Refinancing medical & dental school loans can provide help in a heartbeat

By Lisa Rinkus, Citizens Staff

Congratulations on completing your medical or dental school education. It’s most likely been filled with joy and pain; all-nighters and Ramen noodles; and perseverance and dedication. Not to mention laser-focused intelligence. And when you’re out there saving lives and healing patients during your residencies and fellowships, the last thing you need to be stressed about is dental or medical school debt. But you’re not alone. And as of 2019, approximately 80% of graduating medical and dental students took out loans, according to the American Association of Medical Colleges.

In fact, the Association says graduates of medical school owe an average of $200,000. Dental students owe even more. According to the American Dental Education Association, it’s a whopping $292,000. Painful, yes. But paying back these sums can be made a little more comfortable.

One way to lessen the pain

Refinancing is one way to effectively manage medical and dental school loans while lowering your rate. Commonly known as a “refi,” refinancing involves changing the terms of one or more existing loans in favor of better conditions – which includes a potentially lower interest rate. Simply put, a refi is one or more loans, replaced by another loan. And with the right lender, the process can be done quickly, efficiently and pain free.

A refi is a particularly good option for medical residents and fellows who expect to make a high salary as an attending physician or an oral surgeon, for example. By refinancing early, medical and dental residents can start saving now, before they become full-fledged doctors.

The Citizens Medical Residency Refinance Loan was created to provide some stress relief for medical doctors and dentists during their training. With this refi, we pay off your existing debt with a new loan, often times at a lower interest rate. As a result, you may save thousands of dollars a year. Not only that, there are other benefits to the Citizens Medical Residency Refinance Loan that other products on the market may not provide. These are discussed later in this article.

As a result, you can save thousands of dollars a year. And with a Citizens Medical Residency Refinance, your rate will be based on your higher expected future earnings, not what you’re making today. Basing your loan on a larger salary can help you get a better rate than what other lenders may offer. Not only that, there are other benefits to the Citizens Medical Residency Refinance that other products on the market may not provide. These are discussed later in this article.

Should I refinance my medical school loans?

Borrowers typically choose to refi for five main reasons:

1. To get a more favorable interest rate
2. To consolidate several loans to make just one payment
3. To mitigate risk (making a switch from a variable interest rate and lock in a fixed one)
4. To reduce their monthly loan payment
5. To pay off their debt faster

Some or all of these motives might ring true for you. However, there are several things to consider before you decide to refinance, such as the types of loans you have, your professional specialty, your future expected earnings and more.

As with most undertakings, advanced planning is always a good idea. Refinancing options should be evaluated sooner, rather than later in your residency or fellowship. Of course, it’s optimal to pay off debt early in your medical career. If loans are deferred until you are a full-fledged dentist or an attending physician, you’ll just be kicking the can down the road, accruing interest. So, getting your loans under control by refinancing early on makes sense, particularly if you have private student loans (these are loans from banks or credit unions, as opposed to government loans.)

Diagnose your future prospects

If you are getting into a specialized area your salary may increase later, so a refinance now is an excellent option. Or, if you have achieved some notoriety as a medical or dental student (e.g., you won awards, were recognized for an achievement) and your prospects of getting a position are almost certain, a refi is a good bet.

On the other hand, if you have federal loans and plan to work for a nonprofit or qualifying government agency (such as the National Institutes of Health), you may want to weigh your refinance options, as there are many benefits to these loans that are outlined later in this article.

If you are unsure about your plans after your residency or fellowship, you should wait to refinance any dental or medical school loans. If possible, refinancing as soon as you can is a good option to fast track any potential savings.

Federal student loans vs. private loans

All private and federal loans can be refinanced and consolidated into one payment with flexible options, depending on your credit profile. Federal student loan consolidation options are available through the government. However, if you refinance your private student loans, the federal loans can be paid off as part of the refi with payments rolled into your new (and potentially improved) loan. But if you think you will need the benefits that federal loans offer (i.e., deferred payments, Public Service Loan Forgiveness, income-driven repayment plans) it may be best to hang on to those in the event something unforeseen happens (for example, the residency is cancelled or there is an emergency in the family). If that happens, there are forbearance options to help.

A prescription for savings

There is no downside to a refi if the result is an overall better financial situation. In addition to saving with lower interest, autopay and customer “loyalty” features can also save you substantial costs. The Citizens Medical Residency Refinance Loan offers both.

Here is an example of the difference between deferring a loan for 4 years and getting a Medical Residency Refinance Loan:

How to refinance dental, medical school and medical specialty loans

Medical residents and dental fellows with loans should take the following steps before committing to a refi. First, you need to add up the total cost of the new loan, compared to the loan you currently hold. The new loan cost should include total interest (that would be paid over the life of the loan) and any origination fees. The total cost of the new loan should be less than the remaining interest that would be paid on the existing loan. To get the best rate, you will want to have an idea of where your credit stands.

If refinancing does make sense, the process involves checking all of the available options and terms (e.g., a variable vs. fixed rate). If you prefer to pay off your loan quickly, a variable rate might be a better choice because it may offer a lower interest rate for a period of time. One thing to consider is that variable rates do fluctuate over time, so if you prefer knowing what payments to expect a fixed rate may be best for you. Since fixed rates are locked in you pay the same interest rate over the life of the loan, even if rates increase. So, a fixed rate may be a better option if you prefer the same monthly payment.

Get a second opinion

As you will find out, there is no shortage of lenders out there that want to help medical and dental students with their loans. But as more and more financial institutions offer these types of products, it pays to shop around. Get the best terms with the lowest rates, with a knowledgeable and reputable lender that will grant loans to residents and fellows.

When choosing a lender for your refi, it is important to know if your lender will charge origination fees, service fees, or prepayment penalties. Once you select a lender, you will need to get pre-qualified for a new loan, hopefully at a lower rate. But first, find out if the pre-qualification for the refi will affect your overall credit rating. At Citizens, we can determine if you qualify for the Medical Residency Refinance Loan by doing a soft credit pull first, that will not affect your credit score.

The Citizens difference

The Citizens Medical Residency Refinance Loan charges no origination or services fees and there is no penalty for paying off the loan early. Citizens also offers competitive rates and provides a .25% discount for borrowers who sign up for automatic monthly payments. An added benefit is a .25% loyalty discount for customers. This means that if you hold a checking or savings account, money market, certificate of deposit, credit card, or another loan with Citizens, residents and fellows who refinance with us can save even more on interest. Combined with autopay, you’d save a total of .50% on your rate.

Whether you’re a customer or not, the Medical Residency Refinance from Citizens offers additional benefits for anyone taking out a new loan including:

• Only a $100 fixed monthly payment during Residency or Fellowship
• Competitive low interest rates and terms
• Loan consolidation simplifying many payments into one
• Generous loan limit ($750,000)

The Citizens Medical Residency Refinance Loan allows physicians and dentists to stay on track by managing their loans during their training with affordable, streamlined payments. Our fixed monthly payment of $100 can free up cash for other things, such as paying off credit cards and other loans that have high interest rates.

The Citizens Medical Residency Refinance Loan allows physicians and dentists to stay on track by managing their loans during their training with affordable, streamlined payments. Our fixed monthly payment of $100 can free up cash for other things, such as paying off credit cards and other loans that have high interest rates.

Ready to refinance your medical school loans?

Citizens can help. We’re committed to getting you to where you want to be on your financial journey while you navigate your medical school residency.