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Universities and colleges play a major role in shaping the lives of their students, but the cost of a college education can be a significant burden. That’s why many students choose to take out a student loan, either through a government-backed loan or a private loan. However, while the cost of college is rising, the financial aid available is oftentimes not sufficient to cover it.
The completion of a pharmacy education is, without a doubt, one of the biggest accomplishments a young adult can have. Pharmacists are a vital part of the health care system, and can make an incredible amount of money, especially after many years of experience. Unfortunately, the cost of pharmacy school is staggering, and even worse if you choose to attend a private institution. With over $300,000 in debt looming over you after graduation, it can be hard to think of the long term consequences of your choices. Since you won’t be making any money as a new pharmacist, refinancing your student loans may seem like a distant dream.
I’ve done a lot of consulting on student loans in pharmacy, and I’ve always been amazed at how much unnecessary interest many pharmacists in the private sector pay on their student loans. Unfortunately, most pharmacists are not eligible for student loans during their training.
Often, pharmacy graduates who receive federal student loans are automatically enrolled in either a standard 10-year plan or an income-contingent repayment plan. Let’s be clear: There are many cases where these options are most appropriate. But sometimes refinancing at a lower interest rate makes more sense.
There is no one-size-fits-all strategy for repaying student loans. But on average, pharmacists are better candidates for student loan refinancing than graduates of other fields of study. Let’s take a look at how pharmacists in the private sector can decide whether and where to refinance their pharmacy education loan.
General advantages and disadvantages of refinancing student loans
Whether you are a pharmacist, lawyer or social worker, the main advantages and disadvantages of student loan refinancing are generally the same. The main advantage of refinancing is that you can get a lower interest rate. If you have a large loan amount, even a difference of just 0.50% can save you tens of thousands of dollars in the long run.
The largest gap in student loan refinancing occurs only among borrowers of federal student loans. If you refinance federal student loans with a private lender, you lose the right to all the benefits of federal student loans. These include income-contingent installment plans, forgiveness programs, and federal deferral and repayment programs.
It should also be noted that all Federal Direct Loan borrowers are currently on hold due to the pandemic. The 0% interest deferral expires on the 30th. September 2020. But repayments will likely begin immediately if you choose to refinance your federal loans.
The least disadvantage of refinancing, which applies to everyone, is that it can be difficult to qualify. Companies that refinance student loans generally require not only that you have a good credit history, but also an income high enough to comfortably make your monthly payments. If you have a poor credit history or a high debt-to-income ratio, it may be harder for you to lower your interest rate by refinancing or getting approved.
Why do lenders want to offer pharmacists a lower interest rate than the government?
Private student loan refinancing companies emerged in the early 2010s. They realized that the government was charging pharmacists and other high-income professionals more money than they needed, based on the likelihood that they would repay their loans.
For each type of loan (e.g. Direct Subsidized and Unsubsidized Loans, Grad and Parent PLUS Loans, etc.), the federal government applies the same interest rate regardless of the program of study. This left a lot of room for private lenders to take on most of the credit risk and offer these customers lower rates while making money.
This benefits everyone except the federal government, which loses interest income. The government has no incentive to make a profit, so it has allowed this status quo to continue. I think part of the reason is that politicians don’t understand the true cost of borrowing from the federal government.
Most pharmacists pay too much interest on their student loans
To pay off your student pharmacy debt in 10 years, simply choose the standard 10-year monthly repayment plan. Sounds like a good plan, right?
The problem is that Grad PLUS loans typically have an annual interest rate of 5-8%. So any pharmacist working in the private sector who owes less than double their salary is probably paying too much on their student loans.
The typical pharmacist working at Walgreens, CVS or another large private employer earns a solid $100,000 to $130,000. Most of these pharmacists only owe $100,000 to $150,000 for pharmacy school. They have enough money to pay off their debts.
