7 Strategies To Pay Off Student Loans

This is guest post by Bash Sarmiento

Tackling your student loans may seem like a mammoth task. Coupled with the feeling of shame many of us feel around our debt, it’s easy to feel hopeless.  But that doesn’t mean nothing can be done!

Don’t beat yourself up for taking up student loans. You had your reasons, and whatever those reasons may be, you shouldn’t feel ashamed. 

In 2021, 15% of all American adults still had outstanding undergraduate student loan debt, and 7% with outstanding postgraduate student loans. That’s around 38.75 million and 18 million Americans, respectively! And there’s the hope of paying the loans off because 24% or nearly 62 million adult Americans have paid off their student loans. 

It won’t be easy, but it can be done. 

Here are a few strategies you can do to pay off your student loans. Go ahead, test out a few of these strategies, and pick one that works best for you. You can also modify these strategies to make a customized plan that you can stick to.

Stay Updated and Educated

Before everything else, go ahead and update all your contact information on your StudentAid.gov profile and your lender’s website. This ensures you don’t accidentally miss any important announcements or information regarding your payments. Reacquaint or re-educate yourself with your loan’s terms, grace periods, and total debt. A student loan calculator can help you better visualize your payment timeline and determine how to best move forward.

1. Debt Avalanche 

This strategy requires you to focus on your highest-interest debt first. You also get to pay the least overall in the end by reducing the amount you pay towards interest. You do this by paying as much as you can afford towards your loan with the highest interest rate. Of course, don’t forget about your other debts and make the minimum monthly payments on those as well. 

Once you’ve paid off your highest-interest debt, move on to the second-highest interest rate debt. Continue making those minimum payments on your other debts. Continue this process until you’ve worked your way from the loan with the highest interest to the lowest. 

The trick here is to pay as much as you can afford and pay more than the minimum payment for the primary loan you’re paying off. 

Do note that if you make extra payments, be sure to advise your servicer to apply the overpayments to your current balance and not to next month’s payment. This ensures that you’re paying off your loan quicker and not just paying the next month’s bill in advance, defeating the purpose of paying above the minimum monthly payment. 

2. Debt Snowball

If you’re overwhelmed by the big numbers and want to ease into the payment momentum, the debt snowball strategy will work well for you. 

You focus on your smallest debt first. Similar to the debt avalanche strategy, pay as much as you can afford toward your lowest student loan debt. Go ahead and pay the minimum monthly payments on your other debts.  After you’ve paid off your lowest debt, move on to the next-lowest debt while continuing to pay the minimum payments on your other debts. 

Focusing on the smaller loans first makes you feel gratification quicker, which can motivate you to continue your payoff journey. The downside is that you do end up paying more in total debt due to the interest fees. 

3. Focusing on Accrued Interest First

If you’ve had your student loans for a while and maybe have foregone strategic payment for a bit, you may notice a big chunk of your current payments go towards paying those accrued interests. 

Some of these accrued interests can grow VERY big if left unchecked. Somtimes so much so that even if you pay more than your minimum monthly payments, a significant portion of it will end up paying those interest fees and not your actual loan. 

By paying off the accrued interest immediately and consistently, you’ll be able to have a better handle on your debt and your payment strategy. 

4. Look for repayment assistance programs

If you work for a company, consult your company’s HR and see if they offer student loan repayment assistance or benefits. You can also check your alma mater’s income-based benefit programs and forgiveness programs for alums. Go ahead and check your town, city, or state’s local programs as well.

5. Using cash-back cards for payments

Check with your servicer if you can pay with credit cards or even prepaid debit cards. Some of these bank cards offer incentives like cash back which you can use to your advantage.

On top of making extra payments towards your debt, you can earn cash back from using your card. The money you receive from the cashback incentive can go directly to your student loans, helping you pay them off even faster and with some savings to spare!

Staying on top of your card payments and avoiding overdraft fees is crucial. Carrying a balance will simply negate any savings or benefits you’ve created. 

6. Refinancing your private student loans

Refinancing your student loans is one way to pay off student loans fast. You ideally lower your total interest rate by consolidating all your student loans to a single private loan. This only works if you choose a new loan with a better rate and payment term than what’s left of your current loans. You’re refinancing to make paying off your loans more manageable, not to make it harder for yourself.

7. Increase your income

One of the most effective ways to pay off your student loans quicker is by increasing your income to allocate more towards loan payments. You can create a side business or find other ways to make money online.

No “extra dollar” is too small to go towards your debt payments. 

In fact, you can also treat any extra money that comes your way as money that can go towards your loans. This includes any bonuses, pay raises, gifts, or tax refunds. You can set aside a bit of the “extra” money for yourself, of course, so you don’t feel deprived of some well-deserved joys. But keep in mind that every dollar counts.  

Everyone’s debt journey looks different, but one thing’s clear: staying consistent is important. Soon, you’ll be free from the shackles of student loans, and you’ll be financially independent!

Meet Bash Sarmiento

Bash Sarmiento is a writer and an educator from Manila. He writes laconic pieces in the education, lifestyle and health realms. His academic background and extensive experience in teaching, textbook evaluation, business management and traveling are translated in his works.

Find him on Instagram and LinkedIn

Financial Planning Checklist for Dental & Medical Professionals

I can’t believe I’m saying this but, a new year is fast approaching! I don’t know about you but this time of year usually means getting my financial ducks in a row (it’s always a great time to do this). As 2022 approaches, let’s start to think about ways we can improve and be better for our future selves. One way to do this is to re-assess to finances. Here’s a quick checklist to follow:

Create and Stick to a Budget

Develop good financial habits early by setting a budget. There are several guidelines out there as to how an ideal budget should be set up. I personally follow the 50-30-20 rule (with some variation). Essentially this means, 50 percent of your money each month should go to essentials like bills and housing, 20 percent should go towards your financial goals like savings, investments, saving for retirement and paying off debt/student loans, and 30 percent should go towards wants like vacation, entertainment, etc. If you want to, you can switch the 30-20 around if that makes more sense for you. Of course, your budget sometimes need a little wiggle room but for the most part try to stick to this plan. Automate it so that you don't have to think about it.

Build an Emergency Fund

Make sure you have at least three (3) to twelve (12) months of funds saved up for a rainy day.  Personally, I think 12 months is a good buffer. This is where part of the 20 percent savings portion of your budget should go, and it's there in case you lose your job, become ill, or encounter an unexpected expense. Keep this money in a separate savings account at a separate bank from your checking account and forego a debit card for that account. Also, automate your contributions.  Ask your employer to direct debit a portion of your salary into your emergency fund account or you can do this yourself. You can also consider placing the funds into an account with high yield interest. Another smart thing to do is put this money in a short term investment vehicle where you can access it immediately if needed.

Create a Plan For Student Loan Repayment

The pandemic gave us a nice break from the pressures of repaying student loans every month. Hopefully we were smart about taking advantage of the 0% interest period as the end of that is fast approaching (after Jan. 31, 2022). Explore all the options for student loan repayment that is available to you and choose the best one for your situation. Look into options like public service loan forgiveness (PLSF), the different repayment options available through the federal government and/or take advantage of the benefits of student loan refinancing or consolidation. If you are still not clear about the best option for you, seek a professional help. I have personally used Travis Hornsby, The Student Loan planner and he was able to help me figure out a repayment option that fits my goals all while saving me money in the long run.

Pay Down Debt and Build Good Credit

All debt are not created equal. There is what we call good debt and there's bad debt.  Things like credit card debt are considered bad debt because it grows pretty quickly and doesn't help you in the long term. Interest rates are usually higher and can take much longer to pay off. On the contrary, student loans are considered good debt because it's an investment into your future earning power. Put as much money as you can towards credit card bills first starting with the with the one with the highest interest. Once that's paid off, prioritize the next highest interest debt, and so forth. Also consider automating the contribution to your debt payment so that you never have to worry about a missed or late payment.

Protect Your Paycheck

An injury or illness could limit your ability to practice. Ensure you have enough disability insurance coverage to cover you in case of sickness or injury. Supplemental insurance options are available specifically for health/medical professionals, but be sure you understand how the policy defines total and partial disability. Finally, remember to update this coverage as you grow in your career and into your practice.

Put Additional Protections In Place

As your career grows, explore the various life circumstances and get the right insurance to protect against potential impacts to your budget:

• Malpractice Insurance

• Life Insurance

• Renters/homeowners Insurance

• Auto insurance

• Umbrella Insurance

Save and Invest For Retirement

It is really important that you get on this early! It is vital that you prioritize creating and contributing to a retirement fund and take advantage of compounding interest. Compounding interest will do a lot of the hard work for you if you start early. Try to maximize your contributions and take advantage of any match system your job has to offer. If your job does not offer retirement options, you can do this on your own. Speak with your financial advisor and your accountant about the tax benefits.

Explore Attorney Assistance

Utilize attorney expertise to review employment contracts, help protect your assets from malpractice, maximize tax planning and discuss estate planning.

