When it makes sense to pay off your student loans early (if you can afford it)

<h3>When you can save money by avoiding interest</h3><p>While student loans tend to have lower interest rates than other common forms of debt, such as credit cards, the substantial cost over time can be alleviated by paying off your loans sooner, thus incurring less interest.</p><h3>When you need to lower your debt-to-income ratio</h3><p>Your debt-to-income ratio (DTI) is the sum of your monthly debt payments divided by your gross monthly income, expressed as a percentage (e.g., $1750 in monthly debt obligations / $6250 gross monthly income = .28, or 28% DTI ). A low DTI signals to lenders that you can likely make timely monthly payments and are able to handle debt responsibly. Paying off student loans early can help you lower your DTI and take on other debt more easily, such as a mortgage or practice loan.</p><h3>When you’re looking for a return</h3><p>You can look at paying off your student loans as having a positive return on investment in yourself and your future. Generally speaking, good debt is debt on an investment that will grow in value, generate long-term income, and increases your net worth. Many consider student loans to be good debt.</p><h3>When you feel stressed out by your debt, even while making payments</h3><p>Dealing with debt is no walk in the park. The emotional effects of heavy debt can be deep and long-lasting, so prioritizing faster repayment as part of your overall wellness plan is a smart move. If monthly student loan payments cause a lot of stress for you, early payoff is a good thing to consider.</p>

When it’s not worth it to pay off your student loans early

<h3>When you haven’t built up an emergency fund</h3><p>Having 6-12 months of living expenses in cash, readily available and on hand in the case of an emergency or financial stress, is universally regarded as smart and resourceful. Don’t threaten those savings by using them to pay off student loans. If you are having to consider tapping into your emergency savings, consider some alternatives — now is probably not the right time for early payoff.</p><h3>When you’re fully utilizing your tax advantage</h3><p>Seeing that interest on student loans is tax deductible up to only $2,500 each year, it may not be worth it to pay more towards your student loans each month, as you may forfeit this advantage. To see if this is a consideration, please consult a tax professional or financial expert.</p><h3>When you’re taking advantage of federal loan repayment options</h3><p>Certain federal loan repayment options you may be benefitting from include forgiveness programs such as Public Service Loan Forgiveness (PSLF), or Income-Driven Repayment (IDR). If these plans afford you the peace of mind to meet your goals and pay your loans at the right pace for you, there’s likely no need to change things up. To learn more about the forgiveness benefits from PSLF and IDR go to studentaid.gov</p><h3>When you would create higher interest debt</h3><p>It usually doesn’t make sense to prioritize student loans over higher interest debt, such as credit card debt. Avoid these scenarios that incur higher interest rates such as putting money on a credit card or personal loan to pay off your student loan early.</p>

How to pay off your student loans early

<ol><li><h3>Make extra payments automatic</h3><p>For some lenders, setting up autopay can come with a rate reduction and is worth looking into—not only for the convenience, but for the savings, too. To pay extra, you can set up your preferred payment amount via autopay and forget about it.</li><li><h3>Look for employers that help with student loans</h3><p>Some employers offer direct student loan repayment assistance as part of their compensation packages. It is increasingly common to find this offering from employers, so be sure to ask about it when interviewing if it’s important to you.</li><li><h3>Refinance your student loans</h3><p>Refinancing allows you to take out a new consolidated loan with a private lender—and if you have a strong credit history and meet certain criteria, potentially get a lower rate. If you obtain a lower rate with a shorter loan term you could pay off your loans sooner, reducing the overall interest paid over the life of the loan.</li></ol>

Medical Student Debt: Consolidation or Refinancing

Upon graduation, medical students are faced with the daunting reality of paying off their student loans. The average cost of medical school in the United States is a staggering $218,792, leaving many doctors with significant debt – typically via multiple loans – to repay.

To manage medical student debt more efficiently, many medical school graduates consider consolidating or refinancing their loans. Deciding if either of these paths is right for your financial situation comes down to a variety of factors.

