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Help! Can't refinance my loans!

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  • The White Coat Investor
    replied




    Hello all,

    This is my first WCI post so if I forget a few details bear with me. I am quite embarrassed about my position, which I unfortunately got to after an exorbitantly priced medical school. I am currently a first year pulmonary/critical care fellow in Chicago. I have $511,000 of student loans currently in the federal program at a horrible 7.25% interest.

    I am currently in PSLF with 25 months in (I had to defer the loans for 11 months when I bought my home). Based on some of the posts here I attempted to see what kinds of refi options I had, but EVERY BANK I contacted said their maximum refi amount is $450,000 and that they couldn’t help me at all. I have my paperwork in process to move into the REPAYE plan but I’m not sure what my best option is. Should I refinance, if so, how? Should I hold the course with the Feds at this horrible interest rate? Any help is appreciated!!

    Dan
    Click to expand...


    Welcome to the forum. You're not alone, not even close. Yes, you've made some mistakes, but sounds like you're learning from them so you're moving in the right direction and that matters more than where you are starting from.

    Your mistakes:

    • Borrowed way too much to go to school

    • Have way too high of an interest rate for someone who graduated med school in 2013-2014 or so. I can't figure out why your loans aren't at least 1% lower.

    • Bought a house as a resident despite having half a million dollars in debt.

    • Trying to refinance while still in training.

    • Deferring your loans in residency instead of enrolling in IBR/PAYE/REPAYE ASAP.


    So, let's look at the big picture.

    You're a fantastic candidate for PSLF. Huge student loan burden and a long training period. Plus, you've already got 25 payments in in residency. Add on another 36 for fellowship, and you'll only need another 60 as an attending. How do you feel about staying in academics for 5 years after fellowship? That's what I'd do if I were you.

    So, assuming that's your plan, you don't want to refinance any of your federal loans (i.e. the ones eligible for PSLF.) Pay the minimum on those. You can refinance the private ones if you like, DRB/Laurel Road is the main choice. And you can throw any extra money you can scrape up at those since you'll be paying them off at some point.

    Whether PAYE or REPAYE is best for you is hard for me to say, but the usual answer is REPAYE. It really depends on your spouse's (if any) income.

    Leave a comment:


  • Craigy
    replied







    At some point, the loan burden chooses your career path for you…
    Click to expand…


    Respectfully, slightly disagree.

    At some point yes… but not entirely. Maybe points you in a new direction, but not totally even at this level of debt.
    Click to expand...


    Of course nothing is absolute.

    $511k of debt, 3 year fellowship in front of you where you won't even be paying the full interest, and 2 years of PSLF behind you already?  I think I'd find a 501(c)(3) to work at for another 5 years.

    I'm not very familiar with their particular salaries, but at that level of debt, I'd be tremendously inclined to find a qualifying job, even if it meant I had to take job that pays only 80 or 90% or was located somewhere undesirable.

    Would be interesting to see the figures on this one.

    Leave a comment:


  • adventure
    replied




    At some point, the loan burden chooses your career path for you…
    Click to expand...


    Respectfully, slightly disagree.

    At some point yes... but not entirely. Maybe points you in a new direction, but not totally even at this level of debt.

    Leave a comment:


  • adventure
    replied


    You would likely be in PSLF for 3 more years due to your fellowship at which point you are halfway done.
    Click to expand...


    So if you worked for PSLF/Repaye/etc for 3 years, you'd get paid a physician salary, and get nearly 600k (tax free, if I'm not mistaken!)? That sounds like an amazing deal.

    To say it another way, I'd put up with a lot of (but not endless) hassle at work for another 200k/year.

    The program is there now, and hasn't changed yet. I'd leave the loans alone and go for it. Afterwards, you'd have amazing freedom. Put another way, WCI advocates to pay off loans quickly. 3 years is wayyy faster than what he recommends (pouring cash into loans). Make a 10 year plan, in a spreadsheet, and compare loan repayment, refinance at 4%, and see the difference!

    Leave a comment:


  • Craigy
    replied
    At some point, the loan burden chooses your career path for you...

    Leave a comment:


  • MochaDoc
    replied
    ICUDoc2020 are you willing to sell the house?

    Leave a comment:


  • Peds
    replied
    This is a horror story. I wish you the best.

     

    - The Lowely Pediatrician

    Leave a comment:


  • jhwkr542
    replied
    Loan forgiveness all the way.

