Dave Ramsey's Reaction to $750K Dental School Debt

[SigmaFS]

Dave Ramsey's Reaction to $750K Dental School Debt. I'm not a fan of Dave Ramsey's positions as it applies to health professionals because his knowledge is limited. None the less, I'm still surprised how financially naive adults can be. https://www.youtube.com/watch?app=desktop&v=tqdmi8d31uY

My comments: Income Driven Repayment (IDR) Plans - These repayment plans determine federal student loan repayment based on % of Adjusted Gross Income ~ 9% of AGI. At an AGI of $200k, she would pay approximately $18k/year or $1,500/month. Likely the only way to make this debt service manageable. But, it's not a panacea. Any debt forgiveness at the end of the repayment period (usually 20 to 25 years), could be taxable income (and, this is probably a negative amortizing loan). Diligent planning (ie, investing for the tax bomb) will help mitigate the cost of the loan. Too many recent grads don't appreciate the circumstances they put themselves in.

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[Big Time Hoosier]

ie, investing for the tax bomb

Imagine approaching your ultimate loan forgiveness and having saved for the “tax bomb,” and then something like a recession or a war happens and a third of that savings vanishes. But, those things never happen, so you’re prolly ok.

Big Hoss

 

[voxveritatisetlucis]

750k to maybe make 250k. Makes sense.

 

[SigmaFS]

Diligent planning...a target-based fund might be appropriate for asset allocation and risk management. The recent S&P 500 drop bottomed at about -30%, so you're better off than not being proactive.

 

[Let me out!]

Dave Ramsey is an idiot.

He had multiple videos in the past where he made stupid comments and advice about health professions. And the idiot says don't use credit cards.

Not sure how he's a financial adviser with such limited knowledge.

 

[Mr.Smile12]

Dave Ramsey is an idiot.

He had multiple videos in the past where he made stupid comments and advice about health professions. And the idiot says don't use credit cards.

Not sure how he's a financial adviser with such limited knowledge.

All one needs to do is sound smart to people who don't know any better but will pay you to confirm their beliefs. Like how ivermectin can cure you from COVID. (Refraining from any admissions-related analogies.)

 

[voxveritatisetlucis]

Dave Ramsey is an idiot.

He had multiple videos in the past where he made stupid comments and advice about health professions. And the idiot says don't use credit cards.

Not sure how he's a financial adviser with such limited knowledge.

In this case he’s right. Who would ever take out 750k for graduate school especially when BLS says that dentists make a median of 160k. 750k would really only be worth it if you were guaranteed to match neurosurgery, plastics, or orthopedic surgery from a debt to income ratio.

 

[Mr.Smile12]

Apparently he was outraged when the debt was around $450k back in 2016 (seeing the similar threads links)...

 

[charlestweed]

It doesn't matter what profession (health vs nonhealth) you choose. It's still the math problem. And the math doesn't change. The more money you owe, the higher the repayment amount you have to make every month. That's why a lot of dentists and doctors have come to Dave Ramsey's show to seek financial advice from him. Dave's advice may sound extreme but they have helped a lot people get out of the debt trouble. Just like my fitness trainer, he gave me a list of food that I can't eat.....he basically told me to starve. Most people can't eat like that and that's why most people (myself included) at my age are in unfit shape.....many died of heart attacks and strokes.

When you only put aside 9% of your income toward the debt repayment, you don't really pay back the debt because the repayment amount is less than the interest amount. As Periodont, a frequent member here, put it, you simply transfer the loans from Sallie Mae to the IRS, which is the most feared government institution. The reason the government let you do this IDR thing is they want to own you for rest your life. You will forever be the slave to the government if you do this IDR thing. You will put your family at great risk. When you only put aside 9%, you fail to recognize that you are broke and you will go out and buy stupid things. Most dentists (myself included) are not good with their money. Most want instant gratification (who doesnt?) especially when they had already put in 8 + years of schooling. I know that I myself am not very good at investing my money (totally clueless about stock investments) so I put a large (at least 50%) chunk of my income toward debt repayments (student loans, home loans, rental properties loans etc). When I didn't have a lot of money left after loan repayment I couldn't go out buying/wasting my money on stupid things....it prevented me from developing a bad spending habit.

Dave is not always right. He is against leasing cars. But he doesn't realize that not all cars are reliable like a Toyota. Luxury German cars require a lot of expensive repairs/ maintenances after the warranty expires in 3 years. That's why I lease cars and return them before their warranties expire. Nonetheless, Dave is still right about not wasting money on cars since car's value depreciates quickly over time. I can afford to lease cars and go against Dave's advice because I am debt free....and I work hard.

