Don’t Let Dental School Debt Crush Your Ownership Dreams

Students working on school work in library

As a dental school graduate, or soon to be graduate, we know what you’re thinking. Your student loan debt is a six-digit number, and you’re wondering how you’re going to make that number come back to zero.

According to the American Dental Education Association, the average dental school debt per graduating student in the Class of 2021 was $301,583. With a mountain of debt on your shoulders, your first instinct may be to start working as an associate and immediately pay off your student loans. You may believe that owning your own dental practice is a mere dream that will come years down the line, and perhaps you can’t even fathom thinking about it right now.

Most dentists spend the first 20 to 25 years of their careers gradually working to pay off their private or federal student loan payments. And that’s okay.

The truth is, dental school debt is not an obstacle to owning your own practice, but rather, owning your own practice can be a catalyst to get you out of it.

Increase Your Earning Potential

Practice ownership has many benefits. As an owner, you can take advantage of increased lifetime compensation, build equity in a business, take advantage of strategic tax planning, and maximize a pension plan to prepare for retirement. Essentially, it can be a ticket to control your own destiny.

Many dental school graduates assume banks won’t give them financing, or graduates won’t be able to afford a down payment for a practice because of their amount of debt. The good news is student debt is not a contributing factor to whether or not a bank will loan you money to buy your own practice.

Banks will, however, consider personal debts like credit cards to be a hindrance. Unless you have poor credit or above average credit card debt, you don’t have to worry about your student loans standing in the way of banks when purchasing your practice.

What banks are concerned about is liquidity. Although business loan lenders will typically lend 100% of a dental practice loan with no money down, they want to make sure you have access to it. To get the best rate possible, make sure you have enough liquidity, or cash readily available.

Instead of attempting to pay off all your student debt your first year out of school, utilize your years as an associate to build liquidity while growing your clinical speed and productivity. A bank would rather see an applicant who has $250,000 in student loan debt and $50,000 dollars in savings over a borrower who has $200,000 in debt and $0 in savings.

When you do purchase your own practice, this is when you can start to put more money towards your student loan debt. Ownership ultimately gives you flexibility to pay off your student loans and start building your future.


We also suggest holding off on refinancing your student loans until you own your practice. With larger payments, refinancing could cut into how much you can save in that first year post-dental school. Also, you’ll most likely receive more favorable financing terms as a business owner with a steady cash flow rather than a first-year associate saddled with student debt.

Two Words: Cash Flow

Now that you know practice ownership is within closer reach than you previously thought, how will owning your practice get you out of student loan debt? The answer: The cash flows that you will receive as an owner will be much higher than that of an associate.

This may be an obvious answer, but to illustrate this, let’s look at a general dentist practice that makes $1 million in collections annually.

As an associate at this practice, the doctor will typically have a pay range of 25-30% of collections after subtracting 28% of collections related to hygiene. After subtracting 28% of collections for this practice, we have $720,000. The associate will then earn 25-30% of $720,000, which is $180,000 to $216,000 in gross associate compensation.

For an owner’s possible earnings, the collections derived from the hygiene production will be added back because that portion of the collections is considered a benefit of being an owner. This means that the doctor will earn 40% of the full $1 million (after taking into account an assumed overhead of 60%).

Thus, the owner has the potential to earn $400,000 each year, which is $184,000 to $220,000 more than an associate. As an owner, your higher compensation will allow you to pay your loans off more quickly while saving additional money that would have been allocated to accrued interest.

Shift Your Focus

You worked your way to become a dentist, and you’ve reached that milestone. Embrace it, and instead of allowing your student loans to consume your thoughts, focus on the steps you need to take to become a practice owner.

If you’re unsure of where to start, NDP offers buyer resources to help prepare you for the process. Additionally, check out our practice listings for a list of practices for sale nationwide. If you already have a practice in mind and would like to discuss the opportunity, our team is prepared to answer your questions.