency. There wasn’t any magic to it, just kept living like a resident with only a few upgrades. Being student debt free makes everything else easier.
Well, guess I’m going to ask DRB to re-finance again after I finish residency this year, because I’m one of those that didn’t get anywhere near the lowest 1.9% variable rate they advertise.
Maybe I’ll give SoFi a shot this time…it’d be nice to pocket another $300.
It seems pretty easy to reapply once you’ve gathered the paperwork one time.
The only thing I’m not sure about is if there’s a good timing for this? Right out of residency? After 1 year of high attending salary?
I don’t see any reason to wait a year. Maybe a month or two. But I’d probably do it as soon as I had the attending contract in hand. You can always refinance a year later if they’ll give you a better rate. Especially at this time with expected rises in interest rates. Most of these companies have raised rates 0.25% in the last month along with the Fed, at least on their variable loans.
I wanted to ask if anybody had difficulty trying to refinance through DRB. I signed loan documents in October and DRB still has not followed through with the refinance. On questioning, their response was that they had several people attempt to refinance at that time, and they do not have the funds available. I was reassured all the paperwork is completed, and they will pay off the federal loans as soon as the money is available. My only issue is, the longer i wait, the longer my loans are compounded at 7% instead of 2%. Anybody have a similar problem? Should I move on? DRB did offer the best rate. If it helps, I’m trying to refinance a loan well below the national average in medical student debt, so the asking amount isn’t outrageous. Any thoughts WCI? I’ve been a long time reader and supporter. My financial knowledge and planning is drastically improved thanks to your work. BIG THANK YOU for all your help
That’s a new one on me. I know Link Capital was short on cash a few weeks ago, but I think that was resolved. I hadn’t heard the same for DRB. Let’s have my contact at DRB look into it. I’ll CC you on the email.
They both had that funding issue. It took 2-3 months for me to get a response back at which point I had already refinanced with LinkCapital.
I’ve got a new company coming on board now that also refinances loans in residency. Initial indication is that rates may be a little higher than DRB/Link Capital, but if the customer service/ability to fund the loan gets too bad, it may be a good option. REPAYE, of course, is also now a highly competitive option for residents.
I waited a month and they still couldn’t give me an answer on when the application would be processed. So, I went with SoFi, which only took 2 weeks.
Err– I waited a month with DRB.
I was approved by DRB in early September 2015 (still a resident). The payment to my previous (then current) servicer just came through last week. It literally took 4 months. DRB did take several days to a week to reply to each of my emails, but eventually responded to each one. In the end, they did actually make a $500 monthly payment to my previous servicer due to the delay. So far I have not been impressed with their customer service, though I have to admit the $500 payment went most of the way toward placating me. They have also agreed to pay the interest that has accumulated during the delay. Be persistent, and don’t be afraid to ask for compensation. If they’re unresponsive, I would hesitate to go somewhere else – I was very close myself.
not* hesitate
Glad they were able to help you out. Sorry for the hassle.
I had the same situation as you. My official close date was October 15th. They delayed it four times until they finally came through on December 15th. They just kept telling me they were short on funding to keep up with the massive demand to refinance. I called them nearly every week to see if there were any updates. This may have been a case of the squeaky wheel getting the oil, but who knows. After a few weeks they were very apologetic and sent me email updates on my status every few weeks. Good luck.
Glad it worked out for you eventually. Your comment makes a good point- the money to refinance your loans has to come from somewhere. It might be taxes/printing money from the government, or it is an investor’s money eventually routed to you through the financial system. It’s not the magic money box. When it’s empty, it’s empty, and keeping it from getting empty has been a challenge for all of these companies over the years.
They gave me credit for the difference in interest rate.
I had about $50000 in med school loans with average interest rates of about 5.4% that I refinanced this past spring with DRB at 3.5% with a 5 year pay-off period based on ads I saw on facebook and on your blog. I got the $300 credit by doing the refinance through the link on the WCI blog! I didn’t have any issues with the loans getting funded, but maybe that wasn’t an issue with DRB last spring. The monthly payment with DRB is much higher than the monthly amount I was previously paying, but since the rate was so much lower and I’m an attending now, the higher monthly payment isn’t a big deal. I have about $100000 in other student loans with an average rate of about 3.25% so I didn’t refinance those loans and I’m currently just paying them at the lowest payment so they won’t be paid off any time soon. In 5 years when the DRB loan is paid off, I should have about $81000 in other student loans remaining and I figure I can just take the ~$920/month I’m paying to DRB and use it to pay off my remaining loans faster if I don’t make more money in the mean time that I can use for that same goal.
