Unless you have a large source of private wealth, pursuing any career in a medical field will likely mean you’ll be deep in student debt before earning much money. U.S. medical graduates in 2018 had a median debt load of $200,000, according to the Association of American Medical Colleges. Student Loan Planner®’s MD clients average closer to $332,000 in student debt.
Dermatologists, however, are known for earning high salaries, especially if they own a private practice. As of August 27, 2020, the median salary for dermatologists in the United States was $348,400. Because of that high salary, most dermatologists are often great candidates for student loan refinancing.
If you’re interested in pursuing student loan refinancing for dermatologists, here’s everything you need to know about the advantages, disadvantages and alternative options for handling your medical school debt.
Why refinance student loans?
If your credit improves between the time you initially got your loans to when you apply for refinancing, you could be offered a more favorable interest rate. Lower interest rates can help you get out of debt faster and help you spend less on your loans overall. That’s the goal of refinancing, although there are also added benefits.
For dermatologists who are earning a high salary, an improved debt-to-income ratio could help boost their credit score, which could make obtaining a favorable interest rate easier. That’s why many dermatologists, particularly those in private practice, are good candidates for refinancing.
Student loan refinancing for dermatologists
Dermatologists in residency don’t have to refinance their federal student loans right away. When you refinance your federal student loans you lose any federal benefits, such as loan forgiveness. In residency, when your income isn’t yet high, pursuing a federal repayment program like Revised Pay As You Earn (REPAYE) can help you minimize your payments.
If you head into private practice after residency — and want to stay there — then it could be a good time to look at refinancing your student loans.
Pros of refinancing
- Lower interest rate: Saving money on interest could help you get out of debt faster or give you extra room in your budget for current expenses.
- Different term: You can change the length of your loan when you refinance. With a shorter term, you can get out of debt faster. A longer term increases the amount of debt overall but gives you extra room in your monthly budget.
- Choose your own lender: Instead of working with the lender you were assigned to for your federal student loans, you can choose your own lender when you refinance. Changing lenders can be valuable if you’re looking for one that offers top customer service or perks.
Cons of dermatologists refinancing student loans
- Not a good fit for some couples: If your spouse currently earns significantly less than you, sticking with federal student loan repayment options might still be more advantageous. With repayment plans like REPAYE, your spouse’s income is also used to calculate your monthly payments, which can help you secure a lower payment.
- Not ideal if you work in the public sector: If you want to pursue dermatology at a public hospital or clinic, Public Service Loan Forgiveness (PSLF) could be less expensive over time.
Alternatives to dermatologist student loan refinancing
Although refinancing is a popular way to pay down student debt, it’s not the only way. Dermatologists have several other options. Here are some of the more common student loan repayment methods, aside from refinancing, that dermatologists can use.
Public Service Loan Forgiveness
If you work in the private sector, pursuing PSLF will likely be more advantageous than refinancing. You need to make 120 on-time payments and work at a qualifying employer to qualify for PSLF. When you begin pursuing PSLF you’ll need to consolidate your federal student loans and choose a repayment program such as REPAYE.
If you start repaying your loans while you’re in residency, you’ll begin those payments early in your career when your income is still low, meaning you’ll pay less initially. Your payments will increase as your income grows, but getting a portion of your payments out of the way while you’re still in residency can save you a lot of money over time.
State-sponsored loan repayment programs
Many states offer help with student loan repayment as a way to attract medical professionals to work in certain regions or with particular demographics. For dermatologists, the options are fewer, as many state programs cater to primary physicians; however, there are some programs where you could be a fit.
The Maine Health Professionals Loan Program, for example, is available to postgraduate medical students, providing loans of up to $25,000. Also, the Montana Rural Physician Program is available to physicians working in areas of Montana with a shortage; it repays your loans based on the length of your tenure. For example, six months of service is equal to $10,000 in loan repayment assistance.
How to decide whether to refinance dermatologist student loans
If you decide to refinance your student loans, here’s how to compare lenders:
- Get quoted rates from various lenders. Clarify that lenders are using a soft credit check to quote you rates, which won’t impact your credit.
- Compare loan details. Run a side-by-side comparison for different repayment terms and interest rates.
- Ask about any fees. Make sure you understand whether the loan includes any fees, like an origination fee, late fee or prepayment penalty.
- Double-check your budget. Make sure you can afford your new monthly payments.
Refinancing your loans can be complicated — you want to get the very best deal possible so that you’re not leaving any incentives or opportunities on the table. If you’d prefer to have some guidance before making a final decision, schedule a student loan consultation with one of our advisors.