Financial value of HPSP vs buying into a practice

[youraverageasia]

I will most likely be attending MWU AZ next fall, and the expected loans I'll take out is about $400K. I'm debating whether or not to do the HPSP or buy into a practice 2 years out. Financially, which would be the smarter decision?

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[Munks]

HPSP, though I like the safe routes.

 

[ncide]

It seems that most people on Dental Town would recommend the military route and to not go in debt for 400k, but then some guys are just killing it in practice. Someone posted a thread about GP earnings, and some guys just a few years out are making 400-500k a year. Some established individuals hit 800k-1.1 million take home a year. The income potential is in owning a private practice, but then you also have some people making significantly less and it's not guaranteed that you will be successful. Military route is a safe choice but the income is significantly less than ownership.

 

[deleted696582]

HPSP. Consider that interest on your 400k in loans turns into something like 480k by the end of school. That's close to $3200 a month on a 25 year repayment plan.

While I'm not exactly sure what your pay is as a military dentist, I think it's around 70k a year. That means theoretically you're making something like $190k a year in the military, because all of that debt got paid for. Don't forget the signing bonus.

If you do your time and leave the military after four years, you are debt free and clinically competent enough to open your own practice instead of buying in. The sky is then the limit for earnings. You may even have savings from your earnings during military payback. None of your classmates will be debt free four years out of school.

Of course, you'll be in the military, so social life and relationships can be affected. You go where they tell you. Plus it isn't easy to get the scholarship, unless you already received it. Finally, I'm probably a bit biased, since I'm doing HPSP. Keep digging around these forums, there's plenty of great info.

 

[LFA20]

I will most likely be attending MWU AZ next fall, and the expected loans I'll take out is about $400K. I'm debating whether or not to do the HPSP or buy into a practice 2 years out. Financially, which would be the smarter decision?

Don't go to dental school if you have to take on that much debt. The stress from school itself is already overwhelming..

 

[Incis0r]

True.

 

[deleted696582]

You talk about value- I'll add my $0.02.

With the military, you get some nice experiences. I'm excited about getting to deploy, treating our servicemembers, being stationed overseas, and living the military life for a while.

If you buy into a practice, you don't have the financial freedom to do that- you have a business to run and a loan to pay off!

And you might never be able join the military- several branches are relying on HPSP to bring in fresh blood, and direct accessions are on a case-by-case basis.

Join the Navy: See the World

 

[Incis0r]

Join the Navy: See the World

Haha.

 

[deleted696582]

I do think they exaggerate that a bit given that if you're on a ship, most of your time may well be spent underway, but if you can get an assignment with a dental battalion overseas, or if you can get stationed on a base overseas (Bahrain, Diego Garcia, Japan, etc.), man it truly is Join the Navy See the World!

Personally, I'd like to be on a ship. Ships are awesome.

Yeah, when they say "see the world", I'm sure we'll be seeing that the world is 71% water, if you're on a ship.

 

[DentalAptitude]

As someone who is incredibly business oriented, and plan on being a multiple practice owner, my opinion still leans toward HPSP. Yeah, yeah, the earnings potential this and that. In the end, I don't want to be stuck paying what really amounts to 800-900k if I'm left with school loans. I can do all the financial analysis I want and predict future cash flow, it still is not guaranteed. A scholarship is. I would consider myself far from risk-averse as well. Just my opinion.

The facts are that you can be incredibly financially successful, enough to pay off a 25 year loan structure in 10 to substantially decrease the weight of interest. Thats a minority of practitioners though, and takes incredibly strong business schools, or some real luck. I'd like to know how many dentists, in reality, actually take home more than 250-300k a year (not including specialists). I'd look it up on the ADA fact reports I have, but its Friday and I'm lazy. Lol. I just have been debt free thus far, and want to keep it that way. Besides, nothing is stopping you from buying a practice/practices as a practicing dentist in the HPSP. Business ownership in reality only takes so many hours, its primarily delegation and administration. It depends on how savvy you are though.