My other debt is a mortgage and while I’m not on track to achieve your level of financial success so quickly after finishing training, your blog and book have helped my wife and me come up with a much better financial plan than we previously had. I just wish I had come across your advice a few years sooner. Would likely have made some different choices… Anyway at this point rather than rapidly paying down the other $100000 in student loan debt, we’re just continuing to avoid other debt, trying to get up to 20% savings (about 13% last year, should be much easier this year without a move sucking up all kinds of money), and maxing out tax deferred savings opportunities. Thanks for all the great suggestions you have provided!
I think if you’re still working on getting retirement savings up to 20%, then you’re probably going about this the right way (i.e. not paying off loans faster.) You might consider a tighter budget, of course, although it is hard to cut back on lifestyle.
My situation is a bit unique. I have about 80K at 6.5% in federal loans from medical school. I worked my way through college, so debt free undergrad. I got married in May and my wife has 80K at 7.8% in private loans from undergrad so I am working on getting our debt at a minimum rate. Her loans are not eligible for any graduated repayment so I am working on getting the lowest rate and lowest monthly payment while in training (Internal Medicine 2nd year, bound for Heme/Onc). My strategy has several iterations. I have consolidated her loans into my name so they will be eligible for MD specific refinancing programs and my credit score. Hopefully the consolidated loans will only exist for a few weeks during the refi process.
Plan A: Step 1 consolidated loans from 7.8% fixed -> 6.5% variable. Step 2 attempt to refinance all 160K with DRB or Link Capital (100/mo and 0/mo repayment plans in training) Step 3 pay down as much as possible during training, but have flexibility depending how much she can work after our 1st baby is born in March Step 4 after graduation, refinance to a 5 year and pay them off in 3-4 years.
Plan B (if DRB/Link fall through): Step 1 consolidated loans from 7.8% -> 6.5% variable Step 2 refinance 80K at 6.5% variable to the lowest monthly payment option and keep my Federal loans in PAYE to minimize our obligate monthly student loan payments. Step 3 after graduation, refinance everything to a 5 year and pay them off in 3-4 years.
*important insight* if you refi with DRB or LinkCapital, they repayment term starts at graduation meaning you can get a 5 year term loan for a much lower interest rate than a 10, 12, or 20 year and can make payments throughout residency while you are in “deferral”
Experience so far:
Plan A: Link Capital has not been accepting new applications for at least the last month. They keep claiming it is due to website issues. I’m wondering if it’s more of an issue with funding. Re-fi application pending with DRB.
Plan B: SoFi application was super quick and they offered a great fixed 20 year loan at 5.375% saving tons of money compared to initial 7.8%. CordiaGrad (via Credible) offered a much higher interest rate (5.7%) and a max repayment term of 12 years. Citizens Bank good rates based on Credible’s quote, but won’t refinance until at least 3 months of repayment demonstrated (since I just consolidated her loans into my name they have 0 months of history).
Overall, in the best case scenario above I will be ahead at least 30K by the time the loans are paid off. Couldn’t have done any of this without learning a ton from WCI. Thanks so much for the site!
You’re very welcome.
That’s the first time I’ve heard of the strategy of pulling a spouse’s loans into yours. That works great if you die and she doesn’t, but obviously doesn’t if the opposite happens. Better make sure that marriage is stable too! I think I’d probably generally recommend against that sort of thing and didn’t even realize it was allowed.
I think part of the difficulty in figuring out what is too much debt is it’s probably very different at different income levels. Someone with a higher income will always have more potential disposable income which can go to debt repayment. Someone making 20K per year and paying back a 40K loan is in a much worse position than someone making 200K and paying back a 400K loan–now that’s assuming the 200k person didn’t make all the stupid doctor mistakes of buying a McMansion/car/etc. If you live like a resident, you can pay that back relatively quickly; while the 20K person doesn’t really have much he can cut back on. I imagine there are other factors like cost of living, getting married, having kids–but even then, you can have a pretty good lifestyle and still payback the loans.
