If you’ve attended college, chances are you have student loan debt. If you've attended medical school, chances are you have a lot of student loan debt.

While the price of admission to the medical field is steep, it doesn't have to cripple your career or lifestyle. There a number of strategies for tackling debt, and new doctors are in a unique position to succeed given their high starting salaries.

In this guide, we will walk you through everything you need to know to refinance medical student loans and pay off medical school debt as fast as possible.

Consider the following statistics:

  • More than 44 million Americans have a combined $1.5 trillion in student loan debt. That is equivalent to 7.6 percent of the U.S. GDP in 2017.
  • Among types of consumer debt, school loans trail only mortgages. There is more student loan debt than both auto loans and credit card debt.
  • The average person with student loans carries $39,400 in debt. That’s equal to 70 percent of the median household income in the United States of $56,516, according to 2015 data from the U.S. Census.
  • The average monthly payment on student loans for borrowers aged 20 to 30 is $351.
  • Nearly 11 percent of debtors are more than 90 days delinquent on student loan payments.
  • The per-person student loan debt exceeds, on average, the annual salary of a typical new college graduate. According to the latest Bureau of Labor Statistics, the average American ages 20 to 24 earns just over $28,000 annually. It’s slightly better — $38,400 — for Americans between the ages of 25 and 34, but still less than the average overall student loan debt.
  • New doctors have more than four times the student loan debt as the average college graduate. About 75 percent of new doctors in the U.S. graduated with debt in 2017. The average amount was $161,772.

How student loan debt impacts you as a borrower

The investment in college often pays off in the long term. In the short term, student loan debt can hinder a person’s finances.

According to a 2017 PricewaterhouseCoopers survey, 40 percent of millennial employees have a student loan. More than 80 percent say student loans have a moderate or significant impact on their ability to meet financial goals.

One of the major impacts is the ability to get other types of financing. Whether you want to buy a car, a house, or other need, student loan debt factors into whether you can obtain a loan.

Your student loan payment adds to your debt. When you’re starting out, your income is as low as it will likely ever be. This means you have a higher debt-to-income ratio (DTI).

Your DTI ratio is the percentage of your monthly income that pays debt and obligations. Whatever you hope to borrow money for, your lender will strongly consider your DTI when assessing your creditworthiness.

This is especially true for mortgages. Traditional mortgage lenders limit your DTI to between 35 and 40 percent. That means if you earn $10,000 a month, your current debt can’t exceed $3,500 to $4,000 a month.

Other ways that student loan debt can impact your financing include:

  • Damaging your credit score if you have missed payments.
  • Paying a higher interest rate depending on your DTI and payment history.
  • Affecting how much you can borrow.
  • Affecting your ability to save for downpayments.
  • Having to convince a lender you can afford another loan.

As a physician, you can access financing that mitigates these impacts.

Lenders have created physician mortgage loans. The philosophy behind a physician loan is that homebuyers in your profession are low-risk borrowers. Banks offering physician loans take the approach that a doctor’s income potential will more than offset the risk of having student loan debt and little in savings.

Physician mortgage loans either recalculate the impact of student loan debt or dismiss it altogether. This lowers your DTI. A lower DTI makes it easier to qualify for financing.

Similar to physician mortgages, physician practice loans are designed for the unique financial circumstances of medical professionals. Lenders who work with physicians know that student loan debt is an investment in your future. It’s not like consumer debt that offers little to no return. Health care lenders understand that student loan debt will be offset by the income a physician can generate through their practice.

Even with the advantages of physician financing, you should pursue ways to reduce the impact of your student loan debt.

Student loan repayment options

No matter what you do, you need a student loan repayment plan. A repayment plan can help you get organized, understand your options, set goals, budget for your future, and put you on a clearer path toward conquering student loan debt.

There are a number of options available to physicians and residents to reduce their student loan obligations, including:

  • Refinancing your federal loans and/or your private loans into a new loan
  • Consolidating your multiple federal loans and/or private loans into a single loan
  • Qualifying for an income-driven repayment plan
  • Qualifying for a student loan forgiveness program

Each of these options has benefits and drawbacks. In addition, there are certain restrictions involved with each option. Carefully research all of your options before deciding on a course of action.

Refinancing your student loan debt

A popular way of minimizing school loans is to refinance.

When you refinance, you obtain an entirely new loan. The new loan completely replaces your existing debt. The proceeds from your new loan pay off your existing loans. Once your old account closes, you are only responsible for the new loan. None of the rates, terms, or conditions from the old loans apply to the new one. In fact, you don’t even need to use the same lender to refinance.

Your new loan will likely have a different interest rate, different repayment terms, and different monthly payments than your existing loans.

Your new loan should benefit you in one or more of the following ways:

  • Lowering your interest rate
  • Lowering your overall interest expense
  • Lowering your monthly payment
  • Shortening your loan term to repay the loan sooner to save on interest costs
  • Lengthening your loan term to lower your monthly payment
  • Reducing multiple monthly payments to one payment

Don’t wait until your student loans become unmanageable before your look into refinancing. This is something you should always be open to --- especially if you can obtain a lower interest rate.

How to know if refinancing is right for you

The benefits of student loan refinancing are too enticing to ignore. This is especially true for doctors, given their starting salary and income potential. Not only is refinancing the easiest way to lower your interest rate, but it also allows you to adjust your monthly payment and term length. When done right, refinancing can amount to thousands in savings over time.

Refinancing student loans with a private lender could be a good idea if:

You struggle to make your minimum student loan payments. This could be the case if you’re still in residency. By refinancing, you can lower your monthly payment by qualifying for a lower interest rate. You may also lower your payment by extending the repayment term. For example, you could refinance your 10-year loan into a 15- or 20-year term.

You qualify for favorable loan terms. Having decent credit means receiving a lower interest rate and more favorable loan terms. Even if your credit isn’t ideal, check with some private lenders that look at a borrower’s merit to see if you can lower your current rate.