    Leave a comment:


  • Faithful Steward
    replied
    If you are going for PSLF, why in the world would you refinance? Refinancing would eliminate the possibility of PSLF and ensure you pay back the entire amount. Do you know what repayment program you're on? IBR, PAYE, or REPAYE?

    I would recommend you speak to my good friends over at Doctors Without Quarters (http://www.dwoq.com/). They specialize in helping physicians navigate the student loan repayment minefield. I'd encourage you to visit their website and have them help you analyze refinancing versus going the PSLF route.

    Leave a comment:


  • DMFA
    replied




    Hello all,

    This is my first WCI post so if I forget a few details bear with me. I am quite embarrassed about my position, which I unfortunately got to after an exorbitantly priced medical school. I am currently a first year pulmonary/critical care fellow in Chicago. I have $511,000 of student loans currently in the federal program at a horrible 7.25% interest.

    I am currently in PSLF with 25 months in (I had to defer the loans for 11 months when I bought my home). Based on some of the posts here I attempted to see what kinds of refi options I had, but EVERY BANK I contacted said their maximum refi amount is $450,000 and that they couldn’t help me at all. I have my paperwork in process to move into the REPAYE plan but I’m not sure what my best option is. Should I refinance, if so, how? Should I hold the course with the Feds at this horrible interest rate? Any help is appreciated!!

    Dan
    Click to expand...


    Does the interest rate *really* matter if you're not going to pay it anyway, i.e. RePAYE/PSLF or MFS/PAYE/PSLF?

    Even if you get paid less as a non-profit W-2 employee, with *that* level of debt, I'd be RePAYE all the way, fingers crossed.

    That's $101.50 every *day* of accruing interest.  Yikes.

    Leave a comment:


  • TotallyBroke
    replied
    I also bought a house straight out of fellowship before seeing the WCI light.  If it helps, this is what I did with my $450K in student loans (current salary ~$220K).  The problem I had was that even if I did refinance everything into a 5 yr loan, monthly payments would have been too high.  Over the past year, I've been able to refinance while making payments and paying off certain loans.  Here is what I have now:

    $184K in a 15 yr fixed (I got a rate of 4.75%)

    $207K in a 10 yr variable (currently 4.02%) - maybe should have gone with fixed.... we'll see...

    $33K in a 5 yr variable (currently at 2.92%)

    My minimum monthly payment now is $4300.  That fits comfortably in our budget and leaves me space to make extra payments, and still allows me to cash flow unanticipated costs/replenish, E-fund, etc.

    Although less than ideal, you may need to consider something like this where you refinance part into a very low interest rate at a 5 or 7 yr term and leave some at slightly high interest rates (though less than 7.25%) until your debt to income ratio is better.

    Leave a comment:


  • Doctor Money Matters
    replied
    You would likely be in PSLF for 3 more years due to your fellowship at which point you are halfway done. Unless you work for a private group, you may still be eligible for forgiveness as long as you are employed by a non-profit (not necessarily academic) institution. For those who believe loan forgiveness is going away, I tell them to set aside the extra payments in a separate account. Once you refinance, I believe forgiveness is over. Unless you can get significantly lower rates by refinancing, maybe you should continue down the loan forgiveness path.

    Leave a comment:


  • ICUDoc2020
    replied
    Donnie,

    Yeah...that might have been a mistake from the credit metrics idea but hindsight is 20/20...sigh.

    I do wonder though if it would be better to have these refi banks only take on say half of the fed loan debt so I can get a better rate (4-5%). As it stands if I maxed out their ability to refinance (the whole 450k)...they offered 6.25% which doesn't sound that great.

    This might be a silly question at this point, but with myself eventually moving out of primary care and not likely being able to be hospital employed or at an academic institution I assume PSLF is a silly thing to stay in federal repayment for since my numbers are already so high and the interest is murderig me

    Leave a comment:


  • Donnie
    replied
    Agreed, try to refi a portion of your loans at least.  If you can do so, I would pay the remaining 7.25% loan down as fast as possible, except for possibly funding a retirement plan up to the match if there is a match with your employer.

    While this isn't helpful now, it probably would have been a good idea to refi prior to taking on a mortgage because your debt to income and other credit metrics probably look pretty rough now, which may harm your ability to get better refi deals.  Generally, with that much student debt it would have been a good idea to just wait to buy a house.

     

    Leave a comment:


  • ICUDoc2020
    replied
    I'm not sure...i didn't ask. Has anybody ever tried refinancing part with one bank at a lower rate, and then waiting a few months and trying to refinance the remaining part with another bank at a lower rate?

    Leave a comment:

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