Last updated April 2020.
Medical school is expensive and getting more so every year. Meanwhile, federal student loans are still at above market rates (and many private ones are predatory). Combine the two and a new doctor will borrow more and then pay more for the privilege than at any other time in history.
Over the past two years, historically low interest rates and a rebounding economy mean that private banks have re-entered the student loan business, particularly on the refinancing side.
As a resident, your options are essentially limited to refinancing with DRB (now Laurel Road), LinkCapital, Splash Financial, and SoFi. Starting in March of 2015, DRB became the first company to offer a resident refinancing program that is unique, practical, and affordable for residents ($100 a month). SoFi’s new offering is similar (only up to 4 years). LinkCapital’s resident program requires a little less at $75 but isn’t available to interns. Splash Financial originally only required a $1 token monthly payment during training and was thus a true forbearance alternative, but they’re now doing $100/mo payments as well.
I wrote about refinancing as a resident at length in this post.
Otherwise, here is the complete picture for student loan refinancing.1
There are only a handful of options and the initial applications are short (really short, ~5 minutes or less). Rate ranges are typically concordant and are theoretically as low as the 2%-range variable across lenders. All quote you low rates assuming you’ll auto-debit from a checking/savings account. Initial applications will result in a soft pull on credit (does not affect your credit score) and give you a preliminary rate, so if you have good cash flow and can otherwise afford your loans (i.e. you’re an attending), you’ll do yourself no harm by simply applying for refinancing from each company and seeing which one is willing to refinance you at the best rate:
- Laurel Road (formerly DRB)
- Splash Financial
- Citizens Bank
- First Republic Bank
Laurel Road (formerly DRB) is the rebranded refinancing arm of the Connecticut-based Darien Rowayton Bank and was one the first big players to return to the student loan game along with SoFi. They were the first company to offer a program specifically geared toward residents (where payments during residency are $100/month regardless of the total loan amount or your income). Laurel Road refinances 100% of private and federal loans with a minimum of $5000 and no maximum, no origination fees, offer fixed and variable interest rates, and flexible loan term lengths. Refinancing after applying through the referral link above would net you $300 dollars.
LinkCapital joined DRB as only the second company to actively court residents for refinancing. You have to wait until you finish intern year to apply, and unsurprisingly, the resident rate won’t be as a good as the attending rate (but still likely better than the federal one). The token monthly payment is $75 instead of DRB’s $100/month, so it’s nominally more flexible. Similarly, accrued interest won’t capitalize until the end of the residency/fellowship period. They also have a unique model where the resident rate automatically goes down 1.4-2% when you reach attendinghood, so refinancing as a resident is partially just an enticement to lock down a guaranteed good rate in the future regardless if interest rates go up in the interim. Trainees in their final year with a signed employment contract automatically qualify for the attending rate as well. The minimum amount is $15k with a maximum loan of $450k with the usual standard offerings: fixed & variable, multiple term lengths (7, 10, 15 and 20-year), cosigners if needed, etc. As of August 2018, Link is no longer offering referral bonuses.
SoFi (which stands for “Social Finance”) was the first company to make a name for itself in the current game of loan refinancing and by far the most likely to send you pre-qualification letters in the mail. The “social” refers to the fact the company originally funded loans at select institutions using money invested by school alumni. Since then the company has grown and begun using conventional financing, but they still claim that some community money makes it into every loan.
SoFi finally began offering a resident refinance program in October 2017, which involves reduced $100/month payments during training (only up to 4 years) with eligibility after matching. They will also refinance senior residents with an employment contract in hand while also offering a one-year deferment on payments. So once you’ve signed on for that private practice job, you won’t have to wait until you’re actually making the money to try to refinance, but you also won’t be on the hook for the larger payments until you can really afford them, which isn’t a bad middle ground.
Minimum loan amount of $5k, variable and fixed rates, and must have graduated from an “eligible” school (depending on where you went, there is rarely an origination fee, which is otherwise not typical among these options). $100 welcome bonus.
