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. 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).

I wrote about refinancing as a resident at length in this post.

Otherwise, here is the complete picture for student loan refinancing.2Many of these programs have referral programs, so if you were to refinance through one of the links below, you would also be supporting me/this site. After negotiating, most have been kind enough to extend even bigger bonuses to the referees (you), which I’ve enumerated below.

TL;DR

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:

[This old page is here for archive purposes. I’ve removed the specific company references.]

Summary

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.2Current rates have recently lowered again with variable rates at the moment as low as 1.9% 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.3The initial applications don’t affect your credit score. When you move forward and actually apply for financing from several student loan companies within a short time frame once, it’s still considered a single hit on your credit report (no penalty for comparison shopping). 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.

Last updated July 2020

If you’re a resident with a big load of student loans from the feds at a 6.8% interest rate (or worse), your choice has generally been IBR or forbearance. The mountain of debt compared with your relatively paltry resident salary has put conventional student loan refinancing—which requires a reasonable debt/income ratio—out of reach. If you have an average loan burden (say, $180k) or higher, your IBR payments also only cover around half of the monthly interest accrued (so despite your best efforts, your loans are still growing). If you forbear, they’re growing even faster.

So basically, your loans have been growing at a crappy interest rate, and you’ve been unable to bail to greener pastures.4If you’re doing IBR in order to qualify for PSLF, then that’s a separate issue. See below. Until now.

[This is old post; I’ve removed all the specific company references, as they’re out of date. I’ve moved on from this topic.]

This is how it works:

• You apply for student loan refinancing whenever you want starting from when you match as an MS4 (they’ll respect the usual 6-month post-graduation grace period, don’t worry). Ditto SoFi.
• All will use a multifactorial process to look at your application, including your FICO scores, your debt and total loan amount, and your medical specialty. They use your specialty to determine the median projected/future income for you and use that instead your current income to calculate your debt to income ratio (DTI).
• If you meet the requirements, you get to trade your old loans for a new one.
• None have origination fees. 
• After you finish training and begin making real money, you will enter standard repayment. Any interest accrued during the training period will capitalize at this point (but did not compound/capitalize during training).
• In some ways, these offerings are like income-driven repayment plans in the sense that your payments are low in residency and then ramp up once you finish. It’s not like IDR in the sense that it stays $100 or $75 per month regardless of your fluctuating income as a resident, and the new private loan loses any chance of achieving federal loan forgiveness.
• None have prepayment penalties. Prepayment can also directly go to your balance and not to uncapitalized interest. If you are already doing IDR, this means that you can put that extra $300 or $400 you’re already used to paying every month toward your loans anyway, only now this money will go further. For example: $500 a month for IDR means you spend $6000 a year on your loans. Depending on your loan amount and your new interest rate, this amount may be enough to completely stop the growth of your loans (instead of merely slowing down the rate of negative amortization).
• Grace periods are usually honored, as well as a three-month grace period before entering full repayment after residency/fellowship ends, giving you a few cushion months at your new salary.
• Accrued interest capitalization won’t capitalize again until after residency (which is similar to what happens for many physicians in IBR/PAYE, worse than REPAYE, but better than forbearance).
• Loans are discharged in the event of death and permanent disability (like federal loans). With Splash, only some loans are forgiven (depending on the underlying funding source, so read that fine print!)
• If you don’t qualify for refinancing (e.g. low credit score), it’s possible to reapply with a cosigner (and still be a part of the resident program).
• The rates you’ll get as a resident aren’t going to be as good as those of an attending. With most companies, if you want to get lower, then you should reapply when you’re an attending. A trainee applying in their final year with a signed employment contract can get an attending rate.

It seems like all student loan refinancing companies have referral programs to drum up business, whereby you get some cash if you send a friend their way. If you’re interested in refinancing, just do the initial 2-min rate check application and see who gives you the lowest rate. If the offers don’t make sense, then don’t sweat it. Your credit won’t get pulled until you do the real application.

What I found clever about the original company offering is that they not only stood to profit from the extra years of interest accumulation if a new borrower paid the minimum amount during residency, but that they’d found a way to get at physicians early and compete against the other companies on something other than who has the lowest offered rate on a given day. Frankly, I’m surprised others took so long to join in (I talked with one of their directors about this back in 2016!).