 

[askadds]

its amazing reading the comments on SDN vs on dental town (folks who are ACTUALLY doing dentistry). SMH, no it does not make sense to borrow 750k to make 250k (false, vast majority of dentists make 120k-150k). Add another 500k+ in building a practice. Add another million on buying a house. Add life expenses in and its a total scam. Oh I forgot, you have no medical insurance, no 401k.

 

[Mr.Smile12]

its amazing reading the comments on SDN vs on dental town (folks who are ACTUALLY doing dentistry). SMH, no it does not make sense to borrow 750k to make 250k (false, vast majority of dentists make 120k-150k). Add another 500k+ in building a practice. Add another million on buying a house. Add life expenses in and its a total scam. Oh I forgot, you have no medical insurance, no 401k.

Feel free to have a few of the DT folks visit us with their perspectives on this issue.

 

[askadds]

Feel free to have a few of the DT folks visit us with their perspectives on this issue.

You're an admissions advisor? What school? What are you telling your predental students and are you having a conversation about the amount of debt associated with and post graduation or are you more focused on the academic side? I am on dental town and what I have been posting is what the majority of dentists say about the profession.

 

[Mr.Smile12]

You're an admissions advisor? What school? What are you telling your predental students and are you having a conversation about the amount of debt associated with and post graduation or are you more focused on the academic side? I am on dental town and what I have been posting is what the majority of dentists say about the profession.

I no longer work for admissions to a dental school so I'm a bit more free to discuss. In my HPSA project in Becoming a Student Doctor, I have a unit focused on student debt, financial aid, and what the challenges are to start your own business, but I always look for more, especially since the resource is meant to be Interprofessional. And I'm sure SDN would be game for a webinar about the topic, so let me know.

Early on though as an advisor, I have asked students to really think of how they manage their debt burden as an investment on themselves, but you can understand how that went over a lot of students' heads. I push for the known scholarships we talk about here. I've let professionals also really discuss this to their comfort level. I have many who are first generation low income students who have had big dreams about being dentists, and it is critical to discuss.

I had a discussion with my dean (then) when he asked me how specific tuition increases would affect our application pool. That was many, many years ago. ADEA supposedly had a Presidential Task Force? looking at the student debt burden, but I don't remember whatever came of it.

I think that application pool is flattening and decreasing. But I have to see if the cost is the real reason over other trends (fewer graduates from college).

 

[SigmaFS]

Feel free to have a few of the DT folks visit us with their perspectives on this issue.

That's why online forums exist...a free flow of thoughts and experiences. Please feel free to visit to broaden your perspective. And, but for the IDR repayment options, too many would be committing financial suicide.

 

[charlestweed]

its amazing reading the comments on SDN vs on dental town (folks who are ACTUALLY doing dentistry). SMH, no it does not make sense to borrow 750k to make 250k (false, vast majority of dentists make 120k-150k).

You’re right. It’s not easy to make $200k as a GP, especially if the dentist is a new inexperience grad. To break the $200k income ceiling, one may have to work 6 days/wk. One can work crazily like that when one is young, healthy, has zero back problem, and has no kid. That’s what Dave Ramsey recommended in this video: either work like a dog and live like a broke student for the first 3-4 years to pay off the debt……OR be a “normal” dentist (work 4 days/wk and take vacation every year) and live with this massive debt for the next 2 decades of your life.

Add another 500k+ in building a practice.

A dental practice doesn’t have to cost $500k to build. When I opened my first office in 2006, I could only afford to spend $120k to build one because my wife and I had already owed close to $1 million ($450k student loan + $382k home loan+ 2 lease cars). The fear of losing a house and the possible failure of my practice (I am in a very saturated area) prevented me from spending big on my new practice. And 5 years ago, I moved my practice to another location and I only spent $55k ($65k but the landlord gave me back $10k for tenant improvement) to covert an existing medical office to an ortho office. Laminate flooring and paint are cheap. Here was what it looked like after the conversion.

Add another million on buying a house.

I don’t think with such massive student loan debt, the bank would approve another $1million loan for purchasing a house. Ever since the housing market crashed in 2008, banks have become very strict. This is a good thing because it prevents a broke dentist from getting into further debt trouble. With such massive debt, it’s better to be a renter for a while…until the student loans are paid off. You are not supposed to buy anything when you're broke.

Add life expenses in and its a total scam. Oh I forgot, you have no medical insurance, no 401k.

Hopefully, the husband of the dentist in the youtube video above has health insurance and 401k from his job.

