Medical school graduates in the United States oftentimes start their careers with hundreds of thousands of dollars in student loan debt over their heads. But many borrowers may be able to lower their monthly payments by refinancing their student debt.
And while it won't be a cure all for all physicians, it can be a worthwhile strategy to partner with any federal forgiveness programs a borrower may also be eligible for.
Here are 6 lenders to consider for physicians looking to refinance medical school debt.
What is student loan refinancing?
Student loan refinancing is the process of partnering with another lender to replace some of your existing student debt with a new loan, at a lower interest rate (and potentially different term).
It is very common to refinance already private loans, but borrowers should know that refinancing federal student loans with a private lender may disqualify them from participation in certain federal forgiveness programs, like Public Service Loan Forgiveness, for example.
For this reason, borrowers should weigh the pros and cons to refinancing before making a final decision.
Refinancing is beneficial to borrowers for 3 reasons:
Lower monthly payments
Altered terms
Simplified repayment
1. Lower monthly payments
Your monthly payment medical school loan payment consists of two different pieces: repaying principal (the amount you actually borrowed) and paying interest.
Forgiveness aside, your principal is what it is and you'll need to repay it. But over time, interest rates change and you may become more creditworthy in the eyes of borrowers. Both of these situations can lead to you finding a lower rate.
2. Altered terms
Some borrowers may also pursue a shorter or longer term to further alter what they'll pay each month. Shorter terms at a lower rate may still increase your payments, but you'd save on interest and be out of debt sooner.
It really depends on your preferences and the reality of your cash flow.
3. Simplified repayment
Also worth mentioning is that refinancing can simplify your monthly payment process. Rather than making multiple payments to multiple different lenders, a new refinanced loan can allow you to make just one payment each month.
This benefit is often underestimated.
How much money can you save by refinancing?
Medical professionals that opt to refinance their undergraduate and medical school debt stand to save thousands - potentially tens of thousands - of dollars over the course of a 10-year repayment.
Consider that the average physician leaves med school with $202,453 in student loans. At an average interest rate of 6%, this will leave a first-year physician facing ten years of $2,248 monthly payments.
Now, imagine that this physician is able to refinance at a rate of 4%. This 2% rate reduction leads to payments of $2,050 per month instead - a $198 monthly reduction.
In other words, you could improve your cash flow by:
$198 per month
$2,376 per year
$23,760 over the life of your loan
And unlike some forgiveness programs, these savings are federal and state tax-free.
Best lenders to refinance medical school loans
Among our favorite medical school loan refinance options in 2024 are:
1. SoFi
SoFi has quickly become one of the United States' largest refinancers in the student loan space.
What sets SoFi apart from the crowd when it comes to medical school debt is that they offer special financing options for residents to take advantage of, in addition to these perks:
The option to pay just $100 per month for up to seven years during residency
One easy payment via a simple consolidation process
The choice between a fixed and variable interest rate based on your expected future earnings
There is also no maximum loan amount.
2. PenFed
Pentagon Federal Credit Union offers up to $300,000 in refinancing for medical school graduates. And while you need to be a member to participate (opening a checking account is the only requirement), you'll gain access to a number of perks, like:
The ability to release a cosigner after just 12 months on a loan
Refinancing loans with your spouse
Interest rate caps on variable-rate loans
Whether your spouse is a doctor or not, if he/she has student debt, you can join your loans together.
PenFed is best for those who anticipate becoming a high earner early on, since you'll need up to $50,000 in minimum income and will not have access to a 20-year term option.
3. Citizens Bank
Citizens Bank allows med school grads to refinance up to $750,000, complete with a 0.25% autopay discount. This high loan limit may be perfect for specialized physicians, like dermatologists and anesthesiologists.
The current cons to Citizens' current offer is similar to other lenders. They:
Don't provide guidance on minimum income and credit requirements
Don't offer cosigner release for at least 36 months
But since most med school grads don't have cosigners anyway, it may be worth an application. You may be surprised with a competitively low interest rate!
4. Massachusetts Educational Financing Authority (MEFA)
MEFA offers loan refinancing to undergraduates, graduates, and medical professionals holding degrees. With no loan application, origination, or disbursement fees, MEFA presents a lower cost option for borrowers.
MEFA also allows borrowers to borrow up to your total amount of qualified debt, tailoring your loan limit to the cost of your education rather than a lender set lender.
Eligibility criteria is pretty standard too and requires a minimum credit score of only 670.
5. Education Loan Finance
ELFI is another lender with no established loan limit.
Known for providing a solid customer experience, ELFI refinancing is an option for those with credit scores of at least 680 and comes complete with a variable-rate cap and up to 12 months of hardship forbearance available over the term of your loan.
6. Credible
Credible functions as a student loan marketplace, rather than a lender, meaning that borrowers can receive multiple refinancing offers after completing just one simple application.
And that is exactly why they've made this list. You'll easily be able to browse more rate offers and vet more lenders than you otherwise could applying for refinancing one lender at a time.
Should medical school graduates refinance?
Ultimately, whether or not physicians and doctors should refinance their med school debt depends upon a number of variables, mainly:
Your employer: Those employed by for-profit offices, hospitals, or provider groups are likely to be better off refinancing for two reasons. First, their incomes may be higher than other providers in their fields. And secondly, those not working for the government, nonprofits, or completing a service commitment will have lower prospects at earning student loan forgiveness.
The rate on your existing loans: Some forgiveness programs may still offer eligibility to those with private debt, meaning that the rate on your existing loans should be forefront in your mind. If you're able to save tens of thousands over the life of your loan, it may be too good to pass up.
Conclusion
Refinancing medical school debt can be strategic for borrowers, leading to reduced payments, altered terms, and/or a simpler repayment experience. There are dozens of reputable lenders out there, and picking the right one may just provide access to career counseling, financial advisory services, and more!
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