The road to becoming a dentist is long and often expensive. After completing a 4-year bachelor’s degree program, you’ll undergo another 4 years of general dentistry in Dental School. Completing any specialty dental program can take another one to three years. By the time you’re licensed to practice, you’ll likely be carrying a significant debt load. The good news is dentists earn among the highest income, which makes it easier to clear your debt relatively quickly. Moreover, you’re not necessarily stuck with the original terms of your loan. Refinancing is one way to exchange your old loans for a new loan with better terms and a lower interest rate.

Here’s what you need to know about refinancing federal and private dental student loans.

What You Should Know About Federal Dental Loan Refinancing

There’s one important thing you need to know before refinancing federal dental student loans. The federal government does not offer refinancing options. You can only refinance through private lenders. When you do this, the original federal loan gets converted to a private student loan. This newly refinanced dental loan does not have any of the benefits associated with the original loan. This won’t matter to you if you aren’t interested in the federal student loan protections anyway. However, it’s best not to refinance federal dental loans if you are pursuing forgiveness. You may qualify for Public Service Loan Forgiveness if you choose to work in the public sector or in specific underserved areas.

If you do want to change the terms of your federal student loan, choosing an income-driven repayment plan may be a better option.

If you’re not interested in the benefits associated with federal student loans, then refinancing is the best way to manage your dental loans.

What You Need To Know About Private Dental Loan Refinancing Options

Refinancing involves exchanging your old student loans for a new loan with new terms. When you apply for refinancing, the lender will give you a couple of options. The best option for you will depend on your monthly income, your current financial situation, and your long-term financial goals.

Option 1 – If you’re earning a decent, steady income, you can choose to increase your monthly payments. This will shorten the loan term and also reduce the total interest that accrues. Just doing this can save you hundreds if not thousands of dollars over the life of your loan. The shorter the loan term, the more you’ll save by way of accrued interest.

Option 2 – If you’re not earning a steady income and can’t afford your monthly payments, you can choose to lower your monthly payments. This will increase the life of your loan. It will also increase the cost of the loan before of the additional interest that accrues over the longer term. The longer you stretch out your payments, the higher your total accrued interest will be. However, this may be better than missing a payment or defaulting on your loan because you can’t afford the monthly payment.  

Best Time To Refinance Dental Loans

Dental students can choose to refinance either during residency or after completing their residency. Some dental residency programs offer students a stipend, while others charge tuition. Refinancing is recommended only if your program offers a stipend. If your residency charges tuition, it is advisable to wait till you’ve finished paying all educational costs before refinancing. Another benefit of refinancing after dental residency is that you’re more likely to have stronger financials. This will qualify you for lower interest rates on your loan.

How to Refinance Dental School Loans

The process of refinancing dental school loans is fairly straightforward. The most important thing is to find the right lender and that’s also often the most time-consuming part. Several online lenders offer refinancing of dental loans. Each lender sets their own eligibility criteria as well as their own interest rates.

The first step towards refinancing is to look for lenders that refinance dental loans. Check out each lender’s eligibility requirements and the published interest rate for refinancing. When comparing lenders, don’t assume that the one offering the lowest interest rate is the best. This isn’t necessarily so. Some lenders publish rock-bottom interest rates and then make up for it by charging origination fees and prepayment penalties. Those charges could increase the cost of your loan significantly.

After you’ve compared rates and chosen your lender, you submit your application along with the required documents. That’s it. The lender will process your application and let you know when your refinanced loan is processed.

5 Important Things To Keep In Mind When Refinancing Dental Loans

#1 – Qualifications

Most lenders will want require you to have good credit, a stable monthly income, and a low debt-to-income ratio to qualify for refinancing.

#2 – Estimated Rates

The interest rate published on lenders’ is not the rate you’ll pay on your refinanced dental loan. That is just an estimated rate. Your rate will depend on your credit score, monthly income, and debt-to-income ratio. The better your financials, the lower the score you can expect to pay.

#3 – Auto-Pay

You can lower the cost of your loan by signing up for auto-pay. This involves setting up your bank account to make the monthly payments automatically on a set date. Doing this reassures lenders that they will receive their monthly payments on time. As an incentive, most lenders will give you a 0.25% rate reduction when you set up auto-pay. It may seem negligible but the savings can add up considerably by the time you clear your debt.

#4 – Correct Any Errors

Always check your credit history for errors before applying for refinancing. If you find any errors that are pulling your score down, apply to get them corrected so your score is reflected correctly. This will qualify you for a lower interest rate, saving you a substantial amount in terms of accrued interest.

#5 – Hard Credit Checks

When researching rates in the initial stage, don’t approach lenders directly for personalized rate quotes. Lenders need to do a hard credit check in order to calculate your interest rate. Every hard check pulls your score down a little bit. Too many enquiries by multiple lenders can damage your credit score considerably. A better way to research rates is by using an online refinancing calculator. This allows you to get a better idea of the rate you’ll pay, without impacting your credit score.