Did you know that 70% of 2025 medical school graduates have education loan debt? Last year, the average medical school debt for students was around $216,659, a shocking amount in this struggling economy.
With such a high level of debt, residency students, who are already under the pressure of working in a field that always has a high stress level, find it even more difficult to cope with the burden they carry.
Residents barely have any time to take care of themselves due to the gruelling hours, and that large debt is like a constant dark cloud hanging over their heads. This is why so many medical students consider changing their loans.
What is Loan Changing?
Every loan has a Loan Maturity Date, by which the entire loan amount needs to be paid. While a medical student is learning, the timeline is quite long, and the salary they are paid during that period is quite low, especially given their high-intensity work hours, and the fact that they are not paid overtime.
So, being able to pay off their student loans feels near impossible during that time, which is why they often either opt for medical resident refinance or loan modification. The latter is essentially what loan changing is.
There are a few types of common loan changes you can make.
- You can extend the loan term, which is basically lengthening the repayment period to lower monthly payments.
- You can reduce interest rate, which also lowers the monthly amount you have to pay.
- Switching the type of rate is another option. You can move from a variable interest rate to a fixed rate to get more stability.
- You can also temporarily pause or even reduce the principal amount. This is called principal forbearance or reduction. In rare cases, the financial institution may even forgive a portion of the principal balance.
- There is also Capitalize Arrear, which changes your status from being a defaulter to a normal debtor by adding any of the missed payments, like principal, interest, and fees, to the outstanding principal of the loans. As the arrears are restructured, it brings the account current and helps the debtor pay back over the remaining term of the loan.
- If it is refinancing, it is the replacement of the initial loan. The original loan is paid off, and instead, you get a new loan, often from a private lender. This is generally done to reduce the interest rate, or to switch from an adjustable rate to a fixed rate. This might be done to shorten the term or extend it.
Resident’s Checklist: Review These Before Changing Loan
While changing your loan may seem very appealing, you can’t just randomly decide to do it. Here are a few things that should be on your review checklist before you change your loan.
Double-Check Your PSLF Eligibility
One of the biggest mistakes residents make is refinancing too quickly without fully understanding what they may be giving up.
The Public Service Loan Forgiveness program, commonly known as PSLF, allows physicians who work at nonprofit hospitals or government institutions to have their remaining federal loan balance forgiven after 120 qualifying payments, typically over ten years.
If you refinance your federal loans into private loans, you permanently lose eligibility for PSLF. That door closes.
Many residents assume they will not work in nonprofit settings, only to later join academic hospitals or large nonprofit systems. Even some community hospitals operate under nonprofit status.
Before changing your loan, ask yourself where you realistically see your career heading. If there is even a moderate chance you will work for a qualifying employer, PSLF deserves serious consideration.
Even if program rules change in the future, historically, borrowers already enrolled have often been grandfathered into existing terms. While nothing is guaranteed, it is important to weigh the long-term value of potential forgiveness against short-term interest savings.
Evaluate Income-Driven Repayment Options
Federal loans offer income-driven repayment plans designed specifically for situations like residency, when income is modest, but debt is massive.
Programs such as REPAYE calculate your monthly payment based on your income rather than your total debt. For a resident earning a limited salary, that could mean significantly lower monthly payments compared to standard repayment.
One major benefit residents overlook is the interest subsidy. Under certain income-driven plans, a portion of unpaid interest may be forgiven.
If your loans are accruing $1,000 in monthly interest and your income-based payment only covers $300, some of that remaining interest may not fully compound against you.
Refinancing eliminates access to all federal income-driven plans. Once you convert federal loans to private loans, options like Pay As You Earn, Income-Based Repayment, and REPAYE are no longer available. If cash flow flexibility matters to you during residency, this factor alone should be carefully reviewed.
Assess Your Cash Flow Reality
Residency salaries are modest compared to the level of education and responsibility involved. Between rent, relocation costs, licensing exams, insurance, and daily living expenses, liquidity matters.
If changing your loan reduces your monthly payment in a meaningful way, that can ease stress and improve financial stability. However, you must examine whether the change genuinely improves your monthly flexibility or simply stretches your repayment over a longer timeline.
Extending your loan term lowers monthly payments, but it may significantly increase total interest paid over time. Short-term relief can sometimes mean long-term cost.