Pharmacists who work for one of the two major national chains are likely to have the easiest time refinancing. Their work is very stable, and the refinancing company recognizes this. When you apply, the lender will only want to see proof of your salary on your pay stub.
If you start at a CVS or Walgreens pharmacy, you can use a high starting salary to get a great interest rate to refinance your student loans. If you later decide to change employers, you will still benefit from the lower original interest rate.
Fourth-year pharmacy students who have signed an offer letter may apply if they are willing to begin paying in 2-3 months. Any high-income employee of a large national chain is eligible for refinancing.
How and where to refinance pharmacy student loans
The ideal candidate is a pharmacist with a six-figure income and a debt-to-income ratio of less than 2. The advantage is that you can reduce the Grad PLUS interest rate from 5% to 8% to 2% or 3%.
How to refinance a student loan at the pharmacy
If you plan to pay off your student debt quickly, I like variable rate loans. Interest rates are typically 1% to 1.5% lower than for fixed rate loans. If you are more averse to risk or want a longer repayment period to keep your monthly payment low, a fixed rate may also be suitable. More importantly, both options will save you money.
My golden rule is this: If you are able to repay the loan in 3 years (if at all), using a variable APR is a good idea. If you are not in a position to make large payments when interest rates rise, the reliability of a fixed rate will not hurt.
If you want to be aggressive, I applaud those who choose the 5 year variable. But either option will make your financial life much better.
Where student loans are refinanced in pharmacy
Where can I find a low interest rate? I help my clients with student loan counseling for a flat fee. But if you want to test yourself, here are the 9 best banks for student loan refinancing. Each of these companies offers competitive rates that include a discount for automatic payment (usually 0.25%).
These sponsorship partners have agreed to let me share the sponsorship bonus with you. Our affiliates are currently offering bonuses of up to $1,275. You won’t get these bonuses if you go directly to their websites. So consider this time well spent while reading the article.
It won’t affect your credit if you just check what your rate is. In addition, none of the lenders we work with charge processing fees or early repayment penalties, and many offer generous grace periods for borrowers experiencing financial hardship.
Why did I only list pharmacists from the private sector?
If you have worked for a nonprofit for any length of time, you should know about the Public Service Loan Benefit (PSLF) program. You can repay 40-70% of the loans you take out and have the rest forgiven tax-free. To qualify for this opportunity, you must have worked in a non-profit organization for 10 years.
If you work in a pharmacy for a year or two and then switch to the private sector, the PSLF will not help you. However, if you’ve been on a low income for years, it’s probably a good idea to get an interest rate subsidy through REPAYE. You will want to refinance once you have a higher income.
This means that pharmacists in the private sector must repay the loan as soon as possible and reduce the interest rate. This means private refinancing. Since pharmacists in the private sector generally earn a little more than their public sector counterparts, it can be a little easier to pay back a loan.
Other compensation options for pharmacy graduates
In addition to refinancing, several loan repayment programs are available to pharmacists. Here are three notable programs to watch:
- National Institutes of Health (NIH) loan repayment programs: Can provide up to $50,000 in loan repayment assistance.
- Indian Health Service (IHS) loan repayment program: Can provide up to $40,000 in repayment assistance.
- NHSC Substance Use Disorder Worker Loan Repayment Program: Can provide up to $75,000 in loan repayment assistance.
Each of these programs requires you to commit to working in a high-demand field for several years. Also consider that your state may have its own pharmacy loan repayment program, which you may find easier to qualify for than these national programs.
Get your student debt in pharmacy under control
Pharmacy professionals are among the most suitable for refinancing. The typical debt-to-income ratio after a pharmacy degree is less than 2. And pharmacists in the private sector are generally unlikely to be laid off (although admissions to pharmacy schools have skyrocketed).
Why pay thousands of dollars more each year for loans that don’t reflect the stability of your profession? So go ahead and save on your pharmacy school loans!
