In the early 1960s, only 31% of medical students took out loans to attend school. Today, according to the American Medical Association, 79% of medical school graduates have $100,000 or more in student loans, and the average amount of medical school debt is $201,490. Needless to say, as a dount of medical school debt to finish your education.
However, carrying six figures of education debt isn’t as dire for you as it can be for someone working in another field. As a doctor, you likely have a relatively high salary. In fact, the Bureau of Labor Statistics reported that the average salary for family and general practitioners is $211,780.
With your education and income, you’re a prime candidate for student loan refinancing, often referred to as consolidation. Refinancing your medical school student loans can help you save money and pay off your loans early.
When you have such a large amount of student loan debt, interest charges can have a significant impact on your balances. Over time, interest charges can add thousands to your loan cost.
Unfortunately, the interest rates on medical school loans can be quite high. Even if you qualified for federal https://yourloansllc.com/personal-loans-ne/ Grad PLUS Loans, you can face steep rates. As of 2020, the interest rate on Direct PLUS Loans is a whopping 7.08%.
To put that rate in perspective, let’s say you had $100,000 in student loan debt at 7.08% interest and a 10-year repayment term. Your monthly payment would be $1,165 per month, and by the end of your loan term, you will repay a total of $139,825. Interest charges would cost you over $39,000. Pretty scary, right?
Medical School Student Loan Refinancing
When you refinance medical school loans, you may qualify for a loan with a lower interest rate. Or, you can extend your repayment term if you want a more affordable monthly payment. Depending on what option you choose, the savings can be significant.
If you refinanced your loans and qualified for a 10-year loan at 4.5% interest, your monthly payment would drop to $1,036 per month. However, you’d pay just $124,366 over the length of your loan. By refinancing your debt, you’d save over $15,000.
If you’re considering student loan refinancing but you aren’t sure whether now is a good time, consider the following scenarios. If one or more of these apply to you, it could mean this is a great time to consider seeking a better rate on your loans:
- You aren’t eligible for Public Service Loan forgiveness
- You plan to work in the private sector
- You have high-interest private medical school loans
- Your spouse’s income is high, which increases your income-based payments
- You have a healthy credit score
If your payments are significant, you’re unlikely to receive any type of loan forgiveness and your credit score enables you to earn competitive rates , why wait? Refinancing could lower your payment and offer you the opportunity to change your repayment term to best fit your financial goals.
Refinancing medical school loans during your residency
Some lenders offer payments as low as $100 per month to students still in residency, which enables you to tackle a small portion of your medical school debt before starting full payments.
This financial option would be a good fit for medical students with good credit who can earn competitive interest rates when refinancing, as well as those who have a cosigner readily available. Refinancing during residency may be an especially good move for borrowers with a significant number of private loans.
Bear in mind, however, that because your payments are so low during residency, you may pay more in interest than you would otherwise. That said, refinancing during residency can be a fantastic way to jumpstart your journey toward financial freedom.