What is your Current student loan debt

[charlestweed]

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How manageable is a $240,000 loan? Looks like a ~$2700 per month payment over 10 years. That's a lot each month but the total balance is relatively cheap nowadays.

I'm wondering how a loan around $240,000 affects your life from dentists who have actually paid it off or are in the process. Is it manageable? Crippling? Still comfortable?

Many of my friends, who graduated from USC, Loma Linda, UOP, BU, Tufts, NYU etc at around the same time with me (late 90s, early 2000s), had to borrow that much in student loans. All of them are doing very well and most of them are practicing in oversaturated market in CA. One of them is my wife’s general dentist boss, who graduated from Loma Linda. Some of them are husband-and-wife dentists so they had a combined student loan debt of more than $500k. My wife and I are both dentists and we owed $450k in student loans….our required minimum monthly payment was $5k/month.

 

[DDS9994]

Yes but any money you invest you will have to pay tax on profits... so if you make 14% then when you sell you will give close to 50% of that to the government. Paying student loans are effectively earning 6% after tax. Plus 14% in a mutual fund is optimistic

Very true, and I continue to see this with newer grads who have only known the bull market from 2009 onwards, but 10 to 14% is very optimistic and not something I would count on. If you invested from 2010 to 2020 you look like a genius , from 2000 to 2010 not so much.

 

[BMEndo]

Yes but any money you invest you will have to pay tax on profits... so if you make 14% then when you sell you will give close to 50% of that to the government. Paying student loans are effectively earning 6% after tax. Plus 14% in a mutual fund is optimistic

What?? This is misleading. Taxes vary based on what the investment is. Their is no tax bracket that is 50%. While everybody’s stress to debt level is deferent, the financially smart move is to invest in your future first. Time is the greatest factor in growing your investments.

 

[DDS9994]

What?? This is misleading. Taxes vary based on what the investment is. Their is no tax bracket that is 50%. While everybody’s stress to debt level is deferent, the financially smart move is to invest in your future first. Time is the greatest factor in growing your investments.

Ahhh I misread that part, yes the longterm cap gains is more like 15%, and I its important to do both, invest and attack debt

 

[Anondds87]

What?? This is misleading. Taxes vary based on what the investment is. Their is no tax bracket that is 50%. While everybody’s stress to debt level is deferent, the financially smart move is to invest in your future first. Time is the greatest factor in growing your investments.

Yes it looks like I'm wrong. Where I'm from dividends are taxed as though its extra income so close to 45% if your income is the highest tax bracket.
I didnt realise the US dividends and capital gains are taxed so low... no wonder theres so much income inequality for people who make their money from the stock market

 

[TanMan]

Yes it looks like I'm wrong. Where I'm from dividends are taxed as though its extra income so close to 45% if your income is the highest tax bracket.
I didnt realise the US dividends and capital gains are taxed so low... no wonder theres so much income inequality for people who make their money from the stock market

Forced wealth redistribution is the devil. Reminds me of the carbon offset scam(s). Now if I could only sell some carbon offsets/indulgences. 🙄

 

[BMEndo]

Yes it looks like I'm wrong. Where I'm from dividends are taxed as though its extra income so close to 45% if your income is the highest tax bracket.
I didnt realise the US dividends and capital gains are taxed so low... no wonder theres so much income inequality for people who make their money from the stock market

Again what are you talking about?? Short term holdings are subject to regular income tax. And the vast majority of American's retirements are invested in some form of stocks so lower tax rates are hugely beneficial to individuals at all income levels.

 

[Anondds87]

Again what are you talking about?? Short term holdings are subject to regular income tax. And the vast majority of American's retirements are invested in some form of stocks so lower tax rates are hugely beneficial to individuals at all income levels.

Then what are you talking about?
You said I was wrong when I said close to 50% of the profits are taxed?
If you live in california, and you earn over 200k a year, the marginal tax rate is above 40%, which means your investments will be added to your income and taxed above 40%? Am I wrong here?

 

[nealofgrafton]

and you are able to pick only good mutual funds? curious, not even wall streets best can do that year after year.

