Dental school debt is a heavy weight to carry and likely a topic you’d prefer to put down and ignore. While it is a debt that needs to be addressed, integrating it into both a payment and savings strategy can help alleviate the mental burden and even positively impact your lifestyle and career goals.
Average Dental School Debt
According to the Education Data Initiative, 82% of dental school graduates take out loans specifically to pay for dental school, and the average dental school graduate owes $296,500 in student loan debt. On a slightly positive note, the average dental school debt peaked in 2020 at $331,100, and it has since declined in the past two years.
While the numbers aren’t exactly encouraging, rest assured that several strategies exist to manage your student loans.
Minimal Payments Over Aggressive Ones
Data shows that the majority of graduates report a plan to pay off their loans with an aggressive repayment plan. However, when it comes to purchasing a practice and obtaining a lending approval, it is important to understand how your monthly payments play into the mix. Many student loan companies offer income-based repayment plans and/or plans, allowing you to make the minimum monthly payments. These options can be strategies to preserving and managing monthly cash flow.
Student loan debt is considered a low priority debt—as opposed to revolving debts like credit card and auto loans—and can be viewed strategically as “useful” debt. Prioritizing your debt allows you to focus on any high priority debts first, leading to greater monthly cash flow on hand.
Student loan debt is purposeful debt, which helps you generate income over your lifetime and allows you to focus on goals, such as practice ownership. While the balance can be daunting at times, leading you to want to pay it off sooner than later, your CPA can help you understand how and when to prioritize aggressive payments.
Prioritize Your Savings
Not only will paying the minimum amounts on your student loans help with monthly cash flow, but it will also allow you to prioritize your savings in other areas.
When funds are limited, it can feel difficult to determine where your money should go first. There is no shortage of options, from paying down debt, saving for retirement, buying a home or building liquidity. You may be more inclined to aim for the short-term goals, such as your dental school debt, but getting started on your long-term goals shouldn’t be ignored.
Although retirement may seem a lifetime away, it’s key to prioritize your savings early, as time can be a significant ally. Compounding interest’s impact on today’s savings is the biggest asset young people have on their side. The earlier you start saving, the faster your money can take advantage of growth rates.
Unsure where to start? This Cain Watters & Associates article shows six vital categories to save for. It offers guidance on how to make progress on your goals while still addressing your student loan payments.
Practice Ownership is Attainable
Contrary to what most people think, dental school debt actually has little impact on becoming a practice owner. In fact, practice ownership can be used as a springboard to get you out of your dental school debt.
Banks recognize that the cash flow potential of an owner is oftentimes much higher than that of an associate. As an owner, your higher compensation will allow you to pay off your loans more quickly and even offer potential to save additional money that may have been allocated to accrued interest.
Practice ownership presents the opportunity to control your career. While student debt can make you feel trapped, ownership reverses this dynamic and can pave the way for a financially flexible and secure future.
Dental-specific professionals, like NDP and Cain Watters & Associates, can guide you through key strategies to help you fulfill your financial and career goals. Contact us to start building an individualized plan.
