Your job affects more than just what you do all day and how big your paycheck is. It can also influence your ability to repay your student debt.
That’s because borrowers in certain careers are especially good candidates for student loan refinancing. Refinancing student debt allows qualified borrowers to get lower rates and has grown in popularity in the past few years. If it’s the right move for you, refinancing can save you thousands of dollars in interest and help you become debt-free faster.
Best careers for student loan refinancing
If you’re in health care, law, business or engineering, you have a good shot at qualifying for refinancing. Those careers are very strongly represented among borrowers who refinance through Earnest, says Lian Chang, a data editor at the online student loan refinancing company. Of the company’s student loan refinancing clients, 44% have a professional degree, she adds.
At CommonBond, another online company that offers student loan refinancing, attorney, pharmacist, physician assistant, physician, registered nurse and physical therapist were among the most common occupations of borrowers who refinanced between Oct. 1, 2015, and Sept. 30, 2016, says Radhika Duggal, vice president of marketing. Teacher and project manager also made CommonBond’s list.
Why your career matters
Student loan refinance lenders typically look at three things when they underwrite potential borrowers: credit score, income and debt-to-income ratio, which is the amount of debt you owe relative to your earnings. In addition, your occupation helps lenders understand the likelihood that you’ll repay your loan.
“Physicians historically pay back their loans pretty responsibly,” says Jan Miller, an independent student loan consultant. “They get better [refinance] rates than someone else who has a different profession and the same income.”
Student loan borrowers with postgraduate degrees tend to have higher incomes and higher debt loads than borrowers with bachelor’s degrees, according to data from the Bureau of Labor Statistics and the National Center for Education Statistics.
Even if borrowers in high-paying fields have higher debt-to-income ratios or slightly lower credit scores compared with other borrowers, their job can help make up for it, Chang says. “If we know that [borrowers are] M.D.s and they’re currently in their residency, we know that they’re likely good for it,” she says. “We know what their trajectory tends to look like in the future.”
A fancy job isn’t everything
Doctors, lawyers and pharmacists stand to save the most, on average, by refinancing their student debt, according to a 2015 NerdWallet analysis. But you don’t need a professional degree to qualify for and benefit from refinancing.
“You could be a teacher or a librarian and be a great candidate for refinancing,” says Catherine New, senior editor at Earnest, “as long as your track record demonstrates that you’re financially responsible.” For Earnest, that includes having a history of paying your bills on time and contributing to a savings account.
Not everyone should refinance student debt. For example, hold off on refinancing federal student loans if you work for the government or a nonprofit. You’re eligible for the federal Public Service Loan Forgiveness program, but you won’t be if you refinance. Refinancing also disqualifies federal loan borrowers from accessing income-driven repayment plans and other federal forgiveness programs. Private student debt isn’t eligible for these programs, so that debt may still be worth refinancing if you have high interest rates.
If you think refinancing is for you, whether you’re in a high-earning career or not, you’ll save the most money by finding the lowest rate. Using a marketplace makes it convenient to compare rate estimates across multiple lenders. Try Credible, a NerdWallet partner, or LendKey, a refinance marketplace featuring community banks and credit unions.