Getting into a relationship with a lender is a long-term prospect. Especially when you’re looking to refinance your medical student loans.
The truth is, some loan relationships last longer than many of today’s marriages—when you think of it that way, it’s clear some cold feet are certainly in order.
The best way to alleviate your fears is to do some serious research into your prospective loan partner before you refinance your medical student loans.
Don’t be afraid to ask tough questions before you make the leap.
Here are four questions you should ask before you sign on the dotted line.
Do You Charge an Upfront Fee to Refinance Medical Student Loans?
Many banks will charge what’s called an “origination fee” on student loans in order to refinance. As studentloanhero.com explains, “Some banks charge a student loan origination fee up to two percent of the total amount you are requesting to be refinanced.
For example, if you refinance $60,000 in student loans, you will pay a $600 for a one percent origination fee.”
Generally, these origination fees are added to the loan amount due. The upside of that arrangement is that you don’t need to pay it upfront. The downside is that you will end up paying interest on that amount, as well.
Do I Have to Change My Checking Account to Get Your Rates?
Some banks will offer their best interest rates only to those who use the bank’s own checking accounts to make payments.
If you’re considering refinancing your medical student loans, find out whether the institution you’re considering has such a requirement to get the best rates, and if so, you’ll also want all the details about the new checking account you’ll need to open.
Start by asking about minimum deposits and fees, whether bill pay options you currently use are available, and the convenience or difficulty that might be involved in making the switch.
What Happens to My Family if I Die Before Repaying My Student Loan?
Generally speaking, for federally backed student loans, families are safe from liability for repaying loans if the borrower dies or even becomes disabled before the loan is repaid.
For private loans, however, that may not always be the case. With some private loans, a cosigner or spouse will still be responsible for repayment after the borrower dies. It all depends on the policy of your lender and the terms of the loan itself.
Will I be Required to Make Payments During Residency or a Fellowship?
In the past, many borrowers were able to put off paying back federal student loans during residency thanks to the government program called the “20/220 Pathway.” For borrowers who could take advantage of the 20/220 Pathway, interest on student loans would not accrue during residency.
Unfortunately, that program was eliminated in 2009, which means many borrowers must choose between making high payments or going into interest-accruing forbearance during residency, an already stressful and strapped period of time for anyone. Worse yet, in forbearance, interest can cause the debt level to significantly increase.
Project Your Future: Understand Your Medical Student Loans
Financial decisions you make about your student loans can affect your life for a very long time—everything from what kind of home you buy to how you retire could be determined by whether or how you refinance your medical student loans.
That’s why it’s important to do your research and ask the right questions of your lender. Because unlike in marriages, even divorce court can’t save you from a troubled relationship with your lender.
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