Student Loan Refinancing for Young ODs: The Basics

As you begin your career as a doctor of optometry, repaying your optometry school loans is likely a significant consideration when it comes to your personal financial strategy. Looking into student loan repayment options sooner rather than later can potentially put you in the position to save significantly over the life of your loans, allowing you to keep more of your hard-earned money and more easily achieve personal financial milestones.

Consider these eight frequently asked questions about student loan refinancing to help you begin planning your student loan repayment strategy:

• What is student loan refinancing? Student loan refinancing is a student loan repayment option in which a private lender pays off your existing student loans and provides you a single new loan with a new interest rate. Refinancing student loans can simplify your repayment strategy by giving you just one loan to manage, rather than several loans with different interest rates. If your refinanced loan has an interest rate that is lower than the rates of your original student loans, you may stand to save over the life of the loan.

• What is the difference between federal consolidation and refinancing? When you consolidate your federal student loans, you combine them into one loan with an interest rate that is a weighted average of the interest rates of the loans you’ve consolidated. This can simplify your repayment by combining your loans into one monthly payment but is unlikely to lower your interest rate. Refinancing your loans with a private lender can have the effect of consolidating multiple loans into one loan, but rather than taking the weighted average of the interest rates of the original loans, you receive a new interest rate based on your credit profile, which could potentially be lower and save you interest over the life of the loan.

• Will I still be eligible for federal repayment options or loan forgiveness if I refinance? If you choose to refinance your federal loans with a private lender, you will no longer be eligible for any future and current federal programs such as income-driven repayment plans, federal student loan forgiveness, or federal deferment options. It is essential to do your own research and to assess whether refinancing your federal loans is the right fit for your financial circumstances.

• Do I have to refinance all of my student loans at once? Because student loan refinancing is not an ‘all or nothing’ repayment option, you can choose which loans you’d like to include when refinancing. You may find that you can save on your private loans by taking advantage of a lower interest rate but find it beneficial to hold off on refinancing federal loans if, for example, you think you may qualify for federal loan forgiveness in the future or if the interest rate on one or more of your federal loans happens to be lower than the rate offered through refinancing with a private lender. One thing to note is that you must refinance the entire amount of any loan you choose to refinance – it is not possible to refinance a partial amount of a loan.

• Can I refinance my student loans more than once? You can typically refinance your loans multiple times when lenders are offering better rates. When choosing to re-refinance, it is important to consider if there are any fees you will have to pay that outweigh your potential savings and if the new loan terms put you in a favorable position to save on your loans.

• How do I choose a lender to refinance with? When considering a private lender to refinance with, you want to find a lender who will offer you a low interest rate and favorable loan terms. You will also want to look into what fees the lender may charge as part of the refinancing process and over the life of your new loan. Some lenders also offer perks such as flexibility to adjust your payment date or complimentary financial advice. You may also find that lenders may offer you rate discounts based on certain memberships—like Laurel Road offers a rate discount on refinancing based on AOA membership.

• Will student loan refinancing impact my credit score? In order to provide you with preliminary rates, sometimes referred to as a ‘quick quote,’ some lenders may perform a soft credit pull. A soft credit pull will not impact your credit score. If you decide to go forward with your loan application, the lender will make a hard inquiry to view your credit report and finalize a rate offer. While a hard inquiry is typically required for any loan application, it may have an impact on your credit score.

• How do loan terms impact my potential savings? Pay close attention to the repayment term of the loan when you choose to refinance to ensure the new loan is suited to your financial circumstances. A shorter loan term, (an example would be a 5-year term), often comes with higher monthly payments, but you will pay off your loan faster and will pay less interest over the life of the loan, saving you money. With a longer loan term, you will have lower monthly payments, which may make payments more manageable as you handle your other expenses. However, with a longer loan term it will take more time to pay off the loan and you will end up paying more interest over time. You will need to consider your monthly income, savings goals, and expenses to best determine which loan term helps you achieve your primary goal for refinancing.

This content is sponsored by Laurel Road.

AOA members in good standing are eligible for a 0.25% rate discount when refinancing with AOAExcel’s endorsed partner, Laurel Road. Learn more about student loan refinancing at aoa.org/studentloans.