One of the most common questions physical therapists and occupational therapists ask me is “Should I refinance my student loans?”
For the occupational therapists and physical therapists not familiar with the topic of refinancing student loans, this article will cover what that phrase actually means and then begin to address if refinancing might be right for you at this time.
Since Money Mobilizer readers will likely be referring back to this article at different times, the phrase “at this time” may be different for each reader. That is why I will continue to keep this article up-to-date so that it can continue to be a helpful resource to you even though variables influencing your student loan situation will likely continue to change.
Let’s get started.
What Is ‘Student Loan Refinancing?’
When a student takes out student loans, the loans come from an organization. That organization can either be the federal government or a private company, referred to as a private lender.
When a physical therapist or occupational therapist refinances their student loans, they are allowing a new private lender to pay off that original organization’s (either the federal government or private company) student loan balance. In turn, that new private lender issues the physical therapist a new student loan balance with new terms (e.g. a new interest rate).
Can I Refinance My Federal Student Loans?
Yes. However, as in the example above, you can only refinance your student loans with a private lender. You cannot refinance them with the federal government.
Therefore, if an occupational therapist or physical therapist refinances their federal student loans, their loans will no longer be with the federal government – they will be with a private lender.
Can I Refinance My Private Student Loans?
Yes, you can refinance your private student loans.
In fact, you can refinance them as many times as you want – and it can be in your best interest to do so. More on this below.
Why Might I Not Want To Refinance My Student Loans Right Now?
1.) You’re Going For Forgiveness
If a physical therapist or occupational therapist wants their student loans to be forgiven, they should be on the Public Service Loan Forgiveness (PSLF) track or the Income-Based Repayment Plan track.
If you are currently an occupational therapy or physical therapy student or a newly graduated physical therapist or occupational therapist, I strongly suggest learning about these programs now so that you improve your chances of actually getting your loans forgiven in the most efficient timeline possible. The Education Data Initiative reveals how only 2.16% of processed PSLF applications have been accepted since November 2020.
2.) The Federal Student Loan Forbearance
Physical therapists and occupational therapists with federal student loans are currently in forbearance until August 31, 2022.
In other words, occupational therapists and physical therapists with federal student loans are not required to make student loan payments until August 31. The interest rates on their student loans are being kept at 0% until then as well.
If a physical therapist or occupational therapist decided to refinance their student loans right now, they would have to start making payments and their interest rate would be higher than 0%.
3.) Federal Student Loans Are Discharged Upon Death
If you have federal student loans and you pass away, then your federal student loans will be discharged. On the other hand, student loans with a private lender may still need to be paid back.
That is why some occupational therapists and physical therapists worry that, if they were to pass away, their loved ones would be stuck having to pay back their student loans.
Why Might I Want To Refinance My Student Loans Right Now?
Here’s some reasons to consider refinancing your student loans:
1.) Save Money
Getting a lower interest rate can save you thousands of dollars.
The interest rate on my student loans was around 8% on average. Lowering your rate can do wonders for the amount of time it takes you to pay them off.
2.) Make Money
With interest rates so low right now, the student loan refinancing market is so competitive that several private lenders are even offering to give you money if you refinance with them.
That’s why shopping around is to your benefit, so be sure to get quotes from more than one company to find the best deal.
3.) Supply and Demand
There are 43.4 million Americans with federal student loans. That’s A LOT. Right now, they are in the Federal Student Loan Forbearance. But, come August 31st, the private lenders may not have to try so hard to get you to refinance, and the deals listed above may be gone or less appealing.
4.) Rate Hikes
We just discussed how interest rates are low right now, but how long will they stay that way? The inflation rate has now risen to 8.5% and the Federal Reserve has already announced it will respond by raising interest rates.
5.) The Federal Student Loan Forbearance Ends August 31st 2022
Okay, so the Federal Student Loan Forbearance was extended again – but how many more times do you think it will continue to be extended?
While none of us can predict the future, hoping for another extension of the Federal Student Loan Forbearance might be a reach.
6.) Term Life Insurance Can Protect Your Family
Although refinanced loans are not dischargeable upon death, you can still protect your family’s financial situation by purchasing an inexpensive term life insurance policy.
Such a policy can cover the remaining balance of your student loans should something unexpected happen to you.
Final Thoughts. . .
Looking back on things, with the interest rates on my student loans averaging at 8%, I wish I had refinanced my student loans right after I graduated from my physical therapy program. Not doing so cost me thousands of dollars in extra student loan payments.
I hope this article serves you well.
Do you have any additional information to share after reading this article? Any questions on aspects that may not have been covered? Before moving on, please help make the Money Mobilizer a supportive and welcoming community for our current and future colleagues by leaving a question or sharing your knowledge below!