When our loan specialists talk with potential borrowers, they are often asked, “What are the advantages of refinancing my medical student loans?”
There is often a lot of confusion about medical student loans. How much of my loans are federally-funded? How much are private? Why is my interest rate so much higher than my mortgage? How can I have my loans be forgiven?
Anyone who takes out an education loan does so through the federal government and then supplements, as needed, with private loans. While banks, credit unions, and finance companies may refinance these loans, you’re potentially stuck with a high interest rate, no matter what your credit score or earning potential. In recent years, the student loan refinancing market has come back and several new businesses now specialize in refinancing student loan debt.
Below, we discuss the advantages of refinancing your medical student debt, but first let’s begin by explaining what refinancing means.
What is Refinancing?
Refinancing means you apply for and become approved for an entirely new loan with a different interest rate, maturity schedule, and schedule of monthly payments. Your new lender effectively pays back your existing student loan(s) and issues you a new loan at a potentially lower interest rate, with a lower required monthly payment.
The new lender takes into account your credit score, earning potential, and credit history—just like they would for a mortgage, car loan, credit card, or personal loan.
Refinancing means you can potentially save hundreds, if not thousands, of dollars every month in interest. That, in and of itself, is worth considering your options.
The Advantages of Refinancing Medical Student Loans
A Link borrower, Ken M., MD, had an original loan amount of $366,000 with an interest rate of 6.80 percent. All of his student loans were at high interest rates and, because he did not have an income during school, there was no way to pay down his debt during that time.
With the refinancing LinkCapital provided for Ken, he was able to reduce his interest rate significantly (down 4.87 percent) to 1.93 percent and save $121,195 over the life of his loan.
Some borrowers who want to save money monthly can opt for a longer payment term, which provides a lower monthly payment. Keep in mind that, while refinancing gives you the option of extending your loan term, as with all debt programs, you may pay more in interest because you will be paying off the loan for a longer period of time.
With refinancing you may also have the option to switch from a fixed rate to a variable rate loan. An advantage when you refinance your loan with a variable rate is that you may be able to secure a rate lower than the fixed interest rate.
You may also be able to find a refinancing solution that offers full deferment throughout the length of your residency and fellowship, as well as medical student loans that offer no origination fees and no prepayment penalties.
Better Understand How to Refinance Your Medical Student Loans
If you’d like to better understand what’s involved in refinancing your medical student loans or have questions about how to reduce your monthly student debt, please contact a LinkCapital loan specialist at (844) 226-LINK.
Our loan specialists understand the complex aspects of a medical professional’s life, and work with each borrower to best support their financial future. We’re here to help you make better decisions when it comes to managing your student debt.