[2020 Update: Since this post was written, but LinkCapital and Splash have shuttered their resident-specific programs and LinkCapital subsequently shut down completely.]
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 a 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 Financial, SoFi, 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 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 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 $500 bonus for loans above $100k.
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 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
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).
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 formal (but still short) 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 temporary 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 your federal rate. In many cases, REPAYE offers the straight up best rate for 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 once they’ve signed a contract for a job that is not PSLF-eligible.