Medical professionals are consumed with loans due to an outdated industry model
Consumer customization is a trend which has infiltrated countless industries. From Coke cans with our names on them, to personally designed Nike and Converse, to online personal shoppers—customers are demanding customization and companies are responding in clever and effective ways.
Unfortunately, there is one industry that is significantly lagging behind—student lending.
Drowning In Debt
The abnormally high interest rates on federal graduate school loans receives a lot of news coverage, and for good reason—borrowers are being swallowed in debt. This is true for borrowers of all income levels and financial situations.
In fact, one group of professionals is being hit particularly hard—medical professionals. As aspiring doctors and surgeons graduate from undergrad and transition to medical school, the federal rate on any new loans taken out is 5.84 percent annually (for the 2015-16 school year). But federal loans are just the start.
After medical students have exhausted the $20,500 annual maximum allowed by the federal program (which happens relatively quickly when paying for medical school), they must take out private loans or apply for additional federal funding through Grad Plus loans. Grad Plus loans have no upper limit but carry a 6.84 percent annual interest rate (for the 2015-16 school year) and a whopping 4.3 percent origination fee!
Private loans often offer lower rates to begin for borrowers with strong credit and low levels of debt, unfortunately these rates rise as a medical student’s debt load increases year after year. By year four, a medical school student might have to take out private loans with interest rates in the double digits.
For comparison’s sake, a strong credit consumer can get a mortgage at a 4.0 percent rate today. This means the lending industry is essentially treating medical students as a higher risk from a credit perspective. Obviously, given the large salaries and in-demand skills of these future doctors, this type of treatment doesn't make sense.
One-Size Does Not Fit All
Relatively high interest rates are only half of the story. As medical students transition into residency (typically a 3 to 5 year program) and, sometimes, additional fellowships, they are no longer considered students and must figure out a way repay their medical school loans. Since the typical salary for a medical resident ranges from $50,000-$60,000 and their average student loan debt is $180,000, it’s virtually impossible to make full payments on their large loan balances. This means that residents are forced to make much smaller, or in some cases, no payments while in medical school, while their student loan interest continues to accrue at abnormally high rates.
The Solution: Customized Medical Student Loans
It’s time customization became a part of the student loan world as well. What does this look like?
- Dynamic interest rates that take into account credit profile, future income and earnings potential.
- More than one interest rate to choose from.
- Medical residents and fellows who aren’t forced to watch their debt accrue at abnormally high rates during training.
This solution—customizable lending to the reliable medical professional community.
This goal was the motivation behind the founding of LinkCapital. By refinancing medical school loans at lower interest rates and with customized repayment options, we take into account the individual borrower’s unique situation and career stage.
It is our goal to disrupt the student lending industry and save our hard working medical professionals a lot of money and hassle.
Because after all, if your coke can isn’t a one size fits all, your student loan definitely shouldn’t be one either.