Your future income will be enough to meet your expenses. Once you refinance, you lose the ability to enter an income-based repayment plan. Therefore, you should be sure that your income is sufficient enough to handle your refinanced debt to avoid default.

You are motivated to repay your student debt. If you have sufficient funds, strong credit, and a secure job, then refinancing into a private student loan may be a good option. This is especially true if you do not qualify for loan forgiveness or income-driven repayment plans.

Potential drawbacks of refinancing

While there are many advantages to refinancing, you should consider the potential downfalls before making a decision. Some of those include:

You may lose federal loan benefits. Refinancing your federal government loans into a private loan means losing options only available on government loans. These include forgiveness, forbearance, and cancellation options. Also, federal loans offer income-based repayment options, which you will likely lose if you refinance.

You can consolidate your federal loans together with a Direct Consolidation. But this option may also disqualify you for special repayment or forgiveness plans.

There are eligibility requirements. While it may have been relatively easy to obtain student loans, refinancing may not be as simple. Refinancing companies require that borrowers be creditworthy. You will need a minimum credit score to qualify, and a good one if you want the best rates.

You will likely be locked into a repayment term. A benefit of federal student loans is the ability to alter your repayment plan. For example, you are often able to switch from a 10-year term to a 20-year term. Once you refinance, you lose this option. You will have the same repayment plan until your debt is paid.

You may pay more in the long run. One way to save money on refinancing is to lengthen your loan term. For example, say you exit medical school with $150,000 in student loans. You refinance to lower your interest rate from 6 percent to 4.5 percent. You also extend your repayment term from 10 years to 20 years. Your monthly payment is drastically cut from $1,665 to $949. However, over the life of the loan, you will pay an additional $28,000. This is because interest will accrue on the loan for an additional 10 years.

You lose the grace period on existing loans. If your current loan has a grace period, you may want to wait until it expires before you refinance.

How much money can you save by refinancing student loans?

There are a number of ways you can use refinancing to save money on student loans. Here are a few scenarios.

Scenario #1: Extend the loan to reduce monthly payments

Consider a physician who:

  • Has $150,000 in student loans.
  • Pays an overall interest rate of 6 percent.
  • Has a repayment term of 10 years.

The physician refinances his or her student loan(s) with terms that include:

  • The same 6 percent interest rate.
  • But over a 20-year repayment term.

The results of this refinance agreement for the physician are:

  • The monthly payment drops from $1,665 to $1,075. This results in a monthly savings of  $675.
  • The total interest paid over the life of the loan increases from $49,837 to $87,583. This means additional interest paid of $37,746 over the life of the loan with refinancing.
  • The total payments for the life of the loan increases from $199,837 to $237,583.

Scenario #2: Refinance to achieve a lower interest rate

Consider a physician who:

  • Has $150,000 in student loans.
  • Pays an overall interest rate of 7 percent.
  • Has a repayment term of 10 years.

The physician refinances his or her student loan(s) with terms that include:

  • A reduction in the interest rate to 4.75 percent.
  • Keeping the repayment term at 10 years.

The results of this refinance agreement for the physician are:

  • The monthly payment drops from $1,742 to $1,573. This is a savings of $169 a month.
  • The total amount of interest paid over the loan’s term falls from $58,996 to $38,726. That’s a savings of $20,720 in interest payments over the life of the repayment period.
  • Total payments over the 10-year term fall from $208,996 to $188,726.

Scenario #3: Refinance to get a lower interest rate AND extend the loan term

Consider a physician who:

  • Has $150,000 in student loans.
  • Pays an overall interest rate of 7 percent.
  • Has a repayment term of 10 years.

The physician refinances his or her student loan(s) with terms that include:

  • A reduction in the interest rate to 5 percent.
  • Extending the repayment term to 15 years.

The results of this refinance agreement for the physician are:

  • The monthly payment drops from $1,742 to $1,186. This is a savings of $554 a month.
  • The total amount of interest paid over the loan’s term increases from $58,996 to $63,514 That’s just an increase of $4,518 in interest payments over the life of the new loan.
  • Total payments increase from $208,996 for the 10-year loan to $213,514 for the 15-year loan.

Scenario #4: Refinance to reduce total interest payments

If you have the means, you may want to refinance to pay your loan off sooner. While this will increase your monthly payment, it will reduce your overall interest charges. It will also reduce the total amount of payments you make to repay your debt.

Consider a physician who:

  • Has $150,000 in student loans.
  • Pays an overall interest rate of 7 percent.
  • Has a repayment term of 10 years.

The physician refinances his or her student loan(s) with terms that include:

  • A reduction in the interest rate to 5.25 percent.
  • A reduction in the repayment term to 5 years.

The results of this refinance agreement for the physician are:

  • The monthly payment increases from $1,742 to $2,848. That’s an additional $1,106 the doctor would pay each month.
  • The total interest paid over the life of the loan would drop from $58,996 to $20,874. That’s a potential savings of $38,122.
  • Total student loan payments would decline from $208,996 to $170,874.

Best student loan refinancing companies

Below is a list of private lenders who can help you refinance your student loans:

College Ave

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. The company offers 5, 10, and 15-year terms. The maximum loan amount is $450,000.

In the event of death or disability, the terms of your credit agreement are nullified. College Ave will not pursue your estate.

There is no specific forbearance policy for struggling borrowers. College Ave determines payment-postponement periods on a case-by-case basis. There is also no cosigner release option.

Read our complete review of College Ave Student Loan Refinancing.


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.

What makes CommonBond unique is that it refinances private, federal, and recently refinanced loan types under a grad refinance loan. This allows CommonBond to offer some of the lowest rates on the market. Ideal candidates are borrowers seeking to refinance a large amount of student loan debt. CommonBond claims its average member saves $24,046.