This is just me thinking abstractly; someone much smarter than me could probably make a chart that shows income level vs manageable debt–like 20K is 10% of income, 50k is 50% of income, 100K is 150% of income, 200k is 200% of income (I just pulled those numbers completely out of the air). Different charts for married/single/kids/high vs low cost of living area. Of course, you can’t really predict what you will eventually earn before you even start med school given the differences in specialties.
I don’t know if these charts would serve any actual purpose, I was just a little bored today, so thought I’d post something.
Excellent points.
I think another important point to think about is the potential peace that comes along with refinancing. I do not have a terrible loan burden (~138K), and after doing various calculations figured I could save between 10K and 30K doing PSLF. However, if I don’t find a 501c3 job at the end of residency, the difference between refinancing now vs at the end of residency was going to cost around 30K. I decided partially for the peace of mind factor (we have a set plan that is not dependent on government actions or future jobs) and partially bc the job market for 501c3 positions around me in my specialty isn’t great, that refinancing now was the best decision for my family. It may end up costing us some money, but 30K over 8 years is a small price to pay for that peace and freedom with being able to look for any job I want. I have a nice situation with a lower than average student loan burden and a spouse that is an NP which also helped make the decision easier to make for me.
BTW, I refinanced with DRB in October and have a fixed 4.1% rate as a resident and didn’t have problems with the disbursement. I stayed on top of them though and was in frequent communication.
That’s a great resident rate.
I have significant medical school debt and have been waiting over 2 months to get a response for DRB and have found their customer service not ideal. I am glad I read this because I will look into Link Capital. I would think these places would have better customer service when you are providing business.
If you would like me to forward your issue to someone at DRB, send me an email. Many readers have had their issues with DRB or other companies resolved very quickly that way. Obviously their plan isn’t to make you wait 2 months for a response. They wouldn’t have any business at all if that was their usual manner of doing business.
I am having problems getting my loan from DRB.
I had put in my paper work at the end of november 2015, and it still has not disbursed. I am concerned because I already took out a 1 month deferment on my loan thru younomics (loan from undergrad) and the deferment will end this week. younomics seems like a pain to defer again, as they specifically said one month and wanted an approval letter.
If you’d like me to forward something to my contact at DRB, please shoot me an email. We may be able to speed things up for you.
I had trouble with a number of the links that don’t provide loans to South Dakota residents. The other question I have is if it’s worth refinancing ($189,948 at 6.8%) when we’re planning on paying off all the loans within 2 years (Dave Ramsey plan). Any input?
Sure, just use a 5 year variable. You may save something like $8K, and that’s like paying off your loans a month sooner and going to Paris with the next month’s “payment.”
I thought would throw this old post from WCI in. https://www.whitecoatinvestor.com/debt-ratios-from-your-money-ratios/
The post is also an excellent review of this book called Your Money Ratios by Charles Farrell. This is more of a proactive understanding about student loans that may not apply to many readers of this blog at this time. However there is a other discussion in your post about other loans that my be helpful.
I’m in a position where I don’t believe I have any real reason to refinance my student loans–at least not yet. I finished residency with 139k in student loans at 5.25%, which has been reduced to 84k thanks to payments that I have made and 50k tax free from the NHSC. My monthly payments are thus currently ~$900 per month, and my employer conveniently provides me with $1,000 per month in student loan repayments guaranteed until my student loans are paid off. The way that my contract is written (base pay + productivity over base pay), this really is additional money and not just something I could easily tack onto my base pay. So I have every reason to drag my feet and keep my payments under $1,000 per month that my employer provides unless I ever change jobs. I’m up for renewal of my NHSC contract in 18-months for $20k per year, and at that point, I might consider refinancing, as I could go with a 5-year payment plan that would save me interest and keep my payments under $1 per month.
Seems reasonable.
We have been hearing about issues with DRB through our clients. I am not sure what the deal is… Was curious if others had experiences similar. Basically the issue is that DRB is dropping the ball on closing the loans out. Maybe their loan demand has become higher than supply? Anybody had issues with this?
I hear of occasional issues, but it’s a tiny minority of the folks I’m sending there. If I can help with something/someone specifically let me know.
I am fortunate that I will receive some help with the cost of medical school and my parents have also thought of loaning me a portion of the cost, to avoid the interest accrued during medical school on a typical loan. My question is, after medical school would I be able to refinance my parent’s loan with a traditional lender? If so where and what should I be looking at? What would be things we should consider before proceeding with this type of arrangement?
