Student Loan Refinancing Guide

Student loan debt is increasingly becoming a contributor to stress, burnout, and even suicide in doctors and other high-income professionals. Refinancing private student loans is a no-brainer anytime you can lower your interest rate, even as an intern. Direct federal student loans should be refinanced as soon as you know you will not be trying to qualify for Public Service Loan Forgiveness (PSLF) and you can get a lower interest rate than your effective rate after the REPAYE subsidy is applied.

If you are undecided about going for loan forgiveness or private refinancing, take a deep dive into our Ultimate Guide to Student Loan Debt Management for Doctors.

 

Refinance Medical School Loans

It is best to refinance medical school loans early and often, especially if interest rates just drop or you discover another company is offering a lower rate than your current lender. If you refinance through the links on this page, you will get a cash bonus. WCI also gets advertising compensation from these companies when you use these links. It is a win-win. As you pay down your loans, your credit score and debt-to-income ratio will improve, possibly lowering your rate.

You can do this and WCI can help! We want you to be successful, so we are going to give anyone who refinances more than $100,000 in student loans through the WCI links free access to The White Coat Investor’s Flagship course, Fire Your Financial Advisor. Not only will you continue to get the amazing cash rebates that we have negotiated, but now you will also get another $799 in value. Join more than 5000 other professionals who have created their own Financial Plan with the help of The White Coat Investor.

If you have clicked through to these lenders from a different website, you will need to clear the cookies in your web browser before you click any of the WCI links below to ensure you are identified as a WCI reader (and get our best rates and bonus cash back).

Offer valid for loan applications submitted from May 1, 2021 through October 31, 2021. Free course must be claimed within 90 days of loan disbursement.

To claim free course enrollment, visit www.whitecoatinvestor.com/RefiBonus.

 

Best Student Loan Refinance Companies

 

Table of Contents

• What Is Student Loan Refinancing?
• Should I Refinance My Student Loans?
• Who Should Not Refinance Medical Student Loans?
• Pros and Cons of Refinancing Student Loans
• Consolidate vs. Refinance Student Loans
• When to Refinance Student Loans
• How Much Can You Save by Refinancing?
• How to Refinance Medical School Loans
• Compare Student Loan Refinance Companies
• How Does Refinancing Student Loans Affect Taxes?

 

What Is Student Loan Refinancing?

Doctors often accumulate multiple loans from both private and federal loan programs to fund their medical schooling. Student loan refinancing is when you seek out a private lender to replace those loans with a brand new loan at a new interest rate and terms. Refinancing is free, can be done over and over, and can save you a lot of money by lowering your interest rate.

Student loan refinancing is NOT the same thing as a Federal Direct Consolidation Loan. Consolidation is the process of combining multiple federal student loans into one federal loan.

 

Benefits of Refinancing Your Medical School Loans

En route to debt elimination, most professionals should take advantage of the ability to refinance their debt with a private company. It is usually a no-brainer (assuming loan forgiveness is not an option), because you can lower your monthly payment and the amount of money you owe over the life of the loan, in addition to paying it off quicker.

Eliminating your student loan debt at the beginning of your career will increase your happiness and speed your way to financial freedom, allowing you to take advantage of future opportunities, both professional and personal.

You Save a Ton of Interest

If you have $300,000 in student loans at an average rate of 7% and refinance that to 2.5%, you will spend $13,500 less in interest in the first year alone. That is $13,500 that can go toward principal instead of interest. The same monthly payment that would pay off a 7% loan in 20 years pays off a 2.5% loan in less than 10 years. A 10-year loan becomes a 6-1/2-year loan. A 5-year loan goes away in less than 4.

You Get Cash Back Now

As if saving tens of thousands of dollars in interest isn't enough, as a little extra icing on the cake WCI has negotiated a special deal for you with each of the main refinancing companies! When you refinance, you get some money back (and you help support this site). If you're smart, you'll throw those dollars saved into paying off your loans.

You Get Better Service

No company is ever perfect, but compared to the service you were getting from your federal loan servicer, these guys might seem like it. You can get people on the phone, a functioning website, and can easily make extra payments to pay your loans off even faster.

You Get a Quick and Easy Way to Make Money

When refinancing companies first showed up in 2013, there were lots of kinks to work out. Well, they've all been worked out. Now you can get a preliminary quote from most of them online in 5 minutes or less.

