How to Qualify for
and Refinance Medical School Loans in 2022

Have questions about medical school debt?

With our trusted partner, Credible, you can compare prequalified rates from up to 12 of the best medical student loan refinance companies for doctors in minutes. Plus, checking your rates is free and doesn’t affect your credit score. Get your rate and see how much you can save today!

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Company
Minimum Credit Score
Maximum Loan Amount
Loan Terms
States Available In
advantage-education-loan-logo_o4mclu_hcen4r Advantage
Minimum Credit Score N/A
Maximum Loan Amount $500,000
Loan Terms 10 , 15 , 20 year options
States Available In Available in 1 state. (View State)

The Advantage Refinance Loan is a fixed-rate student loan refinancing option exclusively for Kentucky residents with at least $7,500 in private or federal student loans. The program has 10, 15, and 20-year loan term repayment options and loan amounts up to $500,000 (amounts higher than $200,000 require special approval).

Advantage Education Loans are owned, serviced, and collected by the Kentucky Higher Education Student Loan Corporation (KHESLC); originated and disbursed by its sister agency, the Kentucky Higher Education Assistance Authority (KHEAA). Both agencies are state-based, not-for-profit, governmental entities.

Learn More: Advantage Education Loan Review

    Pros
  • Available to borrowers who haven’t completed their degrees
  • Offers forbearance options
  • No prepayment or origination fees
    Cons
  • No variable rate loans offered
  • Only available to Kentucky residents
States Available
  • Kentucky
brazos-student-loans-logo_auuiud_vctdud Brazos
Minimum Credit Score N/A
Maximum Loan Amount $250,000
Loan Terms 5 , 7 , 10 , 15 , 20 year options
States Available In Available in 1 state. (View State)

Brazos is a student loan refinancing option for Texas residents who have at least $10,000 in private or federal student loans, and earn at least $60,000 in income ($30,000 with a cosigner). The program offers 5, 7, 10, 15, and 20-year loan repayment terms, and loan amounts up to $150,000 for undergraduate borrowers and up to $250,000 for graduate borrowers.

The Brazos Higher Education Service Corporation, Inc. (Brazos Higher Education) is a nonprofit corporation that manages several nonprofit companies (Brazos Managed Companies) all founded by student loan pioneer Murray Watson, Jr. Brazos Higher Education and the Brazos Managed companies have been dedicated to higher education for over 40 years.

Learn More: Brazos Student Loan Refinance Review

    Pros
  • Offers fixed and variable interest rates
  • No origination or prepayment fees
    Cons
  • No cosigner release available
  • Must have a relatively high minimum annual income
States Available
  • Texas
Citizens_Bank_awcx1x-thumb Citizens Bank
Minimum Credit Score N/A
Maximum Loan Amount $750,000
Loan Terms 5 , 7 , 10 , 15 , 20 year options
States Available In Available in 55 states. (View States)

Student loan refinancing through Citizens Bank is available to all U.S. citizens and permanent residents who have at least $10,000 in private or federal student loans. Citizens Bank offers fixed and variable rate loans with 5, 7, 10, 15, and 20-year repayment terms. Maximum loan amounts include up to $300,000 for undergraduate (bachelors) borrowers $500,000 for graduate school borrowers, and $750,000 for professional school borrowers.

Citizens Financial Group, Inc. is among the nation’s oldest and largest financial institutions. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations, and institutions.

Learn More: Citizens Bank Student Loan Refinance Review

    Pros
  • Offers variable and fixed interest rates
  • Available to borrowers who haven’t completed their degrees (if they have good credit and are no longer enrolled in school)
  • No prepayment or origination fees
    Cons
  • No disability discharge offered
States Available
  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Canal Zone
  • Colorado
  • Connecticut
  • Delaware
  • District of Columbia
  • Florida
  • Georgia
  • Guam
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • Puerto Rico
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Vermont
  • Virgin Islands
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming
College_Ave_nztzkp-thumb College Ave
Minimum Credit Score 700
Maximum Loan Amount $450,000
Loan Terms 5 , 10 , 15 year options
States Available In Available in 0 states.

