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Most physicians, dentists and veterinarians take on significant student debt, but once they graduate, repayment begins. There are many repayment options for federal student loans, but if you have private student loans or have refinanced with a private lender, there are fewer options for your repayment.
If you are making a plan for repaying your student loans, we have tips for handling your private or refinanced loan balance.
A private student loan is a type of educational loan offered by private financial institutions, such as banks, credit unions, or online lenders, to help students cover the costs of higher education. Unlike federal student loans, which are provided by the U.S. Department of Education, private student loans are issued by private entities and are subject to different terms and conditions.
Private student loans differ from federal loans as they tend to have shorter repayment periods, more complex credit requirements, and without options for income-driven payments or forgiveness. While private student loans help bridge the financial gap for education expenses, it’s generally recommended to exhaust all federal student loan options first, as federal loans often come with more flexible repayment terms and borrower protections.
Refinanced student loans are a type of financial arrangement where borrowers replace one or more existing student loans with a new loan from a private lender.
The purpose of refinancing is to obtain better loan terms, such as a lower interest rate, extended repayment period, or improved monthly payment options. Borrowers typically seek to refinance their student loans to save money on interest payments, simplify their repayment process, or reduce their monthly financial burden.
Refinancing can be a great tool to handle the hefty student loan balances doctors often carry, but if wanting to pursue Public Service Loan Forgiveness or a federal repayment plan, refinancing may not be the best choice for you.
How Much Student Loan Debt Do Doctors Have?
High student loan balances are common for physicians, dentists and veterinarians, but just how high are those debt loads? According to the Education Data Initiative, 73% of medical school graduates have educational debt with an average total student loan debt of $250,990. Dentists are similar with 66% of graduates owing an average of $293,900, based on data from EDI, and 83% of veterinarians take out loans with an average student debt total of $188,853, according to the American Veterinary Medical Association.
How Do I Repay Private Or Refinanced Student Loans?
Private lenders are not required to offer flexible repayment plans, so repaying private or refinanced student loans can be more challenging than repaying federal student loans. If all of your loans are private or refinanced, there are two main options for repaying the balance:
- Keep your loans unchanged
- Refinance with another private lender
Below we share tips for both avenues for handling your student loans.
Tips For Paying Back Your Current Private Or Refinanced Student Loans
If you plan to keep your loans unchanged, here are four tips to repay your loans
1. Understand Your Loan Terms
The first step in repaying private or refinanced student loans is to familiarize yourself with the terms of your loan agreement. Understand the interest rates, loan duration, and any potential penalties for late payments or early repayment. Knowing these details will enable you to create a realistic repayment plan and avoid any unexpected surprises down the road.
2. Create A Budget
A well-structured budget is a fundamental tool for managing your finances effectively. List all your sources of income and track your expenses to identify areas where you can cut back.
Allocate a portion of your monthly income toward loan repayment, ensuring that you meet the minimum payments to avoid penalties. By sticking to a budget, you can prioritize loan repayment while still meeting your other financial needs.
3. Prioritize High-Interest Loans
If you have multiple student loans held by private lenders, one option is to prioritize paying off those with the highest interest rates first. Tackling high-interest loans early can save you in interest expense in the long run and accelerate your overall debt reduction. Focus on making additional payments towards the principal of these loans to chip away at the debt faster.
Tips For Refinancing Private Or Previously Refinanced Student Loans
Refinancing student loans can be a smart financial move if done strategically. Here are some essential tips to consider when refinancing your student loans:
1. Improve Your Credit Score
A strong credit score is crucial for getting the best refinancing terms (i.e. lowest rate). Work on improving your credit by paying bills on time, reducing credit card debt, and correcting any errors in your credit report.
2. Compare Multiple Lenders
Don’t settle for the first offer you receive. Shop around and compare refinancing offers from multiple lenders. Look for competitive interest rates, loan terms, and repayment options that suit your financial goals.
3. Consider Fixed vs. Variable Rates
Choose between a fixed interest rate, which remains constant throughout the loan term, and a variable rate, which may fluctuate with market changes. Fixed rates offer stability, while variable rates at times may start lower but carry the risk of increasing over time.
4. Evaluate Repayment Terms
Look for lenders that offer flexible repayment terms, such as different loan durations and monthly payment options. Longer repayment terms may result in lower monthly payments but could lead to higher overall interest costs.
5. Check for Prepayment Penalties
Avoid lenders that charge prepayment penalties. This way, you can pay off your refinanced loan early without incurring additional fees, allowing you to save on interest.
6. Review Customer Service and Support
Look for a reputable lender that offers excellent customer service and support. A responsive and helpful lender can make the refinancing process smoother and address any questions or concerns that may arise.
7. Understand the Impact of Refinancing
Before committing to refinancing, thoroughly understand the terms and conditions of the new loan. Assess how it will affect your monthly budget, long-term financial goals, and overall debt management strategy. A very important point is that once you refinance a federal loan you cannot go back to the federal system.
8. Maintain Good Financial Habits
Even after refinancing, continue to practice responsible financial habits. Make consistent, on-time payments, avoid unnecessary debt, and keep monitoring your credit score to stay on track towards financial success.
Handling Your Student Loans
Paying off your student loans requires careful planning, discipline, and persistence. It’s essential to stay committed to your repayment plan while staying informed about potential changes in your financial situation. With determination and a well-executed strategy, you can successfully repay your student loans and embark on a debt-free financial future.
If looking to refinance your loans, our medical, dental and veterinary school refinancing could be right for you. With competitive rates, 24/7 customer service, and no maximums, we are ready to help you take control of your debt. Learn more here.
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