If you have all of your loan paperwork handy, you can usually upload it electronically in a few more minutes. Once you've gathered the paperwork to refinance with one lender, checking your rate with a couple of others is no big deal either (and I recommend you do so).

I don't know how long it takes you to make $13,500, but I guarantee refinancing your loans will take less time, especially since it is all after-tax money.

 

Should I Refinance My Student Loans?

 

 

Do I Have Any High-Rate Student Loans That Aren't Federal Loans?

These include any private medical school loans you may have taken out. Those aren't eligible for the RePAYE interest subsidy and not eligible for PSLF, so you might as well refinance them if you can get a lower rate (which you usually can).

 

Am I Sure I Will NOT Be Going for Public Service Loan Forgiveness (PSLF)?

PSLF is a program where any remaining direct federal student loans are forgiven tax-free after you make 120 on-time monthly payments in a qualifying program while working full-time for a qualifying employer.

If you're absolutely positive that working at a 501(c)(3) and going for PSLF is not in your future, then you can consider refinancing federal loans. If you're not sure, don't refinance!!

Refinance or PSLF?

• If you're sure you won't work at a 501(c)(3) and going for PSLF is NOT in your future  →  Refinance
• If there's a chance you will work at a 501(c)(3)  →  Don't Refinance
• Debt-to-income ratio of 1.25 or lower  →  Refinance
• Debt-to-income ratio of 1.25 – 2, run the numbers on refinancing vs PSLF. The longer your training (residency, fellowship, internship), the better PSLF is.
• Debt-to-income ratio of 2 or higher  →  PSLF
• Weigh the risk of not being awarded PSLF
• Decide on PAYE vs REPAYE
• If deciding between PAYE and IBR (Income-Based Repayment)  →  Choose PAYE
• If heavily indebted and unable to work at a 501(c)(3)  →  Consider REPAYE/PAYE

You can learn more about PSLF vs refinancing by reading Refinance and Pay off or Go for PSLF. If you're needing help understanding federal student loan programs like PSLF, PAYE, REPAYE, IBR, IDR, etc, you'll want to also familiarize yourself with our Ultimate Guide to Student Loan Debt Management.  If you don't want to wade through blog posts and DIY your student loan management, set up an appointment with one of our consultants at StudentLoanAdvice.com. You'll have an experienced professional to answer your questions and guide you through your best options.

If you're not going for PSLF, then refinance today! With companies out there offering 0% for 6 months and cashback bonuses, it really makes the decision easy.

 

What Is the Effective Rate of My Federal Loans Under RePAYE?

This will differ for everyone, but if you are a married resident with kids and have a stay-at-home partner, your effective rate could be as low as half of your loan interest rate. If you are married (and filing Married Filing Jointly) with your orthopedic surgeon partner, it is likely equal to your loan interest rate. Everyone else will be somewhere in between. So log in to the federal system and figure out what your RePAYE payment will be. (While you're at it, enroll in RePAYE ASAP—even before your graduate med school.) Once you know your payment, you can calculate your effective interest rate.

If your RePAYE payment is $200, and you have $200K in loans at 6%, then your monthly interest charge is 6%*$200,000/12 = $1000 per month. So essentially, you pay $200 a month, $400 a month gets added to the loan balance, and $400 a month is forgiven. Your effective interest rate equals:

6% * ($200 + $400)/$1000 = 3.6%

Bear in mind that this effective rate is likely to change every year of your training along with your RePAYE payment as your income fluctuates.

 

What Rate Can You Get from Student Loan Refinance Companies? 

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 with the best cashback bonus.

Check Your Refinance Rates

 

Student Loan Refinance Requirements

Lenders take many factors into consideration including your:

• Income
• Job History
• Savings
• Credit Score
• Debt

The better you are in each of these categories, the better the rate you will generally receive.

Private practice physicians who refinance often have a combination of these factors:

• Household debt-to-income ratios below 1.5
• A spouse that could NOT benefit from PSLF
• Smaller family size
• Desire to reach financial independence from medicine as fast as possible
• A spouse that earns a lot of money but who also has a minimal amount of debt

 

Can You Refinance Federal Student Loans?

