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The best way to pay off dental school loans will depend on your career path. A dentist starting a general practice has different financial challenges and priorities than an orthodontics resident, for instance.
Based on your post-graduation plans, use these guidelines as a starting point for mapping out your approach.
Private practice: Standard repayment or refinancing.
Residency program: Income-driven repayment, deferment or refinancing.
Public sector: Dental school debt forgiveness and income-driven repayment.
There are five main options to pay off dental school loans. Here's how to figure out which strategy is right for you.
1. Pursue dental school debt forgiveness
Best for: Dentists working in the public or nonprofit sector, or in an underserved area.
Forgiveness will likely be the least expensive way to pay off dental school loans. But it's also one that few dentists pursue.
According to a survey by the American Dental Education Association, 5.6% of dental school graduates in the class of 2019 planned to pursue Public Service Loan Forgiveness. An additional 3.1% were going to use a service commitment program that forgives debt, such as National Health Service Corps.
Several dental school debt forgiveness programs will pay off debt for dentists who work in the public sector or in an underserved area for a certain period of time. This route is a good option if your career aligns with one of these programs — like you plan to pursue academic dentistry at a nonprofit university, for example.
2. Refinance to pay off dental school loans fast
Best for: Private practice dentists who want to save on interest.
More than half of dental school graduates in the class of 2019 planned to aggressively pay off dental school loans. Dental school loan refinancing is likely the best option if you want to do this.
Refinancing can lower your interest rate, which may save you money and help you pay off dental school loans fast.
For instance, refinancing $304,824 — the average dental school debt among the class of 2020 — from 7% interest to 5% would save you roughly $306 per month and more than $36,736 over a decade, assuming you had 10 years of payments remaining before refinancing and kept the same repayment schedule.
Refinancing can make sense if you plan to work in private practice and are confident you won’t need an income-driven repayment plan or pursue Public Service Loan Forgiveness. You lose access to those benefits when you refinance federal student loans.
3. Stick with the standard repayment plan
Best for: Dentists whose payments are manageable.
On the federal standard repayment plan, you’ll make equal monthly payments for 10 years. If those payments are affordable, sticking with the standard plan can make sense.
You’ll save the most in interest on the standard repayment plan among all federal options, and you'll keep federal student loan benefits by not refinancing. You can even make extra payments if you want to pay off dental school loans faster.
4. Enroll in income-driven repayment
Best for: Dental residents; dentists with excessive debt; dentists working in the public sector.
There are four income-driven repayment plans. These plans cap monthly payments at 10% to 20% of your income, making them affordable even during residency. For example, if you earned a $56,000 annual income as a dental resident, your monthly payments could be as low as $315.
Income-driven payments are subject to increase annually as your income increases. And your balance will probably increase because your payments likely won’t cover the interest as it accrues. You may want to revisit other strategies after your residency.
But if your debt vastly outpaces your income, income-driven repayment may be a viable long-term strategy. These plans forgive your remaining debt after 20 or 25 years. Those amounts are taxed, but you may pay less overall than under the standard plan or by refinancing.
Using an income-driven repayment is also a necessity to qualify for Public Service Loan Forgiveness.
5. Defer loan payments during residency
Best for: Dental residents in programs that charge tuition.
Whether you’re pursuing a dental specialty or doing a general practice residency, it’s possible to postpone federal loan payments during your training through in-school deferment or mandatory forbearance.
If you’re in a residency program that charges tuition, deferment will likely be necessary. But if you’re in a paid residency program, avoid deferment if possible, because it increases your loan balance. Most dental school loans — except any subsidized loans from your undergraduate studies — continue accruing interest during deferment.
For example, postponing payments for one year on $292,169 would add more than $52 in interest per day for a total of almost $19,000, assuming you had a 6.5% average interest rate, didn’t make any interest payments during that time and had no subsidized loans.
To limit the amount of extra interest that accrues, make at least partial payments during residency if possible, even during deferment.