Start a College Savings Plan

You certainly know the value of a good education - and the cost of getting one. If you have a child or children and their education is a priority, start saving now. A 529 plan is a great place to start.

Talk To a Professional

Financial planning can feel overwhelming, but it doesn’t have to be. A financial representative can help you design a plan and implement strategies to meet your specific goals with confidence.

Getting your finances together means stability, security and dear I say it, freedom. It’s okay if you don’t have all this together just yet. The important thing is that you start, now. I will have the 2022 planner, budget and financial tracker ready in a few days so be on the look out for that. Let’s make 2022 the year we get our lives together. Our future selves will thank us for it.

How One Doc Is Repaying $575K of Student Loan Debt in 7 Years

A Q&A Session with Dr. Samantha Tillapaugh aka The Debtist

Q: Thank you for agreeing to answer some questions on your journey to financial independence. Please, tell us a bit about yourself.

 A: At my core, I am an extremely multi-faceted person – the Jill of many trades with no intention to master any one of them. Since I was a child, I have had a short attention span, and I think that is why my mom was so adamant on teaching me how to focus. I thank her, because now I am very efficient with my output, but I still haven’t lost my curiosity. 

 I am the truest definition of a Gemini, intermingled with a Type I Personality on the Enneagram scale, and an INFJ. My biggest goal in life is to constantly learn and experience something new, and my biggest fear is standing in the same place. I LOVE movement, as well as creative thinking, which explains why my favorite hobbies include motion and thinking on your feet. I guess that makes dentistry a good fit for me. 

I am a part-time dentist who owes a ridiculous amount of student loans, hell-bent on not allowing finances to impede my wish to live life to the fullest, explore my interests, and retain full autonomy over my day-to-day life. 

Professionally, I am also a blogger for my website, thedebtist.com and others’, a wholesale director for a bakery called Rye Goods, an occasional speaker on the topic of student debt, as well as a temp for other random events such as teaching lunch-and-learns for companies, or dog-sitting for traveling pet parents. 

Privately, I am a real nerd. I am an avid reader, I depend heavily on my planner, and I still write analog. Writing helps me process my thoughts; organizing the house keeps me calm. I take piano lessons and boxing classes. I love to sleep, but hate to waste time, so I mitigate that with my love for coffee. I also like to travel, take photographs, and bake.

I practice slow-living and minimalism because I naturally gravitate towards a fast-pace and a maximalist life. 

Q: What made you interested in dentistry?

A: It’s hard to say when the true point of inception occurs, but I have been saying I wanted to be a dentist since I was 8 or 9 years old. When I was younger, I thought it was destiny. I was born on the Philippine Islands and when we would vacation on beaches, I would play with fish teeth. My parent’s actually have a video of me, at 2 years old, holding a dead fish in my hand, and literally playing and inspecting its mouth. Gross, huh? 

 I also have a video of me floating in the ocean with a floaty in the shape of a Colgate toothpaste tube. I loved wearing fake Dracula teeth for Halloween in elementary school. And I always liked the dentist. As I got older and started considering which medical profession I would pursue, it was the lifestyle of a dentist that attracted me. It was not until college that I learned my great-grandfather on my mom’s side was a dentist, too. 

 My mom wanted to be a doctor, actually. She never had the ability to pursue that dream because student loans did not exist in the country I was born in. You either came from a rich enough family to pay for medical school on your own or not. In that respect, I understand the privilege I had of having student debt. Now that I am older, I think subconsciously, or maybe even consciously, my mom’s unfulfilled dream got translated and handed down to me, eventually becoming my own.

Q: You graduated with a hefty amount of student loan debt. If you don’t mind, please tell us how much. Was this from undergrad as well as dental school and residency?

A: I absolutely don’t mind sharing this at all! I graduated with a sum total of just over $575,000 in student debt. More than half a million dollars! This was mostly from dental school. In undergrad, I chose a university to which I could commute from home and I lived at home all four years. I also worked three jobs and graduated in three years. All of this was part of my plan to save as much money as possible. I had no help with paying for undergrad, so I still graduated with about $15,000 in student debt. I did not go to residency.

 Q: What repayment plan did you choose and why?

A: Choosing the repayment plan for me has been quite the adventure. As aggressive as possible was our repayment choice, although we have switched between repayment plans and we also have plans to exit the loan forgiveness umbrella in the near future. Before I go into the minor details as to our repayment thus far, I will answer the question “Why?”. 

Most people don’t know this, but when you do the math, aggressively paying down debt was the cheapest path. Actually, paying it in the standard 10-years was cheaper than waiting 25 years to forgive the loan by over $100,000! And you save 15 years! To me, that’s a no-brainer. The reason as to why it is cheaper is simple.

The government banks on your income growing over time. Since you pay a small percentage of your income to them, you will be paying more to your loan over time, as well. However, your income payment will unlikely exceed the interest that is being added to your debt. Under the federal loan forgiveness plans, the interest rates are high (mine is 6.8%). Which means that each month, my loan of $575,000 is accruing $3,258 in interest. 

Assuming my program requires me to pay 10% of my income, for me to cover interest, I would need to be making about $391,000 per year. And mind you, that doesn’t even touch the Principle Amount. Therefore, unless you do make over $400k a year, your loan is growing for 20-25 years.

Now, where the government benefits is on the tax bomb at the very end, which shockingly, some people do not know about. In short, whenever the loan is forgiven, the debtor will be charged taxes that tax year as if they earned that much income. 

To give a finite example of this, if I was on the IBR plan, my loan of $575,000 would have increased to about $1.4 Million. They would consider $1.4 Million to be income I earned that year. Which means my tax bomb would be about $420,000 (plus whatever my taxes are on what I ACTUALLY earned that year doing dentistry) – a sum I would have to pay that year. When you add this amount to the minimum payments I would have made throughout the course of the program, I would have paid about $750,000 in total. When we pulled the numbers, paying off the debt in 10 years would have only cost me $650,000. 

Here’s the kicker. I knew we could do it in less than 10 years!

So now that I have answered why we chose to pay it down aggressively, let me go through our ever-changing repayment plan.

 When I was just exiting dental school, I was visiting the financial aid office constantly. The one at school kept telling me that my wish to pay off student debt “did not make sense.” They said that between the house I would want to buy and the new car I would want to get and the vacations I wanted to take, I would not have the income to pay back the debt, even with my husband who was working at the time as a mechanical engineer! Which is funny because I never told them about a house, or car, or vacation. 

I remember running through the numbers and not understanding why they couldn’t see that the income could cover the debt. I even had my husband (who I was engaged to at the time), come into the school with me to look at the Excel sheet the financial aid admin had created. She painted a picture that said it was impossible, and she recommended I sign up under the IBR repayment program. With a heavy sigh, we did.

But I just couldn’t sit with this notion that I was going to be in debt for what feels like FOREVER, and I wanted to get my finances in shape. I also did not believe the admin HAHA. I hired a financial planner who happened to be the husband of a fellow dental classmate. He helped me get rid of all my credit card debt and set up our finances in the few months between starting work and getting married at the end of 2016. 

After we were married and all the credit cards were paid off, my financial planner started noticing that we were setting aside about $8k a month. Which is when he told us that paying back my loan is a possibility for us. In order to do a 10-year repayment plan, we would need to make payments of about $6,300 per month. We were worried about the risk refinancing into a 10- year program would entail, especially if one of us lost our jobs. In order to have the flexibility of decreasing our monthly payments should life throw lemons our way, I stayed in IBR and started paying back my debt aggressively. The plan was to get the loan to a smaller, more manageable number that would give us a lower interest rate when we refinance, as well as a more comfortable minimum monthly payment that we knew we could achieve should our income ever change.

It was not until I talked to Travis Hornsby from Student Loan Planner (who I BTW recommend to every grad who has student debt), that I learned I could optimize my plan by switching to REPAYE. This is because REPAYE subsidizes the interest and pays 50% of it for the first three years. So I switched to REPAYE a year into my loan repayment journey. By taking advantage of REPAYE’s interest discount, we technically achieved the interest rate we would get if we had refinanced, while retaining the flexibility. We hung onto the ability to stop making massive monthly payments in cases of emergency. 

And boy were we glad we did! The pandemic came in March of 2020 and REPAYE’s 3 years was going to end for me on November 2020. My husband ended up losing his job for ten months during the pandemic and the pause on federal loan payments have been a real blessing!

However, we are still sticking to our real plan, which was to refinance at the end of 3 years. Since student loans are on pause currently and at 0% interest, I am waiting for whenever they resume to refinance. At that time, we will make a large lump sum payment, bringing our loan from the OG $575,000 to around $340,000. This will hopefully land us a better interest rate than if we refinanced in the beginning (since the total is much lower). Our target interest rate is less than 3%, which would be an improvement from the current 6.8%.

Q: What is your strategy for tackling your student loan debt (please break down).

