Advice on paying off a $360-400k+ debt?

[TheVoMan]

When I applied for dental school, I intended to aggressively pay off my loans as soon as possible. Coming from out of state, my yearly loans are close to $90k. This means that's $360k loans for all four years.

I'm living in the cheapest/reasonable apartment I can find at the moment in order to reduce the amount of loans I would be taking out. My goal has always been to become a general dentist, so specializing wasn't within my scope when I began dental school. I tried to seek advice from my school's financial advisor but she's been very reluctant to listen to students and is never available.

In addition, I'm applying for instate which would knock down my $360k loan to a $300k loan, but there is no guarantee that I will get it. I do have a fiance who'd willing to support me for temporary, but I can tell she's not comfortable taking care of me financially and expects me to support myself.

I've seen a lot of threads that make it seem either impossible or possible only through military of HSHL options. Being as I'm engaged, and my fiance and family disapprove of me joining the military, these options don't seem optional for me.

My goal is to be able to pay off my loans within 6-7 years, is this possible?

To those living with this amount of debt, have succeeded or failed to overcome this debt post-graduating dental school, would you please advise me?

Ever Grateful,
TheVoMan

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[Typical Average Student]

An ASDA rep spoke at my school and told us a mistake that a lot of students make is trying to pay off their debt as soon as possible. She said it's better to work for a year or two to build up speed and open up a practice as soon as possible, banks are very willing to work with you to give you a business loan since they know dentists will very rarely default on their loans. She said to consolidate your student loans and business loans, in the long run, you'll make more money. There really isn't any point of paying off student debt as soon as possible other than achieving a personal goal.

But if you aren't trying to own your own practice, working in corporate dentistry for long hours will bring in very good pay. You shouldn't have a problem paying off your loans in 6-7 years assuming you put in 50-60k a year toward your loans and live frugally.

 

[Screwtape]

What area are you in and are you willing to move to anywhere that will pay you the most ? If you answered yes to the second part and are serious then you'll be fine. If your fiancé (or yourself) would hate moving somewhere semi rural or away from family and wants to be in a particular area. Then you might be in trouble.

 

[Daurang]

Get a dose of reality by joining and posting in dentaltown. The hottest current topic in their finance forum is about paying off the massive dental school student debt.

 

[THS]

An ASDA rep spoke at my school and told us a mistake that a lot of students make is trying to pay off their debt as soon as possible. She said it's better to work for a year or two to build up speed and open up a practice as soon as possible, banks are very willing to work with you to give you a business loan since they know dentists will very rarely default on their loans. She said to consolidate your student loans and business loans, in the long run, you'll make more money. There really isn't any point of paying off student debt as soon as possible other than achieving a personal goal.

But if you aren't trying to own your own practice, working in corporate dentistry for long hours will bring in very good pay. You shouldn't have a problem paying off your loans in 6-7 years assuming you put in 50-60k a year toward your loans and live frugally.

This is the philosophy I buy into. Why try to pay off loans on $120k-150k/year when you can buy a practice and pay that loan off with a higher income? The argument is "well, why would you go into more debt to buy a practice?" Because it increases your cash flow. And cash flow is what you live off of during your working days, not accumulated wealth / net worth.
The same argument could be made for people that "go into debt" to buy rental properties.

 

[schmoob]

This is the philosophy I buy into. Why try to pay off loans on $120k-150k/year when you can buy a practice and pay that loan off with a higher income? The argument is "well, why would you go into more debt to buy a practice?" Because it increases your cash flow. And cash flow is what you live off of during your working days, not accumulated wealth / net worth.
The same argument could be made for people that "go into debt" to buy rental properties.

Yes. This is the same philosophy that people follow by going to dental school in the first place, but don't realize it. They take on ~$300K+ in loans in order to make more money eventually, but are afraid of taking on loans to make more money after dental school.

 

[distressstudent]

Being quoted at 90k for "every" year isn't 360k at the end of 4 years. More like around 430k with interest and tuition increase

You can try to do your best and pay it all off in 5-7 years. You can certainly try. But that wouldn't be the best use of your money. If you take a practice loan, don't even think about repaying that under a 10 year repayment plan. 800k would require 8.8k in monthly payment or 108k in annual payments. There's no guarantees that you will be profitable your first couple of months (or even years) out. Certainly build up a good emergency fund, and having a working SO helps

DT is a good place to head towards for discussion about building a practice.

