How are people willing to take 450k+ debt?

[Incis0r]

Freedom isn't free.

Lovin' this patriotism!

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[strep mutans]

I was unaware of the $90,000+ income threshold. But I'm not sure where you are getting the double tax from. Can you elaborate? But even with the threshold, assuming that you are taxed only on any income over 90k, that would still be a pretty good deal imo. If your income over there is around 120k (it would probably be more because you have a US degree, which is highly respectable), then getting taxed on 30k+ isn't so bad. Keep in mind that this threshold doubles if you have a spouse.

What I meant by double taxed was that above 97,600, you are paying income tax to both the US and to your country of residence, if applicable. For example, if you make 120,000 in Denmark, you are taxed on the full 120,000 by Denmark, and on 22,400 (120,000-97,600) by the US. Obviously this would be a very bad deal considering Denmark's high tax rate, plus the additional US tax on the 22,400. My "double tax" statement is only applicable to countries that have their own personal income tax, however, so does not apply to working in the UAE specifically. In that regard, yes, it seems that the taxation would work to your benefit, if dentist salaries there are good. I personally wouldn't choose that path, but to each his own.

 

[Incis0r]

I'm not sure what it's like in Europe.

One word: socialism.

Taxes are pretty high in the US as well....your effective federal income tax is usually 22-28%, throw in an additional 5-7% for FICA, an additional 5% for state income taxes....and you could be paying as much as 40% of your income in taxes. Oh, and this is BEFORE property tax, sales tax, etc.

Put another way, if you work five days a week, consider that you're working Mondays and Tuesdays just to pay the government.

 

[strep mutans]

Ohh gotcha. I thought you meant the US would tax you twice the normal rate lol. I'm pretty sure income taxation by Middle Eastern countries is nonexistent, based on what some of my relatives that work there tell me. I'm not sure what it's like in Europe. But thanks for informing me, definitely some food for thought.

http://www.tradingeconomics.com/country-list/personal-income-tax-rate

 

[1070752]

Simply because there are many people who take out mortgages that are more than that. Now, why wouldn't I be taking on a debt of that size when I'd be making $100-200k? Simple cost benefit analysis, gets even better over time.

 

[Likkriue]

Simply because there are many people who take out mortgages that are more than that. Now, why wouldn't I be taking on a debt of that size when I'd be making $100-200k? Simple cost benefit analysis, gets even better over time.

Mortgages you get an actual house, and people usually don't mortgage a house unless they have a good source of income already. If you take on 450k debt you are paying 5.3K out of your paycheck every month if you do the 10 year repayment. Its not as simple as go out, get job after D-school.

 

[Incis0r]

Simply because there are many people who take out mortgages that are more than that. Now, why wouldn't I be taking on a debt of that size when I'd be making $100-200k? Simple cost benefit analysis, gets even better over time.

Mortgages are secured by the property; if things get too tight, you can sell the property and walk away.

Student loans are not dischargeable in bankruptcy. They will follow you around for life.

Mortgages are taken out on properties, and properties can be income-producing assets- they can produce income for you 24/7 if you rent them out.

Student loans grant you the ability to get an education, but strictly speaking, your dental education will only bring you income if you a) get a job and b) work at the job. It's not an "investment" in the sense that real estate is.

 

[strep mutans]

Put another way, if you work five days a week, consider that you're working Mondays and Tuesdays just to pay the government.

Yeah, all those damn government roads, transportation regulations, public school systems, waste sanitation, water treatment, health programs, veterans benefits, unemployment/social security/disability programs, science funding like NIH, military, and national and state park preservation.

 

[1070752]

Mortgages are secured by the property; if things get too tight, you can sell the property and walk away.

Student loans are not dischargeable in bankruptcy. They will follow you around for life.

Mortgages are taken out on properties, and properties can be income-producing assets- they can produce income for you 24/7 if you rent them out.

Student loans grant you the ability to get an education, but strictly speaking, your dental education will only bring you income if you a) get a job and b) work at the job. It's not an "investment" in the sense that real estate is.

1. Tell that to the 2008 crisis.
2. Yes, renting out and producing a profit on top of your mortgage is as easy as one-two-three. Especially for houses in which you take out a $450k+ loan, you'll never be profiting on rent
3. Dental school is more of an investment. It's a life time investment. Hence, why when everyone says "What should I do with X amount of money" at an early age, the answer is always education.

