The average student loan debt for a medical graduate is more than $200,000.
While having a higher starting salary than many other professions can help ease the burden, your student debt can still feel heavy.
If you’re trying to figure out how to pay off $100K in medical school debt (or more), there are several ways you can do it. For example, you can refinance medical school loans, apply for loan forgiveness or repayment assistance programs, and more.
Here’s what to know about your options and how to choose the right one for you.
The benefits you get when you refinance medical school loans
Student loan refinancing typically requires a high credit score, a low debt-to-income ratio (DTI), and a high income. As a medical professional, you may have a better chance of qualifying than other recent college graduates.
If you can qualify to refinance student loans, here are some of the benefits you could take advantage of:
- Lower interest rates: It’s possible to qualify for a lower interest rate than what you’re currently paying on your student debt. If you do, it can save you a ton — and the more debt you have, the higher your potential savings.
- More control: As you’ve borrowed money throughout your time in college, you may have multiple student loan servicers you’re working with, including a mix of federal and private loans. Refinancing your loans allows you to choose the lender you want to work with and reduces your number of monthly payments to just one. You can also typically choose a repayment term between five and 20 years, depending on your budget and financial goals.
- A lower DTI: Your DTI is an important factor if you’re trying to apply for a mortgage, car loan or other type of debt. If you can reduce your monthly student loan payment through refinancing, it could increase your chances of getting approved for the loan amount you want.
Keep in mind: if you opt for a longer repayment term than your current loans, you’ll end up paying more interest, even if you qualify for a lower interest rate.
When it makes sense to refinance medical school loans
While there are clear benefits to refinancing your medical school loans, it’s not a great fit for everyone. Here are some situations where it’s a good idea to consider refinancing medical school debt:
- You don’t qualify for loan forgiveness or repayment assistance: If you work for a qualifying employer under the Public Service Loan Forgiveness program (PSLF) or an employer that offers repayment assistance on federal loans only, the potential savings could be much greater than what you could get through refinancing your loans. But if you’re not on track for forgiveness or repayment assistance, refinancing can allow you to qualify for savings you might not get anywhere else.
- You have a high credit score and solid income: Your credit score and income are significant elements of the underwriting process for just about any loan. With student loan refinancing, the higher your credit score and income are, the better your chances of getting approved for a low interest rate.
- You don’t need access to federal loan benefits: Federal student loans allow you to qualify for loan forgiveness, and provide access to income-driven repayment plans and generous deferment and forbearance options. If you’re struggling to make your payments, these perks can provide much-needed relief while you get back on your feet financially. If these benefits are important to you, refinancing through a private lender may not be the best choice as you would no longer qualify for them.
It’s important to make sure you understand your financial situation and goals to determine if refinancing is the right fit for your needs.
How to refinance medical school debt
If you’ve decided to refinance your student loans — or at least explore the option — here are some steps you can take to make sure you make the most out of the process.
Check your credit
Start by checking your credit score and report to see where you stand. You can get free access to your FICO credit score from Experian or Discover Credit Scorecard, and you can get a free copy of each of your credit reports every 12 months through AnnualCreditReport.com.
Remember: the better your credit score, the higher your chances are of getting a low interest rate. If your credit score isn’t where you want it to be, consider improving your credit before you apply. Check your credit report to pinpoint areas that need your attention, and watch out for inaccurate or even fraudulent information that could be bringing your score down. If you find anything that doesn’t belong, dispute it with the credit bureaus.
Once you know your credit is in good shape, shop around and compare rates and terms from several lenders to find the best fit.
To save time, use Purefy’s Compare Rates tool which allows you to view rate offers from multiple lenders in one place with no credit check required.
Note that lenders may offer both fixed and variable interest rates. Variable rates typically start out low but can fluctuate over time based on market rates. Since you’re dealing with a lot of debt, it may make more sense to get a fixed-rate loan because it may take several years to pay back and there’s more certainty with what you’ll owe.
Apply with your chosen lender
You can typically apply for a refinance loan online, and during the process, the lender will let you know what documents you’ll need to provide. Depending on your situation, that can include:
- W2 form
- Bank statements
- Tax returns
- Proof of residence
- Photo ID
- Payoff information for your current loans
- Contact information for your current servicers
Provide the required documentation as quickly as possible. Then if you agree to the loan terms, the new lender will pay your current loans off directly.
How to pay off medical school debt in other ways
If you don’t qualify to refinance medical school debt or you want to explore other options, here are some to consider:
- Public Service Loan Forgiveness: PSLF allows you to get forgiveness of your remaining debt after you make 120 qualifying monthly payments while working for an eligible employer — that includes government agencies and qualifying not-for-profit organizations. Because you’re required to get on an income-driven repayment plan for PSLF, the potential benefit can be in the tens of thousands of dollars.
- Loan repayment assistance programs: If you’re joining the military or another eligible employer, you may qualify for loan repayment assistance. Check with your employer to see what your options are to get help paying back your debt.
- Income-driven repayment plans: If you’re struggling to make your monthly payments, refinancing your loans may not be the best option. Income-driven repayment plans allow you to reduce your monthly payment to 10% to 20% of your discretionary income, and extend your repayment term to up to 25 years. While you’ll pay more interest if you stay on one of these plans, it can make it easier to afford your payments in the short term.
- Making payments during residency: While you technically don’t have to make payments until after you graduate, interest accrues on your loans while you’re still in school, then capitalizes to increase your principal balance. If you can manage it, pay at least the amount of interest that’s accruing each month during residency, so you don’t end up paying interest on interest.
When it comes to paying off student loans, no strategy is best for everyone. Although refinancing medical school loans can be a smart solution for many professionals, it’s vital to consider your own situation to determine the right path forward for you.