A: We are doing all sorts of fun and creative things to pay it down. I look at the task as a game– kind of like Mike and I versus the world. We made a pact to live off of one income, because both our parents supported us in that way. The income we live off of is my husband’s, whose wish in life is to live comfortably without sacrificing what makes life worth living. His income is enough to maintain our lifestyle. Which leaves 100% of my earnings to go towards student loans – after maximizing a 401K first, of course. (I could be throwing this extra 19.5K into paying down student debt, but our motto is centered around not sacrificing the NOW for the LATER. (We are such millennials, am I right?)

 We implement a number of other tactics in order to maximize what we can put towards loans. First, we budget to keep our spending on the minimum. We travel hack to be able to see the world, without spending post-tax dollars on flights, and hotels. We also house hack, which helped us save money to buy our property, as well as reduce the amount we spend on putting a roof over our heads. Between 2017 and now, we have reduced our housing expense by $1,000 – not an easy feat in Orange County, California. 

 I also try to have the hobbies I pursue make money for me. I find that so many people do things they like without trying to monetize it. A few things I like to do that I’ve turned into side hustles are write, bake, and be around animals and pets. I also like to teach and take photographs and have been paid for both before. I like coffee shops, which is why my new role as the wholesale director of a bakery works well for me. I get to meet all sorts of coffee shop owners and probe their brains on how to source the best cup of coffee! Plus I use my blog to sponsor my lifestyle. Companies that I promote send me products to try, and instead of buying things for myself, I reach out to the company and ask if I can trade a post for a product review. It’s a win-win situation, and I get high-quality items without spending hard-earned dollars! 

 We love the idea of passive income and remote work. This is because our dream is to travel the world. We are working on both. During the pandemic when Mike did not have a job in mechanical engineering, he completed a course on coding so that we could make remote a reality. Little did we know that the pandemic would change our lives! He returned to mechanical engineering at the beginning of this year, and just this week, he was offered the option of coming in as little as once a quarter (aka 4 total days a year)! Meanwhile, my work as the wholesale director, writer, and blogger is all remote. And the blog and the wholesale directing gives me passive income – which I define as income that I continually receive without me doing additional work. The blog is the best because content I’ve written in the past can still bring in revenue in the future through affiliate links.

 Our strategy is not “work as hard as you can, as many hours as you can.” On the contrary, as a slow-living advocate, I am quite the opposite. I like working as few hours as I can while receiving the most output. Ways in which that can happen is to create continuous revenue from a product (like the blog), earn commission through a past sale (like the wholesale directing), or place your dollars in something that would grow in value (like our home). Even during the pandemic, we paused our loan payments but moved all our money to a high yield savings account. Since we planned to put our savings into the loans right when the relief ended, we wanted a short-term solution that would still have our dollars working for us. The HYSA gives a 0.7% return versus the typical 0.01% return with a bank. So on the side, it is earning us a few hundred dollars.

 Q: With your current breakdown, how long would it take you to pay down your entire student debt load?

A: As described in the previous question, we went from IBR to REPAYE. We will soon refinance for a lower interest rate and hope to be in the low to mid $300,000’s when we do. After that, I hope to get rid of the debt within 3 years! EEEK!

The pandemic definitely slowed us down, but the student debt relief has greatly helped. We are on track to finish sometime between the 7 to 8 year mark. 

Q: Does any part of your life suffer because of your aggressive debt repayment?

A: This question is why I embrace my work as TheDebtist. I want to show people that my choice does not hold me back from living my life. I mean, look at me! I work 2 days a week in dentistry. I get to call my own shots at the dental office, and control which days I work, as well as how many patients to book. I work remote for blogging and the bakery, choosing my own hours. I like the flexibility of that. My husband and I have traveled to 10 international countries, as well as all over the United States. I opened a bakery and a dog sitting business between now and when I graduated. I’ve experienced so many things, and since that’s my life goal, then No, I do not suffer.

 I do find this question really painful to answer, because it is asked often and insinuates this common belief that paying back debt leads to deprivation. That’s why I care about sharing the story of my student debt repayment journey. That fear of deprivation and inability to live life was in me, too. I had no one to look up to and it was lonely, as well as scary, to take the leap. 

The people around us feed off of this consumerist energy and paying back debt obviously means offsetting it with less consumption. So I choose to show people that a minimalist life in terms of material goods can also mean a maximalist life in terms of experiences. It’s just about being fueled by different things, that’s all.

 Q: Do you have other debt and if so, what is your mindset towards those?

 A: We do not! Except for our mortgage. My mindset on that is clear. I would rather pay for a home, earn equity and use it for house hacking and my business (my entire bakery operated in my kitchen!) than rent a home from someone else and contribute to their wealth instead.

 Q: What is your approach to spending and your psychology about money?

 A: I have been socially brainwashed to spend money, so it is natural for me and most people to spend. My natural instinct is to hold tight to money, but when I see other people around me buying things, I start to want things too. I work very hard to stick to a budget and stay a minimalist.

 My psychology around money has changed significantly over the past four years. I used to have a scarcity mindset around money. I worked many hours to attain it because I thought hours worked equated to money earned. Now I have an abundance mindset around it, investing money into things that will give more output with less input. I am also trying to be more generous with money, having adapted to the idea that generosity is repaid tenfold. 

 I used to be scared of not having enough money but that’s what this journey gave me. Paying back student debt aggressively gave me the confidence to overcome my fear of money. Now I understand that I am in control of it, and not the other way around.

 Q: If you had to do it all over, would you pursue a career in dentistry? 

 A: Yes. I wouldn’t have said Yes in 2017, but I have since changed my mind. Told you I was a Gemini! 

A: Dentistry gives me autonomy over my work. I have full control of how much I work and for whom and how. Some people have to work 9-5, 5 days a week in order to have a job. I don’t. I also have the freedom to own my own dental office or work for one. I have the ability to work around the world. I can choose which community I serve, and can refer people out if I feel they and I are not a good match. I meet all sorts of fun people and have watched children grow into teenagers since I have been at the same office since 2010. 

I have found that while some people on my path are motivated by wealth or money, I am not. I thought I was, but I realize that I am most motivated by freedom. Wealth and money might help get me there, but that’s not what I care about. During the pandemic, I quit a job that made a lot of money and honestly carried me and my husband while he was out of a job for ten months. I worked four days a week and made as much money as when we both worked. But I did not have freedom over how I did my work. I couldn’t decide the days I wanted to work. And I was very unhappy. So I left. 

I think I answered differently in a podcast interview back in 2017. That was before I realized the flexibility I had with this job. That was before I realized I could call my own shots. That was before I started thinking positively; before I viewed dentistry as a power instead of a crutch.

Q: What advice would you give other health professionals/ health profession students on handling debt and student loans?

A: Tune out all the noise. Then look deep inside your very heart and ask all the hard questions. And hear all the terrible answers. March to the beat of your own drum. Not everyone will pay it back aggressively because it doesn’t fit everyone’s lifestyle. But don’t be afraid of the choice that you know is right for you. Where there’s a will, there’s a way – actually, a million ways!

You’ve got to center your plan around your goals, your personality, your lifestyle, and your comfort level. Don’t ignore the emotions, but also, consult the numbers. Understand your options and be a continual learner. Study ways to earn money and make money. Pivot when you have to and don’t box yourself into one way. Lastly, consult professionals, or friends like Patrice and me! 

About Dr. Sam: The Debtist

I am a debtist – a dentist who graduated with a lot of student debt. After four years of undergrad and four years of dental school, I ended up with a debt of over $550k, which I then had to start paying back. This led me to a series of life changes and discoveries about myself in my late twenties that shaped my lifestyle into what it is today. Saving money required us to be more frugal, and being more frugal opened up the doors to finding alternative ways to find happiness in things that don’t require consumerism. I now embrace a simple life. I live in OC with my husband, although we prefer to be traveling, and do so when we can. We focus more on experiences rather than material things. Being selective when it comes to purchasing consumer goods, we spend most of our money and time acquiring new skills, picking up new hobbies, learning about new cultures, and exploring the globe. I’ve become more intentional with my life decisions, and am currently working towards buying my freedom from my massive loan, but not at the expense of giving up my life in exchange for grueling work hours. Open to questioning society’s standards of success, I am finding ways to reach my life goals by refusing some things that we take for granted as the norm. Balance is key, and this is my journey towards financial freedom, in the process of discovering what life is really about.

Follow along with Dr. Samantha’s debt free journey over on her blog thedebtist.com. Also check her out on Instagram here and here!

Corporate Dentistry vs Private Practice

An opinion piece by Travis Hornsby of the Student Loan Planner

Corporate dentistry wants your student loans to make you afraid of taking risks. I’m not accusing DSOs of anything devious but there are pros and cons of corporate dentistry. Like any business, the owners want a reliable pool of labor that’s perfectly happy with good benefits, a predictable income, and the illusion that working for someone else is safer than working for yourself. 

