TT Ep 152 – The Latest Student Loan Updates and What They Mean for You

Christy: Hey, team. Welcome to episode 152 of Transition Talk, where we talk about dental transitions and how to navigate the sometimes messy path to practice ownership. If you’re a dental student, resident, or early career associate, chances are student loans are one of your biggest concerns. With recent changes to federal repayment programs, understanding your options is more important than ever.

The decisions you make today can have a lasting impact on your ability to build wealth, purchase a practice, or plan for retirement. To help break down what these changes mean and how to navigate them, we’re joined by Austyn Scott, Certified Financial Planner and Wealth Advisor with Cain Watters. Austyn has helped many dental professionals create repayment strategies that align with their long-term financial goals, and today he is sharing his insight and wealth of knowledge with what borrowers need to know.

Austyn, welcome to Transition Talk.

Austyn: Thank you.

Christy: We’re so happy to have you here. If you are a longtime listener of Transition Talk, you know that we always tell you not to pay off your student loans until you buy a practice, which most people do not love that advice, and it feels like the weight of the student loan is on your shoulders, and I’m sure you hear that from your clients every day.

Austyn: Yep. It’s main part of the conversation every new client is big topic is student loans. So we gotta spend some time on it, make sure that they understand the strategy, long-term outlook, and, like, where we’re trying to get them to.

Christy: And I love that you talk about their goals, right? I’m sure you talk to some people who never wanna own.

They have a spouse maybe that owns, and so I’m sure that the strategies you put forth to those individuals may be different than someone who’s “My goal is ownership within two or three years,” because of the repayment options.

Austyn: Absolutely. We can use the income-based repayment to lower the payment that you have to make to get you to some place.

But that doesn’t always work for everybody, so if you come to me, maybe that’s not your goal. You wanna be an associate. You have other family goals. Let’s look at other options. Maybe we can get these paid off faster.

Christy: Okay. There’s been a lot of changes recently, and so I wanna make sure we have time to cover all these.

Let’s start with the recent changes in the student repayment world. What do dentists need to know about where we’re at today?

Austyn: So for current payers, you’re out of school, you’re paying on your student loans, the SAVE and the PAYE plan are going away. The SAVE plan is gone as of July 1st, 2026. If you are on the SAVE plan, you have been hopefully checking your email.

Christy: Check your spam. Check for junk …

Austyn: Yep, you’ve probably gotten dozens of emails that you need to make in a selection and move on from that. PAYE will be gone in about two years in 2028.

So we do have some time for the folks on that repayment plan. But that’s kinda the main gist of where we are. There’s also for new borrowers that are starting dental school this fall going forward, there are now caps on how much you can borrow. So that is a big piece as well as now there’s only a couple of repayment options.

Christy: I wanna dive in further to that. Before we go if you’re, if you are listening and maybe you’re not in, not there yet the PAYE repayment plans and the SAVE, what are the primary differences? Is it the same just kinda called something different and with a new start and end date?

Can you kinda give listeners a little bit of difference into the plans?

Austyn: Yeah, so the SAVE plan, the big fundamental piece of that plan was that the interest was subsidized on the SAVE plan above your payment. No other plan really had that option. The PAYE plan was the big plan for a long time before SAVE came out, and really that one was just it was 25 years to forgiveness or it could’ve been 20 depending on when you took out your first loans.

And then when they rolled out SAVE, that was for the subsidized interest, and now going forward RAP that one will also have subsidized interest, so they did keep that feature.

Christy: So they kept some features and adjusted some other ones.

Austyn: Yep.

Christy: What what are the new plan options for future borrowers?

How can they determine what plan is right for them? If we’re talking about the two that you just mentioned, how are individuals supposed to determine this is better for me or that is better for me?

Complicated question, I’m sure.

Austyn: Yeah. The nice thing I would say about this new rollout is there’s a lot of simplicity built into it.

So you either have one income-based repayment option, which is RAP, or you have just an amortized 20, 25-year loan.

So going into it, coming out of dental school, I would say the option I would want to go with is RAP so that we can get that income-based repayment while your income is lower in those first few years.

We can work on getting some other savings goals working, and then we also get that subsidized interest so the loan balance won’t be growing on you. It gives us some time to work on it. But you can go with just an amortized loan, which for most dental borrowers will be 25 years.

Christy: And that just allows some security of understanding, like my payment is X per month.

If you’re one of those lucky people that have someone who’s offering to pay, help you pay your loans, like they may want a certain amount a month or if you’re not sure. How often when you do an income-based loan repayment, how often are they looking and reassessing how much you are making?

Is that annually with your tax return?