Yes, you can refinance federal student loans, but should you refinance them? With the federal student loan interest rate at 0% since March 2020, many borrowers have held off refinancing federal student loans. 0% is obviously a great deal but this federal loan interest moratorium is due to expire on September 30, 2021, and supposedly, interest rates will go back to normal. Uncertainty remains, however, surrounding what the Biden Administration will actually do come Summer's end. Should you refinance now or continue to hold off?

There is one way you can refinance today, lock in a low long-term interest rate, AND still keep a 0% rate in the short term. Common Bond is offering 0% for 6 months when you refinance at least one federal loan. That's an even better deal than the government and a huge reason to consider refinancing today. 

Are there key considerations when moving from federal to private loans? 

Yes. The government offers very real, very legitimate benefits, such as:

1. Loan forgiveness
2. Repayment programs
3. Longer forbearance and deferment periods
4. More generous loan discharge if you pass away or become totally or permanently disabled before loans are paid off or forgiven

When moving from a federal to a private loan, you’ll lose some benefits. If you’re going to lose federal benefits, you better get the best deal.

A couple of disadvantages of moving to private loans include:

1. Less flexible repayment options
2. High payments in early career years when income tends to be lower (except the small payments offered in residency)
3. Inability to convert private loans to federal loans
4. Private loans tend to have shorter forbearance periods that are commonly limited to a year, while federal loans have longer deferments and forbearances available to borrowers
5. Death and disability discharges are less common
6. Private loans don’t offer nearly as many loan forgiveness programs

 

Can You Refinance Private Student Loans?

Yes, always shop for better interest rates on your student loans! Refinancing rates are historically low, so if you have private student loans and are not going for PSLF or getting a REPAYE subsidy, it is worth it to see if you can save even more money by refinancing those again.

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 refinanced previously, you can do so again and should whenever rates drop (and if you go through a different company, you can even get another cashback bonus). There is no break-even period since there is no cost to you to refinance, so keep refinancing over and over until you have obliterated those student loans! 

Compare Your Rates and Get Cash Back

 

Can You Refinance Medical School Loans Multiple Times?

Perhaps you didn't get the best rate when you refinanced due to your credit score. Or perhaps interest rates have dropped. Or now you qualify for a 5-year term or you decide to change to a variable rate loan. There is absolutely nothing stopping you from refinancing again.

In fact, it's probably a lot easier since you now only have one loan to enter the information for. And yes, you get the bonus money every time you do it. In fact, probably even the refinancing companies like it when you do this. They've already sold your previous loan off to investors. Doing it all again means more business for them.

See How Much You Can Save 

 

Can You Refinance Subsidized Student Loans?

Yes. But, remember subsidized loans will not accrue interest while you’re enrolled in school. Once they are converted to private student loans they will likely begin to accrue interest.

 

Do You Have to Refinance All Student Loans?

No, you can refinance one or all of your loans.

 

Can You Refinance Your Student Loans While in Your Residency?

It depends. Some refinancers will work with you while you’re in residency. Others wait until you’re an attending.

 

Can You Refinance Your Federal and Private Loans Together into One loan?

Yes. Private loan servicers can consolidate all your federal and private loans together. They can even consolidate your partner’s student loans with yours into one loan.

 

Who Should NOT Refinance Medical Student Loans?

Refinancing and paying down your med school debt in less than 10 years (and preferably less than 5) can be a wonderful way to race to financial freedom. Once you’ve refinanced, however, you can’t go back. The refinancing decision warrants an abundance of caution if you have a combination of these characteristics:

• Potential that you might go for PSLF (obvious)
• Large family size
• Household debt-to-income ratio above 1.0 – 1.5, with no expectation that you’ll hit this level within 5 years (ie you earn $200,000 but have more than $300,000 of debt)
• Physicians who would like to go part-time or work less for family reasons
• Some physicians married to higher earners that also have large students loans
• Spouse with low or no income

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.

 

Recommendations on Refinancing vs REPAYE

1. If you have private loans, refinance them now as long as the rate you can refinance to is lower than what you now have.
2. 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. Don’t forget about your interest capitalization when switching repayment plans.
3. If you are going for PSLF and are part of a dual-earner family, get some professional advice about your student loans.
4. If you anticipate refinancing your federal loans after residency, weigh your effective rate under REPAYE against the rate you can refinance to and take the lower one.

 

Pros and Cons of Refinancing Student Loans

 

Consolidate vs. Refinance Student Loans

Although these terms are often lumped together, they are very different things and both require your consideration. It’s best to make the decision to consolidate or private refinance at the end of medical school.