CommonBond offers a hybrid loan option, with APRs ranging from 4.22 percent to 5.64 percent. The hybrid loan is only offered on a 10-year term. The first five years will have a fixed rate, and the five years after that will have a variable rate.

Loan terms are available for five, 10, 15, and 20 years. The maximum loan amount is $500,000. The company’s services are available in all 50 states.

Having a cosigner with a credit score of 670 or higher will lower your interest rate. Cosigners may be released after 24 months of consecutive payments.

The downsides of CommonBond are its 2 percent origination fee and its lack of unemployment protection.

Read our complete review of CommonBond Student Loan Refinancing.


Founded in 2013, Earnest provides low-interest personal loans and can refinance high-interest student loan debt based on merit instead of credit history.

Earnest offers unemployment protection that allows deferred payments up to three months at once and for a total of 12 months over the life of your loan. The company can offer student loan refinancing in 36 states. There is no maximum loan amount. Loans are available in 5, 10, 15, and 20-year terms.

The company enables you to switch between fixed and variable rates if you experience a change in your financial situation.

The company claims its members save, on average, $30,939.

Read our complete review of Earnest Student Loan Refinancing.

Education Loan Finance

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 offer student loan refinancing on top of its traditional products.

ELFI offers competitive interest rates to borrowers that qualify for student loan refinancing. Borrowers can choose from fixed and variable rate loans available in five to 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. Loans are available in all 50 states.

ELFI has a forbearance program that allows you to postpone loan payments up to 12 months if you experience economic hardship. However, the company does not allow borrowers who have previously filed for bankruptcy.

The company also provides borrowers a $400 cash referral bonus for every person who applies and gets approved within 90 days of registration.

The company does not provide a cosigner release option like other lenders.

Read our complete review of ELFI Student Loan Refinancing.

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.


Founded in 2007, LendKey is an online marketplace made up of over 300 local community banks and credit unions. The New York City-based lender matches borrowers seeking student loan consolidation and refinancing services with non-profit lenders across the country.

As a large community network, LendKey provides some of the lowest interest rates available on both federal and private loans.

LendKey provides an interest-only payment option for the first four years of a 15- or 20-year term. This enables you to lock in affordable monthly payments.

The company also offers hardship forbearance if you struggle to make payments. And you can pause payments for up to 18 months if you lose your job. This is the largest career protection period available today.

LendKey is available in most states, except for Maine, North Dakota, Nevada, Rhode Island, and West Virginia. The maximum loan amount is $300,000, with loan terms of 5, 7, 10, 15, and 20 years.

Most applicants need a cosigner with a credit score of 660 or higher. A cosigner release option is available after 12 on-time payments. If your cosigner helps you secure a better rate, you get to keep it when he or she leaves.

Read our complete review of LendKey Student Loan Refinancing.


SoFi was founded in 2011. The company operates in all 50 states. The maximum loan amount available is $300,000. Loan terms are available for 5, 10, and 15 years.

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 claims members who refinance to a shorter-term enjoy lifetime savings, on average, of $15,767.

If you lose your job for no fault of your own, SoFi will suspend your monthly payments for up to 12 months. SoFi will also connect you with job placement services. The interest that accrues during this period would be added to the loan.

Read our complete review of SoFi Student Loan Refinancing.

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.

Additionally, the loans have similar benefits to other private refinancing options and government loans, including forgiveness in case of death or permanent disability. Splash also provides comparative features to help customers perform due diligence. Its Loan Assessment tool accurately compares government repayment programs like PAYE, REPAYE, and IBR to private refinancing options.

The company’s loans are available in all 50 states. Splash has loan terms of five, seven, 10, 15, and 20 years. The maximum loan amount is $346,000. It offers fellowship and hardship forbearance.

Splash does not have a cosigner release option.

Read our complete review of Splash Financial Student Loan Refinancing.

Student loan debt consolidation vs. refinancing

Some people think consolidation is the same as refinancing. There are similarities, but they are different.

For starters, the goals of consolidation and refinancing differ.

Consolidating is the process of combining multiple loans into one single loan. Refinancing is when you take out a new loan to replace one or more existing loans.

Student loan consolidation is about simplifying and organizing your debt. Instead of making multiple payments to multiple lenders, you have just one.

The goal of refinancing is always to save money. You should never refinance unless you can get a lower interest rate or lower payment on your new loan.

You may pay less by consolidating loans. And you may simplify your debt by refinancing. But in both cases that would be an unintended consequence.

Federal loan consolidation

You can consolidate most types of federal student loans as part of the Direct Consolidation Program. You cannot consolidate private loans with federal loans.

When you combine federal student debt into one loan, you will receive a new interest rate. This rate will be a weighted average of the rates on your current loans.

The main advantage is to reduce your debt to one monthly payment instead of having to make multiple payments.

You can also use federal loan consolidation to replace older variable rate loans with a fixed-rate loan. This can protect you from paying higher rates in the future in the event interest rates increase.

Another way to use consolidation is to lower your monthly payment. This is done by lengthening your payment term. Be mindful that paying the debt over a longer period means paying more interest over the life of the loan.

Private loan consolidation

Private loan consolidation works the same as federal loan consolidation with one major difference. The new interest rate on a private consolidation is not a weighted average. Instead, the lender will issue your new loan with a rate based on current rates and your financial credit.

Private loan consolidation is basically the same as refinancing. If you consolidate your private loans, a private lender repays your existing loans. These can be a mix of private and federal loans. The lender issues a new loan based on your creditworthiness. You may be able to lower your interest rate and/or your monthly payment with private loan consolidation.

One strategy is to consolidate federal student loans and refinance private ones. Another is to consolidate some federal loans but refinance other federal debt.

Government income-driven repayment programs

There are four income-driven repayment plans offered by the U.S. Department of Education. These plans are designed for borrowers who can’t afford their monthly federal student loan payments under the Standard Repayment Plan.