If you’re still unsure whether to refinance or stick with a government repayment plan, schedule an appointment with one of our student loan counselors. We perform a full credit analysis using our proprietary modeling tool to determine which repayment options (public, private, refinancing, etc.) are best for you.
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VISIT LENDKEY
variable 1.91% – 7.69% APR7
fixed 2.95% – 8.49% APR7
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1Earnest: $1,000 for $100,000 or more, $200 for $50,000 to $99,999.99. For Earnest, if you refinance $100,000 or more through this site, $500 of the $1,000 cash bonus will be provided directly by Student Loan Planner. In the above price range, an additional discount of 0.25% is included for automatic payment Information on income.
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5Sofi: If you refinance $100,000 or more through this website, $500 of the $1,000 cash bonus will be provided directly by Student Loan Planner. The above price range includes an additional 0.25% discount for automatic payment. Disclosure of information about Sofi.
6Valid: If you refinance over $100,000 through this website, $500 of the above cash bonuses will be provided directly by Student Loan Planner. Reliable dissemination of information.
7LendKey : If you refinance over $150,000 through this website, $500 of the above cash incentives will be provided directly by Student Loan Planner. The above price range includes an additional 0.25% discount for automatic payment.
This source has been very much helpful in doing our research. Read more about pharmacy school debt reddit and let us know what you think.
Frequently Asked Questions
Where is the best place to refinance student loans?
Students often forget that they have the option to refinance their student loans at any time. Despite that, a lot of students are still paying high interest rates, and many are likely paying more than they should be. The good news is that refinancing can save you thousands of dollars in interest payments over the life of your loan. Just be careful to find the right company, since some do not offer the same value as others. Did you know that the average student loan debt for a graduate in 2017 was $39,400? It’s a large sum, but it’s not all bad news: student loan refinancing options can be a great way to liberate yourself from the loan payments.
A student loan refinancing company helps people consolidate their loans into one loan with lower interest rates. This is a huge benefit for those who have multiple loans. At the same time, refinancing a student loan does not necessarily lead to better outcomes than making monthly payments. This article takes a closer look at the pros and cons of refinancing your student loan.
When can you refinance medical school loans?
Refinancing is the process of taking out a new loan to replace an existing loan, so you can get out of debt faster. In the case of student loans, it allows you to consolidate several smaller loans into one larger one. Federal student loans have a fixed interest rate that cannot be lowered, but refinancing private student loans can lower your interest rate. What are the benefits of refinancing?
• Lower interest rates: As the economy improves, interest rates will go up, but you can look for a new loan with a lower rate
• Lower monthly payments: Refinancing can lower your monthly payments, which frees up extra money you can spend on other things Not all debt can be forgiven or reduced, but some can. Since federal student loans are not eligible for either debt relief or repayment modification, it’s imperative to seek help from the right people.
The government has designed a program to help people struggling with student loan debt. The Income-Based Repayment Plan (IBR) is available to those who took out a federal student loan after October 1, 2007 and whose income falls below a certain threshold. To find out if you qualify for IBR, log on to www.studentloans.gov, call 1-800-4-FED-AID, or visit your school’s financial aid office.
Can you refinance student loans at any time?
When you graduate from college, you have two big decisions waiting for you. First, you must decide whether you want to pursue a higher level of education, or if you’ll be entering the workforce. If you choose the latter, you’ll face the second decision: how to pay for the education you received. And if you have student loan debt, you’ll have a few additional concerns. But never fear; just because you borrowed money to pursue your education doesn’t mean you have to live in debt for the rest of your life. In fact, you might be able to refinance your student loans at any time.
The cost of attending college has skyrocketed over the past few decades, and now the average student graduates with close to $30,000 in student loans. Many students end up putting off buying a house, a new car, or getting married simply because they don’t want to take on more debt. But what if there were a way to refinance your student loans at a lower interest rate? While the idea of refinancing your student loans may seem like a dream, refinancing student loans is a reality.
