Resident Refinance: Laurel Road vs LinkCapital vs SoFi vs Splash vs REPAYE

Let’s assume that you are a graduating medical student or resident and plan to actually pay off your loans (i.e. not attempt to qualify for PSLF.)

But before we assume that, let’s remember that PSLF makes the most sense for people destined for academic or government (city/county/state/federal) or with long residencies and big loans.

So, assuming you need to pay off this debt yourself, your goal is to get the lowest interest rate possible to reduce the growth on your loans while having a monthly payment that is feasible as a resident.

Low-debt residents can refinance with any company. If you owe less than you’ll make as a resident, you won’t need a special program. If you’re an resident who owes somewhere near $200k while making $55k/year, then your options are likely limited to the federal government options and the four private companies who offer medical resident programs with reduced monthly payments during training: Laurel Road, Splash FinancialSoFi, and LinkCapital

Unfortunately, all special resident programs offer less good rates (at least during the training period) than refinancing as an attending, but for some borrowers, you can still save some real money. On the plus side, via the referral links on this page, most offer welcome bonuses.

 

Laurel Road

Laurel Road gets it. Back in 2015 when the company was just called DRB, they were the first to create a student loan refinancing program for medical residents. The deal hasn’t changed much since then.

Post-match MS4s and all residents are eligible for Laurel Road refinancing. The monthly payment is set at $100/month regardless of your income during residency/fellowship, and then switches when you finish training.

There is no maximum number of training years, and you can continue the reduced payment up to 6 months after finishing training to help get you through the fresh start.

The welcome bonus is $300.

 

Splash

Splash Financial is unique among the four programs as being a true forbearance alternative. The required monthly payment is exactly $1 for up to 84 months (7 years) of training. While most residents should not be forbearing and should hopefully be able to find $100 of flexibility in their monthly budget, many feel pinched and forbear anyway. While a lifestyle that requires forbearance is far from ideal, Splash is the only company that makes forbearance completely unnecessary in your quest to get a better rate.

Note, however, one sneaky wrinkle: while Splash offers the same 0.25% autopay discount as everyone else, the discount doesn’t apply to the $1 trainee payment period. So you’ll need to add that back on to compare apples to apples during residency.

Splash offers a $300 bonus for loans above $30k.

 

SoFi

SoFi is the biggest player in the student loan refinancing market, and they’ve grown and grown into a big corporate entity that offers all varieties of personal loans, mortgages, etc. Without that personal touch and scrappiness of the new companies, it took SoFi a long time to make a resident product, and they didn’t do anything creative.

SoFi offers residents $100/month payments for up to 4 years of training. You are eligible as a post-match MS4, but only if your training is 4 years or less in duration. The total reduced payment period is actually up to 54 months (with the final 6 months for the transition to becoming an attending).

If you apply to SoFi in your final year with a signed contract, you’ll automatically get the attending rate instead of the resident rate. Oddly, you will be placed in a mandatory forbearance during that year so that you won’t be able to get an autopay discount during that time.

The welcome bonus is $100.

 

LinkCapital

LinkCapital was the second company to join Laurel Road in offering a resident-friendly program. Link’s program is only available to PGY2’s and above, so graduating students and interns are not eligible. The required monthly payment is a bit lower at $75/month.

Unlike Laurel Road (but like SoFi), Link offers trainees in their final year to qualify for the attending rate with a signed employment contract. Unlike the other companies, Link also tells you your training and attending rates, and when you finish training, your rate automatically goes down. With other companies, you’d likely be on the lookout to refinance again.

As of August 2017, LinkCapital is no longer offering welcome bonuses.

 

IDR: REPAYE & PAYE

I’ve discussed REPAYE and even compared REPAYE/PAYE more at length previously.

With PAYE, your rate is your rate unless you have subsidized loans from college, and so comparing what you currently have to what the refinancing industry can offer is easy.

With REPAYE, there is the 50% unpaid interest subsidy to complicate (but improve!) matters. In short, the government forgives half of the interest that accrues each month that remains unpaid after applying your scheduled calculated payment. This effectively reduces your interest rate, in many cases substantially (especially if you’re single or married with a non-working spouse).