LendKey (formerly known as cuStudentLoans, where “cu” stood for credit union) is the only lender to offer interest-only payments. You can do the math with your own loans to see where that leaves you, but if you didn’t borrow too much, it could be even less than IDR (making it potentially affordable as a resident). While one should theoretically always put extra money toward paying down loans, having an interest-only option gives you some month to month flexibility, particularly if you’re transitioning from resident-money to attending-money and want to refinance—but don’t want to start paying a ton immediately. No origination fees, variable and fixed options available. The maximum loan amount has been increased to $300k, which makes LendKey viable for most borrowers. They quoted to me that an annual income of around $75k would be required to refinance their old maximum of $175k. If you apply with a cosigner, LendKey advertises their straightforward co-signer release program, which will help your parents get off the hook after 12 months of payments. And you get $300 for using the above link to refinance.
CommonBond is unique in that they offer a “hybrid” 10-year rate plan which is fixed for the first 5 years and then variable for the last 5 (essentially analogous to a 5-year ARM [adjustable-rate-mortgage]). While hybrid rate range doesn’t look particularly impressive, the hybrid rate will fall somewhere between the variable and fixed rates and helps mitigate the anxiety of committing to a full variable rate (particularly if one hopes to be aggressive in paying down the loan and not keep it long into the variable rate period). No origination fees, but there is an accepted/eligible school list.
Trainees in their final year can receive are eligible for an attending rate with a signed job contract.
Another few unique facets: they also allow you to refinance and take on your parents’ Parent PLUS loans to get your parents off the hook. They also offer academic deferment if you decide to go back to school for that MBA. And lastly, they promise to fund the education of a child in need for every loan they refinance. They also agreed to reimburse readers with $300 for using the above link.
Earnest has some interesting unique features compared with the other players. The main one is totally arbitrary term limits (up to 20 years). You want 10.5 years? You got it! What this means is that you can choose a term length and pay that monthly amount, or you can decide on an exact monthly amount that works for you (and then pay that over the resultant calculated term). In practice, this also makes Earnest a potential option for refinancing during residency. For example, if you refinanced a $100k loan at 4% for 20 years, your monthly payment would be $606. Smaller loans make this option more feasible obviously, but remember you can always pay down faster than your term-length, so really the goal here is to get the shortest term that you can afford/get approved for now and pay down aggressively as soon as possible.
Other interesting features are biweekly payments (to help cut down on accrued interest) and the ability to quickly refinance/change between fixed and variable rates without charge or penalty. If you choose the variable and get skittish, you can lock down a reasonable fixed before it’s too late. Likewise, if your income increases such that it would be easier to pay down more if needed, you could switch to a variable rate and take on that risk. Additionally, if you need to lower your payments because of tough times, they offer rapid refinancing at a longer term to make it happen (of course you’ll also pay more and probably have a worse rate, but hey). Loans start at $5,000, no origination fees. Most but not all states are eligible.
Referral bonus is $300.
Splash Financial is one of the newest players on the block and one of the handful of companies refinancing residents. They used to offer the lowest required monthly payment during training of any company: $1. Now it’s the more common $100/month. The maximum training period is 7 years. Rates vary by overall term length (including the training period), so how good a deal you get as a resident depends on how long your program is and how aggressive you’re willing to be when you finish training. Of course, you could always try to refinance again if you find that speed too much to bear. Splash originally tried to enter the market with an origination fee, but they’ve since seen the light and nixed it, so—like the other companies—Splash is a no-cost refinance. The referral bonus is $300 for loans above $30k. Unlike most lenders, please note that sometimes there is no forgiveness for death or disability (it depends on the underlying funding source for your particular offer), so you need to read the fine print before you sign.
ELFI, which stands for “education loan finance,” is a product from SouthEast Bank. Terms from 5-20 years, $15k minimum, no set maximum. Usual no fees. No resident program, but they do offer (but do not guarantee) a deferment to match your grace period if you have one. There is also an approved school list. $100 welcome bonus.
Citizens Bank offers new student loans in addition to loan refinancing. The maximum loan amount is now 300k (used to be $170k). Product is otherwise typical: No origination fees. Fixed or variable. Co-signer release available. Nothing special/unique, and I’ve also never seen them offer a welcome bonus to anyone.
Credible isn’t an actual lender, it’s a student loan refinance marketplace. When you apply through Credible, you apply to up to 7 lenders simultaneously, which would be a nice time savings and an easy head to head comparison. That said, several big players aren’t on their list, so you’d have to (and should) apply to those separately. Most residents needn’t bother, as DRB and LinkCapital aren’t included (though College Ave, one of their lenders, does offer 2 years of interest-only payments; also requires $75k household income). Neither are SoFi and LendKey, for example. Nonetheless, it’s undoubtedly still the fastest way to check out multiple companies at once. $300 bonus for using the link.