 

[1070752]

Mortgages you get an actual house, and people usually don't mortgage a house unless they have a good source of income already. If you take on 450k debt you are paying 5.3K out of your paycheck every month if you do the 10 year repayment. Its not as simple as go out, get job after D-school.

> Its not as simple as go out, get job after D-school.

Yes it is. It's literally one of the easiest to go and get a job. With a mortgage, you get an actual house. With a dental degree, you get a life time return on your investment.

 

[Incis0r]

1. Tell that to the 2008 crisis.
2. Yes, renting out and producing a profit on top of your mortgage is as easy as one-two-three. Especially for houses in which you take out a $450k+ loan, you'll never be profiting on rent

1. Good point
2. Plenty of properties with $450K mortgages that have a 10%+ cap rate.

Yeah, all those damn government roads, transportation regulations, public school systems, waste sanitation, water treatment, health programs, veterans benefits, unemployment/social security/disability programs, science funding like NIH, military, and national and state park preservation.

Well played, good sir. Well played.

 

[Likkriue]

> Its not as simple as go out, get job after D-school.

Yes it is. It's literally one of the easiest to go and get a job. With a mortgage, you get an actual house. With a dental degree, you get a life time return on your investment.

Of course, but for a good while you wont be living in luxury. Many folks believe they could rev up lambos and buy penthouses the moment they get out. Lets say you earn 150k( which imo is still on the high side), you will take home approx 100k. Now lets factor in that $5.3K a month to payback loans. Thats $63,600 per year. 100k-63k= 36.4k after taxes. Thats ramen noodle salary. Especially in high cost areas like NYC/Cali/Philly.
Of course there are pay raises etc etc(wont be much as an associate). But unless you buy your own practice (500k extra) you wont be making that 200k+. And goodluck paying back 450k + 500k . You will get destroyed in debt. That last 500k is going to be private debt with crazy interest rates.
Are you ready being someone in his late twenties/early 30s trying to run his own practice paying back 10.5K$ a month in just loans? $10.5k x 12= $126,000 a year.(If you intend on paying back in 10 years, if not you will be paying almost 1.86 MILLION for a 25 year loan. Thats almost an entire MILLION on top of what you originally borrowed) Now what about paying rent? What about paying your dental assistant(another 50k?) Dental insurance? All those certifications and licenses? You WILL get overwhelmed quick if all you are thinking is "go out and get paid". There is a lot of budgeting going on.

So yeah, It is not as easy as go out and get job and live life. You will have to budget like a wolverine to set yourself off nice for the future.

 

[distressstudent]

I have been saying this for a long time ago.
The issue isn't whether they are willing or not. The real answer is that they just don't care. There is a serious issue with apathy towards their own finances.
All I can say is that for good or bad, it seems like most dental students are very optimistic people.

 

[Likkriue]

I have been saying this for a long time ago.
The issue isn't whether they are willing or not. The real answer is that they just don't care. There is a serious issue with apathy towards their own finances.
All I can say is that for good or bad, it seems like most dental students are very optimistic people.

Exactly, And i'm trying to show them what financials they will encounter in the future.

 

[distressstudent]

lol i can't believe you guys are saying strippers in dubai have it better
You can get raped in those countries and get sentence for adultery (i.e: qatar)
If you wanna do it, go for it. Learning Arabic isn't necessary. Communication isn't important when no means yes.

 

[strep mutans]

[REDACTED]

You are doing a lot of complaining. I understand; there's a lot to complain about. Our system is not perfect. But it's pretty damn good, all things considered.

Don't forget who "the government" is. "We the people" and all that. I'm not saying there isn't corruption -- there is on many levels -- but distancing yourself from "the government" in language does not absolve you from your responsibility and your power as an American voter and taxpayer.

 

[Incis0r]

I understand; there's a lot to complain about. Our system is not perfect. But it's pretty damn good, all things considered.

You're right- it's important to keep the big picture in mind- we do have a pretty great system, and while we may need some improvements, it's up to us to make that happen.

Thanks for helping bring some perspective to the picture.

