Is Refinancing Your Student Loans Right For You?
Refinancing means creating a new loan with a private lender — which can be a bank, credit union, or company like those listed at the end of this.
You would obviously only refinance if you could get a lower interest rate.
There is a major drawback to refinancing, though. Because refinancing means your loans are no longer on the federal system, you give up some benefits and flexible options forever. And ever. AMEN.
Those benefits and options you forfeit are:
• Income-driven repayment plans
• Extended forbearance and deferment in periods of hardship
• Federal Loan Forgiveness programs such as PSLF
Be sure refinancing is the right move before you take the step of moving your loans to a private lender.
If You Do Not Work for a 501c3 Hospital, Look into Refinancing
If your new employer doesn’t qualify as a 501(c)3 not-for-profit organization, your situation is very straight-forward if you owe less than two times your attending income.
Refinance and get rid of your loans as fast as you can. Because you won’t qualify for any of the federal forgiveness programs, it’s a no-brainer to refinance and save interest over the life of the loan.
I suggest a 5 or 7-year refinancing term. If you cannot afford these payments, that means you either spend too much money or shouldn’t be refinancing in the first place. Often the REPAYE program is a good bridge to making large mandatory monthly payments to a private lender.
For some lower earning physicians in private practice who owe over $300,000, using PAYE or REPAYE to go for 20 to 25-year loan forgiveness can make some sense. That rules of thumb about seeing how much the 5 or 7-year refinancing term would be for really works. Usually it’s a dead give away for situations where refinancing really is not a smart idea.
Refinance if you are confident in these scenarios:
• You can meet the financial obligation of making your monthly student loan payments
• Your new employer is not a not-for-profit 501(c)3
• You can’t or don’t want to go for loan forgiveness
Refinancing Options for Doctors
There are many companies out there that refinance loans, and each will have their own offers. For example, some offer unemployment benefits, some don’t. Others offer lower rates than others. It really behooves you to make the effort to apply to all of them so you can choose the one that’s best for you.
$350 sign-up bonus
As of 2017 they no longer offer bonuses
$250 sign-up bonus
($1000 sign-up bonus)