 

[BMEndo]

Then what are you talking about?
You said I was wrong when I said close to 50% of the profits are taxed?
If you live in california, and you earn over 200k a year, the marginal tax rate is above 40%, which means your investments will be added to your income and taxed above 40%? Am I wrong here?

Yes, it is not cut and dry like that. Taxes on investments are fairly complicated and can depend on a multitude of things like what the asset is, what investment vehicles you may be using, how long you held it. Also, not everyone lives in California and pays those insane tax rates.

 

[TanMan]

Then what are you talking about?
You said I was wrong when I said close to 50% of the profits are taxed?
If you live in california, and you earn over 200k a year, the marginal tax rate is above 40%, which means your investments will be added to your income and taxed above 40%? Am I wrong here?

Not everyone lives in CA. There's different types of taxes and deductions. Of course, there's different taxes and the change in SALT deduction has affected higher income individuals in higher tax jurisdictions. If you're a business owner, everything is expensible. If you were to take no deductions and think it is your duty to pay as much tax as possible, then yes, your marginal tax rate will be 40-50%. There's so many vehicles and structures out there that affect your AGI that almost no one pays that hypothetical 40-50% of your net income.

So, if you were to blindly pay taxes, then yes, you are correct. However, most people are smarter than that, in that they will take as many deductions as possible to drive their taxes down. There's a fine line between legal tax avoidance strategy and tax evasion. That's something we tread along carefully.

 

[Anondds87]

Not everyone lives in CA. There's different types of taxes and deductions. Of course, there's different taxes and the change in SALT deduction has affected higher income individuals in higher tax jurisdictions. If you're a business owner, everything is expensible. If you were to take no deductions and think it is your duty to pay as much tax as possible, then yes, your marginal tax rate will be 40-50%. There's so many vehicles and structures out there that affect your AGI that almost no one pays that hypothetical 40-50% of your net income.

So, if you were to blindly pay taxes, then yes, you are correct. However, most people are smarter than that, in that they will take as many deductions as possible to drive their taxes down. There's a fine line between legal tax avoidance strategy and tax evasion. That's something we tread along carefully.

I guess the main point I was making at the end of the day was that if you are paying 7% in student loans, then if you decide to invest instead you need to earn more than 7% to account for taxes to have the equivalent after tax money. If I could guarantee more than 7% return on all my investments I would be very happy

 

[TanMan]

I guess the main point I was making at the end of the day was that if you are paying 7% in student loans, then if you decide to invest instead you need to earn more than 7% to account for taxes to have the equivalent after tax money. If I could guarantee more than 7% return on all my investments I would be very happy

The best investment you could make is in your own office. Your returns would be far greater in your own office v. paying your debt down.

 

[P7898]

The best investment you could make is in your own office. Your returns would be far greater in your own office v. paying your debt down.

Very true if you buy at the right price and can maintain.

 

[charlestweed]

I agree that you should invest in your practice first, instead of trying to pay off the student loans first. But once the practice reaches its peak production, you should start thinking about paying off the debts and about saving for your retirement. You need to resist the temptation to spend money when your practice is making a lot of money. After you reach 30, your health goes downhill from there. Can't work forever to maintain the current lifestyle.

I did it the opposite way: paid off 2/3 of my student loan debt first and then started my own office 4 years after graduation. I should have set up my office sooner. The reason for the delay was I thought it was hard to start a practice and I didn't have enough confidence in myself. It's a minor mistake because I was still only in my early 30s. At least I paid down the student loans and not spent the money on superficial things (expcept for leasing German cars😀).

 

[Rambunctious]

I would never let my debt last 10 years. If I were you I'd pay it off in less than 5 years. Yes it will affect the home you live in, the cars you buy, and the vacations you take. But there is a time and a season for those things. You can do it in less than 5 years, I promise.

What is the point in doing it less than 5 years? You should use that money to invest! it will triple your income quickly versus trying to pay off the loan for a peace of mind im assuming?

 

[TanMan]

Very true if you buy at the right price and can maintain.

Or do a startup. Logarithmic growth - make lots of money to pay off debt, live a good lifestyle, accumulate assets.

 

[Debt Free DDS]

What is the point in doing it less than 5 years? You should use that money to invest! it will triple your income quickly versus trying to pay off the loan for a peace of mind im assuming?