Purefy is another middleman and currently links up borrowers to PenFed and Citizens Bank. Their rate calculations use your credit score and degree more than current income. In my testing, the CB rate was a half point lower through Purefy than through Citizens Bank directly, which is a huge difference. Go figure. Given that the CB website also leaves something to be desired, it’s definitely worth taking the two minutes to add Purefy to the initial rate checks, as they were able to offer one of the lowest rates around.
First Republic Bank
FRB is a private bank that entered the refinance game recently to lure high-income earners toward their banking business. In order to do that, their rates have thus far been lower than the competition. The FRB student loan is really just a gigantic personal loan, and as such, can be a little more flexible in its amount and what it pays off for you. It also means you may not be able to refinance again. Minimum of $60,000 and maximum of $300,000.
Another cool part:
First Republic will rebate the interest that has been paid against the loan, up to 2.00% of the original loan balance if the loan is paid in full within 48 months.
The downside? You must live “near” one of their physical branches to qualify: San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Boston, Palm Beach (Florida), Greenwich or New York City. How near is near? Put your zip code into their website and find out if you qualify.
It’s also a personal loan and not a student loan, which means that it’s not discharged on death or permanent disability etc. That might make you very uncomfortable, so only pursue FRB if you’ve already purchased good disability and term life insurance.
Overall, the interest rate ranges offered by these companies are generally comparable. Typically when one lowers their rates, the others have followed quickly followed suit.2 The increasing competition in this space has been excellent for consumers, because the rates offered even a year ago weren’t that much lower than the federal ones. So, if you have several potential options based on your loan burden and your income, you might as well apply to all and see who gives you the best deal.3 Preliminary applications generally take 2-5 minutes, so there isn’t a big time investment in doing your due diligence. There are never any fees or costs to refinancing with any of these players, so you can refinance, keep an eye on the rates, and refinance again if they go down.
Bonuses: As mentioned above, I was able to convince several companies to provide a monetary incentive for you, dear reader, should you choose to refinance with them (in addition to a more standard referral bounty to me). I’m pretty pleased about that, as this allows you to effortlessly support me/this site as well as yourself.
Thank you for the very helpful article.
For how long all refinancing companies honor the given rate? Day, week, month ? And how long does the whole process take?
Grace period for my son’s loans ends in the end in the next month. Should we wait for couple of weeks or apply asap?
The rate ranges haven’t changed often recently but aren’t set for an any specified length of time. You may be offered a quick preliminary rate prior to completion of the application process, but once offered a formal rate, it’s good for the duration of the refinance process. The whole process length varies on the complexity of underwriting, the company’s volume etc, but usually takes a few weeks, sometimes longer. Rather than worry about a particular rate, it makes the most sense to apply to all companies that potentially suit your needs and see what comes up. Some people have had success getting a rate lowered with one company when a competitor has offered a better rate.
He should apply now, but your son also needs to prepare to make a payment to the federal government as it’s definitely not guaranteed that any refinance would get done in time to obviate that need. If he doesn’t want to make a big 10-year standard repayment (the default), he’ll have to apply for an income-driven repayment plan or forbearance, at least temporarily.
DRB and LinkCapital, the two companies that specifically offer resident refinance, both honor federal grace periods, so there’s no reason to wait. If you are going to try a traditional refinance with one of the other companies, which if he has significant debt will require you to cosign and help pay your son’s loan, then the grace period honoring varies but given the current timing is irrelevant.
Thanks, Ben. We will start.
Good luck and happy saving! Let me know how it goes if you get a chance, always looking for more reader experiences.
Thanks so much for this and your other article (https://www.benwhite.com/medicine/you-can-now-refinance-your-student-loans-during-residency/). I plan on sending applications to both DRB and LinkCapital today. I was lucky enough to have a less-than-average total loan amount (just shy of 100k), but even the IBR payments are a little daunting on an intern’s salary when you’re trying to save for a wedding.
Good luck! Let me know how it goes. The flexibility of lower or no payments can really make a big difference early on as you get settled into your early career (and way way better than forbearance!)