How much debt are you still carrying from dental school? Does nearly $287,331 ring a bell? According to the American Student Dental Association, that's the average amount of debt dental students had when they walked out of the door with their diplomas in 2017. So if you've got six figures of student loan debt, you're not alone, and it's not surprising. Reports have shown that a dental school education is the most expensive of all higher education fields. Your peers are in the same financial boat.
If you've only been in practice a short while, you probably haven't paid much of your debt down. While student loans are a necessary evil for most dental students, they can make life difficult later on. Being six figures in debt with high monthly payments can impact a new dentist's ability to:
- Get approved for a loan for equipment and a location to set up a practice.
- Get approved to rent equipment.
- Buy a home.
- Save for retirement.
- Pay for children's education.
One way to get that debt down to a more manageable number is refinancing, but is that option right for you? It's advisable to refinance your dental school loan if:
Your loans have high interest rates. Student loans for things like medical, dental and law school usually have higher interest rates than loans for undergraduate degrees, no matter if they're federal or private student loans. The interest rate right now is quite low (though the Fed has inched it up over the past year and are likely to continue through 2019), so now might be a great time to investigate refinancing to lower your interest rate. It can save you a lot of money not only on your monthly payment, but on the amount you ultimately pay over the life of the loan.
Your credit and financial picture have improved. If you have been making payments on time not only to your loans but car payments and other bills as well, you'll likely have a higher credit score than when you were in dental school even with the amount of debt you're carrying. It also helps that your income is much higher as well. Better credit and a better financial picture will get you lower interest rates. To qualify for refinancing at a lower interest rate, lenders want to know that you have:
- A credit score in the high 600s or above.
- Stable, provable monthly income.
- A good debt-to-income ratio. This is a ratio of your total monthly income to the total monthly debt you have. Anything under 30 percent is considered ideal. So that means if you have $10,000 of monthly income and $3,000 monthly debt, you're good to go. This is why some financial advisors counsel dentists to hold off on buying big-ticket items like cars and homes until they refinance and pay down their debt substantially.
Whether you should refinance is a decision you should talk over with a financial advisor, who can point you toward options like private, federal or other types of refinancing loans. At Harbor West, we specialize in helping dentists navigate their financial waters. Give us a call today for more information.
This information is provided for general purposes and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the information, please consult your Financial Advisor for individual financial advice based on your personal circumstances.