Student loans can be overwhelming and affect people differently depending on how the debt is managed. Student loans can affect the trajectories of income, savings and lifestyle. Understanding the available options and best strategies to manage student loans can make a significant difference in the personal and professional satisfaction of dentists. 

Here are nine steps to successfully navigate the repayment phase of the student loan maze: 

1. Always be aware of how much you owe. I am surprised when I ask dentists their student loan balance and they do not have an answer. It is as if they have shifted into autopilot mode and are paying bills without considering how long they will have to pay (i.e., the term of the loan), when the loan will be fully repaid (also known as retired) and how much is still due (the outstanding balance). Only by understanding your total debt will you be able to make other critical decisions about not only your career path, lifestyle and savings, but also options in managing your student loans. 

2. Understand your payment obligations. As you determine the amount of debt remaining, you should also understand the terms of the loan. For example, loans can have different interest rates during different periods as well as different repayment rules. This is critical to understand as you look at options so as to avoid extra penalties, such as interest, fees, etc. The terms of your loan should be clearly spelled out by the lending institution in your loan document(s), and you should be able to easily access this information. 

3. Know your grace period (especially for younger dentists). Not all loans need to be paid back immediately. You should take advantage of any allowable grace periods to reduce pressure and establish a more stable financial position. Student loans typically have a six- to nine-month grace period after you graduate before you must begin repaying your loan. And there are sometimes other grace periods, such as during the recent pandemic or other emergency or hardship situations. 

4. Consider loan consolidation. Frequently, you can consolidate multiple loans, extend payment terms and lower payments. Lower payments will reduce pressure and allow dentists the opportunity to build up higher income from practicing dentistry. A highly efficient, high-production practice is important for every dentist, but it is particularly helpful in providing the resources to pay back student loans. Be careful to evaluate the new interest rate on a consolidated loan. Consolidation is typically done to reduce payments, but it sometimes comes with a higher interest rate. Depending on your situation, that scenario may be desirable; don’t let it catch you off guard. 

5. Always pay off higher interest-rate loans first. You should check with your accountant on any of these recommendations, but it generally makes sense to reduce the most expensive loans as quickly as possible. As these loans are retired, your ability to then pay the next lower interest rate loans becomes easier. 

6. Don’t fall into the trap of making interest-only payments. It may be appealing to make lower payments, but, by doing so, you may find yourself in a trap where you are paying off loans for many more years. Always try to pay something toward the principle with every payment. Interest will continue to accrue on the principle, and, if you do not reduce it, the loan could actually continue to grow. 

7. Check to see if there are any mechanisms to receive discounts on the loans. For example, sometimes discounts are offered if you authorize payments to be automatically deducted from one of your accounts. Any opportunity to achieve discounts on loans should be considered, as those will reduce the overall loan burden. 

8. Periodically evaluate other plans and options directly with your lender. For example, your lender may offer you the opportunity to change your repayment requirements, which may be beneficial. Although it is beyond the scope of this article to evaluate all the possible different options you may encounter, your accountant will be able to look at these with you and make recommendations. Keep in mind that, regardless of the accountant’s recommendations, you must be comfortable and confident that moving into a new type of repayment plan is in your best interest. 

9. Establish a personal budget. Very few dentists have budgets for their personal lives, and this is a bit of a mistake. If you have debt, you want to know what your monthly expenses will be (including student loan debt) compared to your monthly income. This will make it easier to evaluate personal purchases, such as a new car or house, and what level of purchases you may or may not want to make. 

There are numerous acceptable strategies for repaying student loans. In general, I lean toward those that eliminate debt as early and quickly as possible. While there may be budgetary or tax reasons to extend your payments, debt is debt, and, in observing thousands of dental practices, I see the best results for long-term practice success when the doctor focuses on retiring debt and then shifts to maximizing savings. The longer the debt is present, the less likely dentists seem to properly take advantage of retirement funding at the highest level. 

The ability to save money and realize the tax advantages that are available in the United States for retirement savings plans allow dentists the opportunity to retire comfortably. Too many dentists today are waiting until their student loans are paid off to explore contributing to retirement plans. They seem to believe that they have many years to address this issue. Unfortunately, that period of “many years” becomes shorter and shorter. According to Levin Group data, the average retirement age of a dentist is now 72 and rising. Given the increase in the average retirement age of dentists, partly due to additional debt like student loans, it makes sense to take advantage of the best strategies that allow retirement funding and compound interest to be allies in the accumulation of a higher net worth. 

Summary 

It is important to remember that improving practice performance to increase production and individual compensation is one of the primary mechanisms available to dentists to create funds to repay student loan debt. It is not the only solution, but a higher income makes it easier to repay debt, leaving more money to fund your lifestyle and your retirement savings. 

Remember that student loan debt is good because loans have allowed many dentists to enter the profession when they may not have had any other way to do so. But you owe it to yourself to evaluate your financial position on a regular basis and take advantage of the best opportunities to create a solid financial future that allows you to leverage all the time and effort you have spent on your education to ultimately help the patients you serve and live the life you deserve. 

Roger P. Levin, DDS, is the founder and CEO of Levin Group, a dental management consulting firm. He is the AGD Impact Practice Management columnist.