Interest Capitalization

One thing that happens if you switch from federal income-driven repayment to private consolidation/refinancing is that your accrued interest will capitalize. This means that if you had loans of $180k with $40k of uncapitalized accrued interest, your new loan amount (that will now be gaining interest) is $220k after refinancing. That can be really bad, but all depends on the rates:

$180k at 6.8% APR accrues $12240 every year in interest.
$220k at 3.5% APR accrues $7835 the first year in interest.

So you’ll have to do the math with the rates you are offered versus the amount of unpaid interest you have sitting around to see how it works out. Online calculators (like this one) make it pretty straightforward. The interest capitalizes at end of your six-month grace period after finishing school or when you consolidate, so if you just recently graduated, this is irrelevant. If you’ve been forbearing, then your interest already has and continues to capitalize, so that downside also doesn’t apply.

Part of what made refinancing so desirable back in 2015 when I first wrote this post was that interest rates were at all-time lows. It was a great time to buy a house too, and it made the 6.8% federal student loan interest rate for graduate students particularly galling. Since then, federal rates dropped a bit and the IDR program added an unpaid interest subsidy to many borrowers through the REPAYE program that many residents can benefit from. In other words, refinancing as a resident was something that lots of residents could have benefitted from in 2015 when DRB was the only party in town. Now, the majority of residents will do better in REPAYE.

So should I try to refinance?

• If you have private loans at high rates, this is a no-brainer.
• If you have federal loans and have been forbearing, then this is also worth pricing out. $75-100 a month to slow down the relentless climb of accruing interest can save a lot of money in the long run, particularly if you have a lot of PLUS loans
• If you have federal loans and are doing IBR/PAYE to be financially responsible but have no interest/faith in PSLF, then refinancing is also definitely worth considering. As there is no prepayment penalty, you are free to still make your old IBR-sized payments. Those payments will go a lot further at a lower interest rate. So if you know you want to do private practice, then there’s really no big reason to stick with IBR. If you’re in REPAYE, then feel free to apply for private refinance, but only pull the trigger if the rate you’re offered is lowered than your effective interest rate with the REPAYE unpaid interest subsidy.
• Other than losing PSLF, the main downside to switching from IBR/PAYE/REPAYE is interest capitalization (as above). Because of interest capitalization, you’ll have to do some math based on what rate you’re offered, how much you owe, and how much you plan on paying monthly to figure out if refinancing is worth it for you. This matters more the longer you’ve been making income-driven payments that don’t cover the accruing interest; if you just graduated, then you don’t have to worry about this.
• If you’re doing IDR temporarily but think you’ll need to start forbearing (having kids soon, etc), then it only makes sense to refinance if you can afford the small token payment.
• If you are nearing the end of residency, keep in mind that depending on your loan amount and your projected salary, your interest may soon capitalize anyway, IBR or not (i.e. you may no longer have a “partial financial hardship”). You’ll also get a better deal with SoFi if you’re within 12 months of the end of your training and have a signed employment contract.

Other options?

You can refinance with CommonBond and get an attending rate + $300 cash back if you apply during your final year of training with a signed job contract.

Otherwise, for residents with average loan burdens, options are limited. Another player that is potentially viable is LendKey ($300 bonus). The maximum loan amount is currently $300k. Additionally, on an average resident salary of $55k, the maximum loan amount without a cosigner would be approximately $75k. To hit even their old maximum of $175k, you’d need an income of $85k. While there is no special resident program, they do offer interest-only payments, which if your loans are a small enough may be entirely reasonable. The interest-only payment on $100k at 5% is around $400/month, for example. Earnest ($300 referral bonus) tells me they are also willing to refinance residents despite their debt/income ratio, but you’d essentially have to have enough income to make full payments on a 20-year (the maximum) term, so it’s a no-go for big borrowers as well.

So if you’re an attending, apply to all of them and see who gives you the best rate. Initial rate checks don’t affect your credit. When you sit down and really apply to several student loan companies to get your finalized rates within a short time frame, it’s considered a single hit on your credit report, so the more the merrier.

For further reading, here is my rundown of all of the medical student loan refinance options.

What about PSLF?

See this post. Keep in mind, PSLF can only take place after 10 years of monthly payments. If you have a smaller loan burden or a short residency, the amount you can theoretically have forgiven may be low (assuming the program continues; it’s new enough that no one has actually had their loans forgiven yet). PSLF is the best deal for those with long residencies/fellowships (low monthly payments for longer under IDR), with a lot of loans (private school = more forgiven), and low attending salaries (lower IDR payments = more forgiven).