An example:

Loan: $200,000 at 6.8%
REPAYE payment as a single resident making $50,000: $270/month
Annual interest accrued: $13,600
Annual interest paid: $3,240
Annual interest unpaid: $10,360
Amount forgiven: $5,180
Effective interest rate: 4.2%

The more you borrowed and the less you make, the bigger your subsidy will be and the more it will lower your rate

If you’re married and your spouse earns income, the less your subsidy will be and the less it will lower your rate.

Also, note that REPAYE can be a particularly good deal for your intern year if you play your cards right. Even if refinancing is a generally good choice for your situation, unless you had substantial income as a family during your final year of school, private companies are going to have a really hard time beating the feds if you consolidate and apply for REPAYE right after graduating.

 

Summary & Verdict

All of these companies offer no-cost refinancing with zero fees. Picking a shorter term will result in lower rates (note: the term doesn’t kick in until you become an attending and start true repayment). A couple things to keep in mind: if you pay the minimum every month, you will definitely be in a negative amortization situation, likely even more than you would be using a federal plan (with their higher monthly payments). Second, unpaid interest will also capitalize at the end of the training period, so it would behoove you to try and reduce some of this accrued interest prior to graduation.

Most companies also offer referral bonuses where you can get some cash back with your refinance. This means that while you can never go back to a federal repayment plan after refinancing, there is literally nothing stopping you from refinancing multiple times, rate hunting, and even collecting multiple referral bonuses.

Assuming you have the financial flexibility to afford all four plans, the only reason to completely exclude a company is if their plan doesn’t conform to your current PGY status and training duration. Getting preliminary rates is a quick 2-minute process that is a soft credit check that won’t affect your credit. It’s only once you move forward with getting a final rate and the application process that involves a real (“hard) credit check; even then, multiple checks for the same thing within a short period of time are considered rate shopping and should function as a single hit. Applying to all of the options that are feasible is the best way to guarantee a good rate. Even the complete applications don’t take more than half an hour or so.

Most importantly, however, is to make sure that your effective REPAYE rate isn’t as good if not better than what the private industry can offer you. Be aware that advertised rates almost universally contain a 0.25% autopay discount, so make sure to account for that when comparing to your federal rate. In many cases, the REPAYE surprisingly offers the best rate to someone in training (particularly if single and not moonlighting substantially). Most residents should be in REPAYE in training and then refinance after training or only when the sign a contract for a job that is not PSLF-eligible.

A few docs talk about early career financial mistakes

A bunch of physician finance bloggers (and me) were asked to weigh in on early career financial mistakes for MDLinx’s relatively new PhysicianSense blog.

Everyone else said don’t buy a house and don’t try to beat the market. I largely agree with both of those sentiments.

I’m not exactly a finance blogger, even though I write about money with some frequency. My answer was instead largely about being purposeful with your time.

Many of us spend our lives reacting. We spend our days constantly reacting to crises, patients, and bureaucracy at work. We react to short bursts of free time or moments of boredom with our phones and social media. We consume media and television like we’re hardwired.

And when faced with financial troubles like student loans or other financial goals, we often react by either shutting down and ignoring our problems or by becoming obsessed with dollars and cents. There’s nothing wrong with moonlighting or trying to carve out some side income–I still do both routinely. But it’s also important to step back and see if and how your efforts are affecting your mood, health, and family.

The need to be cognizant of how you spend your money should be self-evident. The need to be cognizant of how you earn it is less obvious.

Explanations for the 2017 Official Step 3 Practice Questions

Here are my explanations for the 2017 version of the official USMLE Step 3 free question pdf. This is a constant reader request, so enjoy my take on these 137 questions.

You can find my thoughts on preparing for Step 3 here. In short, I think the free materials and UWorld should be enough for most folks. If you want books recs, they’re in that post. If you need another question source, I haven’t tried any of them, but you can get 10% off BoardVitals if you’re interested by using code BW10.

As for this free practice exam, Blocks 1 and 2 are “Foundations of Independent Practice” (FIP). These should take up to 1 hour each. Blocks 3 and 4 are “Advanced Clinical Medicine” (ACM). These should take up to 45 minutes each. Total practice time should be no more than 3:30 if taking under test-day conditions.

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An ad or two

For the past nearly 10 years of writing on this site, I have completely eschewed any form of display advertising. I’ve never wanted to jam the margins full of ugly banners that detract from the reading experience, and I definitely have no interest in being part of any of the usual industry practices of sneaky cookie-based endeavors, user tracking, gigantic data plan-choking scripts, or other things that make the internet worse.

