By Elyssa Kirkham, Student Loan Hero Contributor
Graduating from dental school without six-figure debts is hard, not to mention pretty uncommon. Only about one in five dental students manages to graduate with under $100,000 in student loans. And the typical dental school graduate’s debt is around $237,500, according to the American Dental Education Association.
To make matters worse, the federal student loans that can be used to finance dental school are 1.55-2.55 percentage points higher than undergrad loans. To put this in perspective, if a dentist has the typical $237,500 in GRAD Plus loans with interest rates averaging 6.31 percent, $1,249 of monthly payments will go straight to interest.
With higher student loan rates and even higher balances, being proactive with dental school debt can have big payoffs. Dentists who get rid of student debt faster will save thousands of dollars. Plus, they’ll more quickly achieve financial security and build real wealth.
Sound good? Here are five things Florida dentists can do to knock out their dental school debt.
1. Pay More Than the Minimum
Pay ahead of the 10-year Standard Repayment schedule whenever possible. Doing so will shave months or even years off of your repayment period and save thousands of dollars in interest.
Take the average $237,500 in dental school debt, for example. Assuming the borrower has GRAD Plus loans, that debt will cost a total of $82,610 in interest. Put an extra $500 a month toward these loans, however, and you’d save more than $18,000 in interest. You’d also pay off the loan in eight years instead of 10.
You can play around with a student loan prepayment calculator to see how much extra payments could save in interest and time.
Chances are that your dental school debt is made up of several loans with varying interest rates. If you decide to make extra payments, strategically apply them toward the highest-interest loan for the biggest cost savings.
2. Keep Your Lifestyle in Check
As you earn more, you can afford to pay more toward student debt. The tricky part is making sure your lifestyle doesn’t inflate with your income.
After living cheap through an undergraduate degree, dental school and even residency, the typical Florida dentist’s pay is an impressive $156,000-$172,000 per year (according to the BLS). That probably feels like a fortune – it’s tempting to upgrade spending to match a higher income.
But maintaining a frugal lifestyle will enable you to put more money toward prepaying student loans. Instead of spending a pay raise on more “wants,” keep spending at the same level and apply raises to making extra monthly payments toward dental school loans.
That’s how one orthodontist, Dr. Blake Hillstead, repaid $380,000 in dental school debt in just under two years. He weighed his student debt repayment options and was tempted to upgrade is lifestyle.
Instead, he “decided that we’d save a lot of money and stress if we could just pay my student loans off quickly, even if it meant making some short-term lifestyle sacrifices,” Hillstead told Student Loan Hero.
3. Put Bonuses Toward Student Loans
In addition to your regular income, you can also use “extra” money earned outside of regular paychecks to take chunks out of your student loan balance.
If you’re a new graduate or looking to switch practices, for example, ask for a signing bonus (these can range from $10,000-$50,000) or other work benefits that help with student debt. Signing bonuses, annual bonuses or even a nice tax refund can be used to painlessly pay extra money toward student loans without squeezing your monthly budget.
Dental health professionals also can work a side hustle to generate more income to throw at student loans. Hillstead, for instance, worked as an associate orthodontist at other practices in addition to seeing patients at his own private practice.
4. Consider Refinancing Dental School Loans
When you refinance student loans, you take out a new private loan to pay off your existing loan(s). The goal is to consolidate college debt and achieve a lower interest rate and/or a more favorable repayment term.
Dentists are great candidates for lowering the costs of their student loans through refinancing. They are more likely to have higher rates, so they are more likely to save significantly on interest. Plus, their higher incomes also will help them get approved for refinancing and qualify for the best interest rates.
Remember the 6.13 percent interest rate on GRAD Plus loans? Many dental graduates face rates as high as that, or higher. However, some of the best private lenders can refinance student loans with new rates as low as 1.97 percent APR.
In real dollars, that would lower monthly payments by nearly $500 a month and save around $57,000 over the life of a typical $237,500 balance.
5. Look into Student Loan Forgiveness for Dentists
Last but not least, dental professionals can look into programs that offer student loan forgiveness for dentists. Because the costs of dental school are so high, many public and nonprofit organizations offer loan forgiveness or repayment assistance to ease the burden of dentists’ student debt.
Dentists who serve in the Army Corps, for instance, can get up to $120,000 toward repaying dental school loans. Or you might take a position in an area with a high need for dental professionals and qualify for state-level loan repayment assistance programs.
When weighing this option, make sure to find out what kind of commitment you’ll be expected to make for the student loan forgiveness or assistance. You might have to relocate or take a lower-paying position to qualify for these programs. Weigh the loan repayment or forgiveness benefits against other scenarios, such as taking a higher-paid position and repaying loans out-of-pocket.
Compare your options to ensure you’re choosing the most effective path to conquer your student loans. And then follow through and execute your strategy. A student-debt-free life takes some work and sacrifice, but it’s well worth it.