In 2020, we are seeing doctors and nurses step up to the plate in the most remarkable ways. The rigors of their job, now dramatically intensified by the spread of COVID-19, have never been more apparent. But in addition to their demanding schedules, these workers face another unique stressor — high student loan debt. In a recent study done by the American Association of Colleges of Nursing (AACN), 50% of nursing graduates said their number one concern was their ability to pay their loans back.

Needless to say, the burden of student debt can feel overwhelming for many medical professionals, including nurses, who require a significant amount of education to achieve their career goals. On average, typical recipients of a Master’s of Science in Nursing degree find themselves between $40K-$55K in debt upon graduation.

Today, nurses have a good amount of employment flexibility given current industry shortages. The demand for nurses is at an all-time high. To ensure many more will follow in their path, as they must, these vital professionals need help to better manage their educational costs.

Student loan refinancing is a potential way for healthcare professionals, including nurses, to better manage debt and incur meaningful savings. The difference in savings could be significant — perhaps even enough to make their career outlook more manageable.

This article provides an overview of federal student loan repayment and student loan refinancing options, to help you better understand the benefits and differences.

Federal Repayment Options

Nurses with Federal student loans have a number of repayment options (as well as potential loan forgiveness) at their disposal, including; direct consolidation, income-driven repayment, and Public Service Loan Forgiveness.

DIRECT CONSOLIDATION

You have the option of consolidating individual federal loans into a single loan from the government. The new loan will have a repayment term from 10-30 years, with a new fixed rate that represents a weighted average of the interest rates of all of the loans that were consolidated.

Since Direct Consolidation simply combines two or more loans into one loan with one weighted interest rate, it does not typically offer any interest savings. Also, private student loans cannot be included in a federal Direct Consolidation.

INCOME-DRIVEN REPAYMENT (IDR)

IDR plans allow you to reduce monthly payments for federal loans according to your income–typically a portion of your discretionary income. Repayment periods generally range from 20-25 years.

It is important to consider your future earning potential when enrolling in IDR. While it might make sense during training, monthly payments will likely match or even exceed those of standard repayment plans once you are earning a higher income. This may make refinancing an attractive option – as payment terms may be extended and/or lower rates may be available.

PUBLIC SERVICE LOAN FORGIVENESS

Those working in public or non-profit sector jobs may be eligible to have loans forgiven after 10 years of repayment. If you are employed in certain public service jobs and have made at least 120 qualifying payments on your Direct Loans, the remaining balance may be forgiven under this program.

For nurses, the potential savings from loan forgiveness should be balanced against potential income lost from forgoing private sector employment.

Student Loan Refinancing

Banks and other lenders refinance student loans by paying off a customer’s current student loans and issuing them a new loan with a new rate and term. With student loan refinancing, you can refinance all or some of your federal and private student loans. Refinancing eligibility depends on lending criteria such as credit profile, monthly income, and monthly debt payments.

To show appreciation for those fighting on the front line against COVID-19, Laurel Road, a leading provider of student loan refinancing, is now offering special pricing on student loan refinancing products for nurses.[1]

Laurel Road kicked off student loan refinancing in 2013 with a mission to help qualified graduates reduce the burden of student loan debt. Over the years, they have focused more and more on helping the healthcare community — those in residency, as well as early-career and working professionals — by offering several flexible repayment options and competitive rates. For residents, nurses, or practicing physicians, student loan refinancing helps borrowers create a plan that fits their circumstances. The benefits of student loan refinancing include an opportunity for one or more of the following:

1. Lower interest rate(s)
2. Pay off loans faster
3. Lower monthly payments
4. Move from a fixed rate to a variable rate (or vice versa)
5. Reduce the number of loans in repayment

Please note: certain repayment, forgiveness and other options go away by refinancing federal loans with a private lender, so be sure to do your research to make the best decision for yourself.

Can Refinancing Federal Loans Save Me More?

Refinancing can be a way for a borrower to lower their interest rate to generate long term savings or lower their monthly payments to have more room in their budget. For some borrowers, these opportunities may be more meaningful than the terms and options available through federal loans. However, borrowers with federal loans should review the current repayment options, terms, and other benefits associated with their loans (including the relief offered under the recent CARES Act) when looking to refinance, and weigh them against any potential savings as these options, terms and benefits are not available after refinancing.

To help borrowers, Laurel Road developed a calculator to show the potential differences in payments and interest between federal loans and private refinancing. The calculator takes the borrower’s unique current loan information, estimates what is remaining on their current loan and compares it to refinancing with Laurel Road. If you are currently repaying through the Federal Government’s Standard Repayment Plan, this could be a useful tool to see if you might save through refinancing

For physicians, dentists, and nurses, the calculator will also show the estimated impact of Laurel Road’s special price reduction. Through this offering, healthcare professionals may be able to maximize savings over the life of their loans.

 You can access the calculator here.

For the many healthcare professionals and nurses striving to meet their educational and career goals, we’re here to help. Laurel Road aims to support current and future nurses in generating savings and managing their finances effectively, so they can put more time and effort into where it counts most — helping others. To all nurses on the front lines, as well as those who aspire to nursing — we are forever grateful for your commitment, and we thank you for your service.

Laurel Road is a brand of KeyBank National Association. KeyBank is a Member FDIC, Equal Housing Lender. NMLS ID # 399797.

Any opinions, findings, and conclusions expressed within this article by third parties do not necessarily reflect the views of Laurel Road or KeyBank.

[1] The specialized rates are offered to applicants  who are physicians, dentists, physician assistants, and nurses with the following degrees: Doctor of Medicine (MD), Doctor of Osteopathic Medicine (DO), Doctor of Medicine in Dentistry or Doctor of Dental Medicine (DMD), Doctor of Dental Surgery (DDS), Physician Assistant Master of Science in Medicine (PA), Master in Nursing, Doctor of Nursing, Associate in Nursing, MA/MS/PhD in Nursing, Associate of Science Degree in Nursing (ASN), or Bachelor of Science in Nursing (BSN).  Not available to residents, fellows, or students.