Student loans can be an excellent way to help you pay for college, particularly if you’re pursuing a medical degree or another type of graduate degree. But once you graduate and start your career, that much debt can feel oppressive, even if you find a well-paying job.
Refinancing school loans can help all kinds of college graduates, but it can be particularly helpful for graduate students who have high loan balances. Additionally, those graduates tend to be better candidates for student loan refinancing, since many lenders offer their most competitive rates to high earners and those who hold advanced degrees.
Whether you’ve recently graduated or you’ve been in repayment for years, here’s how refinancing school loans may be able to help you.
Why graduate and medical school loans make good candidates for refinancing
There are a few reasons why student loan borrowers with graduate degrees, particularly those with medical degrees, make good candidates in the eyes of student loan refinance lenders. Fortunately, those reasons also happen to make refinancing school loans a good move for the borrowers as well.
High average loan amounts
Student loan refinance lenders tend to prefer larger loan balances because it means they earn more money in the long run. At the same time, refinancing a larger balance at a lower rate can increase your overall savings.
Here are a few examples for comparison:
- Average student loan debt: If you have the average student loan debt of $29,650 with a 10-year repayment plan and an average interest rate of 6.5%, refinancing that debt at 5% with the same repayment term, you’d save $2,662 in interest charges.
- Average graduate school debt: If you have the average graduate school debt of $102,913 with a 10-year repayment plan and an average rate of 6.5%, refinancing at a 5% rate with the same repayment term would save you $9,241 in interest charges.
- Average medical school debt: If you have the average medical school debt of $203,062 with a 10-year repayment plan and an average rate of 6.5%, refinancing at a 5% rate with the same repayment term would save you $18,233 in interest charges.
Graduate loans have higher interest rates
On average, student loans for graduate and medical students have higher interest rates than student loans reserved for undergraduate students, and that includes both federal and private student loans.
As a result, you have a greater chance of achieving significant savings compared to someone who graduated with a bachelor’s degree.
Higher incomes
Recent graduates with a graduate or professional degree tend to earn more than graduates with an undergraduate degree, and that’s especially true for medical school graduates.
While it’s possible to meet minimum income requirements without a high-paying job, a higher salary will make it easier to get approved for refinancing because it typically means you can better afford the monthly payment.
More established credit history
Refinancing school loans typically requires good or excellent credit, and the better your credit profile looks, the easier it’ll be to enjoy favorable terms.
Those with graduate and professional degrees may have had more opportunities to build their credit histories through loans and credit cards than undergraduate students. As a result, you may have a better chance of getting approved for refinancing on your own.
And if you haven’t built your credit history, you can still enlist the help of a creditworthy cosigner to get approved.
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The benefits of student loan refinancing
There are many reasons to consider refinancing your loans, particularly if you have a high balance. Here’s what to keep in mind:
- Lower interest rates: If you qualify, you may be able to save thousands, or even tens of thousands of dollars on your student loan debt.
- Payment flexibility: Depending on your budget, you may be able to shorten or extend your repayment term to accomplish your objectives — private lenders may offer terms ranging from five to 25 years. With a shorter repayment term, the payment will be higher, but you’ll save more on interest and pay off your debt A longer repayment term may result in more interest over the life of the loan, but it could make your monthly payments more affordable.
- Lower debt-to-income ratio: If refinancing results in a lower monthly payment, it could reduce your debt-to-income ratio, which can make it easier to get approved for other loans when you need them, especially a mortgage loan.
- Simpler repayment: You’ve likely taken out multiple student loans over the course of your college career, which means multiple monthly payments to keep track of. Refinancing school loans can help you combine all of those into one simple monthly payment.
Of course, not everyone qualifies for student loan refinancing, and even if you do, you may not get approved for a lower interest rate.
If you have federal student loans, refinancing them with a private lender will cause you to lose access to federal benefits. As a result, it’s crucial to think carefully about whether you’ll want to take advantage of student loan forgiveness programs, income-driven repayment plans, and generous forbearance and deferment options before you decide to refinance.
When does it make sense to refinance student loans?
Refinancing student loans isn’t for everyone, so it’s important to consider your current situation, your goals, and how the decision may affect you to determine whether refinancing is the right fit. Here are some situations where it might make sense to pursue refinancing:
- You have good credit or have a loved one who is willing to cosign your student loan refinance application.
- Your income (or your cosigner’s income) is relatively high.
- You’ve used a student loan refinance calculator and confirmed that you could save money.
- You’d like to shorten your repayment term and accelerate your debt payoff plan.
- You want to extend your repayment term to secure a more affordable monthly payment.
- You have several monthly payments to keep track of and want to simplify your debt situation.
- You’ve had a bad experience with your current lender or loan servicer and want a better one.
When does it make sense not to refinance?
With that in mind, there are also situations where it doesn’t make sense to refinance your student loans, at least for now. Here are some scenarios where it could benefit you to stick to your current plan, especially if you have federal student loans:
- Your credit and income aren’t in good enough shape to get approved for the terms you want.
- Your job makes you eligible for a federal student loan forgiveness program.
- Your income is low enough that you’d benefit more from a federal income-driven repayment plan.
- Your career isn’t quite stable yet, and you don’t want to risk losing access to federal income-driven repayment plans and deferment and forbearance options.
See How Much You Can Save
View Details
Step 3: See How Much You Can Save
$15,310
Lifetime Interest
Savings
$1,018
New Monthly
Payment
$128
Monthly
Savings
| Current Loan | New Loan | Savings | |
|---|---|---|---|
| Rate | 6.7% | 4.2% | 2.5% |
| Lifetime Interest | $37,520 | $22,210 | $15,310 |
| Monthly Payment | $1,146 | $1,018 | $128 |
Like what you see? Check your actual prequalified rates from the industry’s top lenders in just 2 minutes or less.
How to refinance your loans and find the best rate with Purefy
It’s important to take your time and research all of your options before you decide for (or against) refinancing. With that in mind, if you’ve decided that refinancing is right for you — or you simply want to gather more information to make the right decision — Purefy’s rate comparison tool can help you find the best offer available to you.
This pre-qualification tool allows you to review rate quotes from multiple lenders at once, and it won’t affect your credit score. It’ll also save you the time required to go through this process with each individual lender you’re considering.
As you compare rate quotes from different lenders, you’ll have a better idea of what you qualify for and which lenders can give you the best offer.
From there, you can choose a lender and submit an application directly through its website. You’ll need to provide some basic information about yourself, your student loans, your college degree, and your employment and income. If you’re applying with a cosigner, they will provide similar information.
Once you’ve submitted your application, the lender will run a hard credit check to provide the official offer, and you may need to provide some supporting documents to verify the information on your application.
At that point, you can choose to accept or decline the offer. If you accept, the lender will pay off your included loans and notify you when to start making payments on the new loan.
The bottom line
If you have a sizable student loan balance from graduate school or medical school, refinancing that debt can result in big savings and other significant benefits. Whether or not it’s the right move right now, take your time to research your options and determine the best course of action for you.
In addition to the benefits of refinancing, it’s important to also consider the potential drawbacks and how they might impact you, both now and in the long run.
If you decide that refinancing school loans is the right choice, shop around and compare interest rates, repayment terms, fees, customer experience and other features that are important to you. Purefy’s rate comparison tool is a great place to start.