 

[frozenicecreamDMD]

welll, whoever objects the 400k can take a trip to USC school specific thread to see how they react to you inquiring them how 450k debt is manageable.

the truth is 450k IS NOT MANAGEABLE. it will get you to become a dentist and give you a living for a lifetime at 40k a year after everything deducted.

I am so glad I got into a state school.

 

[schmoob]

Of course, but for a good while you wont be living in luxury. Many folks believe they could rev up lambos and buy penthouses the moment they get out. Lets say you earn 150k( which imo is still on the high side), you will take home approx 100k. Now lets factor in that $5.3K a month to payback loans. Thats $63,600 per year. 100k-63k= 36.4k after taxes. Thats ramen noodle salary. Especially in high cost areas like NYC/Cali/Philly.
Of course there are pay raises etc etc(wont be much as an associate). But unless you buy your own practice (500k extra) you wont be making that 200k+. And goodluck paying back 450k + 500k . You will get destroyed in debt. That last 500k is going to be private debt with crazy interest rates.
Are you ready being someone in his mid twenties/early 30s trying to run his own practice paying back 10.5K$ a month in just loans? $10.5k x 12= $126,000 a year.(If you intend on paying back in 10 years, if not you will be paying almost 1.86 MILLION for a 25 year loan. Thats almost an entire MILLION on top of what you originally borrowed) Now what about paying rent? What about paying your dental assistant(another 50k?) Dental insurance? All those certifications and licenses? You WILL get overwhelmed quick if all you are thinking is "go out and get paid". There is a lot of budgeting going on.

So yeah, It is not as easy as go out and get job and live life. You will have to budget like a wolverine to set yourself off nice for the future.

I have to disagree with your numbers.
33% right off the bat from gross at 150K is not realistic. The tax system is so complex that there are many deductions available, as well as systems in place if people take the time and make the effort to find them, or find someone who knows them.
There are also strategies to reduce debt, legal and ethical. Using your example of 150K starting, let's say you start work from July 1st of your grad year. That puts you at $75K in income for that year. Your tax liability is significantly lower for the year. You are also in your grace period before your interest capitalizes, so if you can leverage those 6 months to attack that interest, the financial benefit is substantial.
WRT your point on opening a business, even if you ARE a million in debt, it's an investment. It won't get the cash rolling in unless you know HOW to work the business. A lean model, maximizing economies of scale, and a whole lot of hard work can very quickly get you out of debt. Also keep in mind that as a business owner with practice and student debt, your income generated will be significantly more than your MAGI. This results in more tax relief, which keeps you in business.
It is a risk/reward scenario. I completely agree with your point that people need to know what they are getting themselves into, but it's not a doom and gloom scenario. Earning that DDS/DMD itself isn't going to be the cash cow, it's how you use it. I'm not a grad yet, but I believe that we truly will know very little about dentistry on our graduation day. It'll take time, it'll take research, and mentorship and networking.
If NYU, USC, and the other high priced schools were really setting people up for failure, a lot less people would apply.
Obviously less debt is better, but there are plenty of people out there who graduated with a higher debt, tacked on practice debt, and are still doing better than some of their peers who went to a state school for less than half the cost.

 

[Likkriue]

I have to disagree with your numbers.
33% right off the bat from gross at 150K is not realistic. The tax system is so complex that there are many deductions available, as well as systems in place if people take the time and make the effort to find them, or find someone who knows them.
There are also strategies to reduce debt, legal and ethical. Using your example of 150K starting, let's say you start work from July 1st of your grad year. That puts you at $75K in income for that year. Your tax liability is significantly lower for the year. You are also in your grace period before your interest capitalizes, so if you can leverage those 6 months to attack that interest, the financial benefit is substantial.
WRT your point on opening a business, even if you ARE a million in debt, it's an investment. It won't get the cash rolling in unless you know HOW to work the business. A lean model, maximizing economies of scale, and a whole lot of hard work can very quickly get you out of debt. Also keep in mind that as a business owner with practice and student debt, your income generated will be significantly more than your MAGI. This results in more tax relief, which keeps you in business.
It is a risk/reward scenario. I completely agree with your point that people need to know what they are getting themselves into, but it's not a doom and gloom scenario. Earning that DDS/DMD itself isn't going to be the cash cow, it's how you use it. I'm not a grad yet, but I believe that we truly will know very little about dentistry on our graduation day. It'll take time, it'll take research, and mentorship and networking.
If NYU, USC, and the other high priced schools were really setting people up for failure, a lot less people would apply.
Obviously less debt is better, but there are plenty of people out there who graduated with a higher debt, tacked on practice debt, and are still doing better than some of their peers who went to a state school for less than half the cost.

