In the last couple months, I’ve heard a few fourth-year med students ask about refinancing your loans in residency. They know they don’t want to do Public Service Loan Forgiveness and they plan to aggressively pay off their student loans after residency.

If you are thinking about this, I wanted to give you an alternative to think on. If you have a high student loan burden, it is hard to get a refinanced rate that can beat REPAYE during residency. Here is why:

  1. FILE YOUR TAXES IN FOURTH YEAR!!!!! – this is extremely important! I’ve said it in a different post, and I will say it again. The point of filing your taxes is to have proof that you did not make a substantial income during fourth year. When you sign up for income driven repayment programs, they use last year’s income to decide your payments for the year. When you file your taxes, you prove you did not make an income so the payments for your intern year will be $0.
  2. REPAYE- one of the income driven repayment programs – pays HALF your unpaid interest each month. If your payments are $0 and you have $1,200 accruing in interest each month, REPAYE will pay $600 of your interest.
    1. This means if your interest rate under REPAYE is 6%, your effective interest rate is 3% (because they are paying half your interest!)

So, I have no qualms with you applying to see what your rate would be under student loan refinance groups such as SoFi, Laurel Road etc. But if your rate is not less than half your current interest rate, then I would consider REPAYE. Additionally, if you sign up for REPAYE, you can still overpay your payments during residency and bring down your loan principle. I would just save up all year and make one large payment at the end of the year. This way you get the interest subsidy all other 11 months of the year.

So, if you want to refinance your student loans during residency, just make sure you aren’t losing out on the government paying half your interest for you and having an actual interest rate of around 3% during residency.

What is advice you wish you had known during fourth year of med school?

https://www.whitecoatinvestor.com/ultimate-guide-to-student-loan-debt-management-for-doctors/

https://www.whitecoatinvestor.com/student-loan-refinancing/