Between the Global Financial Crisis and 2013, physicians basically couldn’t refinance their student loans at all, which was unfortunate given that rates were typically 3-5% higher than mortgage rates. DRB (now Laurel Road) pioneered the way to student loan refinancing bliss. Laurel Road was also the first to offer a resident-specific product, so we all owe them a little debt of gratitude. However, there’s some new competition you should know about. Be aware that I have a business (i.e. affiliate marketing) relationship with each of these companies and it adds up to a significant source of revenue for this site. If you refinance through my links, not only do you get a special deal, but I get paid too. Truly a win-win-win.
Should You Refinance As A Resident?
First, however, I want to remind you that refinancing doesn’t always make sense and it is pretty much an irrevocable decision, so don’t make it lightly.
Private student loans can be safely refinanced. Those aren’t eligible for federal income driven repayment (IDR) and forgiveness plans like IBR, PAYE, REPAYE, and PSLF.
But federal student loans should not be refinanced unless
- You are 100% sure you won’t be going for PSLF and
- Your refinanced rate is lower than your effective rate under REPAYE. Remember that REPAYE subsidizes the interest rate for most residents and generally lowers your effective rate to less than the rate you can refinance to.
There might be some other rare reasons to refinance (such as improved cash flow thanks to the low $0-100/month payments required by private lenders in their resident programs), but for the most part it’s for private loans, although that might be changing soon given one of the new players in this space who is offering significantly lower rates than were available previously.
Remember that we’re not talking about refinancing in your last year of residency after you have an attending contract in hand. That generally gets you the better attending rates and by then you know whether or not you’ll be working at a 501(c)3. These programs I’m talking about today involve refinancing earlier in residency. Many of those who do so will also want to refinance again once they have an attending contract in hand.
Let’s start with a reminder of the original resident program. Laurel Road allows you to refinance as soon as you finish medical school. Readers report to me that they typically get fixed rates in the 5-5.5% range (much higher than the typical attending rate for a 5-10 year variable or fixed rate loan), but they enjoy $100 monthly payments until they finish. If you wish to do a fellowship afterward, you have to reapply for an “in-training” program and if not approved, would have to make “full” payments during their fellowship.
The WCI deal with Laurel Road is $300 back to you if you use this link:
Link Capital was the second company to offer a real resident refinancing program. Unfortunately, they ran out of money after about 6 months and shut down for quite a long time. The good news is that they’re back and refinancing loans for both attendings and residents. Instead of $100 monthly payments, with Link Capital they’re $75 during residency. You may also get your rate lowered upon finishing training, which allows you to avoid the hassle of having to refinance your loans again upon graduation. Rates are determined by a mix of credit score and debt to income based off of projected income for your specialty.
If you decide to do a fellowship, you will just need to provide documentation of the fellowship and your payments can continue to be $75 a month.
In the event of death or disability, the loan is completely forgiven. But wait, there’s more. Even if you have a co-signer the loan will be forgiven in the event of your death or disability, although not in the event of the co-signer’s death or disability. But at least you won’t have to find a new co-signer.
[Update 9/2018: We don’t currently have a deal for WCI readers with Link Capital. I’m also told by someone who tried to refinance recently that they changed the income requirements to $70K for each applicant, an amount that really makes this no longer a true resident program since most residents make less than $70K.]
[Update 10/2018: This section has been updated from the original post.]
Splash no longer offers a resident/fellow loan program. The attending program is still there of course.
SoFi is still the big kid on the block in student loan refinancing, judging by the numbers of you who have used them and note their excellent rates and service. I’ve been talking to them about refinancing loans during residency for years. They were hesitant at first because they were worried about their reputation. They were afraid people would refinance their loans and then get mad when they realized they were no longer eligible for IDRs and PAYE. They also noted the difficulty of packaging up and selling off loans to investors that wouldn’t have payments made on them for years. But in the end, they’ve decided to go ahead and do it and have put together quite a competitive package. This is all brand new and will be available in mid October. [Update 10/11/17: This program is now available.]
Your in-training payments are $100 per month. You can apply as soon as you graduate from medical school, but you only get a maximum of 4 years (plus a 6 month extension) of those $100 payments. So if you’re in a 5 year residency, you might want to wait a year before applying with SoFi. Any fellowship or extended training period must be agreed to at the time of refinancing, so if you later decide to do a fellowship you may find yourself making “full” payments during those years. If you switch specialties, your interest rate won’t change but when the original expected completion date comes up, you’ll need to start making full payments. If you need fewer than four years, you get an even better rate. The unpaid interest (trust me $100 a month isn’t going to cover the interest) accrues, but doesn’t capitalize until you finish residency. Your loans are effectively forgiven in the event of your death and you get a one year forbearance in the event of disability. But here’s the best part about SoFi’s resident program- they estimate your rates will only be about 0.25% more than what they would give you as an attending. That’s dramatically cheaper than the other companies, so I’d be sure to include them in your search if the other terms are acceptable to you. Hopefully this competition will put some downward pressure on rates for residents from the other companies.
The WCI deal with SoFi is $300 back to you if you use this link:
Attendings Looking to Refinance
Now if you are an attending or other type of professional, you are eligible for better rates and a lot more options. You can learn more about those options here on my recommended student loan refinancing page, but here’s a brief list of your options:
Note that there are two new ones on the list–Splash! that you’ve already heard about and ELFI (Education Loan Finance from Southeast Bank), which you may not have but has come highly recommended from readers for a low rate. The special WCI deal for ELFI is $325 back to you. Low rates, lots of options, happy customers, nice bonus….what’s not to like? Like most companies, no real resident program yet, but who knows? Maybe in the future. Even SoFi didn’t have one for four years.
What do you think? Did you refinance as a resident? Why or why not? What has your experience been refinancing during residency? Which company did you refinance with? What rate did you get? Did you have a good experience? Comment below!
Originally posted at https://www.whitecoatinvestor.com/new-student-loan-refinancing-options-for-residents/