Austyn: Yep, every year you have to recertify your income. It’s based on, going forward RAP will be based on your adjusted gross income. Okay. So it’s a relatively easy calculation to make.

Christy: So if you’re married and you file together, is it based on your collective income?

Austyn: Yep. That was a feature with Save, Pay, ICR, these other plans where you could do married filing separately and you still will be able to do that.

Christy: Okay, so you can still file separately, which has its own ramifications, so don’t do that just for this. But that will allow that just to look at your income.

Austyn: Absolutely.

Christy: Okay. That’s helpful to know. Dental school debt is like I said earlier, it is the thing that weighs on dental students’ and residents’ shoulders when they leave. Six figures, I think, is very common. High six figures now that we’re seeing. I think the average I heard is 450, which I feel like if someone can get out of dental school with 450, it’s probably a steal.

I think the average is 450 because some people have zero. But what’s the biggest misconception that you hear from clients about managing this debt?

Austyn: Yeah, I think you brought up one misconception, which is, “I need to pay all of this off as soon as possible.” “I’m gonna live in a studio apartment and drive my 2003 Corolla and I am only gonna put money towards loans.” That may not be the best option. I think another misconception that I see is on the government side of loans, that interest is simple interest, which I think is really important to know.

Christy: Very.

Austyn: You don’t see compound, you don’t see the loan amount compounding on you because it’s just a linear it’s only based on the original loan amount.

Christy: That is huge. If you’ve ever had a credit card or a mortgage then you understand that other form, and so it is different. From managing, like I mentioned, credit card debt, a mortgage retirement, I feel like I joke that dental students come out of school and they do all the things.

They get married, they have a kid, they, buy a house, they buy the car and they also know they need to start planning for retirement. How do you advise someone managing the debt that they have with the student loan debt and all the other kind of facets of debt they’re going to have?

Austyn: Yeah, it comes down to balance.

We have to be able to manage all of those facets. For me, when you first come into the door Student loans is gonna be a major part of the conversation, but we also have to look at emergency fund. I wanna make sure that you can live if you’re out of work. I’m sure most of the listeners here know if you’re out of work, you’re not getting paid.

So we need to make sure that you have some cash reserves. That also ties into buying into a practice, which I’m sure you guys have talked about. Having some of those cash reserves for the loan. And if you listen to our other podcast, the Accumulating Wealth, you can listen to Hunter and Judson talk about one-to-one, two-to-one, three-to-one-

Christy: Such a critical, important application piece, yeah.

Austyn: Absolutely.

Christy: So does student loan fit in with where we would think, if you’ve read anything about paying off debt and kind of the method and the theories that kind of we talk about here, does it fit in with, hey, emergency plan, make sure you’re saving for retirement, then look at your debt in order of interest rate and amount, and start paying off in a different way?

In just that order of event, highest interest rate to lowest interest rate and going from there. Is there any value in keeping dental school debt as far as tax write-offs or anything like that for certain individuals?

Austyn: Yeah, you can write off the interest. There are caps on the income- which most of our dental clients are above that cap, so it doesn’t really help them to keep the loan. But I do look at it the way you just described as we have this credit card, then we have maybe a private student loan at 10%, we have the car loan at eight. Let’s make sure we’re smart about what we’re paying off and when.

Christy: And so you mentioned private student loans. Difference between what we have been talking about and private student loans, what’s the difference there?

Austyn: Yeah, what we’ve been talking about for the most part is the government side of loans, so taking it from the US Department of Education, and then it’s serviced by MOHELA or Laurel Road got bought.

There’s a few other servicers out there. Private loans would be like SoFi, some of the big banks. So those loans, they don’t have really any of the protections that student loans have. The interest rate is not simple interest, and it can be variable interest as well, so we need to be able to manage that.

Christy: And so those are not the ones we’re talking about where we’re saying, hey, don’t pay it off. If that is your highest interest rate loan and it’s compounding and you need to pay that off, right? Then the order of events, that’s what we’re going, that’s what we’re gonna do.

I know we’ve talked about it here, you mentioned about buying a practice. Do any of the repayment plans we’ve offered on these government-based student loans impact how banks look at buyers or their ability to buy a practice?

Austyn: Yeah, they’re part of your debt-to-income ratio for when you’re getting a loan, so they are part of that calculation, and that’s why I like to use income-based repayment as much as I can to get the payment that we have to make down, and then that just opens us up to ooh, a lower debt-to-income ratio.

We can always pay more on the student loans. But what the bank sees that we have to make is important.

Christy: And I think that’s an important point because we talk about that with the practice loan too, right? On the practice loan part, if you’re offered a 15-year term, take the 15-year term, right?

