Managing student loan debt as a new dentist

As new dentists, we can all remember that gut-wrenching moment when we received an email from our loan servicer warning us that our payments would be due soon. Looking back at our time as dental students, we spent years learning the intricacies of prepping the most ideal class II restoration, administering anesthetic and memorizing mnemonics in order to pass our board exams. Seldom did we find ourselves calculating our net worth or determining which loan repayment method would work best for us. Realistically, when would we have had the time? This is something many of us must navigate on our own because there is no formal training in dental school.

Not long after graduating, many of us find ourselves wanting to get married, buy a house, buy a car, buy a practice, have children or start investing for retirement. Those first few years can feel like being stretched in so many different directions. Regardless of where life takes you, it’s important to have a plan early on. Time can work in our favor but can also work against us.

The ADA is advocating for dozens of student loan reforms that would help mitigate these financial burdens, and options are available now for new dentists seeking debt relief. It wasn’t until my grace period that I became overwhelmed with the thought of six-figure student loan debt. I started to do extensive research on different repayment plans and philosophies. Here is a summary of what I’ve learned through my loan repayment journey.

Repayment plans

Repayment plans can be oversimplified into the following three categories:

1. Fixed-payment repayment plans: Those with federal loans can take advantage of a fixed-payment repayment plan, such as the standard repayment plan, which divides your total loan debt over 10 years (120 equal payments). Because the monthly payments can be high, I don’t recommend standard repayment plans for those who have more than $200,000 in student loan debt.

2. Income-driven repayment plans: Those with federal loans can enroll in an income-driven repayment plan. The most recent is called the Saving on a Valuable Education plan, which replaced the Revised Pay As You Earn plan in 2023. This repayment plan calculates your monthly payments by taking 10% of your annual discretionary income and dividing it into 12 equal payments. This plan no longer requires you to include spousal income and takes your family size into account when determining your monthly payment. Any accrued interest that is not covered by your monthly payment is eliminated, which is a huge benefit. After 25 years on this repayment plan, the remaining balance of your loans will be forgiven; however, the amount forgiven qualifies as taxable income. This repayment option can benefit new grads right out of school because it offers the flexibility of low monthly payments when your income is inconsistent or lower than anticipated.

3. Private consolidation: You can also refinance your loans through a private loan servicer for a lower interest rate, but this typically requires the loans to be repaid over a shorter time frame, such as three to five years. Although federal repayment plans tend to have higher interest rates, they offer more flexibility in terms of when borrowers are unable to make payments or want to change repayment plans. It’s important to understand private loans are not eligible for federal loan repayment or public service loan forgiveness.

How to strategize

When choosing a federal repayment plan, there’s no need to stress. You can technically change your mind and switch between repayment plans (although this is not recommended because each time you reapply, your interest is compounded).

No matter how much student loan debt you have, many new dentists will benefit from enrolling in the income-driven repayment plan SAVE. The first few years of practicing dentistry are stressful enough, and no one wants to worry about having enough money to cover their loan payments. Income-driven repayment plans allow you to adjust or pause your payments when your income decreases or you become unemployed.

Many new dentists with the intention of going into practice ownership use SAVE to keep their loan repayment expenses low while their initial practice expenses are high. Dentists who practice part time or go out on extended leave also use this repayment method since it is directly correlated to their income.

Although the SAVE plan will forgive your total balance after 25 years, many dentists will benefit from paying off their loans before 25 years. This is why having a plan early on is so important.

The goal should be finding the balance among repaying your loans in a reasonable amount of time, minimizing the interest accruing and having the flexibility to spend money on other priorities.

Public Service Loan Forgiveness and loan repayment programs

There are ways to pay down your student loan debt using the Public Service Loan Forgiveness program and loan repayment programs.

The PSLF program requires you to be employed full time by a U.S. federal, state, local or tribal government or not-for-profit organization. You must have federal loans and you must be enrolled in an income-driven repayment plan, such as SAVE. The PSLF program will forgive your remaining loan balance after 120 qualifying monthly payments. Unlike the income-driven SAVE plan, the amount forgiven under PSLF is not taxable.

There are many different state and federal loan repayment programs in which dentists who work in government or not-for-profit organizations can participate. These programs include those sponsored by the National Health Service Corps and Indian Health Service and typically require a two- to three-year service commitment.

Although you can’t participate in more than one loan repayment program at the same time, what many dentists don’t know is that you can participate in both PSLF and a loan repayment program at the same time. Working for a community health center or university can keep monthly income-driven payments low. You can then use funds from a loan repayment program to make these monthly payments. You can also renew your loan repayment contracts until the total balance is paid in full or you complete 10 years of public service. Dentists who take advantage of these programs can have the majority of their student loans paid for this way.

For those in private practice who are enrolled in SAVE, loan repayment strategies require closer consideration. One must decide if participating for 25 years for the forgiveness is worth the corresponding taxes.

Real-life applications

To better conceptualize these loan repayment strategies, I like to use this example of identical quadruplets. Annie, Bonnie, Connie and Donnie graduated from the same dental school with $450,000 in student loan debt. These new dentists have a starting salary of $180,000 with an annual increase of 3% per year.

• Annie participates in the standard repayment plan at 5% interest. She pays $4,772 per month for 10 years. The total cost of the loan after 10 years would be $572,754.

• Bonnie participates in the SAVE plan at 5% interest. She pays $1,117-$2,140 per month for 25 years. The total cost of the loan after 25 years would be $409,223, with $449,686 forgiven. The amount forgiven is considered taxable income, so she would owe an additional $179,874 in taxes the year her loans were forgiven.

• Connie participates in the SAVE plan at 5% interest, but she works for a nonprofit organization and has enrolled in PSLF. She pays $1,117-$1,457 per month for 10 years. The total cost of her loan after 10 years would be $136,142, with $500,784 being forgiven tax free.

• Donnie participates in the SAVE plan at 5% interest, and she also works for a nonprofit organization. She has enrolled in PSLF and participates in the National Health Service Corps Loan Repayment Program. Her monthly payments are $1,117-$1,457 per month for 10 years. The total cost of her loan after 10 years would be $136,142, but since she used her NHSC disbursements to cover her monthly payments, she had no out-of-pocket expenses, and $500,784 will be forgiven tax free.

Words of encouragement

It's important to remember that our student loan debt does not define us. I believe that being informed and aware of your financial situation can provide you with the tools to achieve your goals and live an intentional, meaningful life without crippling student loan debt.

This piece originally appeared on the New Dentist blog, newdentistblog.ada.org. The information is for educational purposes only and should not be considered financial advice. The examples were calculated using studentloanplanner.com.

Dr. Vacura is a general dentist and dental director for a federally qualified health center in Sacramento, California. She graduated from the University of California San Francisco School of Dentistry in 2017 and the University of Nevada Las Vegas School of Dental Medicine general practice residency in 2018. Dr. Vacura enjoys encouraging dental students and colleagues to take charge of their finances. Over time, she hopes to recruit and mentor more new dentists into the career of community dentistry.