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Why Many People Are Refinancing Grad and Med School Loans

Ben Luthi
why many people are refinancing grad and med school loans
why many people are refinancing grad and med school loans

Student loans can be an excellent way to help you pay for college, particularly if you’re pursuing a medical degree or another type of graduate degree. But once you graduate and start your career, that much debt can feel oppressive, even if you find a well-paying job.

Refinancing school loans can help all kinds of college graduates, but it can be particularly helpful for graduate students who have high loan balances. Additionally, those graduates tend to be better candidates for student loan refinancing, since many lenders offer their most competitive rates to high earners and those who hold advanced degrees.

Whether you’ve recently graduated or you’ve been in repayment for years, here’s how refinancing school loans may be able to help you.

Why graduate and medical school loans make good candidates for refinancing

There are a few reasons why student loan borrowers with graduate degrees, particularly those with medical degrees, make good candidates in the eyes of student loan refinance lenders. Fortunately, those reasons also happen to make refinancing school loans a good move for the borrowers as well.

High average loan amounts

Student loan refinance lenders tend to prefer larger loan balances because it means they earn more money in the long run. At the same time, refinancing a larger balance at a lower rate can increase your overall savings.

Here are a few examples for comparison:

  • Average student loan debt: If you have the average student loan debt of $29,650 with a 10-year repayment plan and an average interest rate of 6.5%, refinancing that debt at 5% with the same repayment term, you’d save $2,662 in interest charges.
  • Average graduate school debt: If you have the average graduate school debt of $102,913 with a 10-year repayment plan and an average rate of 6.5%, refinancing at a 5% rate with the same repayment term would save you $9,241 in interest charges.
  • Average medical school debt: If you have the average medical school debt of $203,062 with a 10-year repayment plan and an average rate of 6.5%, refinancing at a 5% rate with the same repayment term would save you $18,233 in interest charges.

Graduate loans have higher interest rates

On average, student loans for graduate and medical students have higher interest rates than student loans reserved for undergraduate students, and that includes both federal and private student loans.

As a result, you have a greater chance of achieving significant savings compared to someone who graduated with a bachelor’s degree.

Higher incomes

Recent graduates with a graduate or professional degree tend to earn more than graduates with an undergraduate degree, and that’s especially true for medical school graduates.

While it’s possible to meet minimum income requirements without a high-paying job, a higher salary will make it easier to get approved for refinancing because it typically means you can better afford the monthly payment.

More established credit history

Refinancing school loans typically requires good or excellent credit, and the better your credit profile looks, the easier it’ll be to enjoy favorable terms.

Those with graduate and professional degrees may have had more opportunities to build their credit histories through loans and credit cards than undergraduate students. As a result, you may have a better chance of getting approved for refinancing on your own.

And if you haven’t built your credit history, you can still enlist the help of a creditworthy cosigner to get approved.

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The benefits of student loan refinancing

There are many reasons to consider refinancing your loans, particularly if you have a high balance. Here’s what to keep in mind:

  • Lower interest rates: If you qualify, you may be able to save thousands, or even tens of thousands of dollars on your student loan debt.

  • Payment flexibility: Depending on your budget, you may be able to shorten or extend your repayment term to accomplish your objectives — private lenders may offer terms ranging from five to 25 years. With a shorter repayment term, the payment will be higher, but you’ll save more on interest and pay off your debt A longer repayment term may result in more interest over the life of the loan, but it could make your monthly payments more affordable.

  • Lower debt-to-income ratio: If refinancing results in a lower monthly payment, it could reduce your debt-to-income ratio, which can make it easier to get approved for other loans when you need them, especially a mortgage loan.

  • Simpler repayment: You’ve likely taken out multiple student loans over the course of your college career, which means multiple monthly payments to keep track of. Refinancing school loans can help you combine all of those into one simple monthly payment.

Of course, not everyone qualifies for student loan refinancing, and even if you do, you may not get approved for a lower interest rate.

If you have federal student loans, refinancing them with a private lender will cause you to lose access to federal benefits. As a result, it’s crucial to think carefully about whether you’ll want to take advantage of student loan forgiveness programs, income-driven repayment plans, and generous forbearance and deferment options before you decide to refinance.

When does it make sense to refinance student loans?

Refinancing student loans isn’t for everyone, so it’s important to consider your current situation, your goals, and how the decision may affect you to determine whether refinancing is the right fit. Here are some situations where it might make sense to pursue refinancing:

  • You have good credit or have a loved one who is willing to cosign your student loan refinance application.
  • Your income (or your cosigner’s income) is relatively high.
  • You’ve used a student loan refinance calculator and confirmed that you could save money.
  • You’d like to shorten your repayment term and accelerate your debt payoff plan.
  • You want to extend your repayment term to secure a more affordable monthly payment.
  • You have several monthly payments to keep track of and want to simplify your debt situation.
  • You’ve had a bad experience with your current lender or loan servicer and want a better one.