Decades ago, there were 3,000 graduating dentists a year. Today, there are more than 6,000 new dentists each year. Dental student loan balances have also skyrocketed.

Regulations and declining insurance payouts have drastically reduced the income of an average dentist as well. In 2005, that average stood at almost $220,000. In 2015, the average dentist salary had fallen to about $180,000.

Here’s what I’ve learned from making student loan plans for hundreds of dentists. The higher your student loan balance, the more you should want to own your own dental practice.

What About Student Loans Makes Dentists Afraid of Running their Own Practice?

Most dentists tell me the first time their loans got real was in the first month or two after graduation when their loan servicer sent them their statement. Interest rates as high as 8% on Grad Plus loans are ridiculously high. You probably have tens of thousands of accrued interest, too.

If you owe over $300,000, your payments need to be higher than $3,000 a month just to make a meaningful impact on the principal balance. A typical new grad starts their career as an associate working for someone else earning around $120,000. Many dentists think about paying back their loans, but how do you do that when you’d be paying about 40% of your take-home pay?

Since you receive a letter in the mail every other week from a bank telling you to refinance, you might be tempted to pull the trigger. Thus, your big payments get locked in. Can you take the refinancing risk and then borrow to buy a practice too?

It makes many of my clients terrified. Instead of buying a practice, they might work for years at Heartland, Pacific, Aspen, Comfort, etc. as an associate just to have a guaranteed income to pay down their student loans. 

Why Student Loan Repayment Benefits from Corporate Dentistry Make You Too Comfortable

Remember that the goal of any employer is to give you just enough that you won’t want to leave. That can lead to complacency on the part of employees. One of the fast-growing ways to make new grads feel attached to their jobs (in general not just in dentistry) is student loan payment benefits.

As humans, we are prone to the fear of loss. It’s why we hold onto a bad investment even though the rational action might be to sell it. Fear of loss is why we keep a lousy house, car, or vacation property even though we know we should get rid of it.

I just saw a case of a doctor on Facebook who was having a really hard time getting out of a $600,000 house he knew he shouldn’t have bought. The reason? He didn’t want to lose $15,000 on it. That’s extreme loss aversion. He’s cool flushing tens of thousands down the toilet rather than downgrade to a more affordable house just because he doesn’t want to psychologically admit the mistake and take the financial hit.

Likewise, there is a negative psychological impact when you leave a job with a student loan repayment benefit. If your employer offers $20,000 a year towards your student loans, it hurts to give that up for an uncertain ownership path.

Other Ways Corporate Dentistry Profits from Dentists

Corporate dental groups use other methods to make employees not want to leave. They realize that many dentists would get restless without a seat at the table in their practice, so they’ve invented a lot of hybrid ownership structures.

Pretend Dave is a new grad and associates for a practice in a random part of the country. His starting salary is $120,000 with a 10% to 30% bonus based on how the practice does. His office produces $1.2 million after three years on the job. 

The dental practice does not want to lose Dave, so they show him this amazing projection of income that tops $300,000. All he must do is buy 50% of the practice and stay for 10 years. 

He’ll be a majority owner, and the DSO will handle all the marketing, hiring, billing, and operations. They want him to pay at a valuation of 75% of revenue, and they’ll have him take out a loan for 50% of this price to purchase 50% of the shares.

Why Do I Dislike Joint Ownership Ventures with Corporate Dental Groups? (for the Dentist)

Dave has a lot of student loans, so he really likes the idea of having the DSO handle all these business functions for him so he can focus on dentistry. The high projected salary they show him makes him feel confident that he’ll be able to pay his loans off one day.

Why is this not a great deal financially for Dave? 

Here are a few reasons:

1. He’s spent years building the valuation of the practice by increasing its revenue and now must pay a higher multiple for the business

2. Anything less than 100% ownership of a practice is harder to sell

3. He could get 100% financing on his own without the corporate dental group

4. He could procure the business services much cheaper than equity financing by paying for them directly

Building the Valuation for Someone Else

Many new associates are hungry to prove themselves, which often results in much higher practice revenue within a few years. 

Many dentists turn around and take an even bigger loan out to buy this increased production from themselves basically. You can prevent this with an option to buy a practice at an agreed upon % of revenue at your start date.

Don’t Pay 40% of the Business Valuation for 40% of the Practice 

Another common pitfall happens like this: an accountant tells you that the whole dental practice you’re looking at is worth $1 million. The ownership group then offers you a 40% stake for $400,000. While this sounds fair, it’s not. 

If you had to sell a minority interest on the open market to someone not affiliated with the dental practice, you would have to accept a discount on the price because they’re not getting full control.

When ownership agreements include the exclusive right of a corporate dental group to provide business services (like marketing, HR, operations, etc.), you reduce your pool of buyers. Who wants to be saddled with a contract from the previous dentist? Perhaps the best buyers own the other shares, and thus they can offer you less for your shares.

Another thing to keep in mind is that majority control is often worth more than you think. If you control 51% of a dental practice, you have the power. You would not want to pay 49% of the practice valuation for 49% of the practice.

I could give more examples, but the point is that if you’re even thinking about entering a partnership agreement, you should run the contract by an accountant used to valuing dental practices. Otherwise, how can you know that the agreement is fair to both parties?

When you’re dealing with a sophisticated organization like a corporate dental group, any agreement you sign is likely to be biased against your interests without someone equally sophisticated in your corner.

Why Dentists Will Get All the Capital They Need to Become Owners

Another concern I see with dentists who partner with DSOs is that they don’t want to take on so much debt to own a practice. They look at the $600,000 to $800,000 price tag of many solid practices and get squeamish.

In terms of securing a practice loan, banks will be happy to give you most of what you could want, even with a bunch of dental student debt. The only issues I’ve seen are with loans for jumbo-sized operations (more than $2 million in revenue, then it might get tricky).

Of course, you need to have a track record of at least a year with solid production history for a bank to feel comfortable. That said, getting capital to buy 100% of the practice you want will not be a problem.

In terms of the fear of taking on more debt, I get it. You’re already feeling nauseous that you owe over $300,000 from dental school and you’d like to keep that debt as low as possible.

However, dental practice loans are a different animal. Almost all the loans get paid back. In the rare case that the dentist defaults, the primary culprits are alcohol and drug abuse, not bad business results according to the bankers I’ve spoken with. 

While $800,000 of business debt can look very intimidating, a dental practice is going to pay for itself over time. The profits of the business pay off the practice loan, and eventually, you own an asset in full. The tens of thousands you had to pay towards your business loan you will recoup one day as additional income once the loan is gone. The bigger the practice that you buy, the bigger income number you will have all things equal.

How Dentists Drastically Overpay For Business Services For Their Practice

Finally, pretend you’re the kind of dentist who likes to turn off the lights and go home. This is one of the biggest reasons I hear from dentists who choose to be associates long-term or partner with DSOs.

As a dentist, you’re doing most of the work to keep the practice humming from a revenue perspective. Yes, corporate dentistry might bring in the patients, help with staffing, and run marketing, but what are these services truly worth? 

What I find is that many dentists do not realize that they don’t have to do it all by themselves as practice owners. There is a huge industry of practice consultants and dental professionals that handle everything from collecting bad debts to billing to websites and more. They’ll run your marketing, assist with staffing issues, and even help with compliance. I heard of one company on the Millennial Dentist podcast the other day that even customizes chatbots for practice websites.

Many of these professionals might charge $10,000 or more for their services. While that seems steep, many dentists pay much more than that by partnering with a corporate dental group. Pretend the practice net income is $500,000 and you’re a 50/50 partner with a DSO that handles business functions.

We know that in more than 99% of cases, dentists successfully pay back practice loans. That means that the dental practice will pay for itself in time. Hence, the dentist is paying about $250,000 a year for the services the corporate dental group offers. What kind of team could you build to support your practice with that kind of money? Furthermore, many expenses might be front-loaded in set up costs.

If you set up the website, social media, and operating systems well, they might need only occasional maintenance for example.

While I understand the appeal of turning the lights off and going home as a fellow entrepreneur, you might as well capture the full benefits of your labor. Groups that help you outsource business-related tasks that take an ownership percentage are essentially doing the easy stuff while you do all the bread and butter dentistry that keeps the lights on.

The Simple Truth about Dental Student Loans and Working for Corporate

If you have no debt and want a flexible lifestyle with good benefits, working for a corporate dental group might be a great decision. If you absolutely cringe at the thought of talking to anyone about business, then perhaps you should work for a DSO as well.

I beg you though, please do not let your student debt influence your decision to become an owner or not. It shouldn’t deter you from the advantages of starting a private dental practice. 

You should consider buying a practice as soon as you feel comfortable doing so if your goal is getting a good return on your educational investment.

Bankers consistently tell me the default rate in their dental practice loan portfolio is extremely low. That means there are big profits to be made in dentistry, even with the increasing number of graduates. 