Oh I never said it was doom and gloom. And I agree that it is doable as long as you are on top of everything. Too many people don't do their research and reach out.
My numbers aren't perfect in that post, as it does not factor in a lot of things that can significantly reduce the level of debt.
I was trying to make my point that it's not as easy as "graduate, get a job and ur good to go" like that poster kept reiterating. The 150k is also unrealistic as most people do residencies and only make 50-60k their first year. Which means the grace period would be over by the time the real work starts. Most starting is 100-120k

One of the golden rules back then was never to take on more debt than your first year salary. Now we are breaking it 3-4 X fold.

 

[schmoob]

Oh I never said it was doom and gloom. And I agree that it is doable as long as you are on top of everything. Too many people don't do their research and reach out.
My numbers aren't perfect in that post, as it does not factor in a lot of things that can significantly reduce the level of debt.
I was trying to make my point that it's not as easy as "graduate, get a job and ur good to go" like that poster kept reiterating. The 150k is also unrealistic as most people do residencies and only make 50-60k their first year. Which means the grace period would be over by the time the real work starts. Most starting is 100-120k

One of the golden rules back then was never to take on more debt than your first year salary. Now we are breaking it 3-4 X fold.

You make good points.
I might be wrong on this, but in residency you are still considered a full time student, so interest accrues but it does not capitalize.
There are many ways to go about debt reduction. For example, if you are a resident, you can also moonlight in many states. In other states you're required to have at least completed PGY1. So if your residency is longer than a year, you can moonlight afterwards.
But I will absolutely agree that it's not as easy as graduate, get a job, and you're set. Can't argue that logic.

 

[lazyindy]

funny since I pretty much know that my only option will be NYUCD this august. I find myself rethinking a career in dentistry and just starting a business. But this is what I want to do, shame that the system punishes you for wanting to be a health professional.

 

[Cranjis McBasketball]

http://forums.studentdoctor.net/threads/experience-first-five-years-out-of-school.1137149/page-2

This dude is chilling. Another one of my friends has made 180k-200k as an associate his first 2 years out with 3 kids. Another one has done 200k each of his first 3 years in corporate dentistry. Every brand new dentist says the same thing... Yes the debt sucks and is stressful to worry about, but it is very manageable. Be smart about where you work and be frugal until its paid off. Its a reason dental students have such a low percentage of defaulting on their loans.

 

[Incis0r]

I want to specialize, I'm going to work hard, and I know it will happen. I won't stop until it does.

I love this.
I have no doubt you're going to make it!

 

[DentalLonghorn2014]

Of course, but for a good while you wont be living in luxury. Many folks believe they could rev up lambos and buy penthouses the moment they get out. Lets say you earn 150k( which imo is still on the high side), you will take home approx 100k. Now lets factor in that $5.3K a month to payback loans. Thats $63,600 per year. 100k-63k= 36.4k after taxes. Thats ramen noodle salary. Especially in high cost areas like NYC/Cali/Philly.
Of course there are pay raises etc etc(wont be much as an associate). But unless you buy your own practice (500k extra) you wont be making that 200k+. And goodluck paying back 450k + 500k . You will get destroyed in debt. That last 500k is going to be private debt with crazy interest rates.
Are you ready being someone in his late twenties/early 30s trying to run his own practice paying back 10.5K$ a month in just loans? $10.5k x 12= $126,000 a year.(If you intend on paying back in 10 years, if not you will be paying almost 1.86 MILLION for a 25 year loan. Thats almost an entire MILLION on top of what you originally borrowed) Now what about paying rent? What about paying your dental assistant(another 50k?) Dental insurance? All those certifications and licenses? You WILL get overwhelmed quick if all you are thinking is "go out and get paid". There is a lot of budgeting going on.

So yeah, It is not as easy as go out and get job and live life. You will have to budget like a wolverine to set yourself off nice for the future.