 

[Ivy.ch]

Becoming a dentist used to be about having a good job and living a good life. Carrying around $500k in debt is not compatible with the dream.

 

[Rvting]

That's why online forums exist...a free flow of thoughts and experiences. Please feel free to visit to broaden your perspective. And, but for the IDR repayment options, too many would be committing financial suicide.

Excuse me, I am not the greatest with acronyms. What's 'IDR', again?

 

[askadds]

You’re right. It’s not easy to make $200k as a GP, especially if the dentist is a new inexperience grad. To break the $200k income ceiling, one may have to work 6 days/wk. One can work crazily like that when one is young, healthy, has zero back problem, and has no kid. That’s what Dave Ramsey recommended in this video: either work like a dog and live like a broke student for the first 3-4 years to pay off the debt……OR be a “normal” dentist (work 4 days/wk and take vacation every year) and live with this massive debt for the next 2 decades of your life.

A dental practice doesn’t have to cost $500k to build. When I opened my first office in 2006, I could only afford to spend $120k to build one because my wife and I had already owed close to $1 million ($450k student loan + $382k home loan+ 2 lease cars). The fear of losing a house and the possible failure of my practice (I am in a very saturated area) prevented me from spending big on my new practice. And 5 years ago, I moved my practice to another location and I only spent $55k ($65k but the landlord gave me back $10k for tenant improvement) to covert an existing medical office to an ortho office. Laminate flooring and paint are cheap. Here was what it looked like after the conversion.
View attachment 362864

I don’t think with such massive student loan debt, the bank would approve another $1million loan for purchasing a house. Ever since the housing market crashed in 2008, banks have become very strict. This is a good thing because it prevents a broke dentist from getting into further debt trouble. With such massive debt, it’s better to be a renter for a while…until the student loans are paid off. You are not supposed to buy anything when you're broke.

Hopefully, the husband of the dentist in the youtube video above has health insurance and 401k from his job.

Some of the points you are making are correct but its not the norm.

"A dental practice doesn’t have to cost $500k to build" - it actually does these days, its roughly $200/sq to build a space from scratch after covid and I doubt these prices will come down. This is construction only, so 2000sq foot = 400K. Equipment is roughly 25-30k per op and we have not started speaking of IT, initial supplies, pano and list goes on. I do side consulting for start ups and 500k is average my clients are paying for a basic office and the ones choosing to do fancy build outs are north of 600k+. I know I know, it sounds crazy but I see these numbers all the time. Your situation is unique, trust me.

"bank would approve another $1million loan" - certainly they do and it will get the borrower in further debt. Your office loan does not show up on the personal level at all, as long as there is cash flow at the personal level to justify it, they will approve it. Again I been there and done it.

I have lurked on this forum and have read many of the posts. I will say it again, do not look at the top notch guys and think that ALL dentists are like this. The average dentist is doing 150k to 200k at best. I will also say that I am posting this to not discourage anyone from pursuing a career in dentistry but rather present the facts on the ground so future dentists know what they are getting themselves into. The facts are HUGE debt with decrease compensation thanks to insurance companies, ie delta has not raised our fees in over 2 decades. These two are the reasons multiple dentists have started to come on student doctor network recently to post, its alarming.

 

[charlestweed]

Some of the points you are making are correct but its not the norm.

"A dental practice doesn’t have to cost $500k to build" - it actually does these days, its roughly $200/sq to build a space from scratch after covid and I doubt these prices will come down. This is construction only, so 2000sq foot = 400K. Equipment is roughly 25-30k per op and we have not started speaking of IT, initial supplies, pano and list goes on. I do side consulting for start ups and 500k is average my clients are paying for a basic office and the ones choosing to do fancy build outs are north of 600k+. I know I know, it sounds crazy but I see these numbers all the time. Your situation is unique, trust me.

Even with the rising cost of the building material in this post-Covid era, it still shouldn’t cost $500k to build an office. For a start up, a 2000sf space is too big. You can easily fit 4-5 chairs in a 1200 sf space. Smaller office space = lower construction cost = lower monthly rent. You don’t need to have your own private “doctor office.” The staff lounge should only be big enough for a small table. The staff and you are supposed to be on the clinic floor to work and not to chill or play with the cell phones in the lounge. There are plenty of ways to save $$$ such as buying used chairs and equipment, running air/vac lines above ground, sharing the office space with another health professional, negotiating with the landlord to pay for tenant improvement, avoiding big dental companies like Henry Schien, watching youtube video to learn how to fix the equipment etc.

