How to Decide if Refinancing Your Physical Therapist Student Loans is Smart

Students pursuing a career in physical therapy have a bright future ahead of them. According to the Bureau of Labor Statistics, “Employment of physical therapists is projected to grow 21% from 2020 to 2030.” The average growth rate for other professions is only 8%.

With a career in physical therapy usually comes a hefty student loan bill. Student loan refinancing for physical therapists could be the key to dealing with loan debt. When does refinancing make sense, and when are other repayment options the right choice?

Physical therapists and student loan debt

Physical therapists (PTs) graduate with a ton of student loan debt. According to a report by the Commission on Accreditation in Physical Therapy Education (CAPTE), in 2022-2023, the median physical therapy program at a private school cost $125,055, while the median program cost at an in-state public school was $73,232. These amounts don’t include room and board expenses.

It’s easy for physical therapists and other healthcare providers to come out of school with a six-figure loan amount. At Student Loan Planner®, the average debt of our PT school clients is $170,716. With such high debt, what is the best option for repayment?

Student loan refinancing for physical therapists

Student loan refinancing for physical therapists makes sense, especially if you want to work in the private sector. Refinancing can potentially lower your interest rate, which could cut thousands of dollars of interest charges off your student loans. Getting the lowest rate means more of your student loan payments go toward paying off the loan principal.

When you refinance federal student loans, they become private student loans. This means you’d lose access to federal protections like loan forgiveness, income-driven repayment plans, and deferment and forbearance options. Borrowers will want to be certain that they don’t need access to federal programs like this before moving forward with refinancing loan terms.

To get a good interest rate through refinancing, you’ll need to have a good credit score or use a cosigner with such credit.

Pro and cons to refinancing for physical therapists

Every loan repayment strategy has its benefits and shortcomings. Refinancing is no different. What are the positives of student loan refinancing with a private lender? While it could lower your monthly loan payments, the real benefit is using it to pay off your debt quickly. The total amount of your loan is lower when you refinance. This is because you’ll pay less interest over the life of your loan with a lower interest rate.

There are drawbacks to refinancing, too. As mentioned before, borrowers lose access to federal protections. If there’s even a remote chance that you’re eligible for a loan forgiveness program, it’s worth holding off on refinancing your student loans. Another issue is that refinancing locks you into one repayment plan. Federal loans allow you to switch repayment plans, but refinancing doesn’t. The only way to change your repayment terms with a refinanced loan is to refinance it again.

Other student loan repayment strategies for PTs

Are there solid repayment strategies other than student loan refinancing for physical therapists? You bet. They may even be better options depending on your debt-to-income (DTI) ratio. What options do physical therapists have?

Public Service Loan Forgiveness

Public Service Loan Forgiveness (PSLF) is an option for physical therapists who choose to work in the public sector. PSLF is great because any student loan debt remaining after 120 qualifying payments is forgiven tax-free. To qualify, you must be working full time for a qualifying employer. This includes government agencies, many nonprofits and other qualifying organizations. Borrowers must also be on one of the four qualifying income-driven repayment (IDR) plans, which include:

• Income-Based Repayment (IBR)
• Income-Contingent Repayment (ICR)
• Pay As You Earn (PAYE)
• Revised Pay As You Earn (REPAYE)

With a public sector income, there’s potential to have the bulk of your student loan debt paid off by PSLF. Your monthly payments should be lower on an IDR plan, too.

IDR loan forgiveness

If you don’t meet PSLF eligibility requirements, all hope isn't lost. There’s another federal student loan forgiveness option. Physical therapists can apply to be put on one of the IDR plans mentioned above. Depending on the specific loan repayment program, any remaining debt after 20 to 25 years of repayment will be forgiven.

One thing to keep in mind is that any forgiven debt is considered taxable income under IDR loan forgiveness. You could face a sizable tax bill after your debt is forgiven.

Both PSLF and IDR loan forgiveness can help save student loan borrowers money. Loan forgiveness for physical therapists is a smart move if you qualify.

The bottom line

When is student loan refinancing for physical therapists a good idea? If your DTI ratio is under two, refinancing your loans makes sense. This depends a lot on your career path. Most physical therapists, though, should treat their student loan debt as bad debt to pay off as quickly as possible. Refinancing at a low interest rate can achieve this.

If your DTI is over two, loan forgiveness options are a better choice. Trying to repay your entire physical therapy school debt when your income and loan debt don’t line up isn’t easy. Dealing with so much loan debt could affect other life goals you may have. It’s better to try and lower your taxable income, which will reduce your monthly loan payments. Then either pursue PSLF or IDR loan forgiveness.