Probably going to have a hard time refinancing that loan since it isn’t an official student loan and I don’t know of a way to make it one. You could prioritize paying it off I suppose. If getting that money back in just four years is a big deal for your parents, I wouldn’t take the loan. My general opinion is that if someone needs to borrow for med school, it should be the student. If you do go down this route, make sure someone has bought some life and disability insurance on you, just in case.
Your remarks about DRB’s bait and switch are correct. When I applied for a loan from them in the Summer of 2015, the rate I got (with outstanding credit >790) was higher than many of my federal loan rates (5.5 was the fixed 10 year rate they offered, I believe). I asked Aaron Pisacane to clarify the situation, and he told me, as you stated in your post, that the best rates were for residents with signed contracts and attendings.
I was disappointed, as I told Aaron, that this was not disclosed on the website (not even in the fine print!). He was a good listener on the phone, and seemed genuinely interested in addressing the accidental misrepresentation. Unfortunately, months later, the website still does not specify that most residents would not qualify for the best rates even if they have perfect credit.
Based on this, I would not re-apply with DRB. They knowingly misrepresent the rate available to residents, and have not taken the chance to correct this mistake. I also hope that EmergDoc holds his advertisers accountable for clear and accurate advertising, especially when he does sponsored posts that extoll the benefits of residents financing with DRB, benefits that are not available to most residents.
There are no sponsored posts on this website. I sell ads. I have affiliate marketing relationships. DRB has advertised using both of those methods. But no sponsored posts. I resent you accusing me of that because I turn sponsored posts down several times a week and have routinely done so for the last 5-6 years. My relationships with any financial firm mentioned on the site are very clearly disclosed.
If you are being given a rate within the range of their reported rates for that product, it isn’t false advertising or “bait and switch.” You simply assumed that your rate was 100% dependent on your credit score, which is inaccurate. Many people have made that assumption, so I don’t fault you and that is the reason I wrote this particular post-so more people would not make that inaccurate assumption. As noted in the post, if you are a PGY1, expect a rate in the high end of the range for the product you’re interested in. If companies thought they could make money by lending you money at a lower rate, they would do so. Nobody is stopping any other company from coming in and refinancing you at 3%. The fact that they aren’t doing it tells me they don’t think it would be a profitable idea.
You seem upset that DRB doesn’t reveal how it decides who to loan money to and at what rates. Put yourself in their shoes- are you going to show your competition all of your proprietary business practices? Do you know any lenders who do that? I can’t think of any and I wouldn’t do it. Therefore, I think it is probably not appropriate to expect that.
If your federal loan rates are better than what DRB is offering, then stay in the Federal program. Now with the arrival of REPAYE, that will be the case for many residents. But don’t complain that no one will give you a better rate. From ~2007 to ~ 2013 even attendings couldn’t refinance their loans. And until 8 months ago, no resident could refinance at all. All you’re out for going through the application process is your time and hassle.
Hi! Thanks for the quick reply.
Looks like my tone was a little off on my comment. I was wrong about the sponsored post; please accept my apology. And, truthfully, I would have had no problem if it was a sponsored post (I didn’t mean it as an insult or accusation, I promise!), as you are really good about disclosing any conflicts. I’m a loyal reader because I believe you have integrity. I’ve bought your book, and sent colleagues to your blog…so, I’m sorry if I came across as a jerk.
My issue is that the majority of people applying for the resident refinancing are not eligible for the lowest advertised rates (regardless of credit score), as they don’t have a signed contract. I’m guessing that the majority of applying residents do not have contracts in hand.
To your statement, “You seem upset that DRB doesn’t reveal how it decides who to loan money to and at what rates. ” I’m not upset about this, and was not very concerned about how they decide who to loan money to and at what rates. I’m disappointed that they give a range of interest rates offered to residents, when, truly, that range only applies to a small subset of soon to be graduating residents with contracts in hand. Had I known the range for residents without contracts, I would not have applied for the loan. I’m guessing that there are a few other folks like me.
My heartfelt apologies for any offense I caused. This is honestly the first time I have posted in an online forum in recent memory; I avoid them like the plague because I see these types of misunderstandings crop up in comment sections around the internet. Lesson learned today…don’t post a hasty comment on the internet again 🙂
Is there actually a place on their site where they list “resident rates?” Or is it just the standard rate chart?
