Taking new student loans to pay off old student loans?

[anbuitachi]

So my first two years of medical school, unsubsidized loan was at 6.8%, grad plus at 7.9% interest rate. Now due to the new bill or something, unsub is now 5.41 and grad plus is 6.41 fixed.

Do you guys think it would be wise to max out my grad plus loans, and unsubsidized loans this year, to pay off some of my old loans at the old interest rates?

For example, my first two years i have 80000$ of Unsubsidized loans at 6.8%. Would it make sense to take out 20000$ grad plus loans, and use that to pay off 20000$ of my previous unsubsidized loans so that I'm left w/ a loan w 6.4% interest instead of 6.8%? I'm aware that I have to pay a 1% loan fee to take it out, but I imagine in the long run it would be worth it? Just want to double check before I do it since its a good amt of money.. don't want to mess it up

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[foxhound522]

It totally depends on your personal repayment timeline; you could run the numbers for yourself at AAMC's medloans calculator.

Just as an example, I ran the scenario you mentioned with a couple variables plugged in (3yr residency in IBR, estimated attending salary, 10yr standard repayment strategy). For your 20k PLUS loan, you are paying $858 in fees to take it out (4.288%) vs. about $956 greater interest you would pay over the course of the loan assuming the variables above if it was at 6.8% as opposed to 6.41%. You're also double dipping into loan origination fees with this strategy. You save about 100 bucks. So I suppose theoretically you could save a couple bucks if you're sure of your repayment timeline and you apply the money properly.

Personally, I wouldn't do it. I'm more concerned about minimizing my overall loan burden and paying off loans quickly after residency. Also, if you pay off your loans more quickly, you lose money with this strategy as the interest saved does not exceed the cost of the origination fee.

 

[Igor4sugry]

I would do the following:
1. Keep loans as is.
2. Continue to do everything to minimize any future loan amounts.
3. After residency re-finance your loans with following options:
Two companies currently help physicians refinance to lower rates: Social finance & Darien Rowayton Bank (DRB)
http://whitecoatinvestor.com/refinance-your-medical-school-loans-at-a-lower-rate/