When does it make sense not to refinance?

With that in mind, there are also situations where it doesn’t make sense to refinance your student loans, at least for now. Here are some scenarios where it could benefit you to stick to your current plan, especially if you have federal student loans:

  • Your credit and income aren’t in good enough shape to get approved for the terms you want.
  • Your job makes you eligible for a federal student loan forgiveness program.
  • Your income is low enough that you’d benefit more from a federal income-driven repayment plan.
  • Your career isn’t quite stable yet, and you don’t want to risk losing access to federal income-driven repayment plans and deferment and forbearance options.

See How Much You Can Save

Student Loan Refinance Calculator

View Details

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Student loan refinancing combines your current loans into a single loan with a new rate and term. See how much you can save by entering your loan information below, or by getting quotes from multiple lenders using Purefy’s rate comparison tool.

Step 1: Enter Current Loan Information

Loan Balance
Your remaining student loan debt to be repaid.
Interest Rate
The amount that the lender charges in interest, expressed as a percentage.
Current Monthly Payment
The total amount of your monthly student loan bill.
Add Multiple Loans to Calculate

Step 2: Enter New Loan Information

New Interest Rate
Your updated interest rate after refinancing student loans.
Term
The length of time you have to repay your student loan debt in full.

Add Multiple Loans

Insert additional loan

Step 3: See How Much You Can Save

$15,310

Lifetime Interest
Savings

$1,018

New Monthly
Payment

$128

Monthly
Savings

Current Loan New Loan Savings
Rate 6.7% 4.2% 2.5%
Lifetime Interest $37,520 $22,210 $15,310
Monthly Payment $1,146 $1,018 $128

Like what you see? Check your actual prequalified rates from the industry’s top lenders in just 2 minutes or less.

How to refinance your loans and find the best rate with Purefy

It’s important to take your time and research all of your options before you decide for (or against) refinancing. With that in mind, if you’ve decided that refinancing is right for you — or you simply want to gather more information to make the right decision — Purefy’s rate comparison tool can help you find the best offer available to you.

This pre-qualification tool allows you to review rate quotes from multiple lenders at once, and it won’t affect your credit score. It’ll also save you the time required to go through this process with each individual lender you’re considering.

As you compare rate quotes from different lenders, you’ll have a better idea of what you qualify for and which lenders can give you the best offer.

From there, you can choose a lender and submit an application directly through its website. You’ll need to provide some basic information about yourself, your student loans, your college degree, and your employment and income. If you’re applying with a cosigner, they will provide similar information.

Once you’ve submitted your application, the lender will run a hard credit check to provide the official offer, and you may need to provide some supporting documents to verify the information on your application.

At that point, you can choose to accept or decline the offer. If you accept, the lender will pay off your included loans and notify you when to start making payments on the new loan.

The bottom line

If you have a sizable student loan balance from graduate school or medical school, refinancing that debt can result in big savings and other significant benefits. Whether or not it’s the right move right now, take your time to research your options and determine the best course of action for you.

In addition to the benefits of refinancing, it’s important to also consider the potential drawbacks and how they might impact you, both now and in the long run.

If you decide that refinancing school loans is the right choice, shop around and compare interest rates, repayment terms, fees, customer experience and other features that are important to you. Purefy’s rate comparison tool is a great place to start.

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ELFI Rate Disclosure

4 ELFI Rate Disclosure:

Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 01/01/2023. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change.

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Fixed rates range from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Variable rates from 5.09% APR to 8.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

Earnest Rate Disclosure

2 Earnest Rate Disclosure:


Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.64% APR to 9.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 4.64% APR to 9.19% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.

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ISL Rate Disclosure

5 Iowa Student Loan Rate Disclosure:

Fixed Rate Loan Terms: 5 years/60 monthly payments, 7 years/84 monthly payments, 10 years/120 monthly payments, 15 years/180 monthly payments, or 20 years/240 monthly payments. Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. This rate is expressed as an APR. Fixed APRs range from 6.94% to 11.58% APR [low to high range with 0.25% auto-debit rate reduction]. Rates are subject to change without notice. Fixed rates will not change during the term. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan including a 0.25% auto-debit rate reduction. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. All estimates are based on information provided by you and are for informational purposes only, accuracy is not guaranteed and may not reflect actual rates or savings and do not constitute an offer of credit. Your actual rate, payment and savings may be different based on credit history, actual interest rate, loan amount, and term, including your cosigner [if applicable]. If applying with a cosigner, we use the higher credit score between the borrower and the cosigner for approval purposes. All loans are subject to credit approval.

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