Refinancing Medical School Loans: A Step-by-Step Guide

First Republic Bank
February 22, 2021

Almost 3 in 4 medical school students graduate with an average of $200,000 in medical school debt, and about 44% of them plan to enroll in a student loan forgiveness program. And with over 99% of borrowers being rejected for student loan forgiveness, many would be surprised to learn it can be faster — and sometimes less expensive — to refinance medical school loans to a shorter-term loan instead.

Please note: Currently, all payments for certain types of federal student loans are suspended until September 30, 2021 per an executive order by the president. Interest will not accrue during this time period. 

When to refinance medical school loans

Before you make any moves with your medical school loans, it makes sense to assess your long-term financial goals. You’ll want to make sure that your refinancing debt strategy is the one that best aligns with where you want to be in the long run.

Making a change before you’ve considered your options — and selected a direction — could mean giving up loan benefits you’d ultimately like to apply, particularly if a large portion of your loan balance is federally funded. With that in mind, consider the following.

Should you pay your medical loans off as soon as possible?

Even one  attractive student loan forgiveness program — Public Service Loan Forgiveness (PSLF) — is a 10-year road to repayment and forgiveness. Other income-driven repayment programs can take between 20 and 25 years to complete.

If you’re looking to move past the student loan phase of life and focus on other long-term financial goals — like buying a house, planning a wedding or buying into a medical practice — it may make sense to refinance your student loans to a shorter term so you can pay your balance back as soon as possible.

Higher-income earning physicians or those with a high-income earning spouse can really swing for the fences with a five- or seven-year repayment strategy. The key is to audit your financial situation, so you know just how much you can afford to allocate toward your student loans each month without overextending your budget.

Do you want to minimize your interest owed over the life of your loan?

Refinancing medical school student loans to one with a lower interest rate can significantly reduce the amount of interest you’ll pay throughout the life of your loan. Locking in a lower interest rate, shorter payment term, and more aggressive payment strategy could save thousands of dollars in interest payments over the life of the loan.

For example, let’s say you graduated in 2015, when the Annual Percentage Rate (APR) was 4.66%. If you’re $100,000 in debt and on track to pay off your loan over a 15-year period, you would pay around $773.20 per month. At the end of 15 years, you will have paid $39,175 in total interest over the life of your loan—meaning, you ultimately paid $139,175 in order to borrow $100,000.

However, if you refinance your medical school loans at a 3% APR in 2015 and increase your payments to $965.61 per month, your loan can be paid off in 10 years. What’s more, your total interest would be cut down to $15,873. Not only does this refinancing strategy allow you to pay off your loans 5 years faster, but you also save over $23,000 in total interest.

This would allow you to save a huge chunk of change you can use toward other long-term financial goals, such as a down payment on a house, a new car, or an investment in your medical practice.

If you don’t have the extra funds to pay your loans off more aggressively, you may also consider taking out a personal line of credit. Like traditional refinancing, a personal line of credit allows you to combine multiple student loan payments into one monthly payment and potentially save money by lowering the overall interest rate on the bulk of the loan. But there are additional advantages to a personal line of credit. For instance, it provides flexibility and allows you to borrow as much as you need from a set amount of money. Then, if you’re able to pay back the money within your draw period, that amount would be available to you to use for additional financial needs during the draw period.

Learn more about how a personal line of credit works, and how it might help you lower your overall student loan costs.

Please note, a Personal Line of Credit is not a student loan and you may be permanently giving up the benefits of a student loan such as certain deferment, forbearance, and forgiveness options.

Do your medical school loans qualify for PSLF or Income-Driven Repayment?

If you’re a lower-income earning physician, work in the public sector or know you’re planning to enroll in an income-driven repayment (IDR) program, you may want to hold off before making a change to your loan status. A medical school student loan refinance will recategorize public medical school student loans to private — a move that will void any public student loan benefits like PSLF, other IDR programs, and deferment and forbearance options.

Public-service physicians can apply for PSLF, a 10-year, tax-free forgiveness program. This program can be ideal for lower-income earning residents who work in the public sector.