Founded in 2014, College Ave offers flexible student loan refinancing options specifically for physicians, dentists, and other medical professionals. The Wilmington, Delaware-based company services its loans through Nationwide Bank, which allows it to offer competitive rates.

College Ave features various repayment options, including full principal and interest, interest-only, flat, and deferred payment plans. Full principal and interest payments allow you to make full payments while still in school. Interest-only payments allow you to pay monthly interest while still in school, then make full payments following your grace period. Flat payments allow you to pay $25 a month while in school, then make full payments once you graduate. Deferred payments allow you to wait until your post-graduation grace period is over to make any payments. But this means the interest you accrue while waiting is added to your total loan balance on top of the interest you must already pay throughout your term.

Learn More: College Ave Student loan Refinance Review

    Pros
  • Competitive rates, even with much larger companies.
  • Multiple repayment plans to cater your individual financial needs.
  • 0.25% interest rate reduction with auto-pay through Nationwide Bank.
  • No hidden fees for origination, application, processing or prepayment.
  • Up to 100% total coverage of your school-certified cost of attendance ($1,000 minimum).
  • Refinancing is available to all US residents that attended an eligible undergraduate or graduate school. Find out if your school qualifies before applying.
  • Students with little or no credit history can benefit by applying with a creditworthy co-signer.
  • In the event of death or disability, the terms of your credit agreement are nullified so College Ave cannot pursue your estate.
    Cons
  • Limited information available.
  • No cosigner release option.
  • 15 year max term to repay your loan - no 20 year term option.
  • After 15 days without payment, College Ave assesses a late fee equal to 5% of the unpaid amount or $25 - whichever is less.
  • No specific forbearance policy for struggling borrowers. College Ave determines payment-postponement periods on a case-by-case basis.
States Available
Education_Loan_Finance_bnyuxi-thumb ELFI
Minimum Credit Score 940
Maximum Loan Amount N/A
Loan Terms 5 , 7 , 10 , 15 , 20 year options
States Available In Available in 51 states. (View States)

Based in Knoxville, Tennessee, Education Loan Finance (ELFI) is relatively new to the student loan refinancing space. Its parent company, SouthEast Bank, is a Tennessee community bank. In 2015, SouthEast Bank decided to start offering student loan refinancing to borrowers on top of its traditional products. Its product line includes checking and savings accounts, mortgage loans, and credit cards.

ELFI offers competitive interest rates to borrowers that qualify for student loan refinancing. Borrowers can choose from fixed and variable rate loans available in 5-20 year terms. While ELFI does not have any restrictions on the maximum amount that borrowers can refinance, their minimum loan amount is $15,000.

ELFI works closely with MOHELA and American Education Services (AES). Both refinance loan servicers have great track records of customer service.

Learn More: ELFI Student Loan Refinance Review

    Pros
  • No application fees, origination fees, or prepayment penalties.
  • Forbearance allows you to postpone loan payments up to 12 months if you experience economic hardship.
  • New ELFI borrowers can get a $100 cash bonus through the Fast Track Bonus program if you get approved and accept your loan terms within 30 days of submitting your application. (Beginning December 1, 2018, ELFI will no longer offer the $100 Fast Track Bonus.)
  • ELFI borrowers earn a $400 cash referral bonus for every person you successfully refer if they apply and are approved within 90 days of registration. The person you refer will also receive a $100 bonus. Learn more here.
    Cons
  • Cannot qualify if you have filed for bankruptcy in the past.
  • Cannot qualify if you did not attend and graduate from a Title IV-accredited school.
  • After 11 days without payment, ELFI assesses a late fee equal to 5% of the amount past due or $50 - whichever is less.
  • No cosigner release option like other more established lenders. But borrowers can refinance loans again without a cosigner if they qualify on their own.
States Available
  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • Delaware
  • District of Columbia
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Vermont
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming
INvestEd_Indiana_gkbnjw-thumb INvestEd
Minimum Credit Score N/A
Maximum Loan Amount $250,000
Loan Terms 5 , 10 , 15 , 20 year options
States Available In Available in 51 states. (View States)

INvestEd is an Indiana non-profit corporation that provides student loan refinancing to U.S. citizens and permanent residents with at least $5,000 in private or federal student loans nationwide. The INvestEd Refi Loan offers fixed and variable rates, and 5, 10, 15, and 20-year terms, on loan amounts up to $250,000.

