After a delightful 3-year break from payments, as well as interest accrual on student loans, dentists with student debt should prepare to resume making payments again beginning in October 2023. Interest on student loans will resume on September 1, 2023, and payments will be due starting in October.
The initial suspension or “freeze” in student loan repayment traces its roots back to one of the many programs designed to help Americans through the COVID-19 pandemic. The freeze was extended until the recent debt-ceiling negotiations at which lawmakers ultimately concluded that student loan payments and interest accruals must resume. Sadly, all good things must come to an end!
With the average student loan debt for a graduating dentist topping $300,000, and many dentists owing even more than that, both new and seasoned dentists are wondering what impact these immense debt loads will have on the future of the profession—most notably, whether new graduates will be able to buy their own practices.
While a debt load of $300,000 may seem daunting, especially to a newly graduated dentist, they need not fret! Believe it or not, there is a tremendous amount of flexibility that can be used to manage this debt and the monthly payments it necessitates. When it comes to paying off student loan debt, dentists have a variety of options, including:
None of the above student loan repayment options is inherently better or worse than any of the others; the right strategy for a dentist largely depends on the borrower’s situation.
When determining which strategy makes the most sense, some of the most important things that the dentist needs to consider are their general philosophy toward debt, the outlook for their current and future income, marital status or plans to be married, their spouse’s income, family size, credit score and borrowing capacity. 
In addition, willingness to work in the public sector or enlist in military service and their tax situation should be considered.
For example, a single new graduate who has just taken their first job in corporate dentistry and is unsure of where they will be practicing long term may be best served to use an income-contingent repayment plan, as it is the most flexible and has the lowest required monthly payment.
In contrast, a dentist who has already purchased their own practice, has stable and predictable income from that practice, and is debt-adverse would be well-served to take advantage of the lower interest rates offered by a private student loan refinancing company and get the debt paid off quickly.
The table below shows the overall cost for a $300,000 student loan at 7.9% through the current loan service, or 6.05% through the private refinancing company.
| Repayment Plan | Interest Rate | Monthly Payment | Additional Savings Necessary* | Tax on Loan Forgiveness | Total Out-of-Pocket Cost of Loan + Tax |
|---|---|---|---|---|---|
| 10-year standard | 7.9% | $3,624.00 | 0 | 0 | $434,879.42 |
| 20-year extended | 7.9% | $2,490.68 | 0 | 0 | $597,763.63 |
| 15-year refinanced | 6.05% | $2,539.68 | 0 | 0 | $457,142.68 |
| 15-year refinanced, paid off in 10 years | 6.05% | $3,338.15 | 0 | 0 | $400,578.32 |
| Revised pay as you earn (REPAYE)* | 7.9% | $1,068.00 | $200 | $110,000 | $456,000 |
| SAVE (New REPAYE) | 7.9% | $488 | $350 | $117,750 | $264,000 |
In the above chart, it’s critical to note to the income level relative to the borrower.
It should be noted that the Biden administration has refreshed the income-driven repayment programs by adding a new component: Saving on a Valuable Education (SAVE).
Borrowers on the REPAYE Plan will automatically receive the benefits of the new SAVE Plan. The SAVE version will essentially replace REPAYE with some attractive improvements, including:
While student debt can seem burdensome, especially to a new graduate, and wading through the various repayment strategies can seem complicated and confusing, it’s important to remember that student loan repayment seldom, if ever, prohibit dentists from other financial pursuits, specifically dental practice ownership and home ownership.
Dental practice loan providers like Bank of America, Provide, or Huntington are aware of the cost of education and can accommodate loans to graduates with high student debt loads. The most financially successful dentists are the ones that develop a long-term financial plan, which most often includes buying a dental practice and a formal debt-reduction strategy.
For dentists that develop a plan and stick to it, student debt is not an impediment to financial success.
Not sure where to start as a recent dental school grad? Contact us.
Theodore C. Schumann, II, MBA, MSF, CFP®, AIF® is the Managing Partner of DBS Investment Advisers, LLC and DBS Dental Sales. For almost two decades, Ted has been crafting financial plans for dentists, starting as early as graduation, and extending through their career and into retirement. Besides helping dentists meet their financial goals, Ted also provides support and guidance to clients when they are ready to buy or sell their practice.
Ted is also a frequent speaker at both state and local dental society meetings, as well as at both of Michigan’s dental schools. He is recognized as a thought-leader in dentistry in Michigan, especially as it relates to financial strategy and maximizing wealth for dentists.
Ted is a graduate of Central Michigan University (2006) and earned his MBA and Master of Finance from Walsh College (2015). He has earned the designations of Certified Financial Planner (CFP®) in 2010 and his Accredited Investment Fiduciary (AIF®) in 2015.