All four of these plans set monthly repayment amounts based on the borrower’s household income. They include:

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

These four repayment plans have the following characteristics in common:

  • The monthly payment is determined by your income, family size, and debt load.
  • There is a maximum repayment period, either 20 or 25 years. Once that period has expired, any remaining loan balance is forgiven. That means if you have $5,000 remaining on your loan after your repayment period, that balance is forgiven and you do not have to repay it.
  • Because of how payments are set, there is an annual review of your income, family size, and debt load. Your payments will increase or decrease as these factors change each year.
  • You will typically pay a higher total amount of interest over the life of the loan than you would under a standard repayment plan.

Pros of income-driven repayment plans

The positive aspects of income-drive repayment plans include:

Monthly payments designed to fit your budget. These plans will often result in a lower payment than a traditional repayment plan. This is especially true if you enter an income-driven plan while still a student or resident.

Your payments adjust as your income or family situation changes. If you get married and your spouse does not work or earns much less than you, it could lower your student loan payment. The same is true if you have children. At the same time, your payments start low and increase as your household income increases.

Part of your loans may be forgiven. If you don’t pay your undergrad student loans off within 20 years, the remaining loan balance is forgiven. This means you will have no additional loan payments after 20 years. The repayment term is 25 years for graduate school and professional school loans.

You can still take advantage of PSLF.  If you are eligible for Public Service Loan Forgiveness (PSLF), enrolling in an income-driven plan can lower your payments and help you maximize the benefits of PSLF. (See the Student loan forgiveness programs section below for more information on PSLF).

Cons of income-driven repayment plans

These are the potential downsides of this type of repayment plan.

Loans take longer to repay. Because you are paying less per month, the repayment term will be longer. Instead of paying loans for 10 years, you may end up repaying your student debt for 20 to 25 years.

Your spouse’s income will increase your payments. One of the drawbacks of income-driven plans is that they use a married couple’s combined adjusted gross income (AGI) to determine monthly payments. This is true even if you file separate tax returns. This could raise your monthly payment compared to other options.

You may pay more in interest. The interest you owe on your debt continues to accrue within an income-driven plan. Because you are making a smaller monthly payment over a longer period, your overall interest expense will likely be higher over the life of the loan than if you stuck with a traditional repayment plan.

Your student loan balance might increase. In some cases, your monthly payments do not cover your interest charges. Interest that goes unpaid could be added to your balance and cause it to grow instead of shrink.

The paperwork. There is a lengthy application process for an income-driven plan. Also, you have to certify your income annually since it will likely change from year to year.

Potential negative tax impact. If you make payments for the full repayment term, any remaining balance is forgiven. However, that forgiven balance is considered taxable income the year the loan is forgiven. So if you have a $10,000 student loan balance forgiven by an income-driven plan, you would have to report an extra $10,000 in taxable income when you file your next tax return.

Your income may prevent you from qualifying or benefitting. Because they are income-driven, they may not work well for full-time practicing physicians established in their practice. However, they may benefit residents working to start paying off large student loan debt before they’ve started earning a physician’s salary.

These programs may not exist much longer in their current format. President Donald Trump has proposed the elimination of all income-driven repayment plans. In their place, he has proposed implementing one income plan. This plan would cap a borrower’s monthly payment at 12.5 percent of discretionary income. It would set repayment terms of 15 years for undergraduate loans and 30 years for graduate school debt.

Types of income-driven repayment plans

Below is an overview of income-driven repayment plans:

Pay-As-You-Earn (PAYE)

Pay As You Earn (PAYE) caps a borrower’s monthly loan payment at 10 percent of discretionary income. Discretionary income is defined as household income earned over 150 percent of your state’s poverty level.

For example, the poverty level in the state of New York is considered $12,000 a year, or $1,000 a month. Your discretionary income would be considered anything over 150 percent of that amount. In the case of New York, it would start at $18,000 a year ($12,000 x 150%), or $1,500 a month ($1,000 x 150%).

Say you earn $5,000 a month. Your discretionary income would be $3,500 ($5,000 - $1,500). Your student loan payment under PAYE would be $350 (10% of $3,500).

Additionally, after 20 years of monthly payments, any remaining student loan balance is forgiven.

To qualify for PAYE, you must:

  • Have a payment under PAYE that is less than the payment you’d make if you were on the 10-year Standard Repayment Plan.
  • Have borrowed your first federal student loan after October 1, 2007.
  • Have borrowed a Direct Loan or a Direct Consolidation Loan after October 1, 2011.
  • Demonstrate financial hardship.
  • Have a qualifying loan. These include Direct Subsidized and Unsubsidized Loans, Graduate PLUS Loans (but not Parent PLUS Loans), and consolidation loans made after October 1, 2011, as long as the consolidation loans do not include Direct or FFEL Loans made before October 1, 2007.

Here’s how PAYE might work for a physician:

This hypothetical doctor:

  • Earns $185,000 annually.
  • Is single with no children.
  • Will have his/her income increase 3.5 percent annually.
  • Has qualifying student loans totaling $150,000 at a weighted interest rate of 5.7 percent.
  • Has a current monthly student loan payment of $1,642.

Under PAYE:

  • The doctor’s monthly payment decreases to $1,391. That’s a monthly savings of $251.
  • However, the loan repayment term increases from 10 years to 20 years. Therefore, the doctor pays more over the life of the debt under PAYE than if they had stuck with their current repayment plan.
  • Under the current repayment plan, the total debt with interest paid would be $197,040.
  • Under PAYE, the total debt with interest paid would be $202,738. That’s an extra $5,698 over the life of the loan than what would have been paid under the current plan.
  • Because the doctor can fully repay loans within 20 years, none of the loan balance will be forgiven.

Here is how PAYE can help a resident lower his or her monthly payments.