I couldn't sleep so my stupid self came upon this SDN post. I haven't done the math on this yet (thank you btw) but holy crap that's a lot of debt.

 

[cacajuate]

I have to disagree with your numbers.
33% right off the bat from gross at 150K is not realistic. The tax system is so complex that there are many deductions available, as well as systems in place if people take the time and make the effort to find them, or find someone who knows them.
There are also strategies to reduce debt, legal and ethical. Using your example of 150K starting, let's say you start work from July 1st of your grad year. That puts you at $75K in income for that year. Your tax liability is significantly lower for the year. You are also in your grace period before your interest capitalizes, so if you can leverage those 6 months to attack that interest, the financial benefit is substantial.
WRT your point on opening a business, even if you ARE a million in debt, it's an investment. It won't get the cash rolling in unless you know HOW to work the business. A lean model, maximizing economies of scale, and a whole lot of hard work can very quickly get you out of debt. Also keep in mind that as a business owner with practice and student debt, your income generated will be significantly more than your MAGI. This results in more tax relief, which keeps you in business.
It is a risk/reward scenario. I completely agree with your point that people need to know what they are getting themselves into, but it's not a doom and gloom scenario. Earning that DDS/DMD itself isn't going to be the cash cow, it's how you use it. I'm not a grad yet, but I believe that we truly will know very little about dentistry on our graduation day. It'll take time, it'll take research, and mentorship and networking.
If NYU, USC, and the other high priced schools were really setting people up for failure, a lot less people would apply.
Obviously less debt is better, but there are plenty of people out there who graduated with a higher debt, tacked on practice debt, and are still doing better than some of their peers who went to a state school for less than half the cost.

Your loan is capitalizing the whole time you are in school.

 

[Incis0r]

@DentalLonghorn2014 , I think you also may like this informative, balanced post that WildZodiac made:

If I were you, I would either pull back my acceptance or do the military route. I obviously don't know your financial standing, but if you have to take out the maximum needed, then you're looking at close to $450,000-$500,000. That's before your wonderful interest rate of 6.21 or 7 21% is even considered.

Have you sat down and calculated what your payments would need to be after you graduate to get out of debt? I was accepted to NYU when I applied, and just for sh*tz and giggles, I wanted to see how much my loan payment would be after I graduated. Well, without boring you too much, if I took out the maximum amount needed to cover everything I needed to get through school at NYU, and pay off the debt in 10 years, then I would have had to pay, get this, $6,3000/MONTH. That's over $75,000/year JUST in student loans. Let's say that after you graduate you do really good and start making $120,000/year right when you get out. Well shoot there is income tax, that will knock you down to roughly about 85-95k/year depending on what state you live in. Oops, can't forget about those student loans! Now you're left with 10k/year. You see the problem? For you to live a very frugal life off of 50k/year after loans, then you would have to make over $200,000/year right out of school. Again, do you see the problem? You simply can't pay back your loans after you graduate if you decided on a 10 year fixed payment plan.

You would have to pay back your loans for over 30 YEARS in order for your monthly payments to be relatively reasonable of about $2,700/month. Obviously, going this route and extending your pay period only adds to the total amount of interest accrued. For me, if I were to go to NYU, take the full amount needed to go to school there, and pay it back over 30 years, then it would have costed me, counting interest, by the time it was all said and done, just over $1,000,000. And that's just your student loans! I'm sure that someday, you might want a house, your own private practice, and a few kids that will suck you dry of money.

Needless to say, if you go to NYU and don't do the military route, then you WILL be a slave to Uncle Sam for decades.

 

[Roy Williams]

Has anyone on here mentioned or discussed income based loan repayment? I haven't done an extensive amount of research, but I was recently talking to a med school graduate who strongly recommended getting enrolled in a program like this immediately upon graduation.

 

[schmoob]

Your loan is capitalizing the whole time you are in school.

Your interest accrues based on your principal/loan while in school and grace period. You can make payments on your interest at any point. They are two separate debts. After your grace period, the interest capitalizes, giving you one debt.
Long story short, you do not accrue compound interest until after the grace period.

 

[Incis0r]

@schmoob that is awesome! Wow this makes me feel quite happy. Thank you!

@whaleofatale , does the interest on a direct unsubsidized loan capitalize during a dental residency?