That allows you to have additional cashflow and not the requirement. You can always throw more money at that, throw more money at your mortgage, whatever that looks like. But always give yourself the flexibility of the longer term even though it’s hard because we know the interest is building and we feel it in our head.

Austyn: Right.

Christy: So Austyn, another thing you mentioned earlier was borrowing limits. So I know there was a lot of confusion initially, and I think there’s been some clarity, but limits still exist with student loan borrowing. Can you shed some light on what those limits are, what they’re not, and maybe give a little bit of what you’ve learned and your clients’ experience on how to maybe manage those limits?

Austyn: Yeah, the limits are going to start for new borrowers going into a new program in the fall of ’26.

So the limits technically haven’t started yet, but if you’re entering an undergrad program, master’s, dental school, medical school, whatever it is, as long as it starts this fall going forward, there will be limits on the government side of borrowing.

Christy: Are those cumulative for undergrad or master’s and then dental school? You said per program, so that’s a pretty specific language.

Austyn: So undergrad has their own limits, which is about 65,000. Master’s programs have their own limits. Dental school, medical school law school will be 200,000 total.

And your lifetime borrowing limit is currently 257,000. So relatively low amounts for how much I typically see for new clients coming in with new loans.

So we’ll see how we’re going to manage that. It’s likely going to be with private loans. I would say early on in your school career it’s going to be can I get scholarships to help manage some of the borrowing that I need to do early on to keep that limit high for myself later on?

Christy: So when you say lifetime limit, that’s over all of the programs?

Austyn: Yep.

Christy: That’s crazy. And does dental school and residency just count as dental school?

Austyn: Yes.

Christy: So if you went to dental school, you’re going to residency, you’re probably paying for that out of private funding, at least how tuition stands today.

Austyn: Yep.

Christy: Man, that is … That’s incredible. I went to school a long time ago, even though it feels five years ago, but the lending, everything I got was government loans, right? And so just think about that limit being 65 for undergrads. There are several colleges that were very cheap that are not, can’t probably get through two years at 65 now.

Austyn: Yeah.

Christy: So it’ll be interesting to see how that plays out. And I think, too, thinking about that I think if you’re listening and you’re early on in your career or you are a parent and you have kids who are in high school I think thinking about this and planning proactively is really important.

There are dental schools that are really expensive, and there are those that are cheaper, and I know it depends on what you get into. And some of that you don’t have a choice in, but I do think planning and preparing and making sure you’re understanding those limits and paying attention to them because with anything else in the government, I’m sure things will change.

No doubt … only thing that’s guaranteed, but making sure we’re really paying attention to that because that will certainly impact who, where, how, and then, your financial position post-graduation and post-ownership and even as an associate, you’re going to have to now have different repayment plans for different student loans.

Austyn: Yeah, that, that can make it tough. But we’re here to help manage that. But I would say, if you’re early on in your college career, trying to keep the amount you’re borrowing on the lower side earlier will just help you long term to open up doors. 

Christy: So maybe don’t take out loans for rent and get a job.

Don’t take your, margaritas on Thursday, don’t pay with them with government funds. That’s what I’m hearing.

Okay, moving on. Lot, lots of really good information that I did not know. If we had to say, “Hey,” if you’re listening, you’re in the middle of dental school, you’ve got a few more semesters, you can do the tally in your head you’re calculating the interest or to that person who just graduated and now is looking at trying to tackle that student loan debt.

If someone had to, think about this episode or kind of if, even if you didn’t talk about it yet, one thing that you would want them to take away from the conversation or their thoughts about dental school debt, what would that be?

Austyn: Yeah. You took out this debt for a good reason.

It’s to get you to a point in your life where you have higher income.

You can be an owner in a dental practice. This loan is not bad debt. It’s not credit card debt. It’s nothing like that. So, we just need to be able to manage it in a smart way. So please come talk to us, come talk to a professional about how to manage it. Don’t sit on your couch and just think about the student debt and feel like there’s no way out of it.

There is a way out, and we can absolutely manage it.

Christy: I love it. Austyn, thank you so much for taking time out of your day to be here on the podcast. Student loans can be such an overwhelming and just burdensome thought on our listeners and is such a major point of stress. It’s so incredibly nice to have a resource with such a calm and cool demeanor and so much education to help people gain clarity and perspective.

That’s all we have for today but thank you for joining us.

Austyn: Absolutely. Thanks for having me.

Christy: Thanks for joining us on episode 152 of Transition Talk. As always, make sure to share the trans- Transition love with those who may not know of us yet, and of course, subscribe to Transition Talk wherever you listen to your podcasts.

Until next time.