This hypothetical resident:

  • Earns $58,000 annually.
  • Is single with no children.
  • Has qualifying student loans totaling $150,000 at a weighted interest rate of 5.7 percent.
  • Has a current monthly student loan payment of $1,642.

With the income-driven PAYE plan, the resident can slash his or her monthly payment to $333. That’s a monthly savings of more than $1,300.

Keep in mind that the resident’s monthly payment will grow proportionally to their income once they complete residency and establish their practice. But programs like PAYE can help them through the lean years of residency by drastically lowering their monthly student loan payment.

Revised Pay As You Earn (REPAYE)

So, which is better: PAYE or REPAYE?

REPAYE is essentially a new-and-improved to the PAYE program. It was introduced in 2015 as a way to make more student loan debtors eligible for payment assistance than what PAYE enabled.

Although similar to PAYE, it does not contain the same time restrictions to qualify. REPAYE extends PAYE’s 20-year forgiveness for graduate students to 25 years. REPAYE also does not require the borrower to prove the burden of student loan debt.

The following federal loans qualify for the REPAYE program:

  • Direct subsidized loans
  • Direct unsubsidized loans
  • Direct GradPLUS loans
  • Direct consolidation loans that don't include a Parent Plus Loan.

A borrower’s monthly payment under REPAYE is 10 percent of their discretionary income. Discretionary income is defined as household income earned over 150 percent of your state’s poverty level. Unlike with PAYE, 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 student loans. It is 25 years for graduate school or professional school loans. Once the maximum repayment period expires, any remaining loan balance is forgiven.

There is also an interest subsidy in the event your monthly payment doesn’t cover the interest that accrues on your loan. The government pays 100 percent of accruing interest on subsidized loans for the first three years. After three years, the subsidy equals 50 percent of the interest due.

If you leave the REPAYE program, interest will capitalize. This means it’s added to your balance, and you will have to repay that amount as part of your loan.

If you are single and earn $100,000, your monthly student loan payment would be around $683. This could be different based on where you live. If you’re married and have a child, and your combined income is $100,000, your payment would be around $578.

Income-Based Repayment (IBR)

To qualify for IBR, a borrower’s monthly student loan payments under the plan can’t equal or exceed what their 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 likely not qualify for IBR.

For new borrowers on or after July 1, 2014, IBR caps payments at 10 percent of your discretionary income. The repayment term for these borrowers is 20 years. After the term expires, any remaining loan balance will be forgiven.

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

Federal student loans eligible for IBR include:

  • Direct Subsidized and Unsubsidized Loans
  • Direct Graduate PLUS loans
  • FFEL Consolidation Loans
  • Direct Consolidation Loans

Borrowers with FFEL loans should note that IBR is the only income-drive repayment option for which these loans are eligible.

Here is how IBR can help a physician lower his or her monthly payments.

This hypothetical physician:

  • Has AGI of $150,000.
  • Is single with no children.
  • Has qualifying student loans totaling $175,000 at a weighted interest rate of 5.7 percent. Some of those loans were disbursed before July 1, 2014. This means the doctor would receive a 25-year repayment period. But his or her payments would be limited to the higher 15 percent of discretionary income.
  • Has a current monthly student loan payment of $1,916.

With the IBR plan, the resident can lower his or her monthly payment to $1,649. That’s a monthly savings of about $267.

The total amount paid over the life of the loan would be $229,920 under the standard repayment plan. It would be $235,497 under the IBR plan. That’s an increase of $5,577.

Income-Contingent Repayment (ICR)

The main thing that separates ICR from the other plans is that there is no income eligibility requirement.

Another difference is that ICR is the only repayment plan for which Parent PLUS Loans are eligible, though you will have to consolidate them first.

Monthly payments on ICR plans are set as the lesser of:

  • 20 percent 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.

ICR plans are available for the following loans:

  • Direct Loans (both subsidized and unsubsidized)
  • Direct Consolidation Loans
  • Direct PLUS Loans

The following loans are also eligible for ICR if the borrower consolidates them into a Direct Consolidation Loan:

  • Parent PLUS
  • Federal Stafford Loans (both subsidized and unsubsidized)
  • FFEL PLUS Loans
  • FFEL Consolidation Loans
  • Federal Perkins Loans

Compared with the other three income repayment plans, there are two potential downsides to ICR:

  • Borrowers who choose ICR might find their payments are more per month than they would have been under the Standard Repayment Plan.
  • This repayment plan also has the highest income cap of all the income-driven repayment plans.

Student loan forgiveness programs

There are several state and federal programs that may forgive part of your student loan debt in exchange for service in certain areas. Below is an overview of the most common student loan forgiveness programs.

Public Student Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) Program forgives student loan debt for employees of certain public agencies and nonprofit organizations. It was created in 2007 by President George W. Bush to inspire more graduates to enter public service roles.

Medical professionals can qualify for this federal program by working full-time for a 501(c)(3) tax-exempt nonprofit or public institution. Many hospitals have this status. You can also qualify by working in underserved areas or ones that have a high need for medical professionals. Other public services that qualify include:

  • Emergency management
  • Military service
  • Public safety
  • Law enforcement services
  • Public health services
  • Public education or public library services
  • School library and other school-based services
  • Public interest legal services
  • Early childhood education
  • Public service for individuals with disabilities and the elderly

Private student loans are not eligible for PSLF. If you have one of the following federal student loans, you may qualify for this program:

  • Federal Direct Subsidized Stafford/Direct Loans
  • Federal Direct Unsubsidized Stafford/Direct Loans
  • Federal Direct PLUS Loans
  • Federal Direct Consolidations Loans

The program does not forgive debt right away, however. Borrowers must first make monthly payments for 10 years while being employed at a qualifying agency or nonprofit. After 10 years, the program forgives whatever remaining debt the borrower has left to pay.

However, if you haven’t enrolled in the PSLF, your opportunity to do so may be running out.

