Tackling the Albatross of Dental Student Loans

If you’re in the early phases of your career as a dentist, chances are you probably have some lingering student loans. Data from the American Dental Education Association paints a sobering picture of debt: 4 out of every 5 dental school graduates in the class of 2014 had student debt of more than $100,000. Average debt for all indebted dental school graduates in the Class of 2014 was $247,227. And more than 30% of indebted dental school graduates in the Class of 2014 reported debt in excess of $300,000.

If you’re among the recent graduates with substantial debt, it may be a significant impediment to future planning—including saving for your retirement years. How can you even think about planning for your nest egg when your career has just begun, and you have a ton of loans to repay? Let’s take a look at some strategies that may help you pay that debt down more quickly.

Pain now… gain later. Depending on where you start your career, you are probably looking at a starting dental salary around $125,000. You may have a mortgage obligation, car payments, and many other demands on that salary. But paying off your loans sooner rather than later will pay big dividends down the road. Consider putting off other big purchases, such as a home, until you’ve made substantial progress on paying back your loan, or until your salary begins to escalate.

Biweekly payments. Once you’ve established and are making those high early payments, ramp it up even more by adding at least two more payments per year. This helps in two ways: you’ll make 26 payments a year instead of 24, and you’ll pay less interest over the course of your loan. This may not sound like much, but depending on the terms of your student loan, it can add up to tens of thousands of dollars in savings.

Slightly larger payments each month. Same principle: getting to the principal faster. Again, even tightening the belt a little bit on current spending to save over the long-term, say, in an extra increment of $50 or $100 each payment, can pay off in big savings.

Keep good track of all your debt…and your interest rates. If you have multiple loans from multiple sources with different interest rates, keep good records and make sure your extra payments are going to the highest interest rate loan first. While paying off student loans early can be a great idea, it doesn’t make any sense if you’re doing it by paying the minimum payments on a credit card or other higher-interest loans. Always know what your rates are and prioritize your payments to tackle the ones with the highest rates first.

Keep a solid budget, and make adjustments as necessary. The budget is a great all-purpose tool. Knowing where your money goes each month can help you determine whether you can make those extra payments or pay extra amounts each month.

Make good use of “found money.” Is there anything cooler than found money? We’re not just talking about that random, freshly-laundered sawbuck you unexpectedly discovered in your jeans pocket. Any unexpected income can be found money, such as a bonus, a side job with Uber, or even an unexpected tax refund. As always, little amounts over time can add up, so putting aside that “found money,” or using it to add to your loan payments, can make small amounts much larger.

Pay on time, and don’t miss payments. Even if you can’t pay off your loans early, make sure you stay current. Missing payments is bad on three levels. First, it can negatively impact your credit, which can ultimately lead to higher interest rates. Second, it has the opposite effect of paying off your loans early; it will make the long-term cost of your loan higher. Third, paying even a couple of days late can lead to late fees and other penalties.

An albatross is a big bird. Shed it a little bit at a time. Sometimes, just knowing you’re making progress can make the long road seem shorter.