When to Refinance Medical School Loans?

You just matched into residency, and you’re thrilled to take the next step in your career. For the first time in a long time, you feel like you can breathe again. Enjoy it now: Once residency starts, you won’t be slowing down again for a while. And you won’t have much time to think about the giant elephant you’re carrying on your back: Your student loans.

But the longer you wait to get your debt under control, the heavier the burden will become.

There are a number of options for taking control of your debt, but refinancing is among the simplest and most cost-effective.

Here are four questions to consider when considering medical student loan refinance:

1. Can I Pay Off My Medical Student Loan After My Training?

Income-driven repayment plans, such as Pay As You Earn and Revised Pay As You Earn (REPAYE) promise to forgive the remaining balance of your loans after 20 to 25 years of making payments, depending on whether you borrowed for undergraduate or graduate studies. But who wants to be in debt for that long? You didn’t let anything hold you back from achieving your dreams of becoming a doctor. Why would you let lingering debt keep you from achieving financial freedom to fulfill your other dreams? You might want to buy a new house, start a family, or take that long-awaited vacation.

When you refinance medical student loans, you can pay it off within 10 years of completing your training, even if you choose to defer payments during your residency and fellowship.

Some other options include the federal government’s income driven repayment plans, such as Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE). These plans promise to forgive the remaining balance of your loans after 20 to 25 years of making payments, depending on your circumstances. But who wants to be in debt that long? You didn’t let anything hold you back from achieving your dreams of becoming a doctor. Why would you let lingering debt keep you from achieving your other dreams? You might want to buy a home, start a family or take that long-awaited vacation.

2. Should I Sacrifice Future Earning Potential to Pay Off Medical Student Loans?

No, you don’t have to sacrifice future earning potential to pay off medical student loans. The average public health physician makes about $110,900 per year compared to a top orthopedic surgeon who can make $511,000 per year, according to the Medscape Family Physician Compensation Report 2021. If your plan is to wait it out in a public-sector job for the next decade just to get the rest of your loans forgiven, you could lose out on $4 million in earning potential!

The 2017 Medscape Physician Compensation Report offers some sobering statistics on the earnings gap between the public and private sector by specialty. In orthopedics, the gap between the average public-sector salary and the highest-paid private-sector position is about $168,000 per year. If your plan is to wait it out in a public-sector job for the next decade just to get the rest of your loans forgiven, you could lose out on $1.6 million in earning potential!

3. Where Should I Go to Find Out More About Paying Off My Medical School Loans?

Most of the options for student loan repayment are run by government entities. If you’ve ever spent more than 15 minutes on the phone with the IRS, you know you’d rather change bedpans than do that again.

Fortunately, private companies are stepping up with new options to consolidate, defer, and refinance student loans. Because the private sector demands innovation, these companies may provide more competitive interest rates and better customer support.

4. Can I Save Money on My Medical Student Loans by Reducing My Interest Rate?

When you refinance your existing loans, you can take out a new loan at a lower interest rate. This can translate into big savings over the life of the loan, especially if you are deferring payments during your training years. A small rate reduction could save you a couple hundred in monthly interest payments, and thousands over the life of the loan.

If refinancing sounds like a viable option for you, check out loan options available through Splash Financial.

Let’s find the right loan for you.