These programs have been earmarked for cuts in the past. This has been especially the case since the election of Donald Trump, combined with Republican control of Congress. President Trump, along with Education Secretary Betsy DeVos, has called for its elimination on several occasions.

In December 2017, a pair of Republicans on the House Committee on Education and the Workforce introduced the Promoting Real Opportunity, Success and Prosperity through Education Reform (PROSPER) Act. It included the immediate elimination of the PSLF program.

A similar proposal to repeal PSLF was floated in 2015. That plan at least would have grandfathered anyone currently holding federal student debt. There have also been legislative proposals aimed at capping the maximum benefit a borrower can receive from the program.

In August 2018, a preliminary budget from the Department of Education indicated PSLF was on the verge of being eliminated. At that time, it was estimated that 20 percent of the workforce worked in PSLF-eligible jobs and that 550,000 borrowers were enrolled. The Government Accountability Office said the program was on pace to forgive $108 billion in loans.

The bottom line is that there’s little guarantee the PSLF will be available for new graduates or people who want to enter the program. Nor is there a guarantee that current enrollees will reap the benefits of working for as long as they have in the public sector.

Another downside to PSLF is that it’s hard to qualify. In fact, one report shows that 99 percent of PSLF applicants have been rejected.

As of June 30, 2018, 28,000 student loan borrowers submitted 33,000 applications for the program. More than 70 percent of those were denied for failing to meet program requirements. Another 28 percent of applications were denied due to missing or incomplete information on the employment certification form.

Only 300 applications have been approved. And 96 borrowers have collectively received $5.52 million in loan forgiveness.

To qualify, you must complete the Employment Certification Form. This form must be submitted when you begin a job and every year thereafter to ensure you still work in the public sector. In addition, you must complete a form anytime you switch employers.

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.

The student loan payout is tax-free. The money is paid at the beginning of service to maximize interest savings. The length and level of assistance will depend on the area of service. High-need areas will qualify for larger loan repayments.

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, participants must agree to perform research funded by a nonprofit organization. The commitment must be for a minimum of two years.

Participants can qualify for $35,000 per year in student loan repayment.

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.

Student loan repayment programs by state

You may be able to qualify for student loan repayment programs offered in several states.

Many are offered through the National Health Service Corps. The organization’s State Loan Repayment Program provides incentives to doctors to practice in federally designated “health professional shortage areas” (HPSAs).

Check out the Association of American Medical Colleges (AAMC) database of Loan Repayment/Forgiveness/Scholarship and Other Programs. Some examples include:

California State Loan Repayment Program. It offers repayment of educational loans to health professionals, who in turn must commit to practice in medically underserved areas in public or non-profit entities for a minimum of two years. Health professionals may be granted up to $50,000 for a two-year initial award.

Colorado Health Service Corps Loan Repayment Program. To qualify, recipients must agree to work for three years at an approved site. Repayment amounts include $90,000 for full-time physicians and dentists; $50,000 for physician assistants, advanced practice nurses, clinical pharmacists, and licensed mental health providers; and $20,000 for dental hygienists. You can also receive $45,000 for part-time physicians and dentists; $25,000 for physician assistants, advanced practice nurses, clinical pharmacists, and licensed mental health providers; and $10,000 for dental hygienists.

The Physicians for Rural Areas Assistance Program (Georgia). This program grants student loan repayment of up to $25,000 a year for a maximum of four years. To qualify, physicians must practice medicine a minimum of 40 clinical hours per week in a Georgia county with a population of 35,000 or fewer people.

Kentucky State Loan Repayment Program. To qualify, professionals commit for two years to practice at an eligible sponsoring organization in a federally designated Health Professional Shortage Area (HPSA). Total funding limits vary by profession and range from $20,000 to $80,000.

Michigan State Loan Repayment Program. This program will provide up to $200,000 to repay the educational debt over a period of up to eight years. To qualify, medical, dental, and mental health professionals will work two consecutive years at eligible nonprofit practice sites providing services to ambulatory populations.

Minnesota Rural Physician Loan Forgiveness Program. This program is designed to encourage doctors to practice in a designated rural area. Those who do can receive an annual payment of up to $25,000 to pay down student loans, up to a four-year maximum of $100,000, or the balance of the designated loan(s), whichever is less.

Primary Care Practitioner Loan Redemption Program of New Jersey. Participants can get up to $120,000 over a four-year period of service for eligible qualifying education loans. Primary care providers must agree to provide services at an approved placement site for two to four years.

Ohio Physician Loan Repayment Program. Physicians in certain specialties can qualify for up to $25,000 a year for two years. Physicians can also receive $35,000 a year for the third and fourth years. To earn an award, doctors must commit to a minimum of two years of practice at an eligible site in a Health Professional Shortage Area (HPSA) or Health Resource Shortage Area.

Physician Education Loan Repayment Program (Texas). This program provides loan repayment funds for up to $160,000 over a period of four years to qualifying physicians. Physicians who qualify agree to practice in a Health Professional Shortage Area (HPSA) for at least four years.

Health Professions Loan Assistance Program (Wisconsin). To qualify, medical professionals must work three years in an eligible underserved rural or urban community. Health care professionals in Wisconsin can receive up to $50,000 in education loan assistance. Primary care physicians and psychiatrists practicing in a rural HPSA can apply for both programs and potentially receive a total award of $100,000.

Additional tips and tricks for physicians with student loan debt

Evaluate your options. Between refinancing, income-driven repayment plans, consolidation, and forgiveness programs, there are a number of options to help you pay your student loans. Carefully evaluate those options and, if necessary, get help running the numbers to see which option provides the best savings for your situation. Compare the costs, benefits, advantages, and disadvantages of each option.

If you choose to refinance, shop, and apply to multiple lenders to find the best rates and terms.

Student loan refinancing is a personal decision. What may work for one medical professional may not be the best option for you. Approach your decision with caution. The consequences of your decision will last years.