I mean, I agree if it says:
“These are the rates available to residents 2.5-5%” and the only residents getting 2.5% are really attendings, then that’s bad on them. But as I recall, the site says, “these are the rates: 2.5-5%.” Which doesn’t seem unfair to me. Sure, it would be nice to know you shouldn’t have wasted your time, and most of these companies give you a rate estimate within a couple of minutes, but I’m not sure DRB does that.
Standard rate chart. No, they don’t provide a rate estimate, at least not when I applied.
I can’t argue with your logic. You are right, if someone could qualify for the lowest rate, it is not untrue to post it. Lets say that their model only allows anesthesiologists who have practiced for at least one year and have an income over $500k to qualify for the lowest rate, the standard chart would not be untrue.
I guess we’ll have to agree to disagree on what is unfair, because I think it is not fair to post rates that most residents would not qualify for.
If it is one rate chart for everyone, it’s one rate chart for everyone. The FP with an income of $150K, a credit score of 650, and $450K in student loans is not going to get the same rate as your anesthesiologist. Which one of those two is a resident more similar to? Do you think it is unfair to post rates that an FP with a terrible debt to income ratio won’t qualify for? I mean, obviously everyone wants the best possible rate, but there’s a range there for a reason.
Many WCI readers have gotten the very lowest rate they offer. I agree it was unclear for a few months whether residents could get that rate and that it is good that has since been clarified. If I would have thought to ask that question earlier so I could tell readers, I would have done so. It’s not like there is any profit to me to have you waste your time only to find out your federal loans are better than what DRB can do for you. If they can’t hook you up, I don’t make squat on an affiliate deal.
Question – if you pay early with SOFI do you get the benefit of paying early or do you still have to pay the interest based on your 5 yr or 10 yr plan?
Thanks
No, you get the benefit. Paying down a 3% loan early is like buying an investment with a guaranteed 3% return.
Hi,
I tried applying for a refi with Link Capital but they’re not accepting applications at this time. Per the thread, DRB is having issues. Anyone else experiencing the same?
Thanks
DRB is responding well to me, but I haven’t heard back from my contact at Link Capital from an email I sent a few days ago. Not sure what’s going on there. If you’re a resident, those are your only two choices currently. If you are an attending or a resident with contract in hand, shoot, check out the other options. Plenty of competition in this field.
We are also having issues with DRB’s response time. We applied for my husband’s loans on January 8th (so it has been just under a month). I have called a few times, and their standard response is that they are unable to provide a time estimate for the loan being at underwriting. So far we have received a few “auto-batch” incomplete emails, which they have told us to disregard. Has anyone had success in closing with DRB in the past month?
I am a resident in my final year of training, who just accepted a private practice job back home. I have been trying for 4 months now to get a decision from DRB on refinancing my loans. I have not had a good experience with their customer service and have gotten very frustrated with the extensive wait period with no indication of when I will have an answer. I also looked into Link Capital and while their customer service has been much improved, they are backed up on loan applications and currently you cant even submit an application for loan refinance.
If you have a contract in hand, you are not limited to DRB and Link Capital. Why not take a look at Sofi, Earnest, Common Bond etc?
Funds are limited for all of these companies, but I hear it least often for SoFi.
I am blessed that I will get some assistance with the expense of restorative school and my guardians have likewise considered advancing me a bit of the expense, to evade the interest collected amid medicinal school on a common advance. My inquiry is, after medicinal school would I have the capacity to renegotiate my guardian’s credit with a conventional moneylender? On the off chance that so where and what would it be a good idea for me to be taking a gander at? What might be things we ought to consider before continuing with this sort of course of action.
Probably not. That would be a personal loan and not a student loan. While you could get a personal loan and pay them off, the rate is probably going to be higher than what they’ll loan you money at. Remember the interest you pay is taxable to them and if they charge you less than market rate, the difference is taxable to you at least above the gift tax limit.
Good article.
Refinanced resident with spouse co-signer, 15 year variable rate, currently at ~3.60% with DRB. It’s adjusted up a couple of times but 3.6% is still a long way’s off from 6.8%. I love seeing that principal balance fall as opposed to making no progress on the federal loans.
We’ll be vacationing for two weeks to Italy and France in a couple of months 😉 Can’t do everything right, of course.