Factors to consider

Some important factors to consider when making the decision to consolidate or refinance your medical school debt include:

Loan Types

Loan Tenure

Interest Rates

Credit Score

Financial Goals

Loan Types

Do you have federal and or private student loans? If you have federal student loans, refinancing them with a private lender will disqualify you from potential federal benefits, such as forgiveness. See more information below.

Loan Tenure

How long have your loans been in repayment? The age of your loans and the amount you have left to pay will be an important aspect of whether consolidation or refinancing makes financial sense for you.

Interest Rates

Scrutinize your existing interest rates and evaluate the potential rates available through consolidation or refinancing.

Credit Score

Recognize the impact of your credit score on the refinancing process as it will affect the interest rates you can secure.

Financial Goals

What are your immediate and long-term financial goals? Whether your goals involve minimizing monthly payments, accelerating repayment to get out of debt faster, or something else, make sure your decision to consolidate or refinance is aligned.

Pros and cons of medical student loan consolidation

As you consider the different types of consolidation loans available and the potential benefits and drawbacks of choosing this route, doing your research and speaking to an expert is important. You can schedule a free 30-minute consultation with a student loan specialist here to get help understanding if consolidation aligns with your financial goals. Some pros and cons of medical student loan consolidation you might consider include:

Pros	Cons
Simplified repayment – consolidation facilitates the consolidation of multiple loans into a singular more manageable monthly payment	No lower interest rate – Unlike refinancing, consolidation does not result in a reduction of your interest rate. Its primary advantage lies in simplifying your payment structure.
Access to federal student loan benefits – federal student loan consolidation could potentially make you eligible for Income-Driven Repayment (IDR) plans which offer repayment flexibility based on your income and eventual forgiveness.	Loss of benefits – be mindful of potential loss of any borrower benefits from the original loan such as interest rate discounts or principal rebates.

Pros and cons of medical student loan refinancing

Refinancing medical student loans could provide an opportunity to pay off your original debt with a new, consolidated loan with more favorable repayment terms and a potentially lower interest rate. Some of the top potential benefits of refinancing to consider include:

Saving money over the lifetime of your medical student loans
Paying off your medial student loans quicker
Lowering your monthly payment amount
Changing from a fixed rate to a variable rate, or vice versa
Reducing the number of loans in repayment
Gaining terms and rates based on their current financial situation and creditworthiness

Different lenders have their own criteria for determining eligibility and rates, but generally, borrowers in good financial standing who can demonstrate a strong career trajectory and have good credit scores are more likely to be approved with a potentially lower interest rate. Use our student loan refinancing calculator below to get a sense of your potential refinancing rates and terms.

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Student Loan Refinance Calculator

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This calculator is for illustrative purposes only and does not take into account benefits currently offered by the federal government and should not be used for loans being repaid under a federal program. For additional details click here.

One major drawback that federal student loan borrowers should be aware of is the loss of federal benefits that comes with refinancing federal loans with a private lender. Refinancing your federal student loans with a private lender means you will no longer be eligible for Income-Driven Repayment (IDR) plans or the Public Service Loan Forgiveness (PSLF) program. Depending on how much federal student loan debt you have, how long you’ve been in repayment, and other financial factors, it may make more sense to take advantage of federal benefits than to refinance. A student loan specialist can help determine which path is right for you.

Making the best choice for your medical student loans

As you consider both strategies for your medical student loans – consolidation or refinancing – your decision ultimately hinges on a meticulous evaluation of your financial circumstances and career trajectory. Given the substantial financial investment in your medical education, it’s crucial to make informed choices that align with your personal financial goals.

Our student loan specialists have worked with many medical professionals and understand that managing medical student debt is a critical component of your overall financial success. Informed decisions will not only ease the burden of debt but can also set you on a path towards achieving your professional aspirations. To learn more about your medical school debt management options, visit some of our other resources for medical professionals:

[1] Sources:

https://educationdata.org/average-cost-of-medical-school

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Medical Student Debt: Consolidation or Refinancing

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