 

When to Refinance Medical School Student Loans

Look to private refinance your student loans when:

1. You’ve graduated and aren’t pursuing loan forgiveness
2. Can obtain a private refinance rate lower than the effective interest rate after your REPAYE subsidy is applied

 

Medical School Loans During Residency

If You Will Go for PSLF

If you are going for PSLF, then, if at all possible, stick with PAYE. If this is not possible, choose carefully between IBR and REPAYE based on your expected salary and how much more you'll have to pay as an attending under REPAYE. If utilizing IBR, be sure to consider the resident cash flow issue you will have with IBR.

If You Are Unsure About PSLF

If you are not yet sure about PSLF, then, if at all possible, stick with PAYE. Otherwise, run the numbers with reasonable assumptions and take your best guess between IBR and REPAYE.

• REPAYE is probably the better way to decrease interest accumulation if you're leaning toward paying the loans off.
• IBR may be a better option if you have a high-earning spouse, because you can file your taxes separately and separate your high-earning spouse’s income from your student loan payment calculation.

If You Will Not Go for PSLF

If you are sure you're not going for PSLF, then get refinancing quotes ASAP from the recommended private refinancing list and compare them to your effective interest rate under REPAYE. Go with the lower rate, realizing that the variable rate may be the best deal, even with the additional risk.

Recommended Reading: A Step-By-Step Guide to Refinancing Your Student Loans During Residency

 

How Much Can You Save by Refinancing?

By refinancing your medical school loans you can save tens of thousands of dollars over the life of the loan, in addition to lowering monthly payments.

Are you still asking yourself if it is worth it to refinance student loans? Not only can you save money by refinancing through our partners, but we’ve also negotiated to get you cash back when you refinance through one of our links. And we’ll throw in our flagship FYFA course ($799 value) at no additional cost if you private refinance at least $100K using our links.

See How Much You Can Save  

 

Which Student Loan Term Is the Best Deal?

If you want the lowest rate possible (sub 3%) that means you're going to have to commit to a variable 5-year term and run the interest rate risk yourself. That means if interest rates go up dramatically soon, you may end up paying more in interest than if you had taken a fixed-rate loan.

However, I think that is a risk worth running for anyone willing to commit to living like a resident for 2-5 years until the loans are gone. If rates only rise a little, or rise slowly, or don't rise for a few years (or at all) you're going to come out ahead. Once you run the numbers on just how much and how quickly rates have to rise for you to lose this bet, you will likely be much more comfortable with it.

Also, if you're committed to living like a resident and getting out of debt quickly, you likely have A LOT of slack in your budget and can easily cover the worst-case scenario. Plus, you now have a little more motivation to live efficiently and get out of debt. A variable rate loan not only gives you a mathematical tailwind to speed you to financial independence but a behavioral one as well.

 

How to Refinance Medical School Loans

Step 1

Request quotes from a few of the companies on our recommended list. Initial applications won’t hurt your credit score (soft credit check) and it’s quick and easy.

Step 2

Compare each of the quotes.

Step 3

Determine how much you plan to pay each month toward your loans.

Step 4

Select the lender that provided the lowest interest rate and shortest repayment length that you can afford.

Step 5

Proceed through the application with the selected lender.

 

This process should be simple and only take a few weeks.

Recommended Reading: 10 Errors to Avoid When Refinancing

 

Compare Student Loan Refinance Companies

 

 

 

ELFI – $1449† back to you

ELFI (Education Loan Finance from Southeast Bank)—Education Loan Finance has come highly recommended from readers for low rates. Education Loan Finance offers student loan refinancing and consolidation to both recent graduates as well as parents with Parent PLUS and private student loans. Education Loan Finance offers low rates even without the automatic payment discount that many lenders offer. Loan amounts start at $15,000 and up for qualified borrowers. Education Loan Finance offers repayment terms of 5, 7, 10, 15, and 20 years. These wide range of options provide borrowers with the flexibility they need to choose the optimal product to fit their budgets. Those with high income may opt for a shorter repayment term, saving them money over time. Those who want lower monthly payments, on the other hand, can choose a product with lower rates than they are currently paying. The minimum to refinance is $15,000. There is no maximum. For parents, ELFI offers repayment terms of 5, 7, and 10 years. Education Loan Finance also offers Personal Loan Advisors who are dedicated to each borrower providing individual assistance throughout the refinancing process.