Therefore, consider the following questions as you undergo the process:

  • What benefits will I gain by refinancing?
  • What benefits will I lose?
  • What happens if I become disabled?
  • What happens if I’m unemployed for an extended period?
  • Will an increase in interest rates impact my ability to may payments?
  • How will refinancing impact my eligibility for Public Service Loan Forgiveness?

You don’t have to refinance all of your loans. In fact, you should only refinance the ones in which you can obtain a lower interest rate. For example, say you have three loans. One has a rate of 3 percent. Another has a rate of 6 percent. The third carries a 7 percent rate. If you can refinance at 5 percent, you should probably only refinance the two higher-rate loans. Don’t lump the 3-percent loan into your 5-percent refinanced loan.

Refinancing your student loans will require:

  • Submission of an application
  • Your current loan statements for all of your federal and private loans, which need to show your original balance, date of disbursement, and a full history of repayment.
  • Proof of income
  • Consent to a credit check
  • Proof of citizenship
  • Identification, such as a driver’s license or passport
  • Similar documents for your cosigner, if applicable

Use online calculators when assessing the benefits and drawbacks of refinancing and income-driven repayment plans. There are a number of online calculators that can show you the effects of refinancing to a lower interest rate, extending your repayment term, or entering an income-driven plan. Calculators should show you the effect on your monthly payment. They should also demonstrate how much more or less you will pay over the life of your loan. In the case of income-driven plans, many calculators can inform you if you meet minimum eligibility requirements.

If you are refinancing, review the lender’s requirements for consigners. Some lenders will require a consigner on your new student loan if you refinance your existing debt. A cosigner is somebody who takes responsibility for your loans if you are unable to pay them. Some lenders may require a cosigner regardless of your credit. Others may require one if your credit score falls below a set minimum.

If a cosigner is needed, also review under what circumstances your cosigner can be released from repayment responsibility. For example, some lenders will release your consigner once you’ve made a minimum number of on-time payments.

If possible, improve your financial status before you refinance your student loans. When you refinance your student loan debt, potential lenders assess both your credit score and debt-to-income (DTI) ratio.

Your DTI is the percentage of your monthly income that pays debt and obligations. The higher your DTI, the more difficult it is to refinance student loans. It means you may pay a higher interest rate. One way to lower your DTI is to pay off or consolidate other loans. If you have credit card debt, you may want to consolidate it into a lower interest rate personal loan.

Make sure you also make debt payments on time to maintain a quality credit score.

If possible, avoid deferment and forbearance. Many medical school graduates put their student loans into forbearance while they’re in residency. This is often done because a resident’s salary won’t cover the high monthly payments resulting from the accumulated debt of both undergraduate and medical school loans.

The downside is that loans in forbearance still accumulate interest. Therefore, once a doctor completes residency and starts paying off those loans, the loan balance will be significantly higher. In fact, you could owe thousands more than you originally borrowed.

Residents may be better served by refinancing or an income-driven repayment plan.

If you refinance, determine if a fixed or variable interest rate would be best. A fixed-rate student loan carries the same interest rate for the life of the loan. Variable interest rates are tied to an index. As the corresponding index rises or falls, so too does the interest rate you pay on your loan. This makes the total cost of variable rate debt impossible to calculate. Choosing variable rate loans involves taking some financial risk.

One advantage of a variable rate loan is that the initial rate is often lower than a similar fixed-rate loan. However, if you can lock in a low rate for an extended period, you are likely best served by choosing a fixed interest rate. A variable rate loan could be better for a refinance if you plan to pay off the loan in a shorter repayment period, such as five years. That’s because your loans could be fully or mostly paid off before the interest rate increases.

Set up an automatic payment if your new lender offers it. Your payments will be automatically drafted from your bank account on the same day each month. This will minimize the risk of missing payments. Some lenders will even reduce your interest rate — most commonly by 0.25 percent — if you set up an automatic repayment.

Pay as much as you can afford. As you refinance, choose a loan repayment term based on the highest monthly payment you can afford. The higher your monthly payment, the shorter your repayment term. The shorter your repayment term, the less interest you will pay over the life of the loan.

Make extra payments when possible. Student loans do not have prepayment penalties. If you can make extra loan payments, have the lender apply the excess toward the principal balance. This way, you’ll pay down the principal faster and accrue less interest.

Student loan refinancing terminology

Below are definitions of terms you may encounter as you look to refinance your student loan debt:

  • Accrue. To accumulate interest on a student loan.
  • Adjusted Gross Income (AGI). This is your taxable income minus reductions. It’s reported on a specific line of IRS tax forms, depending on which form you use.
  • Aggregate loan limit. This is the limit on the total amount you can borrow for undergraduate and graduate school loans. If you reach the aggregate loan limit, you cannot receive additional student loans. If you repay some of your loans and bring your total balance below the limit, you can borrow more.
  • Amortization. Amortization is the process by which a loan’s principal decreases with each payment. An amortization schedule is a table that shows how much of each payment goes toward reducing the loan’s principal and how much pays interest.
  • Annual loan limit. The maximum amount of federal student loans you can have in an academic year. The limit varies by type of loan and grade level.
  • Annual Percentage Rate (APR). The actual yearly cost of borrowing money reflected as a percentage rate.
  • Capitalized interest. This refers to unpaid interest added to the principal balance of a student loan.
  • Collection account. A debt, such as a student loan, that has been placed with a collection agency by a creditor. The collection agency works on behalf of the creditor to attempt to collect repayment for the debt.
  • Consolidation. Combining multiple loans into a single new loan.
  • Cosigner. A cosigner is a co-borrower. Cosigners are often necessary if the main borrower has substandard credit. They are just as responsible for repaying the loan as the student borrower. If the main borrower can’t make the payments, the lender will require the cosigner to make the payments.
  • Cosigner release. Some lenders will allow you to apply to release your co-signer from loan responsibility. Options will vary by lender but may include a minimum number of payments made and/or credit requirements to obtain a release.
  • Debt-to-income (DTI) ratio. The percentage of your monthly income that pays debt and obligations.
  • Default. This is the failure to repay a loan. Since student loans are typically uncollateralized, there is no risk of forfeiting property due to a default. However, the creditor will report the default to credit bureaus and your credit score will be negatively affected.
  • Deferment. Student loan deferment is when you are allowed to temporarily stop making loan payments for a specified period. You can defer is generally for a circumstance such as being in school or serving in the military. You're not generally charged interest on subsidized loans during deferment. However, interest will continue to be charged on your unsubsidized loans.
  • Deferred payment. This type of student loan payment allows you to wait until your post-graduation grace period ends before you’re required to make payments. Keep in mind the interest you accrue is added to your total loan balance on top of the interest you must already pay throughout your term.
  • Delinquency. This refers to a loan in which the borrower has not made a payment when due. Your lender is required to report delinquency to at least one national credit bureau. This will negatively impact your credit score.
  • Direct Consolidation Loan. This is a type of consolidation loan. It only combines your federal government loans. This type of loan will not reduce your interest payment. It simply combines your multiple loans so that you have one monthly payment.
  • Direct PLUS Loan. This is a federal student loan used by graduate and professional degree students. They are more like private loans than other types of federal loans. Direct PLUS Loans require a credit check. They also have higher interest rates and fees.
  • Discretionary income. Your AGI minus the poverty guidelines for your family size.
  • Federal Family Education Loan (FFEL) Program. These are federal student loans borrowed through private lenders and guaranteed by the federal government. FFEL Loans include the following types of federal student loans: Subsidized Stafford Loans, Unsubsidized Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans. The FFEL Program ended in 2010. No new loans have been made under the program since then.
  • Flat payments. This enables you to start repaying a student loan while still in school. You can make a small flat payment, such as $25 a month, while still in school. Then you make full payments once you graduate.
  • Forbearance. It’s similar to deferment in that you can temporarily stop making loan payments. The main difference is that forbearance is typically for people facing financial hardship. Also, interest will continue to be charged on both subsidized and unsubsidized loans.
  • Forgiveness. If your loans are forgiven, you are no longer required to make payments.
  • Grace period. This is a time period in which you are not required to make loan payments. You are typically granted a grace period following graduation or leaving school.
  • Graduated repayment plan. This is a repayment plan in which your payments start low and increase periodically, such as every two years, until your loan is repaid.
  • Income-Based Repayment (IBR) Plan. This is a repayment plan in which the amount you owe each month is based on your income. Under the IBR plan, monthly payments are generally equal to 15 percent of your discretionary monthly income. The percentage may be 10 percent if you are a new borrower.
  • Interest-only payments. These are student loan payments you make while still in school. They enable you to pay monthly interest while still in school, then make full payments following your grace period.
  • Origination fee. Some lenders will charge a fee to originate a student loan refinancing loan. For example, the lender may charge 2 percent of the amount you borrow upfront as an origination fee.
  • Parent PLUS. This is a federal student loan available to the parents of dependent undergraduate students. It offers a fixed 7.6 percent interest rate for the 2018-2019 school year and flexible loan limits.
  • Pay As You Earn (PAYE). This is a repayment plan with monthly payments generally equal to 10 percent of your discretionary monthly income.
  • PLUS Loan. Direct PLUS Loans and FFEL PLUS Loans are loans to eligible graduate or professional students.
  • Poverty guideline. This is often used on income-based repayment plans. It’s used to calculate your discretionary income to establish your repayment amount. The poverty guideline amount is based on where you live and the size of your family. The guideline is published annually by the U.S. Department of Health and Human Services (HHS).
  • Principal. The loan amount you borrowed plus any capitalized interest.
  • Public Service Loan Forgiveness (PSLF). This is a  program that forgives student loan balances for people who work full-time in certain public service careers. Borrowers must make 10 years worth of payments before loans can be forgiven.
  • Repayment period. This is the maximum time period over which you must repay your student loans. The repayment period may range from 10 years to 30 years, depending on the loan amount, loan type, and repayment plan.
  • Revised Pay As You Earn (REPAYE). This is an enhancement to the PAYE program. It was introduced in 2015 as a way to make more student loan debtors eligible for payment assistance than PAYE enabled. Although similar to PAYE, it does not contain the same time restrictions to qualify. Monthly payments are generally equal to 10 percent of your discretionary income, divided by 12.
  • Standard Repayment Plan. This is the basic repayment plan for loans from the William D. Ford Federal Direct Loan Program and the Federal Family Education Loan (FFEL) Program. Payments are fixed. The repayment period under this plan is typically 10 years.
  • Subsidized loan. A federal student loan for which the borrower is not generally responsible for paying interest while either still in school, in a grace period, or in a deferment period.
  • Unsubsidized Loan. A federal student loan in which the borrower is fully responsible for paying the interest regardless of the loan status.
  • William D. Ford Federal Direct Loan Program. Also known as the Federal Direct Loan Program, this program provides low-interest loans to post-secondary students and their parents. It is issued and managed by the U.S. Department of Education. It is the only government-backed student loan program in the United States. The program offers several types of loans, including subsidized direct loans, unsubsidized direct loans, Direct PLUS Loans, and Direct Consolidation Loans. All loans granted through the Direct Loan Program have maximum amounts set each year.
Jack Wolstenholm - Head of Content Marketing

Jack is the Head of Content Marketing at LeverageRx, the personal finance company that simplifies how healthcare professionals shop for financial products and services. A Creighton University graduate and former advertising creative, he has written extensively about topics in personal finance, work-life, employee benefits, and technology. His work has been featured in MSN, Benzinga, TMCNet, StartupNation, Council for Disability Awareness, and more.

Published November 20, 2018