By: Dr. Cory Ball
The average student loan debt for a graduating dental student in 2020 was over $300,000.
During school, students can easily fall into a mindset of forgetting about the loans and focusing on other things.
The problem with that is when the time comes to start making payments, it can be overwhelming for young dentists in the workforce if they are not prepared and aware of the options on repayment and refinancing.
Options for Paying off Dental School Student Loans
Let us pretend that if you are reading this, you are not having any of your loans forgiven or you are not part of an organization or program where they will pay your student loans in return for years of service (i.e.- military, service corp, etc) and are in need of a system to pay them back.
What are your options? We will review the main and most common options.
- Standard Repayment Plan
- Graduated Repayment Plan
- Extended Repayment Plan
- Pay As You Earn Repayment Plan
Please Note: There are other options that are less utilized.
1. Standard Repayment Plan
Essentially this is where you have a loan, you finance it through a lender, and you have a term with a monthly payment and interest rate.
Pros:
- All borrowers are eligible for this plan.
- Payments are fixed so you know where you stand every month and you also know how long the loan will be and when you will be finished at the latest (if you do not put extra money towards the loan). You’ll usually pay less over time than with other options.
- Often lenders will offer a minor incentive to refinance with them (for example a $500 Amazon gift card)
Cons:
- Not a good option if you are seeking public service loan forgiveness (PSLF)
- You may lock into a rate that is not as beneficial later on (you can refinance again, however)
2. Graduated Repayment Plan
You start with lower payments and gradually work your way up
Pros:
- It will allow you to get your feet wet in the real world before you start making larger payments.
- It will have a fixed amount of time (i.e.- 10-year loan, 15 years, etc)
Cons:
- You will end up paying more over time than under the standard
- Doesn’t qualify for the PSLF
3. Extended Repayment Plan
Payments may be fixed or gradual and guarantee you’ll be paid off within 25 years.
Pros:
- Lower payments than options 1 or 2
- A fixed period of time of paying back the loan
Cons:
- You will end up paying more than the standard plans with longer periods of interest accruing
- Doesn’t qualify for PSLF
4. Pay As You Earn Repayment Plan (PAYE)
Your payment is 10% of your discretionary income; also this includes the revised pay-as-you-earn repayment plan (REPAYE)
Pros:
- You always know how much you’re paying per month as it is a fixed part of your income.
- After 20-25 years (depending on if the loans are undergraduate or graduate) any outstanding balance on your loan will be forgiven.
- A great option for those seeking PSLF.
Cons:
- Payments are always recalculated each year and are based on your updated income and family size; your spouse’s income will be considered even if you don’t file taxes jointly.
- You will pay more over time than standard plans.
- You may have to pay income tax on any amount that is forgiven.
Others Repayment Options Similar to PAYE:
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
- Income-Sensitive Repayment Plan (ISR)
Which is the Best Plan for You?
This may be a tough question for new graduates who have zero to very little financial experience.
It would be wise to discuss your options with someone who went to school for finances.
If you are someone who wants to pay off your loans as fast as possible and have the means to do so, the standard repayment plan with potentially a lower loan period would be best.
If you are someone with several kids and lots of other expenses where you cannot see yourself putting more than the minimum amount into student loans, an extended or even income based repayment plan may be the most financially savvy option for you.
As a new dentist graduating from roughly 8 years of post-high school education, make sure you are able to make those student loan payments and do not cripple yourself with a fancy car if the basics are not covered first.