I am reading this one at the moment.


http://www.dentaltown.com/MessageBoard/thread.aspx?s=2&f=142&t=280792 -
So How Many of You Have Personally Experienced Practice Failure?

 

[Cold Front]

When I applied for dental school, I intended to aggressively pay off my loans as soon as possible. Coming from out of state, my yearly loans are close to $90k. This means that's $360k loans for all four years.

I'm living in the cheapest/reasonable apartment I can find at the moment in order to reduce the amount of loans I would be taking out. My goal has always been to become a general dentist, so specializing wasn't within my scope when I began dental school. I tried to seek advice from my school's financial advisor but she's been very reluctant to listen to students and is never available.

In addition, I'm applying for instate which would knock down my $360k loan to a $300k loan, but there is no guarantee that I will get it. I do have a fiance who'd willing to support me for temporary, but I can tell she's not comfortable taking care of me financially and expects me to support myself.

I've seen a lot of threads that make it seem either impossible or possible only through military of HSHL options. Being as I'm engaged, and my fiance and family disapprove of me joining the military, these options don't seem optional for me.

My goal is to be able to pay off my loans within 6-7 years, is this possible?

To those living with this amount of debt, have succeeded or failed to overcome this debt post-graduating dental school, would you please advise me?

Ever Grateful,
TheVoMan

You have 2 options.

1. Go with your plan: Reality after school is much different than any plan while you are in school. 6-7 years is a very long time, with the right discipline you might be able to pull it off. Then again, you might not. If you don't, you could just be stuck living on month to month checks. The truth is 9/10 dentists that jumped on this route will tell you this is much difficult path than option 2.

2. Open an office 1-2 years after you graduate: Notice that I said "open", and not "buy" an office. Why? It's the cheaper route. Assuming you are willing to work and live in an area where there are very few dentists (rural or so). Work your butt off for 5 years, 40-50 hours, pay yourself first (living cost), then Uncle Sam, then school loans. Don't buy a house in this area unless you want to live there 5-10 years minimum. The extremists in school got the A's, the extremists in the real world become successful and wealthy. You will be debt free sooner than option 1.

Come back in 5-7 years after you finish school and read this post again. Who knows, you could prove me and other dentists on SDN wrong.

 

[Alpha Centauri]

You have 2 options.

1. Go with your plan: Reality after school is much different than any plan while you are in school. 6-7 years is a very long time, with the right discipline you might be able to pull it off. Then again, you might not. If you don't, you could just be stuck living on month to month checks. The truth is 9/10 dentists that jumped on this route will tell you this is much difficult path than option 2.

2. Open an office 1-2 years after you graduate: Notice that I said "open", and not "buy" an office. Why? It's the cheaper route. Assuming you are willing to work and live in an area where there are very few dentists (rural or so). Work your butt off for 5 years, 40-50 hours, pay yourself first (living cost), then Uncle Sam, then school loans. Don't buy a house in this area unless you want to live there 5-10 years minimum. The extremists in school got the A's, the extremists in the real world become successful and wealthy. You will be debt free sooner than option 1.

Come back in 5-7 years after you finish school and read this post again. Who knows, you could prove me and other dentists on SDN wrong.

Don't laugh at me when I say this, but is living with parents a FEASIBLE option? No living expenses or utility bills provided your parents don't charge you of course

 

[cacajuate]

Don't laugh at me when I say this, but is living with parents a FEASIBLE option? No living expenses or utility bills provided your parents don't charge you of course

Your parents don't want you to live with them, trust me. In 5 years, you aren't going to want to live with your parents either.

 

[Alpha Centauri]

Your parents don't want you to live with them, trust me. In 5 years, you aren't going to want to live with your parents either.

You don't know my parents, trust me, can't argue with the second part though, just looking for opinions

 

[Cold Front]

Don't laugh at me when I say this, but is living with parents a FEASIBLE option? No living expenses or utility bills provided your parents don't charge you of course

The upside of living with your parents: Free rent and many home related expenses. At best, you are saving $1,500-2,000 a month depending on where you live. This would be a great deal if you really get along with your parents.