The headwinds of big student debt and ever declining insurance reimbursement rates make ownership scarier than it used to be, but too many dentists are not confident enough to take the leap and live the dream of ownership. The math is still stacked in your favor.

You can do this, especially if you owe a ridiculous amount of debt from dental school. If you know you’ll eventually refinance, use REPAYE and make prepayments until you’re firmly established in your practice. This will keep payments low and allow you to show a healthy cash flow profile to bankers.

If you want us to create a custom student loan plan for you that incorporates your career goals, we can do that for you. Click here.

If you know you’ll owe more than double your income for most of your career, the tax breaks and income optimization from practice ownership are invaluable. You can increase the financial security of your family while minimizing your taxable income and increasing the amount of loans forgiven.

I have nothing against corporate dental groups. They have contributed to innovation in the field and have provided a predictable stream of jobs for new grads to learn the ropes. 

I just want to look out for the interests of my dentist clients exclusively when they compare corporate dentistry vs. private practice. As a solo practice owner, you can have a high, stable income with a degree of autonomy that’s rare for healthcare professionals. 

Cede that autonomy with great caution to a DSO for an illusion of safety and security.

While I share some of the views and opinions in this article, they are not my own. Click here for the original and full article by Travis Hornsby - The Student Loan Planner.

Travis has helped thousand of dentists with customized plans to pay down their student debt and gain financial freedom. Visit his site here for a consultation.

My Secret To How I Paid Off 200K of Debt in 3 Years!

This is a guest post by Jolene Stahn

For a long time, I didn’t know what kind of job or career I wanted. Like many millennials I was checking off the boxes, the “should” boxes, you know what they are:

✔get good grades so you can

✔go to a good university so you can 

✔get a good job so you can 

✔buy a car and

✔buy a house and 

✔have a good retirement

I started all this and was fully in it. And fully in $200,000 in debt from student loans and a mortgage… But now that I had this house and life, I realized I wanted out of this societal trap of shoulds. I realized that I was only checking off these boxes because I should and not because I wanted to.

I wanted to be free. Free from these shoulds.

I wanted freedom. I didn’t want to be stressed out by this debt. And I surely didn’t want money to stress me out. I wanted to be in control of my finances.

I didn’t want to have to be limited when going out to eat or when deciding between having something or not whether it was a plant to decorate my house or (expensive) avocados for my favourite avocado toast! 

So what did I do? 

These desires led quickly to becoming obsessed over figuring out what exactly I wanted (so a lot of self-help books) and learning from all the money gurus! I wanted to not have any debt as soon as possible. And I wanted to learn about how I could make my money work for me! Now, let me tell you it wasn’t easy but I figured it out.  

Download my secret to see what I figured out:

My results: 

Because I was able to learn so much, diving head first into all the books and courses I could get my hands on. 

I was able to pay off my debt of $200,000 in 3 years! 

And because of this, I was able to have the freedom to quit my (“career” type) job, backpack throughout Australia with my boyfriend, and go on last-minute trips to places like New York and Costa Rica! I was also able to explore new passions that allowed me even more freedom like working online and finding other things I enjoy. And ultimately living the way I want to live. 

I was able to do all of this by learning about personal development and managing my finances and the most amazing part is that I can always feel this freedom I truly desire, do the things I want to do, and not the things others/society says I should do!

I now feel free, in control, and love the luxury of doing what I want. And the best part, I now get to help others with their money, whether someone’s in debt, living paycheck to paycheck, or if you just want to make your money work for you! 

I am so passionate about helping others get out of the situation I once was in with so much debt and lack of control in the finance department. I teach what I’ve learnt on my journey, what I wish I would’ve known, and use a combination of personal development and money management techniques. I simplify finances terms and personalize the best methods based on individual goals. 

I love seeing the amazing results from clients who just paid off their credit card debt, the celebration, and to see how happy and less stressed they are! I’m so proud of each of them to be able to live without being controlled by money!

This is a guest post by Jolene Stahn.

About Jolene Stahn

Jolene figured out the secret to financial freedom, quit her corporate career, moved to Australia with her boyfriend and is living the life she desires!

Now she helps millennial figure out their finances to also live the life they want.

Follow Jolene on Instagram

CONTACT JOLENE

How One Doc Paid Off $200,000 in Student Loans in 4 years

One of the hot topics on this blog and among young professionals has been student loan debt. If you attended professional school, chances are you accrued some debt along the way. However, it is a stark reality that this debt has to be repaid. A known debate for many of us is whether or not to pay down debt aggressively and get rid of it quickly or to pay the minimums as designated by your loan servicer and have the rest forgiven after 20-25 years. I personally have had this debate and have gone back and forth on the two options, which why I was really excited meet our guest, Dr. Rania Habib via Instagram and learned that she repaid her six-figure student loan debt in a short amount time and is now financially independent. I reached out to her to find out just how she did it and she was happy to answer all my questions. I am hoping this will inspire you as it has inspired me.

Q: Thank you for agreeing to answer some questions on your journey to financial independence. Please, tell us a bit about yourself 

A: Hi. My name is Rania A Habib and I am a board certified oral and maxillofacial surgeon (OMFS). I was born In Texas and raised in Minnesota. I obtained my BS in microbiology and completed dental school at the University of Minnesota. I then went on to complete a 6 year joint OMFS/MD program at University of Maryland in Baltimore. I worked in a busy private practice in the Maryland area while living in DC for two years. I then completed a one year fellowship in Pediatric Craniofacial Surgery at the University of Florida, Jacksonville. I love to teach and mentor students, so I found my calling in academic medicine 

Q: You are an Oral & Maxillofacial Surgeon with a specialty in Pediatric Cleft & Craniofacial Surgery. Please tell us what your specialty entails.

A: Oral & Maxillofacial Surgery is a unique surgical specialty that crosses the realm of both dentistry and medicine. We specialize in the treatment of all conditions in the oral cavity, face, head and neck. In addition to performing dentoalveoalar surgery and treating oral benign pathology, there are several fellowships that include cosmetic facial surgery, craniomaxillofacial trauma, pediatric cleft & craniofacial surgery, head and neck oncology, microvascular reconstruction, temporomandibular joint deformities, orthognathic surgery, dental anesthesia and implantology.  I am passionate about treating patients with congenital or acquired deformities in the craniofacial region with an emphasis on the pediatric population. 

Q: What made you interested in that field and how long did it take?

A: I loved surgery from the moment I was exposed to it as an American Heart Association scholar in my senior year of high school. I was initially a pre-medicine student, but decided that dentistry offered the unique ability to combine artistry, surgery and engineering. While in dental school, I fell in love with oral and maxillofacial surgery. I completed my undergraduate degree in three years, dental school in 4 years, combined OMFS/MD in 6 years and one year of fellowship. My training took a total of 15 years post high school. 

Q: Did you have student loans? And if you don’t mind, please tell us how much. Was this from undergrad as well as dental school?

A: I had student loans from my 4 years of dental school and my two years of medical school. For my undergraduate degree and first 2 years of dental school, I had in-state tuition that was offset by academic scholarships. My parents saved for my education, so I was fortunate that I did not have to take out loans for my undergraduate degree. I took out partial loans for my first 2 years of dental school and full loans my final two years of dental school and medical school to cover both tuition and board. My total debt was just under $200,000

 Q: Did you get paid in residency? 

A: Yes, 4/6 years. 

 Q: What was your strategy for tackling student loan debt?

A: For peace of mind, I wanted to eliminate my student loan debt as soon as possible. I opted to take a lucrative job in private practice to facilitate this goal prior to pursuing fellowship. After 10 years of straight post-high school training, I needed a break from the chaos of training. I hired a financial advisor to oversee my finances. He managed my malpractice insurance, disability insurance and helped me establish a budget based off of my salary and spending. We carefully documented my rent, utilities, car payments, car insurance, disability insurance, malpractice insurance, cell phone, groceries, gas, travel and fun. Based off that budget, I established an emergency savings fund to cover three months of living prior to aggressively paying off any student loans. When I first finished residency, I only paid my loans off according to the amount due until I was able to accumulate my emergency fund savings. Once I was done saving the emergency fund, I then began to aggressively pay off my student loans. 

I did not live ultraconservative, but I did not overspend my means. I lived in a nice apartment with good amenities. I did not upgrade my car. It was paid off during residency, so keeping that car saved me a ton of money. As a coffee lover, I invested in a Nespresso machine, so that I was not paying $4-6 for coffee every day. I limited eating out at restaurants to only once a week. I am a big advocate for meal prep, so I usually prepared my own breakfast, lunch and dinner. Eating out is extremely expensive, so learning to cook will save you a ton of money. I did not deprive myself of anything, but I was extremely practical about my spending. I still enjoyed my money, but I eliminated consistent extravagance. 

Q: Did you have other debt and what was your mindset towards those? 

A: I was lucky in that I did not have any other debt. I did not buy a home, nor did I upgrade my car. 

