Should you refinance medical school loans?

When you should, and shouldn’t, refinance medical student loans. (iStock)

Refinancing student loans involves exchanging your current loan for a new loan with a lower interest rate.

These private loans offered by lenders, banks and credit unions can be a major asset to medical grads, who carry an average of more than $215,000 of student debt. Reach out to Credible to see compare student loan refinance options.

While refinancing can be a useful strategy for someone looking to pay off their medical school debt, it isn’t necessarily the right choice for everyone.

To decide whether refinancing is a good call, you need to consider the type of loans you have, evaluate your repayment options and compare rates.


Understanding your medical school loans

There are two types of medical school loans: federal and private.

Medical students may have access to a handful of federal financial aid options, including health professions student loans, direct unsubsidized loans and PLUS loans.

While an adverse credit history may impact your access to a PLUS loan, federal student loan rates are usually fixed and are not affected by your credit score.

Private medical school loans are offered by lenders, with rates based on your credit score, loan term and whether you opt for a variable or fixed rate.

Some private lenders offer specialized plans for medical students, allowing you to adjust payments during residency.

Repayment options

Federal education loan repayment is generally more flexible, with features like grace periods and forbearances.

They also offer the following benefits:

  • Income-driven repayment plan: You can lower your federal loan payments by extending the length of repayment, based on your income.
  • Student loan forgiveness: Through the Public Service Loan Forgiveness Program (PSLF), student debt is eligible for forgiveness after 120 qualifying monthly payments with employment at a non-profit or government organization. There are several additional federal repayment programs and scholarships for doctors.

Federal and private borrowers can also save money by refinancing medical school loans.

Use an online tool like Credible to compare student loan refinancing rates from multiple lenders at once without affecting your credit score.

When is refinancing medical school loans a good idea?

If the situations below sound like yours, you may want to consider refinancing:

1. You have private loans with high interest: If you have private education loans, refinancing could lead to significant savings. Use an online tool like Credible to view a rates table that compares rates from multiple lenders at once.

2. You’re ineligible for loan forgiveness programs: If you don’t qualify for the government’s loan forgiveness programs, perhaps by working at a private medical practice rather than a non-profit, refinancing might be best.

3. You have a steady income and healthy credit: Swapping a federal loan for a private one means forfeiting benefits like income-driven repayment and forbearance. Make sure you’re financially stable before making this move. Likewise, remember refinancing rates are based on credit.


When refinancing is not recommended (and alternatives to consider)

While refinancing is a good call in the instances above, it doesn’t make sense to refinance in the scenarios below:

  1. You have federal loans with low interest rates: With the exception of PLUS loans, federal student loans almost always come with the lowest rates.
  2. You’re eligible for forgiveness: If your federal loans could be forgiven, refinancing might not be worth it.
  3. Your student loan payments are paused: As an extension of the CARES Act, federal student loan repayments are frozen through September 31, 2021, with a 0% interest rate.

In addition to refinancing your medical school loans, here are a few alternatives to consider: 

  • Standard payment plan: For federal loans, your best bet is likely to stick to the standard 10-year payment term.
  • Income-driven repayment: If you’re struggling to keep up with payments, income-driven repayment is a viable option. Just note that extending your loan’s term will increase interest.
  • Consolidation: Consolidating federal student loans gives you one fixed interest rate based on a weighted average of all your rates. With private loans, consolidation is based on your credit and loan terms rather than your current rates.


Wondering how much you might save by consolidating or refinancing your student loans?

Use an online student loan refinancing calculator to get a sense of what your new monthly payments could be.

Refinance your medical school loans when it makes financial sense

Whether you’re an intern, resident, or attending, it’s important to take a step back to evaluate your student loan repayment plan.

Depending on the type of loans you have and your professional plans, refinancing might make sense.

Weigh the pros and cons of refinancing medical school loans and carefully consider the benefits of federal student loans before refinancing them into a private one.

If you’re curious about how much you could save by refinancing, use an online tool like Credible to get prequalified student loan refinancing rates without affecting your credit score.

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