My purposefully limited monetization has primarily been through Amazon affiliate links to things I write about anyway (see what I did there?). Over the years I’ve added relationships with student loan refinancing companies and a handful test-prep companies that I’m otherwise also interested in writing about, which is fine, but a big part of that has also always been to pass on discounts or bonuses to readers. This has always been a labor of love, which is why the vast majority of my writing doesn’t earn a cent and I keep giving away books for free.

This preamble is all to set up the news that the first ad I’ve ever run on the site is currently live. The reason you can’t see it is that it’s actually a time-limited sponsorship on a single popular (radiology) post. It’s from a company I respect with a relevant product and also includes a discount code. I’ve contemplated making the jump for a while now, and that’s the kind of ad I can get behind. If you’re a radiologist and happen to see it, cool. For the rest of you, it’s business as usual.

You may see eventually see an ad or two on a handful of posts or even maybe a single ad on the sidebar. Or you may not. I’d like to help justify (financially) the time it takes to maintain and grow this site, but it’s important to me to do so in a way that doesn’t jeopardize my editorial or the reader experience. That has and always comes first. There will never ever be any tracking of any kind, and I never collect any information from anyone ever.

If you’re a company–like the dozens that email every week asking me to publish your lame guest posts–and would like to reach a large unique audience of awesome medical students, residents, and other physicians, then get in touch.

NYU and the slow coming wave of “free” school

A couple of weeks ago, NYU announced that they were making medical school tuition free for every student. Dean Robert Grossman stated, “This decision recognizes a moral imperative that must be addressed, as institutions place an increasing debt burden on young people who aspire to become physicians.”

My first thought on this news was, Man, Harvard is going to be so pissed that they weren’t first.

The idea of free tuition has been discussed and debated in multiple contexts across Ivy-type schools for years. These institutions are not immune to the burgeoning reality that their educations are financially untenable for most people and crippling for others. With many such schools fostering endowments numbering in the tens of billions of dollars, actual tuition dollars are no longer the bedrock of a healthy world-class institution. Over the past ten or so years, Harvard has often led the way on increasingly generous undergraduate financial aid, and many similar schools have made corresponding efforts to make undergraduate education more affordable, but until now, no one has taken meaningful steps to fix graduate schools, many of which are now considered mandatory for advancement across many industries. Even this move is largely a token effort, as every other extremely expensive NYU school will still keep its top-dollar cost in the shadow of this brilliant PR stunt.

As an illustration of the numbers involved in making one small school free:

The annual NYU med tuition was an exorbitant $55k per year, and there are 442 total active medical students, which gives a total cost of $24 million per year. “Paying” this requires (according to NYU) an endowment of $600 million because the school is utilizing the famous 4% rule that would make this massive endowment essentially guaranteed to last forever based on historical stock market returns.

Numbers aside, I do agree with the words of the dean (though I would expand them). There is a moral imperative to fix the cost as well as the delivery of medical education. The length, cost, and inefficiency are all otherwise mutable strong arms that are breaking healthcare and squeezing the joy out of young doctors in training from coast to coast.

NYU will not be the only school to offer free tuition. Other rich schools in and outside of medicine likely have been and certainly will be shoring up their endowments to join the club as is feasible. I anticipate this is the first in a salvo of private schools slowly making various programs free, and this will speed up if/when PSLF is eventually canceled, as the program is basically the only justification for charging otherwise unmanageable amounts of money to students who are destined to never be able to actually service their debt. Beleaguered state schools with their chronically strapped budgets will struggle.

 

My second thought is that free tuition will now make NYU about as affordable as the best-priced state schools (because the cost of living in New York is otherwise so high). Four years of living expenses will never be cheap, and it’s much harder to scrounge time to be gainfully employed during medical school compared with college. Clinical rotations are inflexible more-than-full-time jobs.

This will also result in, I imagine, a huge increase in applications to NYU. When my wife and I applied to medical school, we only applied to state institutions back in Texas where we were still residents while away for college. We were not keen to spend as much in a single year as we could on the whole package. People like me may now decide to add NYU to the list, especially since NYC is glamorous.

 

So, good on NYU for being the first to pull the trigger. I hope more schools join their ranks, and I hope most of all that this well-publicized confrontation of medical training costs will lead to a paradigm shift that allows schools and hospitals to rethink the whole process. We can do so much better, for our doctors and for our patients