One of my referring GPs has a 2 op office that she shares with her dad, who is a pharmacist. Her initial investment for that office was less than $50k. I share an office with a GP friend of mine…..the initial construction cost for my part was zero….I pay him a flat rent rate of $1700 a month….that’s one of my satellite offices. I paid another $10k for a used pano machine.

I highly recommend the new grads to go work at busy corp office and learn how the corps keep their overhead low. I had worked for the corp for 4 years before I started my own office. I learned a lot. When I started my own office, I knew exactly what I needed to buy and what not to waste my money on.

If one doesn’t have any experience in a new start up, one should keep everything as small and low cost as possible. If the practice fails, one can just walk away with minimal loss. But if the practice does well, one can always expand the office or open a 2nd location later.

"bank would approve another $1million loan" - certainly they do and it will get the borrower in further debt. Your office loan does not show up on the personal level at all, as long as there is cash flow at the personal level to justify it, they will approve it. Again I been there and done it.

Don’t the banks look at the student loan debt? and debt to income ratio? Well, even if it falls through the cracks, at least buying a house is a good investment since home prices always go up over time. If after a few years, you feel you can’t pay the home mortgage, you sell the house and earn a nice profit.

 

[SigmaFS]

Excuse me, I am not the greatest with acronyms. What's 'IDR', again?

Income Driven Repayment of which there are 4:

1. Income Contingent Repayment (ICR)
2. Income Based Repayment (IBR both old and new)
3. Pay As You Earn (PAYE)
4. Revised Payment As You Earn (REPAYE)

 

[SigmaFS]

Just spoke with a DDS 2023 student with ~$560K from a private school accepted to a private school for a Perio residency. Projected debt, assuming interest begins to accrue as of July 2023, about $1.2M. She's not alone.

 

[doc toothache]

Dave Ramsey's Reaction to $750K Dental School Debt. I'm not a fan of Dave Ramsey's positions as it applies to health professionals because his knowledge is limited. None the less, I'm still surprised how financially naive adults can be. https://www.youtube.com/watch?app=desktop&v=tqdmi8d31uY

My comments: Income Driven Repayment (IDR) Plans - These repayment plans determine federal student loan repayment based on % of Adjusted Gross Income ~ 9% of AGI. At an AGI of $200k, she would pay approximately $18k/year or $1,500/month. Likely the only way to make this debt service manageable. But, it's not a panacea. Any debt forgiveness at the end of the repayment period (usually 20 to 25 years), could be taxable income (and, this is probably a negative amortizing loan). Diligent planning (ie, investing for the tax bomb) will help mitigate the cost of the loan. Too many recent grads don't appreciate the circumstances they put themselves in.

DR's knowledge may be limited, but it is unlikely that health professionals would be the only area where he has a lack of understanding. It is also interesting that when he makes negative comments about a particular group/subgroups there is a knee jerk defensive reaction. As someone mentioned, he may indeed be an "idiot", however he does appear to have a pretty good grasp of managing one's income/expenses. It doesn't take a genius to realize that paying 16+% interest on a credit card debt is not a wise choice.

 

[Big Time Hoosier]

Caller: The school cost $750,000, but it’s a good school.

Dave Ramsey: Your wife paid more than double what she should have. It’s a bad school.

Story checks out.

Big Hoss

 

[Roto Picante]

Ramsey is a business man. He makes money by teaching financial principles. He has created a product (philosophy) surrounding financial principles that is just different enough from what the rest of the world teaches. He isn't stupid, he knows that there isn't a one size fits all financial path. He knows that the ability to create cash flow can out weigh the negatives of debt. But he has a product to sell, and if he goes around giving caveats to his principles every time a dentist calls in, his product loses substance. His main client base is not on average, people making more than 100k. It is the person struggling to make ends meet and that have consumer debt.

 

[charlestweed]

In order to qualify for one of these IDR plans, you have to show proof that your income is not high enough to pay back the loans with the standard 10-year loan repayment plan. And to maintain the eligibility, you have to submit proof of income every year. So if you sign up for one of these IDR plans, your goal is to stay with the same low paying job for the next 25 years. These IDR plans essentially encourage you to keep your income low, instead of inspiring you to work hard and to get rich fast. Debt (and other life challenges) actually helps teach a person a lot in life.

This is what I found on Dave Ramsey’s website, which goes over types of IDR. The Truth About Income-Driven Repayment Plans

 

[SigmaFS]

In order to qualify for one of these IDR plans, you have to show proof that your income is not high enough to pay back the loans with the standard 10-year loan repayment plan. And to maintain the eligibility, you have to submit proof of income every year. So if you sign up for one of these IDR plans, your goal is to stay with the same low paying job for the next 25 years. These IDR plans essentially encourage you to keep your income low, instead of inspiring you to work hard and to get rich fast. Debt (and other life challenges) actually helps teach a person a lot in life.