 

SoFi – $1299*† back to you

Hundreds of WCI readers have refinanced with SoFi over the years because of their low rates, exclusive member benefits, and flexible payment terms. SoFi just lowered rates specifically for residents, so even if you’ve looked into them in the past, you might want to look again. While a resident, you only pay $100 a month and there is no compounding interest during residency. SoFi also offers a 0.25% AutoPay discount, Unemployment Protection where they’ll temporarily pause your payments and help you find a new job, discounts of 0.125% on other SoFi products, and other benefits for SoFi members. SoFi loans can be 5, 7, 10, 15, and 20 years and SoFi lends in all 50 states and Washington, D.C. There is no upper limit to the loans they can refinance, but certain minimums apply. SoFi practically invented the modern refinance industry in 2011 and they continue to add benefits for their members, including investing, banking, and insurance products. Membership is free and easy. ^SoFi will offer the lowest rates; if a competitor offers a lower rate, they will match it and give you $100 when your loan is funded, for your trouble of having to upload docs and complete the funding process. Terms apply.

SoFi is now offering a 0%, no payment deal. That's right, same deal you're getting with the government through October 1st, but you can get a lower long-term interest rate. You can lock in a low rate for your federal student loans now without making monthly or interest payments until October, avoiding the potential risk of interest rates rising in the fall. You effectively pause your payments by signing their disclosures to disburse the loan in the fall. Before the loan is disbursed in September, you may cancel and stay with your federal program if you decide you no longer want to refinance. If you wait until September for disbursement of your loan, you would receive your cash back and FYFA course after the loan disburses this fall.

Disclaimer and Payment Examples*

 

Lend-Grow – $750-$2,299*† back to you

Lend-Grow is an innovative new loan marketplace which actually pays you back each month when you pay your refinanced loan on time. Find lenders with some of the lowest student loan refinance rates through their marketplace, and then earn Payback Rewards; Lend-Grow deposits .10% APR of loan amount each month for 3 years. Lend-Grow's mission is to help people get out of debt faster, and they’re truly doing this by actually making payments to your loan amount each month. We’ve honestly never seen anything like this. Not only could borrowers potentially save thousands by refinancing at low rates, but also pay down their loan faster through Lend-Grow's Payback Rewards. Minimum loan amount is $25,000 and a maximum of $500,000. With Payback Rewards, borrowers can earn $750 to $1,500*.

First Republic – $1099† back to you

First Republic Bank offers a Personal Line of Credit¹ you can use to refinance your student loans and other existing debt into one convenient monthly payment. This line of credit also offers convenient access to funds for large purchases, interest-only payments for the first two years and industry-low fixed rates starting at 2.25% APR (with discounts).² Applicants for the Personal Line of Credit must be located within close proximity to First Republic offices in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Jackson (Wyoming), Seattle, Boston, Palm Beach (Florida), Greenwich and New York City. A $300 welcome bonus is available for qualifying new First Republic clients who open a Personal Line of Credit using the above link.³

Please note, by refinancing student loans with a Personal Line of Credit, you may permanently be giving up tax and repayment benefits, including forbearance, deferment and forgiveness. Please consider this as you make a decision to refinance student loans, and talk to a First Republic banker if you have any questions.

See Disclaimers here.

 

 

Brazos Higher Education – $1399† back to you

Start your Brazos refinance application through this page and you will get a $600 cash bonus after your loan funds! Texas residents only. Brazos is a nonprofit with over 35 years of experience with student loans. As a nonprofit, Brazos’ rates can be better than the national lenders. You can refinance up to $150,000 with a bachelor’s degree and up to $400,000 with a graduate, law, medical or other professional degree. The minimum amount to refinance is $10,000. If you’re a Texan, visit studentloans.com now and start saving. Disclaimer.

 

 

 

How Does Refinancing Student Loans Affect Taxes?

In IDR, married borrowers can generally reduce their student loan payments by separating their income and filing taxes Married Filing Separately. After loans are refinanced, however, monthly payments towards your now private student loans are based on the loan size, interest rate, and term, instead of your income. Filing separately will no longer have the potential to reduce your payments. If you are married you'll want to file your taxes in the most advantageous way for your situation which is likely married filing jointly.