Student Loan Repayment for Doctors of Optometry: Consolidation vs. Refinancing

Once a doctor of optometry has become established in their career, it may be advantageous to
evaluate their student loan repayment strategy. Many optometrists stand to save over the duration of their loans if they take advantage of the repayment strategies that best suit their loans and financial circumstances.

Two common repayment strategies that are often confused for one another are student loan federal consolidation and student loan refinancing. It is important for ODs to know that these repayment methods have significant differences in order to decide which strategy is best for them. Here are some key differences between federal consolidation and refinancing:

• Federal Loan Consolidation – Federal loan consolidation is a repayment option offered by the government and is only available for federal loans. When a federal loan borrower consolidates, their loans are combined into a single, new loan with a new, fixed interest rate. The new interest rate is determined by averaging the existing interest rates for the loans being consolidated. According to the U.S. Department of Education, federal loans can be consolidated at
  no cost to the borrower.

• Student Loan Refinancing – Student loan refinancing is a method of student loan repayment in which a new loan from a private lender pays off one or more existing student loans. With a private lender, borrowers are able to refinance both private and federal loans at a new interest rate. One key difference between federal consolidation and refinancing is that when refinancing, the interest rate is determined by the lender who considers the borrower’s credit history and financial circumstances. Because the interest rate is not determined by the average of the interest rates of the existing loans, a borrower may receive a lower interest rate and potentially pay less over the life of the loan.

When deciding between consolidating and refinancing student loans, it is important for optometrists to do research to determine which method best suits their financial circumstances. It is essential to keep in mind that when federal loans are refinanced with a private lender, borrowers will lose access to any future and current federal programs such as income-based repayment, forbearance options, and federal loan forgiveness, though some private lenders may offer similar benefits.

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 here.