In fact, the desire to do PSLF is the main real reason to not bother doing a private refinance rate check if you aren’t eligible for a good REPAYE rate subsidy. At least, the current PSLF is: recent budget proposals have included a proposed capping PSLF or canceling the program entirely, though all changes are designed to affect only new borrowers. So current residents should be grandfathered into PSLF without a cap and get solid loan forgiveness. Future medical students, however, could one day have the real benefits of this program essentially washed away. Now that giving “rich” doctors and lawyers big wads of cash is a legislative issue with bipartisan support, PSLF may end up being a short-lived panacea for physician debt.

If you’ve heard about getting your loans discharged after 20-25 years (IBR or PAYE), you should probably forget about it. Unless you quit medicine and never make a decent attending salary, all but those with the most egregious student loan amounts won’t get their loans forgiven this way (and even if you did, you wouldn’t save much money given all of those extra years of making payments and taxes due on the forgiven amount). If you make little enough (e.g. part-time academic primary care) to stretch out your loans for 20 years but couldn’t do PSLF, then you might have some amount forgiven, but then you would have spent a ton of extra money over the years on interest, and then forgiven amount is taxed (your marginal tax rate * a multi-hundred thousand dollar loan debt = a huge tax bomb). The best reason to keep your federal loans around at 6.8% or worse is for PSLF or because you can’t yet qualify for something better.2The information contained on this website does not constitute legal or tax advice, etc etc.

I’ve discussed (in great and somewhat confounding detail) income-based repayment (IBR), public service loan forgiveness (PSLF), and forbearance previously.

(Read it if you haven’t already. Go ahead, I’ll wait).

To sum up: the best and most straightforward reason to plan to apply for PSLF is if you want to both train and practice at a non-profit or academic center. And doing your income-drive repayment (IDR) right is important.

Now, you can’t actually “apply” for PSLF until you’ve made the 120 monthly payments (which, again, do not have to be consecutive). So you need to make 10 years’ worth of payments. However, there are a few things you should do on your way to this goal of tax-free loan forgiveness. You could wait until 120 payments are made to start the process, but you’ll avoid potential disaster if you keep the PSLF dream of loan-forgiveness in mind from the very beginning.

The PSLF formula:

Eligible Loans
+ Qualifying Payments (discussed below)
+ Qualifying Work (discussed below)
x 120 months (10 years)

= Public Service Loan Forgiveness

The Loans

PSLF is a government program run by the Department of Education. Eligible loans are exclusively of the “DIRECT” variety: Stafford, subsidized, unsubsidized, PLUS, consolidation, etc. If you have other non-eligible federal loans (e.g. Perkins), you can consolidate them into a DIRECT consolidation loan in order to be eligible. The 120 payments are calculated per loan, so if you consolidate, the counter resets. This means that you need to take care of any loan voodoo before you start making payments in order to not waste time/money. Go to www.nslds.ed.gov to find out what loans you have if you don’t know.

The Payments

Payments must be required (monthly) while employed full-time (at least 30 hours/week). Extra payments, grace period payments, payments made during school, etc do not count. It’s 120 months, minimum, no short cuts. They do not have to be continuous payments.

The Work

A public service job is defined as any full time job at a non-profit, tax exempt, 501(c)(3) organization. Most teaching hospitals fall under this category and even some private hospitals fall under this designation. If you don’t know, just ask. Keep in mind that many technically “nonprofit” hospitals do not directly employ physicians but rather contract with them. You have to be an actual employee paid on W2 etc. So that really luxurious “nonprofit” with the great salary probably isn’t going to cut it.

For each different eligible job you hold, you must submit a PSLF employment certification form. This is something you should absolutely do at end of your tenure at any facility. While you could theoretically go back and submit the form for your transitional internship 9 years later, doing it as you go seems like a much safer bet. Once you submit your first employment certification form, your loan servicer will be switched to FedLoan (as opposed to one of the several others you may have been assigned to such as Nelnet, Navient, etc)

The Takeaway

The official FAQ PDF is an excellent read for the questions you are currently directing at your computer monitor. A briefer official FAQ with the barebones is here.

