You just matched into residency, and you’re thrilled to take the next step in your career. For the first time in a long time, you feel like you can breathe again. Enjoy it now: Once residency starts, you won’t be slowing down again for awhile. And you won’t have much time to think about the giant elephant you’re carrying on your back: Your student loans.
But the longer you wait to get your debt under control, the heavier the burden will become.
There are a number of options for taking control of your debt, but refinancing is among the simplest and most cost-effective. In fact, you probably didn’t even know it was an option.
Here are four reasons to consider refinancing your medical student debt during residency:
1. You Can Be Debt-Free 10 Years After Your Training
Income-driven repayment plans, such as Pay As You Earn and Revised Pay As You Earn (REPAYE) promise to forgive the remaining balance of your loans after 20 to 25 years of making payments, depending on whether you borrowed for undergraduate or graduate studies. But who wants to be in debt for that long? You didn’t let anything hold you back from achieving your dreams of becoming a doctor. Why would you let lingering debt keep you from achieving financial freedom to fulfill your other dreams? You might want to buy a new house, start a family, or take that long-awaited vacation.
When you refinance medical student debt, you can pay it off within 10 years of completing your training, even if you choose to defer payments during your residency and fellowship.
2. You Don’t Have to Sacrifice Future Earning Potential
As you consider options for managing your debt, Public Service Loan Forgiveness initially sounds like the most appealing strategy. When you’re working 80 hours a week and earning less per hour than your bartender, the idea of having all your debt forgiven after 10 years sounds too good to be true. And if you’re already planning to pursue a career in the public sector, this very well may be your best bet. However, if you were looking forward to earning top dollar as an orthopedic surgeon, it may be discouraging to realize you may only make half as much working in the public sector.
The 2017 Medscape Physician Compensation Report offers some sobering statistics on the earnings gap between the public and private sector by specialty. In orthopedics, the gap between the average public-sector salary and the highest-paid private-sector position is about $168,000 per year. If your plan is to wait it out in a public-sector job for the next decade just to get the rest of your loans forgiven, you could lose out on $1.6 million in earning potential!
3. You Don’t Have to Spend Hours on the Phone with the Government
Most of the options for student loan repayment are run by government entities. If you’ve ever spent more than 15 minutes on the phone with the IRS, you know you’d rather change bedpans than do it again.
Fortunately, several private companies are stepping up with new options to consolidate, defer and refinance student loans. Because the private-sector demands innovation, these companies may provide more competitive interest rates and better customer support.
4. You Can Save Money by Reducing Your Interest Rate
When you refinance your existing loans, you take out a new loan at a lower interest rate. This can translate into big savings over the life of the loan, especially if you are deferring payments during your training years. A small rate reduction could save you a couple hundred in monthly interest payments, and thousands over the life of the loan.
Let's find the right loan for you.
Splash is a finance company that provides an online lending option for medical residents and fellows who are looking to refinance their student loan debt, while keeping career and life options open. Splash has a unique loan refinancing package that gives borrowers the option to make minimal monthly payments during their residency and fellowship. This allows them to retain more of the money they earn, giving them flexibility in their monthly budget they won’t get from anyone else.