Why I Haven’t Refinanced my Student Loans, Yet.

vagaries of living with student loans

Student loans suck, I hate mine, with a passion – my wife thinks I am obsessed. Though I hate how expensive debt is, mostly I hate how it steals a certain amount of liberty from your life. Refinancing helps you save money in the long run, but it can also trap you in a job or situation that is really bad for you and your family – I should know.

Fleet Street Debtors Prison

If I had refinanced prior to my daughter dying and my partners being shitheads and had a 4000-5000/month student loan payment, I would have felt MUCH more pressure to try and stick it out.  Moving would have seemed much more risky.  At least financially, that gig was damn good.  I may have ended up losing my whole career or even my marriage for the sake of saving some interest payments over the course of several years.

I want to reiterate that I hate my student loans. In fact, after leaving that job, we sold a house, moved, and started renting.  We took what we got out of the down payment from the sale and paid down loans, 12-15% of my loan burden in one fell sweep.  That is how much I hate student loans.

why i still haven’t refinanced

That all being said, I wanted to touch on a couple of aspects of the whole student loan refinancing debate that I think are under-appreciated in some of the other discussions and with which I have personal experience:

  1. Income Driven Repayment has more options than I usually see discussed
  2. Not all physicians are anesthesiologists, radiologists, and private practice emergency medicine docs making $300-500k a year.
  3. Capitalization sucks – going off of an Income Driven Repayment plan causes all that accumulated interest to capitalize.
  4. Life is really freaking unpredictable and the federal student loan servicers are much more flexible than a traditional lending organization.
medical school and residency

Almost all of us ended up on income driven repayment (IDR) during residency.  My biggest financial mistake to date was going to one of the most expensive out-of-state medical schools.  I didn’t have to, my home state has one of the cheapest, and I got in.  I just thought it would be a better career move, and plenty of people agreed with me at the time.

As a first year attending, reading the White Coat Investor was like being visited by the Dickensian Ghost of Financial Decisions Past.

Anyway, I had and have A LOT of student loans.  When I graduated medical school, I signed up for Pay As You Earn (PAYE) rather than Income Based Repayment (IBR), which allows for a lower monthly payment.  There is another REPAYE, which is even lower (point 1).  Over the course of three years of residency, I accumulated about $65,000 in interest. True, only about 33,000 of that could capitalize under PAYE terms, that is till a lot new interest earning debt.

first year attending

If had gone off of PAYE at the time I started my first job, I would have had a $4000/month payment and $33,000 of newly capitalized debt (point 3).  Instead, I stayed on PAYE, my payment was about $1500 and that interest DID NOT capitalized.

My student loan burden (capital + interest) is about $150,000 less than when I graduated.  I am earning in the $200-250k range as a family doc (point 2) and not $500k/year.  Because of that, I still qualify for PAYE, and I still have about $35,000 in interest that has not capitalized.

Obviously, I payed much more than minimum.  I am not saying that paying the minimum is a good idea.  What I am saying, is that even though I was still paying $5-10k/month in student loan payments, I had the flexibility to pay less if something unexpected happened.  That flexibility is worth something.

Now, someone who likes math more than I do could probably make a educated guess on where the benefit/cost break even point is on refinancing versus interest capitalizing.  I still have never done that. I probably should.

But, Mousie, thou art no thy lane [you aren’t alone]
In proving foresight may be vain:
The best laid schemes o’ mice an’ men
Gang aft a-gley, [often go awry]
An’ lea’e us nought but grief an’ pain,
For promised joy.

Robert Burns, To a Mouse, on Turning Her Up in Her Nest With the Plough, November, 1785


The flexibility of IDR was priceless when I had to walk away from my job for the health of myself and my family.  Being able to only pay $1200/month for a couple of months on my loans was a huge relief.

As it was, arranging and paying for multistate move, paying rent and a mortgage for 3 months simultaneously, getting licensed in a new state, and arranging my current traveling doctor gig was stressful enough.

If I had been juggling a $5000/month payment, I might have folded.   Inertia and fear might have kept me miserable in my old job.  It could have cost me my life.  Physician suicide is not a rare thing these days.  How do you put a dollar sign on that?

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