What is your Current student loan debt

[TanMan]

Your student loan interest rate is essentially a guaranteed return. If you invest it could you beat it? Sure. But not for sure. And besides the math thing, it's a behavioral thing. Too many people are way too comfortable with debt.

That kind of rate is not guaranteed. And it's not just about math. It's about behavior. Too many people are way too comfortable with debt.

I think there's 3 basic types of debt: bad, questionable, and good. The debt you acquire depends on what you're using the borrowed money for. Bad for consumer goods, questionable if the ROI is iffy, and good if I can have a higher rate of return based on what I borrowed. If I needed 10MM for an investment, I sure as hell don't want to save up that much for an investment. I would rather leverage what I have and assume debt for that hypothetical aforementioned investment than put my own money on the line. It's better OPM (other people's money) in addition to your own money than all your own money. There is a fine line though and that's where overleveraging can pose tremendous risk.

Dental school, at these rates, can start to go under the questionable category for many dental students. The big question is whether their educational investment will pay off. You remind me of that self proclaimed debt guru (forgot the name), but I'll remind everyone out there that it's not black and white in terms of strategizing your future plans. Psychologically, it might feel better, but it's not always the right decision. People who are basing their actions on pure emotion shouldn't be playing that game and need to think of things objectively.

Yes, you could pay off your debt for a "guaranteed return", or you could invest further in yourself by opening a practice and getting way more than a 6% post-tax return. If I had followed the generic plan where I live like a student, paying off my debt in record time as an associate, I would be far far behind compared to where I am now. In the beginning, I was stupid enough to think that paying off my debt faster was better, but thankfully I made a quick turnaround to starting a practice. That allowed me to pay off my debt very quickly and much faster than if I had just kept saving/paying/working as an associate.

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[DDS9994]

I think there's 3 basic types of debt: bad, questionable, and good. The debt you acquire depends on what you're using the borrowed money for. Bad for consumer goods, questionable if the ROI is iffy, and good if I can have a higher rate of return based on what I borrowed. If I needed 10MM for an investment, I sure as hell don't want to save up that much for an investment. I would rather leverage what I have and assume debt for that hypothetical aforementioned investment than put my own money on the line. It's better OPM (other people's money) in addition to your own money than all your own money. There is a fine line though and that's where overleveraging can pose tremendous risk.

Dental school, at these rates, can start to go under the questionable category for many dental students. The big question is whether their educational investment will pay off. You remind me of that self proclaimed debt guru (forgot the name), but I'll remind everyone out there that it's not black and white in terms of strategizing your future plans. Psychologically, it might feel better, but it's not always the right decision. People who are basing their actions on pure emotion shouldn't be playing that game and need to think of things objectively.

Yes, you could pay off your debt for a "guaranteed return", or you could invest further in yourself by opening a practice and getting way more than a 6% post-tax return. If I had followed the generic plan where I live like a student, paying off my debt in record time as an associate, I would be far far behind compared to where I am now. In the beginning, I was stupid enough to think that paying off my debt faster was better, but thankfully I made a quick turnaround to starting a practice. That allowed me to pay off my debt very quickly and much faster than if I had just kept saving/paying/working as an associate.

For me the there are also 3 kinds of debt, bad, bad, and bad. LOL. I submit for most dentist they should simply view debt as a bad thing, a necessary evil but a bad thing that you money to someone. My caveat is exactly what Tanman said, about knowing how to play the game, most dentist think they do but they actually dont. Just look on Face book and see all the dentist that actually think they have high finance figured more than they super predators on Wallstreet its laughable. Guys like Tanman and Coldfront are the types I suspect than can handle debt and not blink and it works for them. For the majority the simple path of living below your means, saving a huge chunk early on in the markets, paying off your debt in a reasonable time and ,making it a priority. Dentistry can make you enough money in a short period of time with minimal risk. The salaries we make there is no need for big risks.

 

[Cold Front]

Dentistry can make you enough money in a short period of time with minimal risk. The salaries we make there is no need for big risks.

This is true, IF the high student loans don’t continue to get worse - and they will. As long as you don’t graduate with $600k+ in student loans, and many will, 1 in 5 dentists probably, you should be ok.

That’s my 2 cents.



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[charlestweed]

For me the there are also 3 kinds of debt, bad, bad, and bad. LOL. I submit for most dentist they should simply view debt as a bad thing, a necessary evil but a bad thing that you money to someone. My caveat is exactly what Tanman said, about knowing how to play the game, most dentist think they do but they actually dont. Just look on Face book and see all the dentist that actually think they have high finance figured more than they super predators on Wallstreet its laughable. Guys like Tanman and Coldfront are the types I suspect than can handle debt and not blink and it works for them. For the majority the simple path of living below your means, saving a huge chunk early on in the markets, paying off your debt in a reasonable time and ,making it a priority. Dentistry can make you enough money in a short period of time with minimal risk. The salaries we make there is no need for big risks.

Yeah, I'd rather play safe by paying off all the debt as fast as possible. When I was younger, I was ok with taking the risk to take out more loans to buy rental properties because I had more energy to work 6 days/week. Now at 48, I am getting tired of working hard to pay off loans. Being debt-free, I no longer have concerns about the tenants giving their notices, about my practices being slow, about the next recession that may come in the near future, about a new grad orthodontistwho sets up his office right next to mine, about companies like Invsalign and SmileDirect club taking over my job etc.

I am essentially debt-free now because the passive income from my rental properties is more than enough to pay the monthly home mortgage + property tax. I am looking forward to being 100% debt-free when I pay off my home loan by the end of this year. And for the next investment property, I will pay 100% cash....no more loan. Home prices are too high right now. Hopefully by the time I am ready for the next investment, the home prices will drop significantly. I know this is a slow way to get rich but I'd rather be the slow and steady tortoise than being the hare. A lot of my neighbors invested big and lost everything during the 2008 recession.

 

[Strag]

Zero. I have no regrets going the way I went and grinding 6 days a week for first two years out. Yes, some of my classmates now have practices..homes..but they're also in 1+ million debt. We always have convos about wishing we were on the other side. However, I enjoy my freedom, travel often and don't worry about calculating payroll for someone else (yet). Grass is always greener.

 

[Cold Front]

Zero. I have no regrets going the way I went and grinding 6 days a week for first two years out. Yes, some of my classmates now have practices..homes..but they're also in 1+ million debt. We always have convos about wishing we were on the other side. However, I enjoy my freedom, travel often and don't worry about calculating payroll for someone else (yet). Grass is always greener.

Unless you are born into a family that can afford to help you pay for dental school and buy you a practice (or join their legacy practice), you would have no choice but to take out student loans - and get into more debt to specialize and/or open/buy a dental office.

It takes money to make money, and most students and dentists don’t have the financial literacy to know how much money they need to spend to make money. Does $500-900k in student loans at 7% interest rate a good spend of a money to earn $200-400k/yr pre-tax income? Maybe. If a bank gave you $500-900k with a 4% interest rate to start any business, can that give a better return than DS if you are business savvy and would really know what to do with that money? Maybe. It’s all relative.

Ultimately, debt is a risk and should only be in the right hands.


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