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Refinancing med school federal loans

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  • Refinancing med school federal loans

    I need some input on my student loan repayment strategy. I currently have about $260K of med school loans (several loans with interest rates ranging from 3.73-6.28% - 4 of the loans are quite large and are about $50K each with interest rates of 5.28%) that are all federal and I am qualified under the REPAYE plan. I also have about $100K in undergrad loans that I am working on paying off first as they are parent plus loans that are high interest (~7.3%). I am unable to refinance them due to my debt:income ratio. I am a 3rd year resident that will be graduating in June, 2022. Thankfully, because of COVID forbearance I have not had to make minimum payments on my med school loans which has freed me up to focus on paying off the high interest undergrad parent plus loans. Payments for the med school loans will start Feb 1, 2022 at $660 per month under REPAYE. My goal is to pay off all of my loans as fast as possible, I am not planning on using PSLF. So, I would like to aggressively pay off the undergrad parent plus loans and then focus on the med school loans. The two options I am considering are below:

    1. Refinance all of the med school loans and forego REPAYE so that I would pay $100 per month (vs $660, the current amount) through the rest of residency which would free up more money to pay off the undergrad parent plus loans during residency. I would initially refinance and select a long term plan (I did a sample calculation through SoFi which came out to 20 year term with monthly payment of about $1600 at 4.2% interest). Then, when I become an attending I would pay the minimum monthly payment for the med school loans, continue paying off the undergrad parent plus loans and likely have them taken care of/paid off after a year. Then, I would plan to refinance again under a short term, 5 year plan with lower interest, and aggressively pay down the med school loans.

    2. Avoid refinancing, pay $660 per month starting Feb 1, 2022 while trying to aggressively pay off undergrad parent plus loans through residency. Then, when I become an attending through REPAYE my monthly payment could range from $900 to $2K per month. I would still focus on paying off the high interest undergrad parent plus loans first and then turn to the med school loans afterwards.

    I know the major draw backs of refinancing federal loans is losing the REPAYE benefit and PSLF, but what would be the better route to go in order to pay off my loans as fast possible?

  • #2
    If there's a chance you'll do PSLF i'd keep your medschool loans federal and keep the door open for loan forgiveness. Undergrad parent plus loans look to private refinance those when eligible as attending.

    If PSLF is not an option, go with option 1. Interest rates are low right now and might not be in a couple of years if you wait to refinance. Then when you become attending private refi again and you'll get a lower interest rate. I would definitely private refi those parent plus undergrad loans as well and get rid of that super high interest rate.
    Helping student loan borrowers manage their student loans. StudentLoanAdvice.com. [email protected]

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    • #3
      Originally posted by Andrew StudentLoanAdvice View Post
      If there's a chance you'll do PSLF i'd keep your medschool loans federal and keep the door open for loan forgiveness. Undergrad parent plus loans look to private refinance those when eligible as attending.

      If PSLF is not an option, go with option 1. Interest rates are low right now and might not be in a couple of years if you wait to refinance. Then when you become attending private refi again and you'll get a lower interest rate. I would definitely private refi those parent plus undergrad loans as well and get rid of that super high interest rate.
      The job I just signed with is going to provide $100K in loan forgiveness over 4 years, with that wouldn't going the PSLF route and making minimal payments nullify the benefit of that $100K? And I am having a difficult time figuring out my effective interest rate under REPAYE because I have 18 different loans ranging from $750 to $50K. Would using the effective interest rate table on the website Doctored Money (REPAYE Loan Subsidy Charts) be a good way to estimate how my effective interest rate under REPAYE would compare to the interest rate if I were to refinance?

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      • #4
        I'm assuming you're married? Because 660 under REPAYE seems too high on a resident's salary?

        Also, how is the job structuring the "forgiveness"?

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        • #5
          Originally posted by Turf Doc View Post
          I'm assuming you're married? Because 660 under REPAYE seems too high on a resident's salary?

          Also, how is the job structuring the "forgiveness"?
          Yes I am married and we filed jointly. They will be providing $25K yearly over 4 years.

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