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.

 

[Debt Free DDS]

Good Mutual funds run 10-14% return. Government loans under $224k run 6.65%..... do the math people.

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.

 

[Cold Front]

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.

The debt addiction is so bad, that we have an economy that needs $5 debt to create $1 growth. The stock markets are performing at an all time highs, because of stock buybacks and the unprecedented corporate debt levels feeding on a very low interest rates. All of this sums to a bubble.

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[P7898]

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.

Nothing in life is guaranteed but if you look at the stock market, mutual funds are giving you a 10% return that past 3 years so do your homework and never be satisfy with "guarantee" - make your own guarantee.

 

[BMEndo]

In this current market I would say it is better to invest your money vs paying down your debt. Here's a snapshot from my TSP.

 

[P7898]

My portfolio has gone up 38% this year...

 

[DDS9994]

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.

I agree with you, cant emphasize enough that paying off debt is a guaranteed return, everyone is a genius during a bull market, not so much in 2000, 2002, or 2008. I am not saying dont invest, in fact you can do both debt reduction and invest and come out ahead, thats what I have been doing for the last decade.

 

[Cold Front]

My portfolio has gone up 38% this year...

How much did it go down today?


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[P7898]

How much did it go down today?


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1.38%. It has been a rough day.

 

[Cold Front]

1.38%. It has been a rough day.

Yep. The Dow posted the worst day since October and turned negative for the year. This virus from China is not going away anytime soon.


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[anonymousdent]

Yep. The Dow posted the worst day since October and turned negative for the year. This virus from China is not going away anytime soon.


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Yep. The Dow posted the worst day since October and turned negative for the year. This virus from China is not going away anytime soon.


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what would you do if you had an extra $50k cash tomorrow?

 

[Cold Front]

what would you do if you had an extra $50k cash tomorrow?

The GOLDEN rule in investment: invest in what you know or do best. So I would put that $50k into my office or towards a new practice.


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[P7898]

The GOLDEN rule in investment: invest in what you know or do best. So I would put that $50k into my office or towards a new practice.


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Down payment on a piece of real estate or something that china has no effect on.

 

[Cold Front]

Down payment on a piece of real estate or something that china has no effect on.

The virus headlines is not because anyone fears the apocalypse, but rather the investors fear it will keep spreading - and it will eventually derail the global growth that many have in their projections. Because the virus epicenter is in China, of all places, the worry is more acute. China closed businesses (including American companies like McDonald’s), the movement of their people (trains), their borders to Mongolia, NK, etc. Also, the outside world that trades with China day to day is slowing down due to China’s hands on approach to quarantine populations and cities.

The stock market is using the virus as an excuse for the insane rally it had over the past few months. A pullback was overdue and it’s here now, the virus is just helping it happen faster.


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[DDS9994]

what would you do if you had an extra $50k cash tomorrow?

Honestly I would throw it in the market, and buy more.

 

[anonymousdent]

The GOLDEN rule in investment: invest in what you know or do best. So I would put that $50k into my office or towards a new practice.


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Thank you for your response. I originally had "you cant say invest in your business" as part of my question but I removed it because I didn't want to bias your response.

the $50k lump sum question is always an interesting one because, by definition, to "wait and see" is to be a market timer.

DDS9994 what would you buy? VTSAX?

 

[DDS9994]

Yep. The Dow posted the worst day since October and turned negative for the year. This virus from China is not going away anytime soon.


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The virus headlines is not because anyone fears the apocalypse, but rather the investors fear it will keep spreading - and it will eventually derail the global growth that many have in their projections. Because the virus epicenter is in China, of all places, the worry is more acute. China closed businesses (including American companies like McDonald’s), the movement of their people (trains), their borders to Mongolia, NK, etc. Also, the outside world that trades with China day to day is slowing down due to China’s hands on approach to quarantine populations and cities.

The stock market is using the virus as an excuse for the insane rally it had over the past few months. A pullback was overdue and it’s here now, the virus is just helping it happen faster.


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I agree with this, this could be the market looking for an excuse for an overdue correction, which Im fine with, sucks seeing your portfolio losing money, but it is necessary. I suspect by

Thank you for your response. I originally had "you cant say invest in your business" as part of my question but I removed it because I didn't want to bias your response.

the $50k lump sum question is always an interesting one because, by definition, to "wait and see" is to be a market timer.

