I have been hearing from many of my co-residents that they are barely making ends meet each month, paying for rent or mortgage, student loan, food, childcare costs, etc.

Wouldn’t it be nice if somehow we can free up some cash either to address our current needs or to save for future?

Every academic year, we get a pay raise of a few thousand dollars. With that, came higher taxes and higher monthly student loan payments (majority of my peers has selected income based repayments). Some of my peers have even opted to defer (not pay a dime) because they rightfully think that a couple hundred bucks/month is too valuable to now to be throwing at their student loans undergoing negative amortization (ie. the income based repayment that they pay does not even cover the interest accrued each month on their principle debt.)


So most of us PGY’s line up at two ends of the spectrum.

One end: Give me my money now…

and I will deal with my ballooning student loan snowballing at 7+% interest rate and delay my retirement savings for another half a decade. I will make so much more money as an attending than as a PGY. What little I can do today is both PAINFUL to me NOW and NEGLIGIBLE in the long run.


The other end: Give me money later…

I have a plan to help me reach financial freedom. No matter how little my current income seems compared to my future income, I will use a portion of my current income to build my net-worth via a combination of investing and paying down debt. Knowing the time value of money and the nature of compound interest, I know what little I do now makes a big difference in the long run.


But what if you can balance the 2 approaches?

Give me the money NOW and charge me less interest for it.

Refinancing your student loans as a PGY (resident/fellow) was unheard of prior to 2015. But DRB decided to refinance PGYs’ student loans as early as a 4th year medical student with a contract in hand (a few weeks after Match Day.)

DRB Rates 1.21.15 (1)

DRB also requires only $100/month payment until 6 months after training completion. A lower interest (DRB rates above) than 6.8% government loans and 7+% private loans save you money effortlessly regardless what you choose to do with your student loans while in training (pay down aggressively or only the monthly minimum or any style in between.)

$100/month is almost always less than income based repayment plans offered by our government ($345 for Repay; $517 for IBR for a single resident in AZ making $59,000). You can check your personal case here at the federal student aid website.

So by refinancing, you free up a couple hundred dollars/month to do as you wish while allowing your loan to compound @ a lower interest rate, saving you 10’s of 1000’s dollars over the life of the loan.

Click here to submit DRB application.


Now that you have this newly freed up cash, you can put it in your 401k (starting 7/1/2016* for UAHN transitioning to Banner employees) and get instant 100% return as Banner will match your contribution dollar for dollar up to 4% per paycheck.

What does refinancing your student loan get you?

  • You lower your interest rate from 7%.
  • You lowered your minimum monthly student loan payment to $100/mo.
  • You consolidated all your government and private student loans for simplicity and potentially free up even more cash (if you wish.)
  • You may now direct your freed up couple hundred dollars to get instant 100% return (from Banner match) AND enjoy additional daily growth in the investment instruments you choose (available via your company).

When you borrow $1 at <7% interest, and make $1 instantly from match, then plus 5% annual growth going forward that on 2 dollars, the impact of this small amount is tremendous in the long term.

*If you work somewhere else, check with your Human Resources Department, you may already have a employer match for retirement savings. Start taking advantage of the match now. It is salary left on the table if you don’t claim it.


As calculated in a prior post, $5.5/day + dollar for dollar company match (up to 4% per check) during pgy2-pgy6 will likely grow to $23,466 upon training completion.

That’s $10,000 you re-directed from your refinanced student loan (@ the new, lowered refinanced rate), which got you 134% gain over 5 years.

A pretty nice graduation gift to yourself, won’t you say?


  • Have you applied to DRB to refinance your student loans?
  • Do you plan to pay off your student loans or to get Public Service Loan Forgiveness?
  • Do you have private loans that can not be forgiven and yet you have not refinanced?
  • For those in deferment, with the PGY pay raise coming in less than 6 months, can you afford the $100/month DRB repayment? (*hint, this $100/month is great investment, as over 6 years, it can save you 40k.)
  • What would you do with the extra cash you get from paying only $100/month in student loans rather than the couple hundred dollars you are now paying under IBR, REPAY, or PAYE?

 

Best of Both Worlds: More Cash Now & Lower Costs

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