The American Student Dental Association notes that the average debt for a person receiving their DDS degree is nearly $300,000.1 That’s on par with debt levels from other professional degree programs like doctors and lawyers, programs where graduates also tend to carry a ton of debt. That amount of debt can severely hamper any graduate’s immediate career path and personal life as well as long-term goals.
Of course, some debt (such as credit card debt) is often classified as being "worse" than others (such as student loan debt) but debt reduction of any kind, whether it be for non-secured credit or a mortgage, is always a good idea. However, cutting out debt while maintaining a standard of living you've worked hard for (and feel you now deserve) can be tough. Balancing paying off Dental school debt with your other goals may feel overwhelming, but here are five strategies to consider:
Step 1: Take Your Time When It Comes To Big Purchases
Once you graduate and start making a good paycheck, it can be tempting to immediately start considering big purchases. Whether you are evaluating buying a dental practice, buying a home, or making some other big investment outside of your career, the best strategy might be to wait. When you’re just a year or two post-graduation, it may not be the best time to make such big purchases as it could leave you taking on too much, too soon.
Step 2: Avoid "Lifestyle Creep"
Lifestyle creep is the gradual increase of your spending as your wage increases. For dentists, who have been in school and living on student wages for many years, it might feel less like lifestyle creep and more like a lifestyle explosion when you finally start making a good paycheck. If you can stand forgoing the expensive car or new house for a few years, you could pay down a substantial amount of debt with the money you might otherwise spend on those items. Reducing lifestyle creep is about making trade offs so that you can save more (and in this case, pay down more debt).
In fact, if you go from graduation to working and really focus on not changing your lifestyle for a few years, it may actually be easier to continue to leave frugally now, since you may already be used to living more frugally as a student. Of course, it is possible to arrive at a happy medium regarding paying off debt and still living the life you want, but waiting to make any big purchases and trying to live close to the standard you had been living during school could end up helping you to sock away a big chunk of change.
Step 3: Make a Plan
Once you’ve considered what kind of lifestyle you want to lead, and what kind of practice you want to have (whether you want to be an associate or buy your own), you should come up with a solid plan to pay down your debt based on these considerations. You’ll also want to account for how much (or how little, if you’re lucky) debt you’re carrying.
Due to the many federal and private loan programs available, students entering dental school have plenty of options when financing so a good place to start is to evaluate your own specific loan repayment requirements (such as minimum payments, length of the loan, and your interest rate). In coming up with your own individual repayment plan, you may evaluate income-driven repayment plans, refinancing your interest to a lower rate, or working in a state that offers a state loan repayment program for dentists (typically you agree to work in a high-need area that has a shortage of dentists for a set period of time in exchange for loan repayment assistance).
Step 4: Consider Refinancing
Making the appropriate lifestyle changes will be important to pay off debt and stick to your plan. However, you can often accelerate the process by refinancing your loans. Refinancing student loans into a new loan product with a lower interest rate and better terms can help you save money on interest over the long haul. This is especially true with private student loans since rates tend to be competitive and can change over time, so if you have a private loan you'll especially want to look into this option. On the flip side, if you have a federal student loans and refinance with private lender, you might run into issues where you then miss out on certain federal perks and protections, including income-driven repayment, deferment, or forbearance.
Step 5: Automate Payments
Many lenders offer a reduction in your loan's interest rate if you sign up for automatic payments, which in itself is reason enough to enroll, since a lower interest rate means less of your payment goes toward interest over time, saving you money.
However, signing up for automatically debited payments can have another great benefit: it can take some of the stress out of repaying your student loans. By setting up automatic bank drafts, you can rest assured your loan payment is taken care of and you won’t face late fees or penalties.