In dental school you’re taught all you need to become a successful dentist—but what you don’t learn is how to effectively handle your dental school debt.
The typical dental school graduate enters the profession with a student loan burden topping $292,000, according to a recent survey of dental school seniors by the American Dental Education Association.
That’s $90,000 more than the average medical school debt, according to the Association of American Medical Colleges. Right when dentists are ready to hit “go” on their careers, the reality of repayment presents a hurdle.
The good news, of course, is that you’ve picked the right profession when it comes to ROEd—the “return on education” you should reap down the road.
The net annual average salary is $205,000 for general dentists and more than $343,000 for specialists, the American Dental Association says as of 2019.
Creating a Palatable Payment Plan
So sure, your education was expensive—but you’ll likely make that money back and more.
At this stage of the game, it’s important to have a plan for paying down your debt as efficiently as possible. Getting your finances in order early is especially critical if you anticipate borrowing more money down the road, whether to open your own practice or buy a house.
Here’s a review of various student loan payment options available—and how to know which one makes the most sense for you.
Student Loan Refinancing
For many dental school grads, consolidating a number of student loans into a single loan with a private lender, and then refinancing the balance at a lower interest rate, makes sense.
Refinancing makes it easier to manage your finances: You’ll get one bill each month from a single lender, instead of several bills for varying amounts that are based on different rates.
Depending on how you structure your loan, a lower interest rate might allow you to pay back your debt faster—and save a substantial amount of money over the life of the loan.
You could also choose a term that lowers your monthly payments, leaving more money in your pocket to be used for other things, including building an emergency fund, preparing for your first child, and investing for retirement.
One decision you’ll have to make if you refinance your student loans is whether your new loan should have a fixed or variable rate. With a fixed-rate loan, the interest rate stays the same for the life of the loan—the borrower pays the same monthly amount until the loan is paid off.
With a variable-rate loan, the interest rate will depend on the rate banks charge to borrow from one another. That rate changes from month to month, so a loan holder can expect payments to change each month, too. Borrowers who take out variable-rate loans often start out at a lower rate than they would have with a fixed-rate loan, but they can’t be certain that rate won’t rise.
Student Loan Consolidation
Federal student loan consolidation lets you combine federal student loans into a single new loan with a fixed rate, the weighted average of the old student loans’ interest rates rounded up to the nearest eighth of a percentage point. That means the rate might actually be slightly higher than the prior rate on some of the loans.
You can’t include private student loans in a Direct Consolidation Loan.
If the borrower’s monthly payment decreases, it’s likely the result of lengthening the term (up to 30 years), which can mean paying more interest over time.
Income-Driven Repayment Plans and Loan Forgiveness
If you have federal student loans and your credit history prevents you from refinancing, an alternative is to apply for an income-driven repayment plan. The federal government offers four such plans, each with its own eligibility requirements, but they all set your monthly loan payment at an amount deemed affordable based on your income, with any remaining principal eligible for forgiveness after 20 to 25 years.
Thanks to their higher income, dental professionals often pay off their loans before the end of the repayment period, making the forgiveness benefit irrelevant.
If your income is over a certain threshold, you are not able to benefit from the programs.
In addition, the interest you’ll pay over the life of that loan may be higher than it would have been had you refinanced over a shorter term. The math might work out in your favor, but it’s worth a close look before you commit.
Then there’s the Public Service Loan Forgiveness program if you start your career at an eligible nonprofit or public service agency.
Work for a local, state, tribal, or federal government organization or for a nonprofit organization and you may be eligible for federal Direct Loan forgiveness after 10 years in an income-based plan.
Serving as a full-time AmeriCorps or Peace Corps volunteer also counts.
Examples of qualifying government employers are the U.S. military, public colleges, and public child and family service agencies, but not a government contractor.
There are also a number of federal and state loan-repayment assistance programs that reward dentists for providing service to certain segments of the population.
The Indian Health Service Loan Repayment Program, for example, offers dentists who serve American Indian communities $20,000 per year toward the repayment of school loans.
Student loans from private lenders do not qualify for PSLF.
Graduating from dental school? Liberating. Student loan debt? That bites. But a smart repayment plan is within reach. It’s time to read up and get down to making your financial future healthy.
It’s good to revisit the details of your loans, because the rate you were given when you took out the loans isn’t necessarily the rate you’re stuck with.
When you refinance student loans with SoFi, there is no origination fee and no prepayment penalty. SoFi offers flexible terms and low fixed or variable rates.
†Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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 TO DEC. 31, 2022. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
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