I love both France and Italy. Enjoy your trip. Then get back to work on your loans when you get home!
Hi, and completely agree about the importance of the growing debt issue, out of state tuition for some students is getting to be incredibly high. The emphasis on living like a resident until the debt is gone is spot on, if we can just resist the lifestyle inflation temptation for even 2 to 3 three years post residency, that can make all the difference.
At the current rate of tuition increase and salary decrease, it won’t be long before living like a resident for 2-5 years after training is the ONLY way to make paying for med school with debt work out okay in the long run.
Thanks for the great article. I am new to trying to understand my finances and student loans. Recently I met with a local financial advisor to get organized who told me he didn’t know anything about medical school loans but that I should probably consolidate. Here is my situation, I’m in my last year of residency with a 1 year fellowship to start in June. I have 320K in medical school loans, all federal, most at 6.8%, currently in forbearance. There are 20-30 different loans. I will most likely be heading to private practice after I finish, with starting salary ~300K. Should I be looking to hire a student loan expert to help me figure out when/how to consolidate? Or is this a straightforward situation that I can handle myself with a little education. I am worried because the amount is so high and there are so many loans. Thank you!
Definitely refinance. Different than consolidating. Refinancing actually gets you a much lower rate. If you are aggressive about paying down the debt, then go for a 5 year variable or fixed term. You could probably look at a fixed rate of 3-4.5% which could save you at $9K per year in accrued interest. Sofi is the quickest to respond in my experience and also have good rates. DRB is taking forever to get back to me. I still haven’t heard from them in over 6 weeks. It will be onerous to get all of the documents together for your 30 loans but that’s worth $9K to me, although I am just a humble internal medicine resident 🙂
What good is meeting with a financial advisor who knows nothing about your most significant financial issue?
You can certainly hire a student loan expert. You can find one here: https://www.whitecoatinvestor.com/other-resources/ and most of the general financial advisors on the site are quite good with student loans. You can find that list here: https://www.whitecoatinvestor.com/financial-advisors/
Personally, I think it’s pretty straightforward in your case. You’re not going for PSLF because you’re going into private practice and besides you failed to enroll in IBR/PAYE/RePAYE etc. So eventually, you’re going to want to REFINANCE (not consolidate) the loans with a private lender. The only possible issue you might have is what to do with the loans until you finish fellowship. Refinancing is an option (although you’ll probably want to do it again upon completion of training.) Going into RePAYE is likely a better option. Or you can just let them sit there in forebearance but it’ll cost you a few thousand extra in interest compared to refinancing or RePAYE. Forebearance or refinancing during residency will get you the lowest payments for now, but RePAYE will most likely decrease the amount of interest tacked on to the loan compared to the other options.
Thank you very much for this response! I was actually in IRB for all of residency until several months ago when for unexpected circumstances I needed the extra money so switched to forbearance. As for said financial planner- I haven’t been back to him. Not impressed.
Thanks for the summary article. I am a little confused on the details of the refinancing, though. I feel I have a relatively regular debt burden compared to my peers. I will be finishing training soon and my anticipated income is 200k. I want to just pay it all off instead of doing PSLF. I have about 40k in subsidized (no interest!) and 200k in unsub at 6.55% with a total accumulated interest of about 25k. Would there be any benefit from me paying off the interests on these loans first, and then refinancing all my loans with someone like SoFi? Or should I refinance ASAP? I ask because I think that Sofi would add all my current accumulated interest into my principal, or don’t they? And would there be any benefit to refinancing just my unsubsidized loans with someone like SoFi, and paying standard payments on my subsidized loans since they are not accruing interest?
Just refinance as soon as you have a contract in hand for your first attending job. This is pretty straightforward if you are an attending and know you’re not going for PSLF. Presumably your subsidized loans won’t be subsidized much longer. It’s fine to just refinance the unsubsidized ones for now, but figure out how long until the subsidy is gone.
Thank you so much for your reply. I called and found out that the subsidy will be gone very soon (I have been doing IBR). I didn’t know that the interest for the subsidized loans would be subsidized only for 3 years under IBR – darn. So, now I will be looking at private lenders to decrease my overall interest rate after residency – which is what you’ve been saying all along so it all makes more sense now. Now, life would be a little better if I could just get a 4% fixed rate and pay via credit card so I can get airline miles.