Refinance or Wait for Forgiveness? The Math for Physicians in 2026
by Malik Amine
Key Takeaways
- The PSLF changes effective July 1, 2026 mean residency years may no longer count toward the 10-year forgiveness timeline for new borrowers
- Refinancing physician loans to 4.5% (5-year term) can save $30K to $80K in interest compared to staying on federal plans at 7.5%+
- But refinancing permanently disqualifies you from all federal forgiveness programs
- The break-even point depends on your loan balance, income trajectory, and whether you'll work in public service
- Running the actual numbers for your situation is the only way to make this decision. Gut feelings don't work here.
Why This Decision Is Harder Than It Used to Be
A year ago, the refinance vs. forgiveness decision was relatively straightforward for most physicians. If you were going into academic medicine or a nonprofit health system, you stayed on federal loans and pursued PSLF. If you were going private practice, you refinanced and paid them off aggressively.
But 2026 changed the math. The House reconciliation bill, if it passes, eliminates PSLF eligibility for Grad PLUS loans issued after July 1, 2026. And for current borrowers, residency and fellowship years may no longer count toward the 10-year requirement.
That means a physician who used to face a 10-year forgiveness timeline (including 4 years of residency payments) might now face a 10-year timeline that only starts when they finish training. That's 14 years total of payments instead of 10.
Meanwhile, private refinancing rates for physicians are sitting around 4.5% for a 5-year variable term, according to data from Credible and SoFi. Federal Direct Unsubsidized Loans for graduate students are at 7.5% for the 2025-2026 academic year, per Federal Student Aid.
So the gap between federal and private rates is wider than it's been in years. And the value of staying on the federal side just got a lot less certain.
Scenario 1: The Resident Going Into Academic Medicine
Let's say you're a PGY-3 with $280,000 in federal student loans at a blended rate of 6.5%. You plan to do a fellowship and then work at an academic medical center (qualifying employer for PSLF).
Under the old rules: You'd make income-driven payments during residency (roughly $200 to $400/month on REPAYE/SAVE) for 4 years. Then as an attending making $250K, you'd pay around $2,000/month for 6 more years. Total payments over 10 years: roughly $170,000. The remaining $110K+ gets forgiven.
Under the new rules (if passed): Residency years don't count. You'd still make those small residency payments, but the 10-year clock doesn't start until you're an attending. Total timeline: 14+ years. Total payments: roughly $290,000 to $310,000, depending on income growth. Forgiveness amount shrinks dramatically, maybe $20K to $50K.
If you refinanced at 4.5% (7-year term): Starting as an attending, monthly payment around $3,900. Total paid: roughly $328,000. No forgiveness, but you're done in 7 years with no uncertainty about rule changes.
In this scenario, PSLF under the new rules barely beats refinancing. And refinancing gives you certainty. No worrying about whether qualifying payments were counted correctly, no annual income recertification, no risk of further rule changes.
Scenario 2: The Resident Going Into Private Practice
This one is simpler. If you're not planning to work for a PSLF-qualifying employer, forgiveness was never on the table for you.
With $280,000 at 6.5% on a standard 10-year repayment, you'd pay about $3,200/month and $103,000 in total interest.
Refinanced at 4.5% for 5 years, your payment is higher ($5,200/month) but total interest drops to about $33,000. That's $70,000 in savings.
Even at a 7-year term, you save about $45,000 in interest compared to the federal standard plan.
For private practice physicians, refinancing is almost always the right move in 2026. The only question is timing. Some physicians prefer to wait until their attending salary is confirmed before committing to higher monthly payments.
Scenario 3: The Undecided Resident
This is the hardest case. You don't know yet whether you'll end up at an academic center or in private practice. Your specialty might go either way. You're keeping options open.
My honest advice? Don't refinance until you know. Once you refinance federal loans, you permanently lose access to income-driven repayment plans, PSLF, and any future forgiveness programs. You can't undo it.
Instead, stay on an income-driven plan during residency. Your payments will be low anyway. Use that time to figure out your career path. Once you know where you're headed, run the numbers and make the call.
The cost of staying on federal loans for an extra 2 to 3 years while you decide is maybe $5,000 to $10,000 in additional interest. The cost of refinancing and then realizing you would have qualified for $100K+ in forgiveness? That's a much bigger mistake.
The Variables That Actually Matter
Every physician's situation is different, but the key variables are:
Loan balance. The higher the balance, the more valuable forgiveness becomes. At $150K, refinancing almost always wins. At $400K, forgiveness might still make sense even under the new rules.
Interest rate spread. The bigger the gap between your federal rate and refinance rate, the more refinancing saves you. Right now that gap is about 3 percentage points, which is significant.
Income trajectory. If you're in a high-paying specialty (orthopedics, cardiology, dermatology), you'll have the cash flow to pay aggressively. Refinancing makes more sense. If you're in a lower-paying specialty at a nonprofit, PSLF might still win.
Career certainty. If you're 100% going to work at a PSLF-qualifying employer for 10+ years, the forgiveness math could still work. If there's any chance you'll go private, factor that in.
Tax implications. PSLF forgiveness is tax-free. If income-driven repayment forgiveness (after 20-25 years) comes back as an option, that forgiven amount is taxable as income under current law. A $200K forgiveness "windfall" that results in a $70K tax bill is really only $130K of benefit.
What I'd Do
I'm not going to pretend there's one right answer for everyone. But I will tell you what I see most often.
Physicians who refinance tend to be done with their loans faster, pay less total interest, and have more predictable financial lives. Physicians who pursue forgiveness sometimes save more in total dollars, but they deal with years of uncertainty, paperwork, and the constant risk that the rules will change again.
The PSLF changes in 2026 tipped the scales toward refinancing for a lot of people who were on the fence. Not for everyone, but for a lot of people.
Whatever you decide, make sure you're deciding based on your actual numbers, not on what a Reddit thread said, or what your co-resident is doing. Run the scenarios. Talk to someone who can model this out for your specific situation. This is a six-figure decision. Treat it like one.
Summary
The 2026 PSLF changes make the refinance vs. forgiveness decision more nuanced than ever for physicians. Private practice bound residents should almost certainly refinance at today's rates. Academic medicine physicians need to re-run the numbers with the new rules, as forgiveness savings have shrunk significantly. Undecided residents should stay on federal plans until their career path is clear. In every case, run the actual math for your situation, because the right answer depends on your specific loan balance, income trajectory, and career plans.