For over 35 years, the goal of INvestEd has been to provide students with solutions to put higher education within reach. We believe strong choices before college are the best way to limit excessive student loan debt after college. That’s why our efforts focus on providing friendly, free, expert financial aid help to students, families, and counselors. At hundreds of Indiana high school events each year as well as over the phone, in print, and via email, INvestEd assists Hoosiers with the college planning process.

Learn More: INvestEd Student Loan Refinance Review

    Pros
  • Offers variable and fixed interest rates
  • Offers deferment and forbearance options
  • Offers autopay discount
    Cons
  • Long cosigner release period (48 months)
States Available
  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • Delaware
  • District of Columbia
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Vermont
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming
mefa-logo-blue_to4vdt-thumb MEFA
Minimum Credit Score N/A
Maximum Loan Amount N/A
Loan Terms 7 , 10 , 15 year options
States Available In Available in 51 states. (View States)

The MEFA Education Refinancing Loan offers fixed and variable rates, and loan terms of 7, 10, and 15 years. It is available to U.S. citizens and permanent residents with at least $10,000 in private or federal student loans nationwide. There is no maximum loan amount.

The Massachusetts Educational Financing Authority (MEFA) is a not-for-profit, state-based, and self-funded state-chartered student loan organization that helps families cover educational expenses. As an authority on planning, saving, and paying for college, MEFA offers access to powerful and affordable financial products to help students finance higher education.

Learn More: MEFA Student Loan Refinance Review

    Pros
  • Offers variable and fixed interest rates
  • Available to borrowers who haven’t completed their degrees
  • No prepayment or origination fees
    Cons
  • Doesn’t offer any discounts (such as autopay discounts)
  • They don’t have a cosigner release available
  • No forbearance or deferment options
States Available
  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • Delaware
  • District of Columbia
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Vermont
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming
PenFed_Credit_Union_wizeus-thumb PenFed
Minimum Credit Score N/A
Maximum Loan Amount $300,000
Loan Terms 5 , 15 year options
States Available In Available in 51 states. (View States)

PenFed Powered By Purefy is an award-winning student loan refinance option available to PenFederal Credit Union members with at least $7,500 in private or federal student loans. It offers fixed and variable rates on loan amounts up to $300,000 with 5, 8, 12, and 15-year terms.

Serving 2 million members worldwide with $25 billion in assets, PenFederal Credit Union is one of the country’s strongest and most stable financial institutions. PenFed serves members in all 50 states and the District of Columbia, as well as in Guam, Puerto Rico, and Okinawa. Online service is available to members 24/7.

Learn More: PenFed Student Loan Refinance Review

    Pros
  • Offers variable and fixed interest rates
  • Can apply for refinancing with your spouse
  • No origination fees or prepayment penalties
    Cons
  • Doesn’t offer any discounts (such as autopay discounts)
  • No formal deferment or forbearance options
  • Must become a member to refinance
States Available
  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • Delaware
  • District of Columbia
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Vermont
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming
risla_i2mmj3-thumb RISLA
Minimum Credit Score N/A
Maximum Loan Amount $250,000
Loan Terms 5 , 10 , 15 year options
States Available In Available in 51 states. (View States)

RISLA is a student loan refinancing option available nationwide to borrowers with at least $7,500 in private or federal student loans, and who earn at least $40,000 in income. RISLA offers fixed and variable rates on loan amounts up to $250,000 with 5, 10, and 15-year terms.

The Rhode Island Student Loan Authority (RISLA) stands out from the crowd by offering a safety net to borrowers who refinance their student loans in the form of income-based repayment. Although based in Rhode Island, RISLA offers student loan refinancing to borrowers in all 50 states.