Q:  In a nutshell, how did you achieve financial independence?

A: I set my long-term financial goals, hired a financial advisor and lived according to a budget that we designed as a team. I did not overspend my means.

Q: What is your approach to spending and your psychology about money?

A: I am a strong believer that you should do what makes you happy. I enjoy experiences over extravagant items. I would rather pay for a beautiful trip around the world then regularly spend a $1000 on a pair of shoes. That being said, I still enjoy finer things. When my loans were paid off, I opted to finally lease a luxury car. Every once in a while, I will buy a nice pair of shoes, a tailored suit, an expensive purse or jewelry. I just do not find myself drawn to spending my liquid income on expensive, luxury items on a regular basis. I enjoy spending my extra income on family, charities and people in need. 

Q: What advice would you give to other health professionals/ health profession students on handling debt and student loans?

A: I would recommend that you invest in a financial advisor who has adequate experience with student debt from the medical/dental profession. These are different than the average financial advisor. They will understand how to incorporate your malpractice and disability insurance in addition to investing. It is not a bad idea to have a financial advisor to handle malpractice and disability and a second financial advisor to invest. Your financial advisor needs to devise a plan that includes a spending budget, an emergency fund, retirement, and your end goals. When you finish school/training, you will have the option to pay off your existing school loan interest as a lump sum. If you have the financial ability to pay that lump sum, then do it! If you do not, you will accumulate interest on that interest. Depending on your interest rate, you may be eligible to consolidate your loans and pay them off more aggressively in a shorter time frame by applying for an outside loan agency geared towards medical professionals. If paying off your loans is a financial goal, consider these companies to help you pay them off in a shorter time, at a lower interest rate. Always consider your own financial picture before making these decisions. If you have other sources of debt such as a home mortgage or car loan, you may not be able to pay off student loans as aggressively as I did. Utilize your financial advisor to help make these decisions based on your personal goals and what makes the most financial sense for your situation and lifestyle. 

Dr. Rania Habib attended the University of Minnesota for undergraduate and dental school and the University of Maryland for medical school, General Surgery internship and Oral & Maxillofacial Surgery (OMFS) residency. She worked in a busy OMFS private practice for 2 years, then completed a full scope Pediatric Cleft and Craniofacial Surgery Fellowship at University of Florida, Jacksonville. She became the first female attending surgeon in the Department of Oral & Maxillofacial Surgery at LSU, NOLA where she was appointed as an Assistant Professor with a primary focus in Pediatric Cleft and CranioMaxillofacial Surgery. Her main surgical interests include pediatric/adult OMFS, cleft, craniofacial, orthognathic, facial trauma, obstructive sleep apnea, benign head/neck pathology and facial reconstructive surgery. She is now full time faculty at University of Pennsylvania. She is an active volunteer with Smiles International and the Global Smile Foundation where she provides cleft and craniofacial surgical care internationally. In her spare time, Dr. Habib enjoys traveling, rock climbing, biking, cooking, attending live music/art events, volunteering, reading and spending time with her family and friends. She is a master level SCUBA diver who is also a fitness fanatic.

You can find Dr. Rania on Instagram @raniahabib.md.dds

Student Loan Relief During Coronavirus (COVID-19)

*Updated on December 9, 2020

On August 8, 2020 The US President signed an executive order suspending student loan payments until the end of the year! This is a pretty big deal. During the height of the pandemic this was especially helpful to many of us since income was decreased and unemployment rose. If you follow me on social media (Instagram), you may have seen my most recent IG Live with Millenial Money Coach Jolene Stahn (She paid off $200K Student loans in 3 years) to speak on all things student loans. I briefly spoke about what I did with my money this year that would have gone towards student loans and how I plan to tackle it once repayment resumes. In a nutshell, I suggested taking advantage of this time of no payments and no accrued interest by putting the money you would have paid towards your student loans in a high yield savings account where your money would grow over the next several months. I also suggested putting money into a short term investment vehicle where more aggressive growth can be achieved. This way, once you’re required to start paying again you can put lump sums of money down and really put a dent in your loans.

Here are the details of the executive order:

Most of us are facing reduced or slashed income due to the coronavirus. Keeping up with bills may become increasingly challenging especially for those of us with federal student loans. Recent legislation via the Coronavirus Aid, Relief and Economic Security (CARES) Act passed by the federal government is offering support and some relief for borrowers.

1.Payments on Federal Student Loans are Suspended Through December 31, 2020 (was September 30, 2020)

Payments on most federal student loans have been halted until December 31, 2020. Interest does not accrue during this time, and not making payments will not hurt your credit. Each suspended payment will be reported to the credit bureaus “as if it were a regularly scheduled payment,” according to the text of the bill.

The following types of federal student loans qualify for payment suspension.

• Direct Unsubsidized Loans

• Direct Subsidized Loans

• Direct PLUS Loans

• Direct Consolidation Loans

• Federal Family Education Loans (FFEL) held by the federal government

• Federal Perkins loans

2. Some Private Student Loan Lenders Are Offering Relief

Unfortunately, the CARES Act doesn’t cover private student loans, including any federal student loans you refinanced through a private lender like Earnest, SoFi, Laurel Road, CommonBond, etc .

If you are not able to make payments on your private student loans, contact your lender as they may be willing to work with you by offering a forbearance, which will temporarily suspend your payments, prevent your loans from defaulting, and protect your credit.

Check out other student loan refinance options here.

3. Suspended Student Loan Payment Count Towards Forgiveness

Under the CARES Act, months in which payments on qualifying federal student loans are suspended will count toward loan forgiveness for borrowers who are pursuing it.

Federal student loan borrowers may be eligible for loan forgiveness through one of two programs:

• Public Service Loan Forgiveness (PSLF) promises to erase (tax-free) the remaining balance on federal Direct loans after you make 120 qualifying monthly payments while working for the government or a qualifying nonprofit.

• Income-driven repayment plans, of which there are four, cap monthly payments at 10%, 15%, or 20% of your discretionary income. They also stretch your repayment timeline from 10 years to 20 or 25 years. If you have a balance remaining after this extended repayment period, the rest is forgiven (but it’s taxed as income).

4. Student Loan Collection & Garnishing Tactics Have Been Suspended

If your federal student loans are in default, that is if you’re 270 days (or more) behind on your payments, the government can no longer garnish your wages, tax refund, Social Security checks, or other federal benefits in order to collect what you owe. Additionally, the Department of Education instructed private collection agencies to stop contacting borrowers by phone or mail.

5. Employers are Incentivized To Help Pay Student Loan Debt

The CARES Act allows employers to make tax-free payments of up to $5,250 in 2020 toward employees’ student loan payments. Employers can make these payments to employees or directly to their lenders.

PS: The above information is accurate as of August 12, 2020 (was April 3, 2020). As the COVID-19 Pandemic is a rapidly changing situation, it is important to stay current on updated government regulations. The federal government has an FAQ page for students, borrowers and parents that is continues to be updated.

Although the above solutions offer temporary relief from your student loan obligations, you will need to get back on track after December 31st. If you need help figuring out steps to tackle your student loan debt, I highly recommend Travis Hornsby of Student Loan Planner. Being a healthcare professional and having gone through specialty training, I have a lot of student debt. Travis has helped me figure out a strategy to get rid of student debt in a specified amount of time and is saving me thousands of dollars! Schedule a call with him to analyze your situation and and get clarity so you can devise a plan of action to get rid of student loan debt once and for all.

How Does Student Loan Interest Work?

When taking out loans to cover the costs of college, most students aren’t looking ahead to the decades after graduation. They might know that student loan repayment is on the horizon, but borrowers often fail to consider the interest that can quickly accrue once their loan is disbursed.

How does student loan interest work, exactly? What’s involved in setting interest on student loans? What should a reasonable monthly payment look like?

These are crucial questions that all borrowers should ask to avoid taking on too much debt and to stay afloat when loan servicers start sending the bill. This guide will help you understand the basics of student loan interest, how to find good rates, and the best methods for developing a repayment plan.

How does student loan interest work?

As with a mortgage or any other type of loan, student loans are not free advances. Because of interest, the amount you borrow is typically less than what you will end up repaying over the life of the loan.

When you apply for a student loan from the U.S. Department of Education or a private financial institution, you will be quoted an interest rate. Depending on the information you provide in your application, this might or might not be your final rate.

The student loan interest rate your provider settles on is expressed as an annual percentage rate, or APR, which represents the actual yearly cost of funds over the term of a loan. Your rate could be fixed or variable.

• Fixed: A fixed APR will remain the same for the extent of your loan term.

• Variable: A variable APR fluctuates with changes to the market index to which it is tied. Variable interest rates are often lower than fixed rates at the outset, but might increase over the term of your loan.

