Paying off student loan debt is a long and sometimes complicated experience. The strain of managing this debt can put significant pressure on an individual’s finances and overall well-being. Not only can it influence major life decisions, but it can also put healthy credit at risk if you don’t handle delicately. The increasing student loan debt for dental students in particular makes financial education a high priority. With seemingly so much at stake, how can dental students best repay and manage their student loan debt?
Courtesy of Dr. Janki Patel, a recent THE NEXTDDS virtual training event entitled “Maximizing Your Earning Potential & Paying Down Your Student Loan Debt” discusses topics such as credit health, budgeting, types of debt, and much more. Here THE NEXTDDS presents ways in which you can repay your loans, and Patel’s tips for managing your student loan debt.
Repaying Your Loans
Unpaid debts can come back to haunt you. For example, at a 10% interest rate, a $100 debt grows to $400 in 15 years, $672 in 20 years, $1,083 in 25 years, and $1,700 in 30 years. So, for each $100 you spend on non-essentials, you’re costing yourself between $400-$1,700! Think about that extra frappacino with compounding interest in mind—that $4 increases fast! Start chipping away at your debt right away so you don’t fall to this scenario.
Prioritizing your loans and paying them off as soon as possible will set you up for a successful financial future. If you have good credit, see if you’ll benefit from consolidation (combining your federal loans into one lump sum, with an interest rate averaged out from those loans for a single monthly rate) or refinancing your loan at a lower rate from a private lender. There are several different programs available to you:
Standard – 10-year program where you pay less towards your overall loan amount, since you pay less over time
Graduated – 10-year program where your initial payments are lower at first, but gradually increase every two years
Extended – Payment over more than 10 years (usually 25), but will increase the overall cost of your loan because of the time it takes for your loan to mature
Income-based – A good option for residents or new dentists if you have partial financial hardships, such as a lower income than you could pay for a large debt. Your monthly payments will be calculated based on your income, so the payments will be affordable.
Pay As You Go – Similar to the income-based repayment approach, except your monthly payments are lower. Loan forgiveness programs can come faster under this program, but are stricter when qualifying.
Familiarize yourself with the National Student Loan Data System (NSLDA) for more information on paying off school loan debt. Payments, histories, records, alerts, and other documents are available for your viewing. Missing loan payments will affect your credit history, which can have a negative impact on purchases such as your cell phone plan, homeowners insurance, or renting an apartment. If you ultimately default on your loans, the government can withhold money from you in the future (social security benefits or offsetting your income tax refund). Being on top of your loans is a must.
Managing Your Loans
Contact your loan provider to find out how long your grace period is. This is usually six months after you graduate from dental school, but confirm with your loan provider just how long you have before you’re due to start paying your loans.
If you are unable to obtain employment after that timespan, seek deferments or forbearance in order to postpone your loan without having higher interest accrue. Keep accurate records of lenders, balance, and repayment statuses. If possible, pay more than is minimally required each month, in an effort to lower your principal and reduce future interest payments. Make sure to document everything in writing, as it’ll be easier to return to. If you record your correspondence, you won’t lose out on valuable information that you might have overlooked.
If you are a student who is on the verge of graduation (or have graduated already), you may need to focus on more than just completing degree requirements. The reality of student loan debt means young dentists should take the necessary precautions for managing their debt, while making a plan of attack to repay them in a responsible and appropriate way. Whether they owe $20,000 or $200,000, students should make sure to play it smart when beginning to repay student loans. Click here to listen to the rest of Dr. Patel’s virtual training event.