Learn More: RISLA Student Loan Refinance Review

    Pros
  • Available to borrowers who haven’t completed their degrees
  • Low minimum credit score
  • No prepayment or origination fees
    Cons
  • No cosigner release option available
States Available
  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • Delaware
  • District of Columbia
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Vermont
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming
sofi_kazfze-thumb SoFi
Minimum Credit Score 700
Maximum Loan Amount N/A
Loan Terms 5 , 7 , 10 , 15 , 20 year options
States Available In Available in 51 states. (View States)

SoFi burst onto the scene in 2011, quickly becoming one of the leaders in student loan refinancing and consolidation. The San Francisco-based company offers among the most competitive interest rates in the industry and is known for round-the-clock customer service.

SoFi operates within fairly strict credit criteria. The company’s non-traditional underwriting process evaluates merit, employment and financial history, and monthly debt-to-income ratios. SoFi also heavily considers the applicant’s estimated cash flow, career path, and level of education. The company’s ideal borrower boasts strong job stability, substantial income, and a proven history of managing their budget and credit.

SoFi champions transparency and a strong sense of community in everything it does. With SoFi, what you see is what you get. The company makes sure you’re well aware of all the member benefits that it entails. What sets SoFi apart from others in the crowded student loan space is its commitment to the personal growth and career development of its 500,000 members and counting.

In November 2019, the minimum student loan refinance amount for SoFi was increased from $5,000 to $10,000 (100% of school-certified expenses) for all California residents.

Learn More: SoFi Student Loan Refinance Review

    Pros
  • Very competitive rates.
  • Free consultations.
  • No hidden fees or prepayment penalties.
  • Live customer service available nights and weekends.
  • Checking rates does not affect your credit score.
  • Refinancing is available in 49 states, plus the District of Columbia.
  • A swift application process allows for pre-qualification in just 15 minutes.
  • Capitalize on networking events, career services, and complimentary financial advising.
  • If you lose your job for no fault of your own, SoFi will suspend your monthly payments for up to 12 months. Not only will this provide financial relief while searching for a new job, but SoFi will also connect you with job placement services. Still, the interest that accrues during this period of unemployment would be added to the loan.
  • Get additional rate discounts on other products like personal and mortgage loans.
  • SoFi offers wealth management services and SoFi Money, a new personal banking app that simplifies checkings and savings.
    Cons
  • Very strict underwriting criteria. The average SoFi borrower has a credit score over 700 and an income upwards of $100,000.
  • Residents of Nevada are not eligible for refinancing. Variable rate loans are not available in Ohio or Tennessee.
  • The soft credit pull that comes with checking rates on conditional offers does not impact your credit score. If you choose to move forward on an offer, a hard credit inquiry will affect your credit score.
States Available
  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • Delaware
  • District of Columbia
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Vermont
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming
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Everything You Need to Know about Medical School Loans in 2022

nurse-guy-standing

Most medical students wisely pay for medical school using federal student loan programs. Federal student loans for medical school have benefits private loans don’t, such as income-driven repayment plans and loan forgiveness options.

That said, federal student loans may not stretch as far as the student needs. There are many private lenders who cater to medical professionals, which we will review in this article.

And lastly, whether you are still in training or attending, it’s important you know your options about refinancing student loans, loan forgiveness programs, and everything in between.

Let’s dive in.


 

Federal Loans for Medical School

There are two ways to pay for medical school: Private or Federal loans. As a medical professional, it is a no-brainer to start with federal loans:

Direct Unsubsidized Loans

Sometimes called Stafford Loans or Direct Stafford Loans, a direct unsubsidized federal loan does not require the borrower to prove financial need.

As of 2022, medical professionals can borrow up to $40,500 per year in direct unsubsidized loans, with the total maximum amount permissible to borrow being $224,000. The interest rate will be around 5% and you will not pay an origination fee.

PLUS Loans

Direct PLUS loans are federal loans used to cover the difference between other sources of funding and the cost of attending medical school. You can borrow up to the cost of attendance, minus whatever other financing you have received. The cost of attending medical school will include tuition, fees, books, supplies, room and board, transportation and personal expenses.