Create a simple side-by-side projection. Compare your current repayment plan with the proposed modified or refinanced plan. Look at total interest paid, monthly payment amount, and projected payoff date.
Do not rely only on the advertised interest rate. The structure of the loan matters just as much.
Understand What You Forfeit When Refinancing
Refinancing can be powerful, especially for physicians who are considered highly creditworthy borrowers. But it comes with tradeoffs.
If you refinance federal loans into private loans, you give up federal protections. These include income-driven repayment plans, PSLF eligibility, federal forbearance programs, and temporary relief measures like government-backed payment pauses during national emergencies.
During recent economic disruptions, federal borrowers benefited from paused payments and waived interest. Private loans did not automatically receive those protections.
If stability and safety nets are important to you, especially during unpredictable years of training, think carefully before giving up federal flexibility.
Examine the Interest Rate Carefully
A lower interest rate is often the main reason residents consider refinancing. Even a reduction of one percentage point can save thousands over the life of a six-figure loan.
However, your offered rate depends on several factors. Lenders evaluate your total debt, your current or projected income based on specialty, and your credit score. A strong FICO score and a signed attending contract with higher future income can significantly improve your rate offer.
Also consider whether the rate is fixed or variable. A variable rate may start lower but can increase over time depending on market conditions. A fixed rate offers predictability and stability, which some residents prefer during already uncertain training years.
Run realistic projections. A low starting rate that later increases could cost more than a slightly higher but stable fixed rate.
Decide Which Loans to Refinance
Loan changing does not have to be all or nothing. Many residents hold a mix of federal undergraduate loans, federal medical school loans, and sometimes private loans.
You can choose to refinance only your private loans while leaving federal loans untouched to preserve federal benefits. This strategy allows you to take advantage of lower private interest rates where applicable while maintaining access to federal protections on the rest.
Segmenting your loans strategically may provide a balanced approach rather than a complete overhaul.
Think Two to Three Years Ahead
Residency is temporary. Your attending salary will look very different from your current income.
Before changing your loan structure, ask yourself where you plan to practice. Academic medicine, nonprofit hospital systems, government institutions, and private practice all have different implications for forgiveness eligibility and income potential.
If you anticipate entering a high-paying private specialty and have no interest in nonprofit employment, aggressive refinancing could make sense. If you are drawn to academic or nonprofit medicine, preserving federal benefits may align better with your long-term plan.
Financial decisions during residency should reflect not just your current paycheck, but your future trajectory.
Review Credit and Tax Implications
Refinancing a federal loan into a private loan does not remove it from your credit report. It remains categorized as student debt. However, refinancing may involve a hard credit inquiry, which can temporarily affect your credit score.
On the tax side, interest paid on refinanced student loans may still qualify for student loan interest deductions, subject to income limits and current tax regulations.
While these details may seem minor compared to six-figure balances, they contribute to the overall financial picture.
Look at Specialized Resident Programs
Some lenders offer structured repayment options specifically for medical residents. These programs may allow reduced monthly payments during training, followed by standard repayment once you begin practicing as an attending physician.
This structure can provide a middle ground. You may lock in a competitive interest rate now, pay a manageable amount during residency, and transition into higher payments when your income increases.
If you pursue this option, read the fine print carefully. Confirm when full payments begin, whether unpaid interest capitalizes, and what flexibility exists if your timeline changes.
Avoid Emotional Decision-Making
Debt carries emotional weight. Many physicians feel embarrassment or shame about the size of their loans, even though borrowing is common in medical education.
Do not let emotion rush you into a financial move. Changing your loan should be a strategic decision based on numbers, career direction, and long-term goals.
Take time to consult a financial advisor who understands physician compensation structures. Use reputable calculators. Ask questions until you are fully clear on the consequences.
Final Thoughts
Loan changing can be a powerful tool for residents drowning under six-figure debt. Extending terms, modifying interest rates, refinancing strategically, or leveraging federal programs can all create breathing room during an already intense stage of life.
But every adjustment has tradeoffs.
Before making a change, carefully review your eligibility for forgiveness programs, your need for income-based repayment flexibility, your long-term career plans, and the true total cost of any new loan structure.
Residency is temporary. Your financial decisions during this time will echo far beyond it. The goal is not simply to reduce today’s payment. It is to build a sustainable strategy that supports both your career and your peace of mind.
