As a New Dentist, What Should I Do with My Student Loans?

College these days is expensive. Tack on the extra years to complete dental school, and many new dentists are graduating with student loan debt in the six figures. Should this prospect keep someone from attending dental school? Certainly not by itself. But it does add another financial layer to discuss and manage.

For starters, debt can be an emotional topic. How you view debt will determine how you handle it – as a financial tool or as a burden. We encourage all dentists to talk with their financial advisor to help integrate their student loans into their future plans.

While student loan debt is very personal and individual financial situations vary widely, we can offer you some high-level thoughts to consider.

Upon graduation, confirm that you are making the full interest payment every month. I cannot stress this enough. We have seen a lot of recent graduates end up in an income-based repayment plan, which can keep their monthly payments low as they get settled into a job. However, this can be a problem if your payment is so low that it doesn’t cover the interest you owe on the loan. When we asked some of these recent graduates to review their student loan statements, we found that their loan balances were actually growing!

Interest rates are a big factor when looking at your student loan debt. But other variables are just as important. What is your monthly payment? How does that fit into your cash flow and savings plan? Are you subject to any sort of prepayment penalty? A loan with a slightly higher interest rate might also come with other terms that are better for you and your financial plan.

Rapidly paying off your student loan(s) is one option and it isn’t necessarily a bad one. We would challenge you, though, to explore what you are giving up by doing so. Are you locking yourself into a job you don’t really love? Are you putting your long-term savings goals on the back burner? Are you putting yourself at financial risk because you haven’t built up an emergency account?

Having student loan debt won’t automatically prohibit you from purchasing a dental practice. Banks expect you to have student loans. After all, you just made a large investment – in yourself! Banks look at other factors as well, like production history, liquidity and your credit score. Don’t assume a practice purchase is off the table without speaking to a loan officer who specializes in working with dentists.

So, what should you do with your student loan debt? You can only answer that question in the context of your short-term and long-term plans. There is no right or wrong solution. Just one that is specific to you and what you hope to accomplish.

This commentary originally appeared January 22 on DentalTown.com

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The opinions expressed by featured authors are their own and may not accurately reflect those of Buckingham Strategic Wealth®. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

© 2020, Buckingham Strategic Wealth®

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Katie Collins, CFP®

As a practice integration advisor, Katie works directly with clients to develop a financial plan personalized for their specific situation and goals. She quarterbacks the entire financial picture, often for clients who have never put all the pieces together with one advisor. Katie joined Buckingham Strategic Wealth through the 2014 merger with Indiana-based Hufford Advisors, where she spent more than 10 years working in various financial planning roles, most recently as a senior planning consultant.

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