Student loan borrowers may not have been thinking about their loans lately due to the Coronavirus relief legislation that passed in March, known as the CARES Act, which provided for a temporary period of relief for federal student loan borrowers.
As with most things in life, “out of sight, out of mind” holds true with frozen student loan payments.
The CARES Act temporarily halted student loan payments and interest rates on all federally owned student loans were set at 0% until December 31, 2020. In January 2021, federal student loan payments are scheduled to start up again and your loans will begin incurring interest.
One of the most common questions I get from my clients who have medical student loans is: should I refinance my medical student loan debt? Followed closely by, should I recalculate my income for my IDR repayment plan?
The truth is the answer depends on your specific circumstances.
So, in today’s post, I’m going to share compiled research and information to help educate you on the topic of refinancing medical student loans. Specifically, I’m also going to share some tips and steps you can take regarding the ending of the CARES Act relief bill as you transition back to making your student loan payments.
With this information, you can begin to evaluate your circumstances to determine the best answer to the question of whether or not to refinance your debt or recalculate your payment plan.
If after reading the information I’ve put together on refinancing medical student loans you have additional questions, then please feel free to leave a comment or contact me with any questions you have. You can also reach out to our partners at Gradfin.
The CARES Act: What You Need to Know
Student loan borrowers who were enrolled in student loan repayment programs prior to the passage of the CARES Act will resume payments in their plan. However, the federal government provides flexibility for borrowers if they’re interested in changing their plan or recalculating their income for an IDR (income driven repayment) plan.
Note: Should you have changed your address, email, phone number or any contact info during the loan forgiveness period in 2020, make sure to log in to studentaid.gov to update your preferences and account so that you can be sure that notifications reach you during this critical period.
As the CARES Act Relief bill comes to an end it is worth considering your options regarding refinancing your debt at historic low interest rates or perhaps recalculating your income for your IDR payment plan.
Recalculating IDR Payment Plans
Recalculating your income might be worth it for borrowers who have suffered from reduced income during COVID-19.
Did your income decline recently due to COVID-19?
If so, then you should consider recalculating your Income Driven Repayment (IDR) plan to reduce your required monthly payment when the payments start back up again in January of 2021.
The IDR federal loan repayment plan option gives all student loan borrowers some flexibility to reduce the amount of their monthly payments for the next 12 months by submitting new income documentation.
If you choose this option, it is recommended to update your payment plan before the end of the year so that the plan can be changed prior to the new year. This option is also potentially a better option than “forbearance” because it can still allow these critical months to count for forgiveness programs like PSLF and IDR plans.
Note: To recalculate your income for your IDR, go to studentaid.gov and click on “Manage Loans” and choose the “Recalculate My Monthly Payment” option.
Refinancing for Better Interest Rates
Refinancing could be a great option for borrowers looking to save on their interest rates.
One of the best long-term strategies for student loan borrowers can be to refinance and lower your interest cost, which can save you thousands of dollars over the life of your loans. Additionally, student loan refinance rates are at historic lows right now. Rates may not be this low forever, so locking in a low rate now before the temporary CARES Act period ends can be a favorable option for many student loan borrowers.
Frequently Asked Questions About Refinancing Medical Student Loans
In conversations with clients and researching their circumstances, I’ve found the following to be the most frequently asked questions about refinancing medical student loans.
- When does it make sense to refinance medical student loans?
- You don’t need PSLF or a federal loan forgiveness program
- You plan to work in the private sector
- You have high-interest private medical loans
- You have a high income earning spouse
- Should you refinance medical school loans?
- Whether or not you should refinance depends on multiple variables. The best choice will depend on factors like the type of loan (Federal or private), career goals, earnings and more.
- With federal loans, refinancing can make sense if you don’t need an income-driven repayment plan and you won’t be pursuing medical school loan forgiveness.
- With private medical school loans, you basically want to refinance anytime you can qualify for a lower rate. This could be both during residency and during your career as an attending physician. It is ok to refinance multiple times.
- Do I qualify to refinance my college and medical school loans?
- You would have to check with your lender and it doesn’t hurt to ask from time to time if your credit has improved, income has increased, or you have some savings you could use to pay off a chunk of your debt.
- When can you refinance medical school loans?
- It depends on the lender, some allow for refinancing during residency while others require that you are an attending physician. Depending on your long term career goals and financial plans and can make sense to refinance during both residency and after while practicing.
- How to refinance medical school loans?