HRSA Loans

HRSA Loans, or Health Resources and Services Administration Loans, are low interest loans offered to medical students with financial need. There are four kinds and each one caters to different areas of medicine:

  • Health Professions Student Loans (HPSL)
  • Loans for Disadvantaged Students (LDS)
  • Nursing Student Loans (NSL)
  • Primary Care Loans (PCL)

 

Private Loans for Medical School

If you have exhausted all your federal financing options, you may want to consider private loans to pay for medical school. These are the private lenders that LeverageRx recommends:

Credible

One of the best things about Credible is that it is a marketplace that lets you compare rates from multiple lenders at once. Users input their information to receive specialized loan options with rates included.

Splash Financial

Based in Cleveland, Ohio, Splash Financial is a student loan refinancing company built exclusively for the medical market. The Quicken Loans-backed lender was launched in 2017 to provide better student loan repayment options to doctors.

CommonBond

Founded in 2011 by Wharton MBA Students, the New York City-based company offers low fixed and variable rate student loans and refinancing services. This includes MBA, graduate, and undergraduate student loans.

Laurel Road

Formerly known as Darien Rowayton Bank, Laurel Road offers typically lower interest rates for physicians with better than average credit. The company claims it has saved borrowers $20,000 on average over the life of their loans. Unlike most private lenders, the lender forgives debt upon death. You can earn up to $400 with a referral who refinances their student loan with the company.

 

Student Loan Repayment Options

When it comes to paying back the loans you took out, whether federal or private, these are your options:

  • Consolidating all loans (federal and private) into a single loan
  • Refinancing
  • Income-driven repayment plan
  • Student loan forgiveness

Consolidation

Student loan consolidation is simplifying your debt. Instead of making multiple payments to multiple lenders, you will make one payment to one lender.

  • Direct Consolidation Program (for federal loans)Unfortunately you cannot consolidate federal loans and private loans together. But with the Direct Consolidation Program for federal loans, you can combine all your federal loans into one single loan. The way the government determines the new interest rate for the consolidated loan, depends on a weighted average of what you were paying previously for the separate loans.
  • Private Loan ConsolidationPrivate loan consolidation is the same as federal loan consolidation except the new interest rate on a private consolidation is determined on market rates and your credit history at the time of consolidation.

What is the difference between consolidation and refinancing?

If you are consolidating private loans, then consolidating and refinancing your debt is the same thing. This means that the lender will combine all private loans and use current market conditions (and your credit score) to determine the interest rate on the new loan. This typically results in a lower interest rate.

When it comes to federal loans, however, consolidation is your only option as the Department of Education will not use current market rates to determine the interest rate on the combined loan.

 

Should You Refinance Your Medical School Loans?

Refinancing your student loans with a private lender is a good idea if you struggle to make the minimum payments and qualify for better terms (i.e., lower interest rate). However, remember that once you refinance you lose the ability to enter an income-based repayment plan.

Let’s look at a few examples:

Scenario #1

$150,000 at 6% with a repayment term of 10 years. If this person refinances the debt for the same 6% interest, but with a 20-year repayment term:

  • The monthly payment drops from $1,665 to $1,075
  • The total interest paid increases from $49,837 to $87,583
  • The total amount paid increases from $199,837 to $237,583

Scenario #2

$150,000 at 7% with a repayment of 10 years. If this doctor refinances the debt and keeps everything the same except the interest rate, changing it from 7% to 4.75%:

  • The monthly payment drops from $1,742 to $1,573
  • The total amount of interest paid falls from $58,996 to $38,726
  • Total payments over the 10-year term fall from $208,996 to $188,726.

Scenario #3

$150,000 at 7% with a repayment of 10 years. If this physician refinances the debt to drop the interest from 7% to 5% and extend the repayment term to 15 years:

  • The monthly payment drops from $1,742 to $1,186
  • The total amount of interest paid increases from $58,996 to $63,514
  • Total amount paid increases from $208,996 for the 10-year loan to $213,514 for the 15-year loan

Scenario #4

$150,000 at 7% with a repayment of 10 years. If this person refinances the loan to get 5.25% interest with a repayment term of 5 years:

  • The monthly payment increases from $1,742 to $2,848
  • The total interest paid would drop from $58,996 to $20,874
  • Total amount paid would decline from $208,996 to $170,874

 

What are Income-driven Repayment Plans?

