Money matters

Student debt: With federal loan rates set to rise, is refinancing right for you?

DOs who are transitioning out of residency or fellowship should assess their student loan debt and see if refinancing is in their best interest.


With federal student loan rates expected to rise in July, DOs who are transitioning out of residency or fellowship should assess their student loan debt and see if refinancing is in their best interest.

While the increase in rates affects federal student loans directly, it also plays a role in the private refinancing marketplace, according to Doctors Without Quarters, a national student debt advisory firm that has partnered with the American Osteopathic Association to offer early-career DOs financial resources.

“Due to competition and capacity, we have not seen rates rise over the past year in the refinancing marketplace,” says Jason DiLorenzo, founder and executive director of Doctors Without Quarters. “We view this as an anomaly, with private rates eventually falling closer in line with the increase we’ve seen in federal rates.”

Interest rate hikes: The details

Federal student loan rates are established each July based on a premium to the auction of the 10-year Treasury bond in May. This July, the interest rate on Stafford Loans for graduate students is set to increase to 6 percent from 5.31 percent for the 2017-18 academic year.

The rate on PLUS loans, which are used by both parents and graduate students, are set to rise to 7 percent from 6.31 percent. (Undergraduate students will also see their interest rates go up. The rate on undergraduate Stafford Loans will rise to 4.45 percent for the 2017-2018 school year, up from 3.76 percent.)

The higher rates apply to new loans only, borrowed after June 30. Rates on existing fixed-rate loans remain the same for the life of the loan.

To refi or not to refi?

“If they’ve been on the fence about refinancing, medical students and residents who are transitioning to practice would be well served to act before the rate increase on July 1,” says DiLorenzo. “DWOQ has leveraged the lending marketplace to offer deferments for transitioning doctors so that they will get today’s rates, but have up to six months or more to enter repayment based on their contract start date.”

The decision to refinance student loan debt is complex and personal. The average DO graduate with debt owes roughly $240,000, according to the American Association of Colleges of Osteopathic Medicine. Managing that sum effectively requires careful planning and an evolving strategy.

In an effort to tackle some of the questions about medical student loans and refinancing, the AOA has partnered with DWOQ to offer free webinars on managing medical school loans. You can keep abreast of future webinars here.

If you are wondering whether refinancing is a suitable option that’s available to you, you can register for a free refinance analysis if you’re an AOA member.


    1. Seka Palikuca

      College tuition has gone up across the board, undergrad and grad, but it might be worth comparing allopathic vs osteopathic medical school tuitions. Thanks for the idea.

      1. Dr. Bob, DO

        I would especially like to see a study or research article into why tuition is increasing at a rapid rate, much faster than inflation. DO vs MD schools would be interesting. Also, what is the money going too? Chicago College of Osteopathic Medicine tuition is $65,175. I find it very hard to believe that much expense is necessary to properly educate a medical student. I think the real problem is student loans are essentially a blank check for schools and schools know that. Most schools have several departments or committees, but there never seems to be an emphasis on keeping tuition affordable. For all the ethics the medical community likes to preach, there is very little restraint with regards to tuition, fees, and expensive unnecessary testing.

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