Once you graduate from medical school you probably assume your financial situation will improve dramatically. While it is true that you will finally be earning money, as opposed to borrowing it, you may still face tight finances as you begin repaying the money you have borrowed. Fortunately, there are ways to lower your monthly expenses while still making progress on your debt. One way to make the repayment process less painful is through refinancing. You may be tempted to wait until you complete your residency before refinancing. Acting early can help you save thousands of dollars in interest. This money will be particularly beneficial in these early years of your career, where your earnings will be lower, but you are expected to begin debt repayment.
How Refinancing Helps
When you refinance your medical school loans, you can roll all of your school debt into one loan. Paying this off at a lower interest rate or with a longer repayment term will lower your monthly expenses. Having a lower payment gives you more freedom in your budget. Owing less interest allows you to save money for other things, such as a home, or to more aggressively pay down the principal on your debt. There are benefits to both options. If you plan to stay in the same area for more than a few years, purchasing a home can be a smart move. Aggressively paying off debt can also be a good choice. Owing less money gives you more freedom in the career choices you make.
Circumstances When Refinancing Makes Sense
Anytime you can consolidate and refinance at a lower interest rate, you are making a smart choice. There are some times, in particular, that refinancing is a great option. For example, if you are not eligible for loan forgiveness. If your residency is at a for-profit hospital or your existing debt is private, then loan consolidation is probably a good choice. Consolidation makes it much easier to keep track of your debt. Having everything available on one statement allows you to easily keep track of the repayment process. Rolling everything into one loan at a lower interest rate also allows you to take advantage of the improvement in your creditworthiness that naturally occurs as you transition from student to employed professional
What You Need to Know
Consolidating and refinancing medical school debt is a quick and painless process. Unlike when you refinance a mortgage, there are low to no fees associated with doing so. The entire process is quick and painless. You may be curious about how the process is affected by your credit. The lender will generally want to see fair to good credit scores when qualifying you for consolidation. Just like any other loan, the better your score, the less interest you will pay. Income should not stop you from refinancing this debt. While your residency income may be low compared to the amount of debt you owe, lenders understand the timeline from medical school through residency, fellowships, and being a fully qualified, practicing physician, and how your income will change over time. Your future earning potential makes you an attractive prospect to lenders.