Doctors, Dentists and Debt: Starting a Practice While Paying Off Student Loans
The member’s experience below is not a typical member representation. While their story is extraordinary and inspirational, not all members should expect the same results.
Starting a medical practice soon after finishing a medical residency or graduating from dental school may sound a bit crazy. But it’s a real and very serious option—one you can definitely crank if you’re willing to get equally serious about taking control of your finances, especially your student loan debt.
Debt-wise, the numbers sure can be daunting. The average medical school debt for a 2019 graduate was nearly $201,490, according to the Association of American Medical Colleges .
Think that’s a lot? Well, dentists are paying even more. The American Dental Education Association put the average dental school debt load in 2020 at over $304,824.
But those stats don’t have to mean putting your dreams of opening a practice on hold. In fact, a number of SoFi members have done it and have great things to say about their decisions.
Meet Brandi Lindsey, a dentist based in Uvalde, TX; Ian Augustin, an anesthesiologist in Eau Claire, WI; and Jaclyn Martinez, a San Jose, CA, dentist. We asked them to share their experiences and some advice about how to make it in a private practice while still paying off student loans. Here’s what they told us.
Debt Is Part of Life, and That’s Okay
Dealing with med school student loans may seem like an overwhelming responsibility as it is, without taking on the additional financial pressures that opening a practice brings. But there’s no rule that says you have to knock out your student debt before investing in professional growth.
Brandi Lindsey graduated from University of Detroit’s Mercy School of Dentistry with over $250,000 in student loans. Refinancing student loans through SoFi reduced her interest rate by more than 2.5% and enabled her to save $23,000 over the life of her loan.
After talking with an accountant about the implications of taking on additional debt to finance her business, she was given a green light. Borrowing for her practice turned out to be advantageous both as a professional and as a taxpayer by reducing her income tax bracket. “Practice debt, even though you’re backing it personally, can help your tax status,” says Brandi.
Beware of Forbearance
Lots of medical and dental school graduates are startled by their student loan payment amounts when they start coming due. But being more proactive about payments during forbearance can reduce some of that shock.
Mandatory forbearance for medical and dental residents and interns means lenders must reduce or suspend required payments during a qualified residency or internship program. But during forbearance, the total amount of debt owed continues to grow because interest racks up behind the scenes. Refinancing to a lower interest rate could help reduce the cost of the debt over the life of the loan.
Ian Augustin feels the sting years after his 2009 graduation from Loyola’s Stritch School of Medicine. Refinancing with SoFi cut more than 2% of interest off the remaining $125,000 he carried from his med school days. This not only lowers the interest he’s paying each month but importantly, will save him over $50,000. “My biggest regret, looking back, is becoming complacent. I allowed myself to forget about that debt burden,” he says. “Knowing what I know now, I would have spent more than to refinance and start paying them down during my four-year residency.”
Related: Smart Medical School Loan Repayment Strategies
Clamp Credit Card Debt; Don’t Finance Your Business with Plastic
There are lending options specifically designed for medical practitioners. So before charging expenses to a business credit card, you might want to review the other options available to you. In fact, it may be beneficial to look for opportunities to pay down credit card debt and instead seek out small business loans, augmented by personal lines of credit if necessary, to pay for the initial capital and labor costs of building a practice.
Brandi is the perfect example of someone who’s the right blend of patient and aggressive—she bought her practice in gradual stages. Lenders wouldn’t front her the money she needed to buy everything she wanted on day one, so she borrowed to invest in the practice but rented her space at first. After 18 months, she’d built up enough equity and momentum for additional financing, and she bought the building.
Take a Scalpel to High-Rate Loans
Medical school loans can come with disadvantageous and inflexible interest rates. But there’s another option: reduce rates by refinancing.
Refinancing through SoFi helped Jaclyn Martinez, a graduate of the prestigious University of the Pacific Arthur A. Dugoni School of Dentistry, save $100,000. “Being able to restructure my dental school debt at a lower interest rate saved me a ton of money. I’ve recommended refinancing to all of my classmates and colleagues, especially friends who went to medical school,” she says. “I’m not paying much more per month than I would have with my government loans, but more is going toward principal.”
Build a Second-Opinion A-Team of Financial and Legal Superpowers
You need the right professional and clerical staff to serve your patients, and you need a business team that understands your field and goals. A good attorney and a solid accountant are imperative.
You also have to be ready to act like a CEO and replace anyone who doesn’t understand your mission or objectives. “I’ve been through three CPAs since starting my practice,” Brandi says.“A good CPA will understand your goals and makes recommendations based on your specific interests, not just on some formula aimed at getting a dentist to retire by age 55.”
Related: 7 Tips for Improving Your Financial Health
Diagnosis: Think Long-Term, Because These Choices Really Matter
Starting a medical practice or joining an existing practice won’t mean financial success overnight. Like almost everything else worthwhile, that takes time.
At the end of his Mayo Clinic residency in 2013, Ian had $275,000 in student loan debt and faced a tricky choice. He could have signed on with a major medical organization and taken an ample salary, as anesthesiology is the #11 highest-paying medical specialty . Instead, he decided to join a smaller private practice and get on a partnership track. That decision meant taking a lower starting salary in exchange for an equity share in the practice after a successful two-year break-in period.
Ian took the long-term view when deciding where to set up shop and it put him right where he wanted to be. He estimates that he gave up $200,000 in salary during those first two years. While that’s money he could have used to pay down his substantial debt, the savings from his refi, combined with the personal and professional benefits of joining a practice, made the decision easier. “It is a financial sacrifice to get into private practice,” he says. “But the real benefit is in having a say in the practice, and that freedom was more appealing to me.”
Ultimately, It’s about Freedom, Not Money
Jaclyn is currently working at her father’s practice, which she is in the process of buying. While developing the business plan and working through her financial needs, she confronted a reality: for her, the decision was much more about individual preferences and goals than money.
Even with the long-term savings on her student debt as a result of refinancing her dental school loans, buying her dad’s dental practice will mean carrying a total of more than $1 million in debt. She’s gearing up to do it, but the personal struggle is real. “Dentists have inherently low-risk personalities, but if I just wanted to make money, I would have stayed in biomedical sales,” she says. “Buying my own practice means that I’m in charge of the care, and that allows me to better help people.”
Pursuing a career in the medical or dental field can be costly, causing future-doctors and dentists to rack up enormous sums of student loan debt. For those planning on opening their own private practice, the first step toward a future as an independent medical or dental professional is taking charge of student loan debt. One option to do so may be to refinance the student loan debt. However, refinancing federal loans eliminates them from federal protections, so this may not be the best option for everyone.
SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
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Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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Interesting. I, Like so many others, am drowning in a mountain of student debt. Due to the complex consolidation rules set fourth by the DOE, I have wound up with a cumulative 6.8 percent interest rate which is killing me. I faithfully make my IBR repayment every month and my FICO score is well over 800. I tried to consolidate with SOFI, who offered me a less than impressive interest rate. Why would I give up the potential for loan forgiveness with the DOE programs for less than a point of interest savings. SOFI is not the student loan savior that they make themselves out to be. Offer me a competitive interest rate, then maybe I’ll listen. Currently, its better to me to take a home equity loan and pay off my debt than refinance with you.