Two other income-driven repayment programs — Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) — are available to private-sector workers but don’t come with the same tax benefits or forgiveness options as PSLF and can take between 20 and 25 years to complete. Depending on your income, an IDR program could be less beneficial than a medical school student loan refinance. Here’s why:

  • Because PSLF isn’t guaranteed and is, in fact, rare, it’s possible to pay your entire medical school student loan balance before there is any balance left to forgive.
  • Some borrowers could even pay more in total interest than they might with a traditional repayment plan.
  • Finally, if your income-based monthly payments aren’t enough to cover the interest portion of your loan, your balance could actually increase, which can make it difficult for you to switch gears if you later decide to forego IDR and pay your loans back as soon as possible.

These potential adverse outcomes make it particularly important to run your individual numbers before setting a student loan repayment trajectory.

Finally, it’s worth noting that both PSLF and IDR apply to government-funded student loans only and will not apply to any already-existing private student loans.

How to Choose a Medical School Student Loan Repayment Plan

If you’re near the end of residency training and are on track to join a higher-income-earning practice, you may not reap the most promising benefits of an IDR program. That’s particularly true if your goal is to pay your loans back quickly (and increase your discretionary income).

Still, the only way to know the most effective pay-back method for your situation, with your individual life goals in mind, is to crunch the numbers. To compare your own IDR (with or without PSLF) versus refinance options, check out this Student Loan Repayment Estimator by the Office of the U.S. Department of Education and input your loan information.

High-earning, private-sector physicians are often surprised to find they can repay their student loans sooner than the terms available within IDR programs. Sometimes borrowers even save more in total interest paid by refinancing their student loans to a program with a lower rate and shorter term. In some cases, a high-earning physician enrolled in an IDR program will even pay their entire loan balance before they’re eligible for forgiveness, which is not guaranteed. In the end, many may find they unintentionally paid more in interest than they would have if they’d refinanced to a lower-interest, lower-term loan.

Steps to Refinance Medical School Loans

1. Decide if you’re going for PSLF and/or an IDR program, or if you’d save more time and money by choosing to refinance. Once you refinance, your publicly funded medical student loans, you will no longer be eligible for government programs like IDR, deferment or forbearance.

2. Decide how much you can pay toward your loans each month, and shop around for the most competitive rate. These two variables predict how quickly you’ll pay back your loans and how much — or how little — you’ll pay in total interest.

3. Gather all necessary loan documents. That includes proof of income, other assets and outstanding debts (including your student loans). You may also want to take a peek at your credit report before applying, so you’ll have a chance to correct any errors that may be listed.

4. Apply for your loan. Most banks offer an easy online application or quick access to a private banker who can help you work through the application process.

There are many options available to help ease the burden of medical school student loans. Take the time to decide which option best suits your need and, when ready, look for a lender that offers both an attractive interest rate and an excellent customer experience.

If you’re still unsure what is the right move for you, consider speaking with a First Republic banker who can model scenarios for paying down your student loans or making the most of any bonus income, so you can focus on your career.

Learn more about how First Republic Bank can help you in paying off your medical school student loans through a personal line of credit.


Personal Line of Credit consists of a two-year, interest-only, revolving draw period followed by a fully amortizing repayment period of the remainder of the term. Draws are not permitted during the repayment period. Full terms of 7, 10 and 15 years available.

This product can only be used for personal, family or household purposes. It cannot be used for the following (among other prohibitions): to refinance or pay any First Republic loans or lines of credit, to purchase securities or investment products (including margin stock), for speculative purposes, for business or commercial uses, or for the direct payment of post-secondary educational expenses. This product cannot be used to pay off credit card debt at origination.

The terms of this product may differ from terms of your current loan(s) that are being paid off, including but not limited to student loans. By repaying such loans, you may permanently be giving up tax and repayment benefits, including forbearance, deferment and forgiveness, and you may not be able to re-obtain such benefits if this loan is refinanced with another lender in the future.

Contact your legal, tax and financial advisors for advice on deciding whether this is the right product for you. Terms and conditions apply.

Product is not available in all markets. For a complete list of locations, visit Applicants must meet a First Republic banker to open account. This is not a commitment to lend; all lending is subject to First Republic’s underwriting standards. Applicants should discuss line of credit terms, conditions and account details with their banker.

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document.

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