Student Loans Refinance

[brk81144]

With the end of the residency year/school year approaching I have started to look at refinancing student loans. I was wondering what the groups opinions are about variable interest rate loans with companies like DRB. Currently they have a 10 year variable at 2.63-3.88 that looks mighty appealing when considering the 7+% a lot of us graduating now have. Thoughts?

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[JMC2010]

I refinanced last summer to a 3% variable loan with SOFI. I refinanced again last month to a 5 year 2.75% variable loan with SOFI. For someone like me who is anxious to pay off loans as quickly as possible, a variable rate loan creates even more incentive to pay off ASAP.

Now if you plan on dilly-dallying around and want to pay the minimum every month a variable rate loan is not going to make sense.

 

[The White Coat Investor]

I've spent a little bit of time writing and thinking about this stuff:

http://whitecoatinvestor.com/new-options-for-student-loan-refinancing/

In short, if you're not going to go for PSLF, refinance your loans with SoFi, DRB, CommonBond, etc into a 5 year loan, probably variable but fixed if that makes you uncomfortable. Then live like a resident until the loans are gone.

 

[fahimaz7]

For those of us who are still living sheltered lives as residents, if we continue living a resident-type life style should we expect to be able to pay 5k/month onto loans? More? Seems like our average post-tax/retirement/benefit income each month will be ~10-12k...

Thanks

 

[The White Coat Investor]

For those of us who are still living sheltered lives as residents, if we continue living a resident-type life style should we expect to be able to pay 5k/month onto loans? More? Seems like our average post-tax/retirement/benefit income each month will be ~10-12k...

Thanks

Depends on what you're making and spending. If you're making $240K ($20K a month) and paying $48K a year in taxes ($4K a month) and putting 20% toward retirement ($48K, or $4K a month) and living like a resident ($48K, or $4K a month) that ought to leave you $98K a year (almost $8K a month) to use to pay off loans. So 2 years for $200K, 3 years for $300K etc. If you want to live twice as well as a resident, and only want to save 10% for retirement until you've got the loans paid off, then you're looking at $6K a month, or $72K a year. So 3 years for $200K of loans.

 

[fahimaz7]

Depends on what you're making and spending. If you're making $240K ($20K a month) and paying $48K a year in taxes ($4K a month) and putting 20% toward retirement ($48K, or $4K a month) and living like a resident ($48K, or $4K a month) that ought to leave you $98K a year (almost $8K a month) to use to pay off loans. So 2 years for $200K, 3 years for $300K etc. If you want to live twice as well as a resident, and only want to save 10% for retirement until you've got the loans paid off, then you're looking at $6K a month, or $72K a year. So 3 years for $200K of loans.

My plan (hopeful) is to put 40k or so into retirement, 5k/month on loans, and live on the rest. Seems actually quite reasonable if 240k is what I land on. Not so much for 180k.

 

[5739]

OK, so I just got an offer from DRB. For a 5-year term, 4.24% variable and 5.25% fixed.

Not at all what I was hoping for. They advertise their starting rates at 2.15% variable and 3.5% fixed. My credit score is 798 so I'm a bit surprised their offer is for such a high rate. I'm a PGY-1 with a typical salary.

I have a variety of loans from 2.5% to 6.8%. Obviously a no-brainer that I should not refinance loans at a higher rate. I'm questioning whether it's worth it at all, however, given the relatively small differential between their rate and those rates on my loans that are higher. That differential is 0.16%, 0.85%, 1.55%.

I'll have to spend some time with an excel spreadsheet to properly calculate how much the exact savings will be. In the meantime, I'm considering calling them and trying to get a lower rate out of them. Also, any thoughts on variable vs. fixed? I keep hearing rumors about interest rates rising, and the variable rate could go as high as 9% (where it is capped).

Thanks!

 

[dav86]

OK, so I just got an offer from DRB. For a 5-year term, 4.24% variable and 5.25% fixed.

Not at all what I was hoping for. They advertise their starting rates at 2.15% variable and 3.5% fixed. My credit score is 798 so I'm a bit surprised their offer is for such a high rate. I'm a PGY-1 with a typical salary.

I have a variety of loans from 2.5% to 6.8%. Obviously a no-brainer that I should not refinance loans at a higher rate. I'm questioning whether it's worth it at all, however, given the relatively small differential between their rate and those rates on my loans that are higher. That differential is 0.16%, 0.85%, 1.55%.

I'll have to spend some time with an excel spreadsheet to properly calculate how much the exact savings will be. In the meantime, I'm considering calling them and trying to get a lower rate out of them. Also, any thoughts on variable vs. fixed? I keep hearing rumors about interest rates rising, and the variable rate could go as high as 9% (where it is capped).

Thanks!

Depending on how much your loans are, I think you are lucky you got any offer at all. I know they have started lending to residents but they are not the government. They don't just lend everyone money. They are a private company and have to decide how much risk they want to take on. You are likely making less than 50k/yr and have no long term contract. I just graduated and our resident contract was a year long. Plus I am assuming you don't have an attending job yet. You are some what of a liability. I would focus on saving for retirement (get a match if you are offered, and then do a ROTH IRA), doing well at residency, and then trying to make a small dent in your loans. Once you get a job you will likely get a better offer. If you have a small amount of loans then I wouldn't worry about them as much. They will get paid off quickly once you get out.

 

[remzremz]

Depends on what you're making and spending. If you're making $240K ($20K a month) and paying $48K a year in taxes ($4K a month) and putting 20% toward retirement ($48K, or $4K a month) and living like a resident ($48K, or $4K a month) that ought to leave you $98K a year (almost $8K a month) to use to pay off loans. So 2 years for $200K, 3 years for $300K etc. If you want to live twice as well as a resident, and only want to save 10% for retirement until you've got the loans paid off, then you're looking at $6K a month, or $72K a year. So 3 years for $200K of loans.

Where does the $240K figure come from? Are you just taking an average from somewhere?

 

[The White Coat Investor]

Where does the $240K figure come from? Are you just taking an average from somewhere?

I used the word "IF" because I meant it. If you prefer to use something else, you can. Average for EPs these days is $270-310K a year.