DDS9994 what would you buy? VTSAX?

VTSAX is an excellent choice! I suspect you are young? If you are Im telling you INVEST COME HELL OR HIGH WATER, DONT JUMP IN AND OUT , you will be amazed at how fast your investments will grow in a short amount of time. I dont know Real Estate, or other passive incomes so I cant really help with that, but I do know Indexing and it works. Set your amount to throw in the market every month and forget it,

 

[Cold Front]

I dont know Real Estate

Real estate builds wealth more consistently than other asset classes. For cash flow, appreciation in value, depreciation for tax purposes, for leverage, forced equity, inflation from rental rolls, and more. 70% of my portfolio is real estate, 20% dental offices, and 10% stocks.



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[DDS9994]

Real estate builds wealth more consistently than other asset classes. For cash flow, appreciation in value, depreciation for tax purposes, for leverage, forced equity, inflation from rental rolls, and more. 70% of my portfolio is real estate, 20% dental offices, and 10% stocks.



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I have no problem with that, me I only want passive and my office, and Stock Market is about as passive as it gets, is it diversified? well I think so, remember I also have a paid off office that is part of my overall AA for my retirement. I would love to get into RE but I dont have the patience for it.

 

[anonymousdent]

I have no problem with that, me I only want passive and my office, and Stock Market is about as passive as it gets, is it diversified? well I think so, remember I also have a paid off office that is part of my overall AA for my retirement. I would love to get into RE but I dont have the patience for it.

Real estate builds wealth more consistently than other asset classes. For cash flow, appreciation in value, depreciation for tax purposes, for leverage, forced equity, inflation from rental rolls, and more. 70% of my portfolio is real estate, 20% dental offices, and 10% stocks.



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Coldfront, is the 70% real estate you own hard real estate? (single family, duplex, or multiunit housing) that you or a management company manages? I know REITS give you real estate exposure without the aforementioned headaches and not sure if some of your 70% you included was in this investment class or if all is in actual tangible property. I'm currently more like DDS9994 and into passive investments since I'm not a great multi-tasker. However, I do believe actually running the show is one of the more predictable paths to building wealth as opposed to just being rich.

DDS9994- what does "AA" stand for? assets?

thanks for helping me learn .

 

[Cold Front]

Coldfront, is the 70% real estate you own hard real estate? (single family, duplex, or multiunit housing) that you or a management company manages? I know REITS give you real estate exposure without the aforementioned headaches and not sure if some of your 70% you included was in this investment class or if all is in actual tangible property.

2 commercial buildings; 2 of my offices are tenants (1 at each building), 6 other national class A tenants between the buildings. I also own a paved industrial lot for truck parking business; that takes about 450 trucks (18 wheelers). That’s the 70% RE in my portfolio.


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[Big Time Hoosier]

what would you do if you had an extra $50k cash tomorrow?

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[DDS9994]

Coldfront, is the 70% real estate you own hard real estate? (single family, duplex, or multiunit housing) that you or a management company manages? I know REITS give you real estate exposure without the aforementioned headaches and not sure if some of your 70% you included was in this investment class or if all is in actual tangible property. I'm currently more like DDS9994 and into passive investments since I'm not a great multi-tasker. However, I do believe actually running the show is one of the more predictable paths to building wealth as opposed to just being rich.

DDS9994- what does "AA" stand for? assets?

thanks for helping me learn .

That would be Asset Allocation.

 

[DDS9994]

Real estate builds wealth more consistently than other asset classes. For cash flow, appreciation in value, depreciation for tax purposes, for leverage, forced equity, inflation from rental rolls, and more. 70% of my portfolio is real estate, 20% dental offices, and 10% stocks.



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Confront what is the return on RE as a general rule? I know the stock market we have data back to like forever and it's about 8 %. What I will say Confront is a different breed than most of us, getting into commercial re and owning multiple office is not for the average dentist, so my point is know who you are and your risk tolerance and if you sleep well at night, if you owe a bank 3 million.

