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. According to a recent survey of dental school seniors by the American Student Dental Association, the typical dental school graduate enters the profession with a student loan burden topping $260,000. That’s $70,000 more than the average medical school graduate, 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. As a dentist you can expect to earn nearly $7 million over the course of your career, even after repaying all your student loans. So sure, your education was ridiculously expensive—but you’ll likely make that money back, and more.
Still, first things first. At this stage of the game, it’s important to have a plan in place 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 even to buy a house. Here’s a review of the 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, and then refinancing the balance at a lower interest rate is the best choice. Consolidation 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.
There are other benefits to loan refinancing, too. Depending on how you structure your loan, the 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 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—which means you’ll pay the same monthly amount until your loan is paid off. With a variable-rate loan, the interest rate you pay on your loan will depend on the rate banks charge to borrow from one another. That rate changes month to month, so you can expect that your payments will 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 in the future.
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.
If you qualify for the so-called income-based repayment plan, for example, your monthly payment will be limited to 10% or 15% of your discretionary income, depending on the date you first borrowed for school. The repayment period for this plan—and the three others—ranges between 20 and 25 years, and any remaining loan balance after that term is up is automatically forgiven.
That sounds great, until you consider this: There’s a chance you’ll pay back your loan in full before those 25 years are up. 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. And, even if you do have a remaining balance when the plan ends, the forgiven amount may be considered taxable income under Internal Revenue Service rules. The math might work out in your favor, but it’s worth a close look before you commit.
There is another path to dental school loan forgiveness—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 offering public-sector services, and you might be eligible for loan forgiveness after just 10 years in an income-driven repayment plan. Even better, you won’t owe federal taxes on your remaining balance. There are also a number of national (including military) 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 that example, offers dentists who serve American Indian communities $20,000 per year toward the repayment of school loans.
The Choice Is Yours
Should you consider refinancing, remember this: SoFi dentist members who refinance their student loans save an average of more than $59,000. Add to that the fact that when you refinance with SoFi there are no origination fees and no prepayment penalties, you could potentially be saving quite a bit of money.
No matter how you decide to tackle your dental school debt, remember you’re only at the beginning of your career. Before long, your student loans will be a thing of the past—just a hurdle you had to clear so you could follow your dreams.
Article originally appeared in April 2017 on the SoFi Blog. SoFi is a CDA Endorsed Product that brings members the opportunity to save money on their student loan debt by refinancing through SoFi.com/CoDA. Members and their families who refinance their student or Parent PLUS loans through SoFi.com/CoDA are eligible to receive a $500 welcome bonus upon refinancing.
Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)(1) Payment will be issued electronically once you become a SoFi borrower; you have submitted a completed application with documents and your loan has been disbursed. Offer good for new customers only.