One of my biggest regrets of going into medicine is not fully investigating the costs: the costs to my personal life AND the financial cost. I remember the idealism of my teens and early 20s – I was going to help people! I might even save lives one day! What greater contribution to society could one give? Any costs brought on by my education was worth it, so I took out the full amount of student loans available without any questions.
I didn’t really think much of it throughout med school – if I wanted something, I bought it. How could I expect to learn anything if I was un-caffeinated or hungry? How could I expect to truly be at my best if I didn’t take vacations? I was aware that burnout was a thing even then, so of course going to Costa Rica on money borrowed at 6.8% made total sense. And obviously, I wasn’t going to let a thing like med school stop me from getting married and going on my honeymoon, so I paid for that with my student loans as well! Thankfully, at baseline I’m a frugal person so nothing truly got out of hand, and I’m still married to the guy so I’m still counting the wedding and honeymoon a good return on my investment. But, at the end of medical school, my total student loan bill was $217,000, accumulating at 6.8% minus 0.25% for automatic payments.
By that point, the damage had already been done. I started regretting every Starbucks run I had ever taken to fuel my late night studying. A $4 latte compounding at 6.55% interest over 5+ years was not worth it, not to mention the excessive calories and the lactose intolerance! My husband and I tried to stop the hemorrhaging by putting $1500 a month during residency, but that didn’t even cover the interest. At the end of 4 years of residency, my total medical school loan debt went up to $240,000, and my husband’s student loans were at a measly $10,000.
Even after residency and transitioning to my big girl attending job, I stuck my head in the sand and tried to avoid tackling this issue. I had plenty of good excuses – I was moving across the country, had to study for 2 board exams, start a new job. But, in the long run it would’ve been more beneficial to deal with the financial monster sooner than I did – I really should have dealt with it in residency. Finally, in November 2015 I decided I had to do something and did what I do best: study. I looked at every possible outcome for student loan repayment and refinancing/consolidation.
Given that I had already signed up for a private practice job, I was not a candidate for the Public Service Student Loan Forgiveness program. I had classmates in med school who were banking on this option, but I was skeptical this would be a viable option in the future. In the last several months, there have been reports of people getting denied for this and this no longer is an option with the new tax reform bill moving forward.
Ultimately, I decided to refinance/consolidate. I had two different loan servicers with two different payments due. The interest rates were identical, so refinancing them together made the most sense. Due to the ridiculous dollar amount of the loans I still owed, there were only a few options open to me in 2015: SoFi, LinkCapital, Earnest and Darien Rowayton Bank (DRB). Narrowed down to the top 2, I settled on Earnest and DRB (now Laurel Road).
With my credit score > 700, these were the offers given to me for a 10 year loan:
| Lender | Variable APR | Fixed APR | Signup Bonus | Interest rate reduction |
|---|---|---|---|---|
| DRB (aka Laurel Road) | 3.96% | 5.5% | $300 | 0.25% |
| Earnest | 3.8% | 5.32% | $200 | 0.25% |
I knew I did not want to take longer than 10 years to pay off my loans, so I didn’t even look at the rates for the 15 and 20 year options. Also, as the duration of the loan term increased, the interest rates went up as well.
Next, I weighed the options back and forth – variable or fixed? On one hand, the variable rates were VERY appealing. However, I anticipated that interest rates would soon be going up, which they did in 2016/2017. Now, if I had planned on paying off the loans within 3 years, it would have made sense to go with the variable rates and just ride out the possible rate increase. However, that wasn’t something I wanted to do at that point. I’m pretty risk averse, so I decided to go with fixed rates.
For DRB, the 0.25% interest reduction was only applied if the payments came from a DRB checking account. I didn’t want to deal with having to transfer money into the DRB checking account, then submit payments. On the other hand, with Earnest the 0.25% interest reduction was applied with any automatic electronic payment.
There were other items that won me over. I could make biweekly payments to lower the total interest over time (makes an additional 2 payments every year). Earnest services loans in-house, meaning they wouldn’t sell my loans to another lender and I’d have to figure out how to get money to the new servicer (which happened twice in residency). If something happens that causes me to have an involuntary decrease in income/loss of employment/hardship, I could apply for forbearance starting at 3 months. Most important to me, if I died or experienced total and permanent disability, Earnest would discharge all my student loans.
Obviously, I decided to go with Earnest. Earnest also allows you to refinance every 6-12 months without any fees, and after a year I did just that, securing a 3.38% rate (including the 0.25% interest reduction) for a 7 year loan. Now, I’m on track to pay everything off within 5 years.
At the time of this post 12/25/17, here are the listed rates for different lenders, keeping in mind that all of them have the 0.25% interest reduction for automated payments:
| Lender | Variable APR | Fixed APR | Loan terms (yrs) |
|---|---|---|---|
| Earnest | starting at 2.57% | starting at 3.25% | 5-20 |
| DRB/Laurel Road | 2.99%-6.42% | 3.95%-6.99% | 5, 7, 10, 15, 20 |
| SoFi | 2.35%-9.95% | 3.25%-7.25% | 5, 7, 10, 15, 20 |
| Common Bond | 2.57%-6.84% | 3.18%-7.12% | 5, 7, 10, 15, 20 |
If I could deal with it all over again, I would have refinanced my student loans much earlier. However, I don’t know if I would have really gotten much better rates because my income as a resident was no where close to what I’m making as an attending (about 25% of what I make now). For me, the idea of owing this insane amount of money has been a huge emotional burden. It has been worth living as a resident and putting $65,000+ a year toward these loans, just to be done with them. I can’t imagine the freedom I’ll feel when I’m no longer beholden to a bank. I’m waiting for the day when I go to work not because I HAVE to in order to pay my bills but because I WANT to. Financial freedom is just one of those steps to achieving true contentment.
If you’re looking to refinance your loans with Earnest, click HERE. If you do refinance with them through my referral link, I’ll get $200 and you’ll get $200. Win-win!
***Main photo taken at Panama City Beach, FL.