The downside: Well... You sacrifice privacy, potential female companions would not consider you seriously, heck most of male friends won't either... the Neighbors... the stray cat down the street... It will be fun gig if you can tolerate it. I know couple of former classmates who are married and moved in with their parents after they graduated. It's been 6 years and they are still doing it.

 

[schmoob]

Depends on the commute. If you're super close, go for it. If not, chances are you will move anyway. The last thing you want to do is spend needless hours commuting every week.

 

[Alpha Centauri]

The upside of living with your parents: Free rent and many home related expenses. At best, you are saving $1,500-2,000 a month depending on where you live. This would be a great deal if you really get along with your parents.

The downside: Well... You sacrifice privacy, potential female companions would not consider you seriously, heck most of male friends won't either... the Neighbors... the stray cat down the street... It will be fun gig if you can tolerate it. I know couple of former classmates who are married and moved in with their parents after they graduated. It's been 6 years and they are still doing it.

1500-2000 in just pure rent or what? What about all the costs of living besides rent like food water etc. If I bring home 70k pure income after taxes and apply 60k of it to debt, I'll be debt free in 5-7 years (WOW that is a long time with parents)

 

[Cello]

To add to previous comments about the misguided logic of paying off your loans ASAP.

Why would you pay back loans @5.3% interest when you could put the same money on the market and earn 7-8%? If you can consolidate the loans for even lower interest then you would be mad NOT to put your money to work making you even MORE money! Don't listen to people like Dave Ramsey who offer simplistic financial panaceas for complex and highly variable circumstances.

 

[480640]

.

 

[Cello]

In the case that you put the money and get 8% return on the investment in an index fund for example, how much of it is profit after inflation and taxes?

Taxes depends on how you are investing. You can invest a significant amount with little or no tax burden. Inflation works against your investments but benefits your loans ($400k won't be worth as much in the future). Remember that you are paying down your loans with taxed income and you can only write off $2,500 of interest.

 

[schmoob]

In the case that you put the money and get 8% return on the investment in an index fund for example, how much of it is profit after inflation and taxes?

Many investments also provide a tax shelter vehicle. So although you pay taxes on your capital gains, you reduce your tax liability on your earnings.
Inflation is negligible when you're compounding at 8%. When the market takes a hit and share prices drop, you have more buying power and purchase more shares. Shares grow, so if you're growing at 8% on more shares you earn more.

 

[TheVoMan]

Thank you all for your insight, they are all immensely appreciated.

I guess it's worth noting that I have ownership of a townhouse back in Virginia, in which my fiance is willing to support me in (food and bill-wise). On the other hand, as many of you said, I may have to move away from that town house and open up in a rural area. While I'm okay with the move, my fiance isn't very fond of the idea.

I was going to open a dentaltown account, but when they asked for my living location, I thought that was fishy so I didn't follow through. I'll probably follow through this time.

Many of you said that opening an office after 1-2 years (rather than buying) was probably the wiser course of action. This sounds like a reasonable approach, that works with me and my fiance.

You are all very right, when I wanted to enter this career, I was okay with the idea of acuring debt to invest for higher income. I think I forgot that when I realized my total debt. Someone said earlier that 360k was actually 430 K which seems about right in my circumstance, so it's definitely intimidating. Should I continue with this mindset though? The mindset being continue being in debt for for an extra 1-2 more years and even increasing the debt in order to open office and produce higher income to tackle the debt.

I guess the reality is that I will probably always be paying off my office loans and house mortgage, but I think it's reasonable to say that school loans should be paid off as soon as possible (but in saying that I also mean start paying them off once I have my own practice).

Are there any more stories as to how they tackled the debt?

 

[schmoob]

1500-2000 in just pure rent or what? What about all the costs of living besides rent like food water etc. If I bring home 70k pure income after taxes and apply 60k of it to debt, I'll be debt free in 5-7 years (WOW that is a long time with parents)

Theoretically, it sounds great. But in reality you will get very sick of being a 30+ year old doctor living with your parents on a few hundred bucks a month. It's not realistic. ESPECIALLY if you decide to have a family at some point.
You will do just fine. Minimize your debt as much as possible, make smart decisions after dental school, and you will pay off your loans and enjoy the life you worked so hard for.

Thank you all for your insight, they are all immensely appreciated.

I guess it's worth noting that I have ownership of a townhouse back in Virginia, in which my fiance is willing to support me in (food and bill-wise). On the other hand, as many of you said, I may have to move away from that town house and open up in a rural area. While I'm okay with the move, my fiance isn't very fond of the idea.