Keep in mind, there are several reasons to forget PSLF exists:

• You want to work in private practice
• You plan to enter into a contract that will include loan forgiveness
• You don’t have a ton of debt (congrats)
• Your cynicism overpowers your hope that the program will continue to exist when you can reap its benefits (even the first eligible loans won’t be forgiven until 2017)
• The money you will pay for IDR during residency and fellowship will impact your quality of life in such a way as to overcome any future financial benefit in the long term (this is a tricky personal calculus). The fewer dollars you have, the more each individual buck is worth. As in all things, scarcity matters.

But if you still want to:

• Get your loans in order
• Sign up for IBR, PAYE, or (probably) REPAYE during intern year, minimize your payments as possible using tax returns or pay stubs (whichever is lower). PAYE will save you more than IBR.
• Never pay more than you have to, which can include reducing your taxable income by maximizing tax deductions, contributing to pretax retirement accounts, etc
• Fill out your employment certification forms as you can
• Keep count and apply after 120 payments (with that final employment certification form, since you must still be working at a non-profit when you apply)

If you are footing the bill for medical school (and by you, I mean the US government), you’ll like receive slightly more financial aid during fourth year to cover the increased costs. However, depending on your field of interest (and the number of programs you need to apply to and interview at), it’s extremely easy to max out your loan money and end up dry.

Fourth year costs include:

• USMLE Step 2 CK: $560
• USMLE Step 2 CS: $1120 + travel/lodging if necessary (which it is for everyone who doesn’t live in or near Atlanta, Houston, Chicago, LA, or Philly)
• “Releasing” Step scores to ERAS: $70
• NRMP Registration: $50 (+$15 for couples)
• ERAS: Varies, generally a few hundred to over a thousand.
• Travel for interviews: priceless

For ERAS, the costs are calculated based on the number of applications within a specialty:

• Programs Up to 10 – $92
• Programs 11-20 – $9 each
• Programs 21-30 – $15 each
• Programs 31 or more – $25 each

This means that competitive specialties (for which many people submit 40-60 applications) cost significantly more. 50 derm programs, for example, will set you back $832. And of course those seeking advanced specialties like derm, radiology, rad onc, etc also need to apply to preliminary or transitional year programs. If you apply to both medicine internships and transitional years, you add at least another $184 (as one program costs as much as 10 within a single residency field).

Depending on how widely you plan to travel for interviews and how many interviews you go on, the costs can vary from expensive to prohibitively expensive. It’s difficult to find a flight and hotel for an interview less than $350 or so, for example, so it’s not uncommon for people to spend up to $10k after all is said and done. That total figure though hinges a lot on where you’re looking: if you’re focusing on regional programs that you can drive to or can at least crash at a friend’s place, then your per-interview-costs will be low. If you’re shotgunning the whole country, stay at hotels, and want to make some fun trips out of the process, expect to need some help. As a result, many students are forced to seek additional financing (even from other than the Bank of People Who Love You): consult your school Financial Aid to discover lowish-interest loans that may be available through your county and state medical societies. And then, of course, there are always traditional banks if need be.

And don’t forget, school may end in May, but you won’t get paid until July. And you probably have to move too.

For example, in Texas (where I studied and practice), medical students can partake from the Minnie Stevens Piper Foundation loans (maximum of $10k at 4%, payment starting 1 year after graduation) or TMA educational loans (which enter repayment 4 years[!] after graduation). Both of these are under better terms than a typical personal loan from a bank, so ask your school’s student aid/financial guru what programs are available to you if you need them.

After all, what’s an extra few thousand here or there, right?

There were several things about dealing with an unhealthy amount of student-loan debt during residency that I never learned in medical school. In fact, I’d venture that the vast majority of medical students have very little idea how to approach their loans. After all, it’s not on the boards (updated November 2016).

While this post has been updated, you’ll also want to read my posts on prompt federal student loan consolidation and the pros/cons of the REPAYE program to get started.

For starters, the AAMC has an excellent and concise debt fact card to introduce you to the topic. The numbers are sobering. But what’s missing are a couple of specific benefits of income-based repayment (IBR) as well as why most people should do it for at least the first year (if not two). As of May 2013, the federal government has off-loaded loans onto various servicers and changed the application process. As a result, the benefits of “free” money and $0 IBR payments for interns are gone (unless you consolidate promptly or wait and then want to be willfully and blatantly dishonest).

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