In order not to qualify for New IBR, PAYE, or REPAYE, your adjusted gross income (AGI) needs to be approximately 1.4x your loan balance. $750K loan balance x 1.4 = $1.05 AGI. Regarding the low income numbers, here's a quick analysis:

 

[doc toothache]

A tax bomb of ~500K is a heck of a lot better than owing a cool mil.

 

[charlestweed]

In order not to qualify for New IBR, PAYE, or REPAYE, your adjusted gross income (AGI) needs to be approximately 1.4x your loan balance. $750K loan balance x 1.4 = $1.05 AGI. Regarding the low income numbers, here's a quick analysis:

View attachment 362926
View attachment 362927

It’s good to know that you can still qualify if your income is 1.4x the total debt. The problem is when you don’t have to put aside a large amount (that the standard 10-yr repayment plan requires) to pay back the debt, you don’t feel you’re broke. So even with a low $120-150k income and a large $750k debt, you will still live very comfortably if you are in one of these IDR plans. When you’re comfortable, you have no incentive to work harder to increase your income, to save, and to invest for future retirement. Nobody enjoys working. I can’t imagine how a person manages to live an enjoyable life when he’s still in debt and has to worry about the tax bomb at 50-55. At this age, many still have young children who still rely on them for financial support (college tuition, cars, insurance, gas etc); it means that they will have to work longer to save for their own retirement. At 50+, it’s hard to work at the same level (and to earn the same income) as when you’re in your early 30s. This is something many predents don’t realize because they are still young and healthy….they don’t realize that their health won’t be the same 20-30 years from now….can’t work forever.

Dave’s plan is basically a “behavior modification” and its’ applicable to everyone. When you go through his “scorched earth, rice and bean” process, you will think entirely different about the money and how you spend it.

 

[Big Time Hoosier]

Threads like this make me so happy I took the HPSP.

Big Hoss

 

[SigmaFS]

This thread was posted on DentalTown with 165 comments and over 4k views. On SDN, about 700 views and 30 comments. What wrong with this picture (hopefully they're on DentalTown)?

 

[Benefischl]

This thread was posted on DentalTown with 165 comments and over 4k views. On SDN, about 700 views and 30 comments. What wrong with this picture (hopefully they're on DentalTown)?

View attachment 362967

Thanks for encouraging another resource..Dental Town doesn’t actually have a Pre Dental membership option to be on their forums (at least on the app). Seems like you have to already be a student or practicing dentist.

 

[Talonslash]

Thanks for encouraging another resource..Dental Town doesn’t actually have a Pre Dental membership option to be on their forums (at least on the app). Seems like you have to already be a student or practicing dentist.

I tried joining as an "other" student who is still in undergrad and they haven't accepted my membership.

Really annoying because it would be helpful to talk to the experts and what they think about different schools and specialties when making my decisions.

 

[Blueshirts]

I tried joining as an "other" student who is still in undergrad and they haven't accepted my membership.

Really annoying because it would be helpful to talk to the experts and what they think about different schools and specialties when making my decisions.

Your going to be shocked to hear their unfiltered opinions lol

 

[Big Time Hoosier]

Your going to be shocked to hear their unfiltered opinions lol

If you think Big Hoss can be “blunt” in his opinions, might not want to wander over there...

Big Hoss

 

[Talonslash]

Your going to be shocked to hear their unfiltered opinions lol

Uh oh.... is it specific schools they don't think are good or are they pessimistic about the state of dental schools/dentistry in general?

 

[Blueshirts]

Uh oh.... is it specific schools they don't think are good or are they pessimistic about the state of dental schools/dentistry in general?

In general, and it isn’t just older docs. 1 guy on the thread thought he would be capable of paying back the big student loan debt based on his experience, but he was the exception and is practicing as the only game in town somewhere in South Dakota where they NEED a dentist; the key is to find somewhere you are needed or its a race to the bottom.

 

[Talonslash]

In general, and it isn’t just older docs. 1 guy on the thread thought he would be capable of paying back the big student loan debt based on his experience, but he was the exception and is practicing as the only game in town somewhere in South Dakota where they NEED a dentist; the key is to find somewhere you are needed or its a race to the bottom.

Oh I see. I most likely will be staying in-state for dental school to try to mitigate this issue because I would like to work in a moderately sized metro. But I can see how it can get really bad with some private school debt (although my in-states are basically the most expensive in the country, which sucks).