 

[Cold Front]

Confront what is the return on RE as a general rule? I know the stock market we have data back to like forever and it's about 8 %. What I will say Confront is a different breed than most of us, getting into commercial re and owning multiple office is not for the average dentist, so my point is know who you are and your risk tolerance and if you sleep well at night, if you owe a bank 3 million.

The average ROI for commercial RE is 9-10%. Mine are 11%, can be 12-13% in the future when tenants renew their leases. Plus I charge 8% management fees to the tenants for managing the properties myself through their CAM - mostly paperwork.

Like I said before, put your money where you are good at; in dentistry/dental office and the building you are in, if you can. That’s all I did. Nothing really too crazy.


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[Anondds87]

1 in 4 people have greater than 400k debt. 1 in 3 have greater than 300k. Brutal

 

[P7898]

what about the statistics of 1 and >$200k debt?

 

[P7898]

2 commercial buildings; 2 of my offices are tenants (1 at each building), 6 other national class A tenants between the buildings. I also own a paved industrial lot for truck parking business; that takes about 450 trucks (18 wheelers). That’s the 70% RE in my portfolio.


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How do you like working with your property management company? Class A office? I assume modified gross lease or full service?

 

[ToothJockey]

what about the statistics of 1 and >$200k debt?

Here's a link from the ADEA for graduates of Class of 2019

Educational Debt

www.adea.org

"Good News- You can currently fund your entire COA (Cost of Attendance) with federal loans with a combination of federal direct unsubsidized and federal direct PLUS (formerly known as Grad PLUS), negating the need for private loans. "
Am I the only one that doesn't think of that as good news? It feels more like its preying on young kids to sign up for 500k+ debt

 

[Cold Front]

How do you like working with your property management company? Class A office? I assume modified gross lease or full service?

There is no outside property management - so I do the managing. Most commercial properties almost function in an autopilot mode. There is no day to day work, specially in the era of emails, text messages and online banking.

I review the tenants rent roll accounts are in good standing once a month through my bank app, I pay the taxes semi-annually online, utilities are all on auto-pay, other vendors (landscapers, parking cleaner and snow removal company) invoices are paid once a month, insurance is paid in auto-pay as well, etc. That’s 99% or what I manage for a relatively new buildings (both buildings are less than 6 years old). Older buildings require more maintenance and come with more tenant complaints. The total expenses I manage for both buildings are about $200k a year, and I charge 7% of management fee on that number. So about $14k a year or about $1,200 a month for under 2 hours of work a month. Just to give you an idea of how commercial RE works.

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[Cold Front]

Here's a link from the ADEA for graduates of Class of 2019

Educational Debt

www.adea.org

"Good News- You can currently fund your entire COA (Cost of Attendance) with federal loans with a combination of federal direct unsubsidized and federal direct PLUS (formerly known as Grad PLUS), negating the need for private loans. "
Am I the only one that doesn't think of that as good news? It feels more like its preying on young kids to sign up for 500k+ debt

“17% of dental school graduates in the Class of 2019 reported no student loan debt.”

I assume this group are the ones getting military and academic scholarships - so they really should be called that, rather than calling them the “no student loan debt” group, which is misleading.

Most people who go through military scholarships are the ones who would come out of schools with over $300k in debt. If the ADEA did a pre-scholarship stats, then we would see more than 3 in 5 students to be in the $300k in student loans group - which would be in-line with the actual cost of dental school.


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[deleted903013]

“17% of dental school graduates in the Class of 2019 reported no student loan debt.”

I assume this group are the ones getting military and academic scholarships - so they really should be called that, rather than calling them the “no student loan debt” group, which is misleading.

Most people who go through military scholarships are the ones who would come out of schools with over $300k in debt. If the ADEA did a pre-scholarship stats, then we would see more than 3 in 5 students to be in the $300k in student loans group - which would be in-line with the actual cost of dental school.


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A lot of students have rich parents help as well.

 

[Cold Front]

A lot of students have rich parents help as well.

Absolutely, and they are increasing in numbers every year. But I would not put them higher than 1 in 20 dental students in that group. Many rich parents are still reluctant to pay their kids graduate school cost - so the kids can learn to support themselves. Just ask @charlestweed or the other dentist parents on these forums.


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