You will be required to sign a promissory note before your provider disburses your loan. This note will indicate your official rate, and also outlines:

• Terms and conditions of your loan(s)

• Repayment plan choices

• Late charges and collection costs

• Explanations of defaulting, forbearance, consolidation, and any other pertinent information

Each day or month, the interest your loan generates will be tacked onto your total balance, which includes the principal (the initial borrowed amount) and interest accrued.

You must repay the interest prior to paying down the principal balance, so failing to make payments makes your debt more expensive over time.

How Often Is Student Loan Interest Compounded?

Compound interest is the addition of interest to the principal of a loan. Put simply, it is interest on the interest. 

The promissory note for your student loans will also indicate how often your interest accrues as well as your compounding rate. Most student loans accrue interest daily and compound either daily or monthly.

Daily accrual means that lenders will divide the APR by 365 and apply that daily interest rate to your principal balance each day. Daily compounding would mean that your APR would also be applied to the amount of interest that accrued the day prior, in addition to the rest of your principal amount.

As such, compounded interest is constantly tacked onto your balance and incorporated into your next interest charge. So, the longer you take to address interest, the higher your compounded interest balance can climb.

See the full guide here:How Does Student Loan Interest Work?

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How Dentists Can Start Their Own Practice While Repaying Student Loans

Dental school graduates have among the highest amounts of student loan debt compared to other graduate degree types, most graduating with more than $300,000. While that might seem like a lot, dental grads also have significant earning potential, which means that it's possible for them to repay their loans and still fulfill their dream of opening their own practice.

The key to successfully starting a dental practice is to plan for it. That means saving up, optimizing your credit score, and making yourself attractive to lenders so that when it comes time to take out a dental practice loan you will easily be approved.

Here are some smart steps dentists can take to get their finances in order and work their way toward starting or acquiring a dental practice.

Focus on Earning Steady Income and Improving Your Credit

‍Before diving in headfirst to start your own practice, it's important to take a step back and consider the benefits of building your experience as a dentist while earning money along the way. "It's hard to start up a dental practice right out of school for a few reasons," said Adam Glassberg, financial counselor with Chicago-based D3 Financial Counselors, who works primarily with young medical professionals. "First, it might be hard to market your services with little or no experience. Second, working as an associate will also put you in a better financial position."

In addition to earning income and developing more experience, the extra time spent working as a dental associate prior to starting your own practice will allow you to focus on building your credit score. According to Glassberg, that means doing things you likely already know you should do, such as making your student loan and credit card payments on time.

But it also means doing some things that you might not realize improve your credit, such as being mindful of keeping your total debt amount low.

"For example, you want to keep your total debt to less than 30% of your credit outstanding," said Glassberg. "If you have a credit card with a $10,000 limit, you want to make sure your balance on the card doesn't exceed $3,000. Any more than that, and your credit score could suffer." He also recommends that you keep your oldest credit accounts open. "Credit companies look at how long you have had access to credit, and so closing old accounts might have a negative impact on your credit score," Glassberg said.

Meet With a Financial Planner

If you're feeling a bit overwhelmed at the prospect of starting a practice and paying your student loans, it would also be beneficial to reach out to someone who can help you create a plan. A financial planner who specializes in working with health professionals is probably your best bet.

Glassberg believes it's critical that you work with a financial planner, since they help you consider things you might not have thought about. For example, he recommends that his clients save money in an emergency fund to cover any unforeseen expenses for up to one year before starting a practice. "It's important to have that emergency safeguard," Glassberg said, "because you can't depend on making money from your practice in that first year." A financial planner will also help you optimize your assets and manage your student loans in order to prepare you for applying for a loan to start or buy a practice.

‍Find the Best Student Loan Repayment Option

‍Dentists have several options to manage and repay their student loans, and it's worthwhile to look into each one to determine which is right for your situation. Here are a few options that you can consider for tackling your student debt:

• ‍Consider Refinancing Your Student Loans

Because practice loan lenders like to see that the dentists they lend to have more cash on hand, it is often a good idea for dentists to refinance their student loans to lower interest rates with longer terms. This will enable you to lower your monthly payments so you can start saving for your practice.

‍When you refinance student loans, you're taking out one new loan to replace one or more existing loans often receiving a lower interest rate than what you were previously paying. Private lenders like CommonBond, SoFi, Splash Financial or LendKey offer refinancing options that could save the average dentist thousands over the life of their student loans.

‍"If you can reduce the interest rate or extend your repayment term, you can lower your payments which would give you more cash flow in order to start your practice," said Glassberg.

‍Refinancing your student loans enables you to both lower your monthly payments and lower your debt-to-income ratio, which can be helpful when it comes time to apply for a practice loan.

• Explore Federal Student Loan Programs for Dentists

‍Refinancing isn't always the best option for every dentist, however. The federal government offers several programs specifically for dentists that private lenders don't offer. In order to be eligible for most of the government programs, dentists are generally required to work within Health Profession Shortage Areas (HPSA) or a Medically Underserved Area or Population, as defined by the U.S. Department of Health and Human Services.

‍A few of the government programs available to dentists include:

‍National Health Service Corps (NHSC) Loan Repayment Program‍

Under this program, dentists can receive up to $50,000 to repay their dental school loans in exchange for a two-year commitment to work at an approved NHSC site in a high-need, underserved area.

Army Dental Corps Programs 

If you serve as a dentist in the U.S. Army, you may be able to get up to $120,000 in student loan repayment assistance, as the Active Duty Health Professions Loan Repayment Program offers $40,000 per year for a maximum of three years.

‍State-specific options:

‍In addition to federal government programs, most U.S. states offer student loan repayment assistance or forgiveness for dentists who work in medically underserved communities. These options vary from state to state, so it's worth exploring the options available in your state.

‍If any of the situations listed above apply to your desired career path, then it would be worthwhile to explore some of the federal and state student loan repayment options available to dentists.

Apply for a Practice Loan

‍Once you have great credit, strong work experience, a robust emergency fund and have found the best student loan repayment option for your circumstances, you're ready to apply for a loan to start your practice.

‍According to Glassberg, this is when your hard work to save money will pay off: The more assets you have and especially the more liquid assets you have – the more likely you are to obtain a loan.

‍Here are some of the top factors to keep in mind when it comes time to apply for a dental practice loan:

‍Create a business plan

Before giving you a loan, lenders need to understand how you will manage and grow your practice, including how you'll run day-to-day operations and get new patients. Generally, lenders are wary of lending to you until they believe you have a proven business, so having a solid business plan to share with them will help the process significantly. This article in Dental Economics offers useful steps for dentists to take in creating a business plan.

Be prepared to share necessary documents and information with lenders

In addition to a business plan, when applying for a practice loan, you'll need to be able to share further information with lenders. This includes information such as the purpose of your loan, the amount you intend to borrow, debt service coverage, primary collateral, debt-to-worth ratio, management experience, and your credit score.

‍Get life insurance and disability insurance

‍It's common practice in the dental lending industry to require these policies to be in place as collateral for the loan in case something happens to the dentist. Insurance is a big factor in mitigating a lender's risk that a dentist would be unable to repay the practice loan due to death or disability.

‍Determine what type of loan you need and choose the right lender

‍Once you have all of these other elements in place, you'll be in a good position to apply for your practice loan. At this stage, you should determine the desired term of your loan –generally you can choose between repaying your loan in 7 or 10 years and select the best lender, depending on which offers the best interest rate and terms for your situation. Lenders that offer practice loans include Bank of America, US Bank and Wells Fargo. It may also be worthwhile to explore a website like Fundera, which can connect you with a variety of small business lenders and allow you to choose the best option.

‍In addition to these considerations, Glassberg recommends that dentists looking to start up their own practice continue working as an associate at another practice as they get their own practices up and running in order to help with cash flow, which certain lenders require. And, in some cases, acquiring an existing practice might be a better bet, according to Glassberg. "Because the practice is already up and running the terms of the loan could be more favorable since it is a lower risk loan," he says.

While paying down your loans and starting your practice might seem daunting – it's entirely doable. With a plan and some hard work, you'll be able to open the doors of your own practice in no time.

This is a sponsored post from Commonbond and may contain affiliate links.

Can You Refinance Student Loans After Consolidation?

Consolidation and refinancing can both be viable options when trying to simplify student loan repayment or lower monthly payments.

Combining student loan balances under one roof, either through consolidation or refinancing, has the potential to lower a borrower’s interest rate (in the case of refinancing), extend the repayment term, or both, which can reduce the monthly payment to a more affordable level.

Many borrowers, however, find themselves asking whether they can refinance student loans after they have already consolidated them.

In short, if you have previously consolidated your student loans—whether through the government or a private lender—you can still refinance your student loans if you are eligible.

Difference Between Student Loan Consolidation and Refinancing

Student loan consolidation may be referring to two different things in most cases:

1. Consolidating federal student loans via the Direct Consolidation Loan program

2. Consolidating federal and/or private student loans together via refinancing with a private lender

Federal Direct Consolidation Loan Program

Federal Direct Consolidation Loan is a program that allows you to combine outstanding federal student loan balances, either in full or in part, with the federal government. Private student loans are not eligible for consolidation under this program.