There are four income-driven repayment plans offered by the Department of Education:

  • Income-Based Repayment (IBR)
  • Income-Contingent Repayment (ICR)
  • Pay-As-You-Earn (PAYE)
  • Revised-Pay-As-You-Earn (REPAYE)

Income-Based Repayment (IBR)

To qualify for IBR, your monthly student loan payment can’t equal or exceed what your payments would be under the 10-year Standard Repayment Plan.

For example, if you have $150,000 in student loans, but are single and make $150,000 a year, you will not qualify for IBR.

For borrowers who issued their loans after July 1, 2014, IBR caps payments at 10% of your discretionary income. The repayment term is 20 years and after the term expires, the remaining loan balance will be forgiven.

For borrowers who issued their loans before July 1, 2014, IBR limits payments to 15% of discretionary income. The repayment term is 25 years, after which the remaining loan balance is forgiven.

Income-Contingent Repayment (ICR)

The good thing about ICR is there is no income eligibility requirement. Monthly payments on ICR plans are set as the lesser of:

  • 20% of your discretionary income
  • The amount your monthly payments would be if your loan is amortized over 12 years

ICR also offers student loan forgiveness after a maximum repayment period of 25 years.

Pay-As-You-Earn (PAYE)

Pay As You Earn (PAYE) caps a borrower’s monthly loan payment at 10% of discretionary income which means this program works out better for residents or physicians just starting out, rather than seasoned doctors. This is a hypothetical resident’s situation:

  • $58,000 salary
  • Single with no kids
  • Has student loans totaling $150,000 at 5.7% interest
  • Current monthly payment $1,642

If this person qualifies for PAYE, it will slash her monthly payment from $1,642 to $333. That’s quite the savings! However, the resident’s monthly payment will grow proportionally to her income. The beauty of PAYE is it helps medical professionals through the lean years of residency by drastically lowering their monthly student loan payment.

Revised Pay As You Earn (REPAYE)

REPAYE is a new-and-improved version of PAYE. It was introduced in 2015 as a way to make more student loan debtors eligible for PAYE.

A borrower’s monthly payment under REPAYE is 10% of their discretionary income and there is no cap on monthly payments. The more you earn, the more you will have to repay each month on your loans.

The maximum repayment period under REPAYE is 20 years for undergraduate students and 25 years for graduate students. Once the repayment period expires, the loan is forgiven.

 

Student Loan Forgiveness Programs

Instead of working out an income-based repayment plan, or refinancing your private loans — you may want to consider student loan forgiveness programs. Here is an overview of the most common programs.

Public Student Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness (PSLF) Program forgives federal student loans for employees of certain public agencies and nonprofit organizations. Medical professionals can qualify for this program by working full-time for a 501(c)(3) tax-exempt nonprofit or public institution.

However, borrowers must make monthly payments for 10 years while being employed at the qualifying agency or nonprofit before the debt is forgiven. And, this program is unfortunately hard to qualify for.

As of June 30, 2018, 33,000 applications were submitted and 98% of those applications were denied PSLF.

National Health Service Corps

The National Health Service Corps (NHSC) provides up to $50,000 for student loan repayment assistance. To obtain this funding, doctors must commit to serving in an NHSC site in a high-need, underserved area.

The term of commitment is typically two years. Once you complete those two years, you may be able to extend your service. This would result in additional loan repayment assistance.

National Institutes of Health Loan Repayment Programs

The National Institutes of Health (NIH) offers awards to health professionals in research careers. To qualify for its repayment program ($35k per year), participants must agree to perform research funded by a nonprofit organization. The commitment must be for a minimum of two years.

Military programs

Branches of the military not only offer tuition assistance, but they can also help doctors who have already graduated. Graduated doctors who enroll in military service can qualify for student loan assistance.

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