- First, ensure that refinancing is right for you
- Next, check with your lender to see if you qualify
- Then, compare multiple lenders
- Finally, submit your application to refinance
List of Sources on Refinancing Medical Student Loans
Researching the topic of medical student loan refinancing can be daunting. There is a lot of advice out on the internet and it can be hard to find and consume the best information. So, during my research, I’ve compiled a list of the best sources I’ve found that covers a variety of important sub-topics regarding medical student loan refinancing.
- When Should Resident Physicians Refinance Medical Student Loans? – Student Loan Planner (studentloanplanner.com) – Sometimes, a medical school loan refinance can be a bad idea for resident physicians. Here’s how to know whether refinancing student loans is right for you.
- Should I Refinance My Student Loans? (students-residents.aamc.org) – Review these questions and answers to determine if refinancing your existing federal student loans into a private loan is beneficial for you.
- Medical student loans: Federal repayment vs. private refinancing (ama-assn.org) – What’s the difference between federal repayment and private refinancing? And which approach makes most sense for you?
- Is Refinancing Medical School Loans A Good Idea? (thedoctorweighsin.com) – Refinancing student loans may reduce monthly payments the amount of interest you pay over the life of the loan, but it isn’t the right option for everyone.
- Refinance Your Medical School Loans At A Lower Rate (whitecoatinvestor.com) – Medical school loans can be refinanced over and over again at much lower rates. Save a bunch of money with companies competing for your business.
- How This Doctor Refinanced $110,000 in Medical School Debt (studentloanhero.com) – Dr. Brad Venghaus had $110,000 in college debt, but he refinanced his medical school loans for new terms and rates, helping him pay it all off in 5 years.
- How to Refinance Medical School Loans: Compare Lenders Now (credible.com) – If you have medical school loans, refinancing your debt can help you save money. Here’s what you need to know about medical school loan refinancing.
- 5 Best Medical School Student Loan Refinance Options of August 2020 – NerdWallet (nerdwallet.com) – Doctors can refinance medical school loans during residency, as an attending or both. Compare lenders to see how much you could save by refinancing.
- Medical School Loans: How to Refinance and Consolidate (debt.org) – Learn how to refinance and consolidate your medical school debt with private lenders – to lower interest rates, payments and pay off your loans faster.
- What Should I Do With My Student Loans? A Proposed Strategy for Educational Debt Management (ncbi.nlm.nih.gov) – The aim of this perspective is to provide an overview of the options available to physicians with educational debt. We place specific focus on PSLF to simplify the decision-making process for loan repayment. For the sake of clarity and conciseness, we have emphasized the most important features of each option.
- How the CARES Act affects medical student loans (medicaleconomics.com) – A finance expert tells physicians what the CARES Act means for their student loans, and how to handle their debt during the COVID-19 pandemic.
- Consolidating and Refinancing Student Loans (salliemae.com) – Learn the differences between student loan consolidation and refinancing and the questions to answer before consolidating or refinancing your student loans.
Medical School Loan Refinancing Statistics
Sometimes it helps to look at statistics so you can compare your own figures and circumstances to all of the other medical students and doctors out there who are also paying off medical school debt.
I’ve compiled some of the most useful statistics I found during my research in this section to give you a better idea of where you sit in comparison to others.
- According to the Association of American Medical Colleges, the mean student debt for doctors in 2017 was $190,694. (thedoctorweighsin.com)
- This 0.5% percentage point reduction helped Venghaus save even more money on his loans, allowing him to stay on track for his goal of paying his medical school loans off ahead of schedule. (studentloanhero.com)
- Currently, 76 percent of all medical school graduates have education debt, with an average debt of $190,000 per person. (texmed.org)
- The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. (nerdwallet.com)
- The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. (nerdwallet.com)
- All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. (nerdwallet.com)
- Doctors, after all, make an average salary of $299,000 in the U.S., according to the latest figures compiled by the 2018 Medscape Physician Compensation Report. (debt.org)
- The average doctor graduated medical school in 2017 with $189,000 in student loan debt, according to the Association of American Medical Colleges (AAMC). (debt.org)
- Primary care physicians earned an average of $223,000 in 2018, up from $217,000 in 2017, according to the 2018 Medscape report. (debt.org)
- According to the Medicus Firm, a national recruiter that places physicians, nine of 10 recruited docs landed an approximately $25,000 bonus. (debt.org)
Conclusion
I hope you find this information useful when trying to determine whether or not you should refinance your medical student loans.
I tried to cover all of the topics and questions that come up when I’m consulting my clients and researching their circumstances.
However, it is possible that some of you reading this have additional questions and I would be happy to help you with them.
For help with refinancing your student loans, please reach out to our partners at Gradfin. Also, feel free to leave a comment below or contact me with any questions you have about refinancing your medical student loans.