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[DentalAptitude]

While I'm on a roll thus far, I mine as well share that it really is possible to do both, if you're the right person for it. Don't count that out. Business ownership doesn't mean you have to be the head practitioner. An interesting idea:

Options. Those crazy things you hear about on wall street aren't only a form of financial security, it's actually primarily a contract. An option: securing purchase price NOW to buy in the future. This is even better if you actually have the "stock" (ownership interest) transferred to you as you pay off the loan. Income from the practice will more than suffice to cover this, as long as the retiring dentist doesn't keel over, or decide to cut production in half. You can also take over the budgeting, as most dentists near retirement tend to not care or be as strict when there is less incentives like paying off loans (sorry to sterotype)


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[DentalAptitude]

Moreover, you can also hire an associate and finance a practice outright. Even better if you privately arrange the financing instead of heading to the bank. Most (selling) dentists don't even know the tax ramifications of taking a lump sum (when you bank finance). Its actually better to work some accounting magic and count it as a capital gain. Additionally, many young associates don't want the managerial crap, so this is where you salary them and just have incentive to make net income. You may not see a dime or even make a loss (which actually doesn't mean you owe anything, in fact you get tax breaks this way, hence why amazon has had negative earnings most their life), but its a passive investment that will eventually be a cash cow.

Ok i'm done giving away my secrets for the day.


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[schmoob]

Yeah, when they say "see the world", I'm sure we'll be seeing that the world is 71% water, if you're on a ship.

You'll have the chance to see plenty of places, don't worry.

 

[makoons]

I will be doing a similar thing to HPSP with the Indian Health Service for dental school and my reasons for doing that were as follows:

-400k of debt is a ridiculous amount of debt (to pay off in 10 yrs you're looking at ~4.5k monthly in payments) honestly I have no idea how I could have the equity to buy into a practice after 2 years if I'm making 100k-150k as an associate and half of that goes into your loan debt.
-the experience you get as a public service dentist is incredible. you will be doing less referrals and doing more procedures that you feel less comfortable doing until you are comfortable with them. a close dentist mentor near the end of his career says he wishes he had that opportunity, but liability in private practice (especially in saturated areas) can be scary.
-I am young and have 4 years to spare not making a ton of money but learning enough to be a really awesome dentist later.
- fulfillment of public service in a cultural context, not really relevant to the military, but I want to serve my people and inspire kids on the reservation to become dentists etc.

Now that you've read that I just want to say that I'm not in dental school yet, so I might not have a perfect understanding of how everything works but that's the reason I decided to go with IHS.

 

[ncide]

I will be doing a similar thing to HPSP with the Indian Health Service for dental school and my reasons for doing that were as follows:

-400k of debt is a ridiculous amount of debt (to pay off in 10 yrs you're looking at ~4.5k monthly in payments) honestly I have no idea how I could have the equity to buy into a practice after 2 years if I'm making 100k-150k as an associate and half of that goes into your loan debt.
-the experience you get as a public service dentist is incredible. you will be doing less referrals and doing more procedures that you feel less comfortable doing until you are comfortable with them. a close dentist mentor near the end of his career says he wishes he had that opportunity, but liability in private practice (especially in saturated areas) can be scary.
-I am young and have 4 years to spare not making a ton of money but learning enough to be a really awesome dentist later.
- fulfillment of public service in a cultural context, not really relevant to the military, but I want to serve my people and inspire kids on the reservation to become dentists etc.

Now that you've read that I just want to say that I'm not in dental school yet, so I might not have a perfect understanding of how everything works but that's the reason I decided to go with IHS.

That's why you should go into private practice. On dental town, the docs who responded to the income survey that owned their own private practice were making 400k (pre-tax). The opportunity to buy a practice is your dental degree; banks routinely give loans out to doctors.

 

[stoopidmonkeycatdog]

Moreover, you can also hire an associate and finance a practice outright. Even better if you privately arrange the financing instead of heading to the bank. Most (selling) dentists don't even know the tax ramifications of taking a lump sum (when you bank finance). Its actually better to work some accounting magic and count it as a capital gain. Additionally, many young associates don't want the managerial crap, so this is where you salary them and just have incentive to make net income. You may not see a dime or even make a loss (which actually doesn't mean you owe anything, in fact you get tax breaks this way, hence why amazon has had negative earnings most their life), but its a passive investment that will eventually be a cash cow.

Ok i'm done giving away my secrets for the day.


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This is actually a very good idea, if you're business savvy and knowledgeable about finances.

Lol I would probably take it down, not that it actually matters

 

[DentalAptitude]

Thanks! You're right, but I don't mind sharing what I know up to a point, which is pretty high. I'm here for the betterment of all


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