I was going to open a dentaltown account, but when they asked for my living location, I thought that was fishy so I didn't follow through. I'll probably follow through this time.

Many of you said that opening an office after 1-2 years (rather than buying) was probably the wiser course of action. This sounds like a reasonable approach, that works with me and my fiance.

You are all very right, when I wanted to enter this career, I was okay with the idea of acuring debt to invest for higher income. I think I forgot that when I realized my total debt. Someone said earlier that 360k was actually 430 K which seems about right in my circumstance, so it's definitely intimidating. Should I continue with this mindset though? The mindset being continue being in debt for for an extra 1-2 more years and even increasing the debt in order to open office and produce higher income to tackle the debt.

I guess the reality is that I will probably always be paying off my office loans and house mortgage, but I think it's reasonable to say that school loans should be paid off as soon as possible (but in saying that I also mean start paying them off once I have my own practice).

Are there any more stories as to how they tackled the debt?

How are you paying for the townhouse back in VA? Renters?

Debt is not always bad. You will always have some sort of debt. A mortgage is the cost of a place to live. Even your apartment is a debt. But you need these costs. The focus should be the debt to income ratio.
What does your fiance do (if you don't mind me asking)? Also, what are the marriage plans?
I apologize if those questions seem intrusive or irrelevant, but the reason I ask is because depending on her career, you should both think of a way to live after school is over so that you can both be successful AND happy. It seems that you are both already doing that.
The marriage question is important. VERY VERY IMPORTANT. Think about this from a legal standpoint. If you two get married right now, she is not doing you a favor by supporting you while in school so you can minimize your student debt. It is all collective. She would be the primary source of FAMILY income while minimizing the debt both of you are incurring. It would be her debt too. So it would be in both your best interests to help minimize the financial strain on both of you.
You both seem to be on the same page as far as making big decisions, which is very important and you're off to a good start.

 

[TheVoMan]

Theoretically, it sounds great. But in reality you will get very sick of being a 30+ year old doctor living with your parents on a few hundred bucks a month. It's not realistic. ESPECIALLY if you decide to have a family at some point.
You will do just fine. Minimize your debt as much as possible, make smart decisions after dental school, and you will pay off your loans and enjoy the life you worked so hard for.



How are you paying for the townhouse back in VA? Renters?

Debt is not always bad. You will always have some sort of debt. A mortgage is the cost of a place to live. Even your apartment is a debt. But you need these costs. The focus should be the debt to income ratio.
What does your fiance do (if you don't mind me asking)? Also, what are the marriage plans?
I apologize if those questions seem intrusive or irrelevant, but the reason I ask is because depending on her career, you should both think of a way to live after school is over so that you can both be successful AND happy. It seems that you are both already doing that.
The marriage question is important. VERY VERY IMPORTANT. Think about this from a legal standpoint. If you two get married right now, she is not doing you a favor by supporting you while in school so you can minimize your student debt. It is all collective. She would be the primary source of FAMILY income while minimizing the debt both of you are incurring. It would be her debt too. So it would be in both your best interests to help minimize the financial strain on both of you.
You both seem to be on the same page as far as making big decisions, which is very important and you're off to a good start.

Thank you for the quick response. You're absolutely right, my townhouse is being funded by renters, of which I send all the profits to my mother in order to help her get closer to retirement faster. I've been doing this since undergrad and haven't changed that (she's gotten used to the lifestyle right now), but once I'm done with school, my fiance and I were planning in living in the townhouse to minimize our living expenses and at least putting our money towards our realty investment.

Not intrusive at all, my fiance is a web developer, but her income isn't as high as you may think at the moment. We intend on marrying at least 1-2 years after I finish school so that we had a chance to save up for a decent wedding. In addition, I didn't think she was ready to be undertaking the amount I'm in right now, so I didn't think it was time for us to marry just yet.

I've heard that debt is not always bad, and something about how it affects taxes, but I never truly understood that concept but I'm always willing to learn.

 

[periopocket]

Go into corporate dentistry for a couple years, get your speed up, then open up a rural practice.