Borrowers can easily complete a consolidation of selected federal loans through a brief online request form through the Department of Education. All the provisions of federal student loans remain available to borrowers, including income-driven repayment plans, deferment, and forbearance, with a loan consolidation.

Consolidating Student Debt When Refinancing

Refinancing student loan debt is a different process that involves a private student loan lender, not the federal government. When refinancing, student loan borrowers have the option to combine one or more federal or private student loans into a single loan with a new lender—sometimes referred to as private student loan consolidation.

Refinancing is available through many private lenders, meaning interest rates, repayment terms, features, and total costs differ greatly. Refinancing can be beneficial to student loan borrowers if they are able to secure a lower interest rate than what a consolidation or their original loan terms offered. However, if you refinance federal student loans, you will lose any protections that came with the loans and access to federal repayment plans.

How to Refinance Consolidated Student Loans

Some borrowers may opt to consolidate their federal student loans initially, then later decide that they want to refinance to take advantage of benefits like a lower interest rate. In this case, refinancing can be done directly with a private lender even after a consolidation is done.

To refinance consolidated student loans, student loan borrowers need to simply find the private lender they would like to utilize, complete an application for the refinance, and once approved, make payments to the new private loan lender.

Most student loan lenders offering to refinance loans have an easy online application process, the ability to add a cosigner to strengthen the application, and several options for repayment terms.

You can compare student loan lenders and find your best match here.

How Often Can You Refinance a Student Loan?

Student loan borrowers can refinance their student loans as many times as they would like, so long as their credit and income remain strong. Lenders do not typically put restrictions on how often loans may be refinanced, although borrowers may need to move to a different lender if a refinance was recently completed.

As student loan interest rates shift, refinancing student loan debt may be a cost-effective strategy for reducing the total cost of borrowing. However, there are factors to consider before refinancing multiple times.

See the full article here: Can You Refinance Student Loans After Consolidation?


This is a sponsored post by LendEDU

Tackling Student Loan Debt

Almost all young dentists face confusing (and often conflicting) choices after graduation because of the significant amount of student loan debt they have from dental school. The average dental school graduate has more than $247,000 in student debt. That figure has risen nearly 40% since 2010.

"[Dentists have] been trained for years to focus on passing the next academic exam, completing a procedure correctly or passing a licensing exam," says Dr. Douglas Carlsen, founder of Golich Carlsen, a financial consulting firm for dentists. Carlsen retired from his own dental practice in 2004. "[Dentists] have not, in many instances, been prepared well for the real world of employment and possible business ownership," he says. "They have not been prepared for the world of consumer purchasing and financial planning."

The key, Carlsen says, is for dentists to get on solid financial footing so they can start to tackle their student loan debt. Here's how:

‍

Make a Financial Plan

Carlsen recommends that young dentists address debt by establishing goals they want to reach within a certain deadline. Include your partner, if you have one. Factors to consider include what kind of lifestyle you want to have, how much student loan debt you have, how much savings you want to have and what kind of practice you will be a part of in the next one, five, and 10 years, he says. Identifying these parts of your life will help clarify the amount you can dedicate to paying down debt while living your life.

‍The goal of the financial plan is to help you keep your expenses low. By reducing your spending, Carlsen says you could dedicate 40% of net income to pay down debt. "I personally know of dentists that have paid off $400,000 in less than eight years," he says.

‍Free budgeting apps, such as Mint and Personal Capital, can make it easy for dentists (or anyone else) to track their spending.

‍

Consolidate and Pay Down Student Debt

In general, dentists with good credit can consolidate and refinance their loans with a lower rate from a private lender. For example, Common Bond could save the average dentist thousands over the life of their student loans.

‍If qualifying for student loan refinancing at a lower interest rate is not an option immediately after dental school, Carlsen recommends consolidating federal student loans and using an income-driven repayment plan.

‍

Remember Your Retirement Fund

You'll want to balance student loan repayment with other goals, such as retirement. Nate Wenner, a CPA and certified financial planner who specializes in working with dentists, recommends dentists set aside at least 10% of their gross income toward retirement.

‍"After meeting that baseline level of saving, one can look to more aggressively pay down any debt which carries an interest rate higher than what you might expect to earn by investing over the next 10 years," he says.

‍Good financial habits can help dentists retire early, Carlsen says. He notes that the dentists who retired at 50 he knows have these characteristics in common: They bought a home and remained in it until retirement. They have saved more than 20% of their annual net income after their student loans have been paid off. They started saving for retirement by age 35 or earlier. And finally, they paid cash for everything except their homes and practices.

‍

Hold off on Buying a Home or Practice

Carlsen says the worst mistake he sees young dentists make is to buy a home too soon. "A young dentist should not buy a home until he or she is stabilized in their employment or practice situation," he says.

‍Don't rush into buying a practice, either. "I see many of the national brokers promising much higher income projections for practices for sale than what is prudent," Carlsen says. "There will be a plethora of practices for sale by baby boomer dentists in the next five to eight years. Take your time and find a practice that suits your style, not what others tell you to do."

‍Following these tips can help dentists pay off their student loans faster and set themselves up for an even brighter future.

T‍his is a sponsored post from Common Bond

A version of this story was originally published in Forbes.com.

How Student Loan Consolidation Positively Impacted My Credit Score

Many of us have student loan debt, and if you’re a dentist or physician your student loan amount may be pretty significant. Figuring out how to go about tackling them can be quite daunting; knowing whether to consolidate or refinance, choosing from the different repayment options, and deciding which is best for you.

On my own journey to pay down my mountain of debt I stumbled upon a little surprise. I discovered that a wonderful side effect of consolidating your student loans is a credit score increase. I was able to significantly increase my credit score by consolidating my loans.

Here’s how that works:

• One factor that determines your credit score is the number of lines of credit that you have open.  Remember that you get a loan for every semester of school and thus at the end of your four years (or however long your schooling is), you will end up with several student loans. As a general rule, If you have too many lines of credit, your score will go down.  By consolidating your student loans, you are replacing your many student loans with one new loan.  You will still have the same amount of debt, but the number of lines of credit goes down, thus increasing your score.

• A second advantage of student loan consolidation is that it will appear that you have paid off all of your other loans.  Any record of debt repaid is a good thing!  Depending upon how your loans are consolidated, it could read that your loans were refinanced or it could read that it was paid in full.  Either way, your credit score is helped.

• One final advantage of consolidating your student loans is that it can often lower your monthly payments.  This helps your credit score because the ratio of debt to income will go down.  

Consolidating your student loans is dependent upon the type of loans that you have.  For Federal Loans, consolidation is usually a great idea, but for private loans it gets more tricky as there are several private loan lenders to choose from (SoFi, Laurel Road, LendKey, Earnest, Splash Financial, etc). Do your research, speak with a trusted professional and choose the best option for you.

Refinance or Consolidate your Student Loans?

As young professionals, many of us left or will be leaving school with student loan debt. As our grace periods wear off and we enter repayment a lot of us find ourselves scouring the internet or asking friends and colleagues how they are going about tackling their student loans. It can be daunting going through the options - some of us have loans from undergraduate school and/ or graduate school. Some of us may have taken out private student loans, federal loans or a combination. Either way, we need to know the options for repaying these loans.

Student loan refinancing and student loan consolidation are two different tactics to help borrowers repay their loans. In some cases student loan consolidation is the way to go, and in other situations student loan refinancing is best. So what that difference?

Consolidation

Consolidation refers to combining multiple student loans into one loan. You may have taken out a separate loan for each semester of school and thus by consolidating you are combining all those different loans into one, which results in just one monthly payment instead of many.  This is designed to make repayment easy and typically refers to federal student loans. Since it applies to federal student loans you keep all the benefits that federal loans offer (loan forgiveness, income based repayment, etc). Consolidation however, does not lower the interest you pay on the loans. The interest you pay is calculated based on the average interest of all your combined loans. It is important to note that consolidation does not necessarily save you money - it simply combines all your loans to make your payments easier to manage.  

Consolidation is only done through the Department of Education (studentloans.gov)

Refinancing

Refinancing your student loans is a good option if you have several loans from several sources (private, federal, etc). This option does not combine your loans, but rather creates a brand new loan. Your new loan’s interest rate can be lower depending on your credit score, so it is important that this score is healthy. The great thing(s) about refinancing is that you will now have one single new loan instead of many and there is the potential to get a lower interest rate which can save you a lot of money over time.

Refinancing can be done through a private loan lender (not government). There are many options out there like SoFi, Laurel Road, Earnest,, LendKey, etc.

Which is best?

• If you have multiple private loans OR a single private loan with a high interest rate - Refinance

• If you have federal student loans and planning on getting student loan forgiveness or rely on Income based repayment - Consolidate

• If you have both federal and private loans and want a single loan with low interest rate - Refinance