At a Glance
Medical school loans work differently than undergrad student loans, particularly if you rely on federal student loans to get through. First off, medical student loans are approved on an annual basis, so at graduation you’ll be carrying multiple student loans, not just one. That leaves you with several options for repayment, refinancing, or student loan debt consolidation.
Some lenders offer undergrad loans for the entire four years. Medical school loans don’t work like that. There’s a high drop-out rate. More than half of the students who enroll leave school in their freshman year. Private and federal lenders use that number when assessing risk, so they only offer single-year loans for medical school students.
Students who finish medical school and go on to become doctors make an average annual salary of $299,000. They also come out of school with almost $200,000 in medical school debt, not to mention the $50,000 or so in undergrad debt they often still owe. Combined, that’s easily the median price of a house in most parts of the United States.
Student Loan Debt Consolidation with Private Lenders
Interest rates are low right now, but that’s scheduled to change later this year. Traditional banks and online lenders are pushing medical student debt consolidation before that happens. You may have seen some of the offers online. Bundling student loans together and using a personal loan to pay student loans looks like a good idea on paper.
If your original student loans were from a private lender, debt consolidation with a personal loan is a simple matter of changing the interest rate you’re paying and either lowering or increasing your monthly payments. That’s just math. You may even be able to refinance with the original lender to get better terms. Don’t be afraid to ask about that.
Consolidating Federal Student Loans for Medical School
Federal student loans for medical school are a different animal. You can consolidate them through the federal lender, but that won’t lower your interest rate. A direct consolidation with the federal government may increase it. They round up to the nearest one-eight of 1%. On the positive side, consolidating may make you eligible for an income-driven payment plan.
Another variable to keep in mind with federal student loans is the possibility of student loan debt forgiveness. That doesn’t normally happen with private lenders. Consolidating federal student loans with a private lender will eliminate your chances of getting it. Will Biden forgive student loans during his term of office? The answer to that is still unclear.
Waiting Might Be the Best Option
Everyone wants to be debt free, but sometimes the best way to do that is to simply make all your monthly payments on time. There’s a lot of uncertainty in the early years right after graduating medical school. Let the dust settle a bit before making any decisions about refinancing or consolidating your medical school debt.
Frequently Asked Questions
Can you refinance student loans while in medical school?
Yes, you can refinance student loans while you’re still in medical school, but you may get better terms if you wait until you graduate and have a more significant income.