 

[schmoob]

Thank you for the quick response. You're absolutely right, my townhouse is being funded by renters, of which I send all the profits to my mother in order to help her get closer to retirement faster. I've been doing this since undergrad and haven't changed that (she's gotten used to the lifestyle right now), but once I'm done with school, my fiance and I were planning in living in the townhouse to minimize our living expenses and at least putting our money towards our realty investment.

Not intrusive at all, my fiance is a web developer, but her income isn't as high as you may think at the moment. We intend on marrying at least 1-2 years after I finish school so that we had a chance to save up for a decent wedding. In addition, I didn't think she was ready to be undertaking the amount I'm in right now, so I didn't think it was time for us to marry just yet.

I've heard that debt is not always bad, and something about how it affects taxes, but I never truly understood that concept but I'm always willing to learn.

You've got a good, positive attitude.
It will be quite difficult to save for a wedding after graduation. Since we are discussing debt, adding a wedding to the picture is another expense. Based on some of things you mentioned, it seems that you really care about others, which is a rare characteristic these days. You want to make your future wife happy, and take care of your mom. But with weddings, they really are overrated. I know it's an important day in a woman's life to be a bride, but in retrospect I really wish we didn't give so much of our time, effort, and money to our wedding. They are just so damn political!! Who to invite, not to invite, where they sit, who they can't sit next to, which of your parents friends that you couldn't care less about but need to invite because thy invited your parents to their kids wedding. Seriously, it became more of a headache than a fun day. We spent money on an awesome menu and the guests were raving about it. We went home hungry. Seriously! No one eats at their own wedding (there was a McDonald's commercial recently of a bride and groom getting in their limo after the wedding, and the dad put McDonald's in there for them). They have to talk to people all night and stuff. Plus, people get you all kinds of things that you don't need. Yeah, that platter I never use was a great wedding gift lol. I don't even talk to most of the people at my wedding regularly.
If I had the option to do it again, I would do something very small. Just our very closest relatives and friends. I'm talking like 30 people max. Have the focus be great food, great atmosphere, and FUN. I would use the money I would've spent on the wedding on something more useful, like debt reduction, business capital, or reducing the principle on your mortgage. Things that actually benefit your new family.

Ok lol sorry for the tangent, or if I crossed any boundaries. These are things that I just wish I would have known. Just some food for thought.

 

[Incis0r]

We spent money on an awesome menu and the guests were raving about it. We went home hungry. Seriously!

If I had the option to do it again, I would do something very small. Just our very closest relatives and friends. I'm talking like 30 people max. Have the focus be great food, great atmosphere, and FUN. I would use the money I would've spent on the wedding on something more useful, like debt reduction, business capital, or reducing the principle on your mortgage. Things that actually benefit your new family.

One of these days, when I start earning, I'm going to take you out to the best buffet restaurants in town and pay for your meals.

 

[Cello]

The marriage question is important. VERY VERY IMPORTANT. Think about this from a legal standpoint. If you two get married right now, she is not doing you a favor by supporting you while in school so you can minimize your student debt. It is all collective. She would be the primary source of FAMILY income while minimizing the debt both of you are incurring. It would be her debt too. So it would be in both your best interests to help minimize the financial strain on both of you.
You both seem to be on the same page as far as making big decisions, which is very important and you're off to a good start.

But be wise, there are few expenses bigger or worse than a divorce!

 

[Redtwogreen]

I agree with a lot that has been said about being comfortable with some debt. Yes you took out debt to go to dental school so that you could arguably earn more money. Yes, people take on debt to invest in real estate (thats us!), and yes, dentists take on debt to run their own practices (that will be us in a year or so!). Depending on your circumstances and personality, taking on debt to earn more can be the way to go.

However, we are taking a different approach than it sounds like most people are doing on this thread. We have $600k in combined student loan debt (wife law school, me dental school). We are paying it off on our own. For us, it was the approach that made the most sense. We have crunched the numbers a million times. Several of our loans have interest rates above 7%. The argument that we will make more by investing than we will by paying off our loans is just not likely for us. The detailed analysis of what we are doing is here: http://www.redtwogreen.com/rethinking-our-repayment-plan/ if you are interested in that, but the short version, is that paying it off as quickly as possible will make us the most money.

I am working at a small corporate practice but plan to own my own practice before our student loan debt is repaid. I understand the value of making debt work for you, it just didn't make sense in our situation. That being said, everyone is different, I don't know all of the details of your situation, just offering a different perspective.