 

[schmoob]

@schmoob that is awesome! Wow this makes me feel quite happy. Thank you!

@whaleofatale , does the interest on a direct unsubsidized loan capitalize during a dental residency?

I know that question wasn't directed to me, but if I were to take a wild guess on that one, I would say no because you are still considered a full time student. Some residencies require tuition, which would require additional loans and the cycle would just continue past the four years.
Again, that's just my best guess.

 

[Incis0r]

I know that question wasn't directed to me, but if I were to take a wild guess on that one, I would say no because you are still considered a full time student. Some residencies require tuition, which would require additional loans and the cycle would just continue past the four years.

I appreciate it- actually, you're the reason I asked whaleofatale- I saw you mention it earlier in this thread, and I think it's an excellent question.

Whaleofatale works in financial aid for dental schools, I believe, so I think s/he will be able to give us a definite answer.

 

[cacajuate]

Your interest accrues based on your principal/loan while in school and grace period. You can make payments on your interest at any point. They are two separate debts. After your grace period, the interest capitalizes, giving you one debt.
Long story short, you do not accrue compound interest until after the grace period.

While this is better, accruing interest on a 100k/yr loan is not a good situation.

Also, where are we suppose to find money to pay towards the growing interest?

 

[Advance]

While this is better, accruing interest on a 100k/yr loan is not a good situation.

Also, where are we suppose to find money to pay towards the growing interest?

More loans of course.

 

[Likkriue]

Like many many people have said earlier, we moonlight as male strippers at night

 

[Advance]

Like many many people have said earlier, we moonlight as male strippers at night

I'm down.

 

[JLT223]

Debating on going full out Walter White

 

[schmoob]

While this is better, accruing interest on a 100k/yr loan is not a good situation.

Also, where are we suppose to find money to pay towards the growing interest?

We don't have to pay the interest that accrues while in school, it's an option though. Everyone's situation is different. Some people can do it, others cant. For example, some may have a suga mama that can afford to help reduce our debt.

 

[aceofbass]

Debating on going full out Walter White

Make the best laughing gas money can buy.

 

[JLT223]

Make the best laughing gas money can buy.

 

[lazyindy]

I wish we could get some opinions on some fresh grads (graduated within the past 2-3 years) from schools like NYU, USC regarding the debt and their plan of paying it off.

 

[DentalLonghorn2014]

@DentalLonghorn2014 , I think you also may like this informative, balanced post that WildZodiac made:

Thank you!

 

[xerxes106]

My girlfriend started her own company and got rich by 25, so I'm fully expecting her to sugar mama my debt.
Shes obligated to pay for my dental loans because I watch the Bachelorette with her and cook dinner every night.

 

[whaleofatale]

@schmoob that is awesome! Wow this makes me feel quite happy. Thank you!

@whaleofatale , does the interest on a direct unsubsidized loan capitalize during a dental residency?

Interest capitalizes at the end of your six-month grace period. It would only capitalize during a residency if you enter forbearance. Otherwise, no.

 

[Cranjis McBasketball]

I wish we could get some opinions on some fresh grads (graduated within the past 2-3 years) from schools like NYU, USC regarding the debt and their plan of paying it off.

They probably don't have enough money for laptops or even wifi... I can't imagine how someone can handle those costs from those schools.

 

[DentalLonghorn2014]

My girlfriend started her own company and got rich by 25, so I'm fully expecting her to sugar mama my debt.
Shes obligated to pay for my dental loans because I watch the Bachelorette with her and cook dinner every night.

Surely, there's a catch.

 

[MaizeGoBlue]

So this might be a dumb question, but do you receive a stipend during residency for a specialty? Or do you pay tuition? Or... both??

 

[CaliforniaDMD]

So this might be a dumb question, but do you receive a stipend during residency for a specialty? Or do you pay tuition? Or... both??

Depends on the program

 

[xerxes106]

Surely, there's a catch.

Bachelorette IS the catch. Have you ever forced yourself to watch that show? It's like 2 straight hours of the Top Gun volleyball scene.

 

[Incis0r]

Bachelorette IS the catch. Have you ever forced yourself to watch that show? It's like 2 straight hours of the Top Gun volleyball scene.

Exchange it for the dogfight seen where Maverick destroys the MiGs and I'm down to watch.