According to the ADA, 64% of dental school graduates report having more than $200,000 in debt. As these former dental students and recent graduates enter the workforce, many may find themselves juggling both a new career and the uncertainty of debt.
The demands of being a dentist leave limited time for managing student debt, and it may fall by the wayside. If you, like many others, are managing student loans, whether from undergraduate or dental school, and are unsure where to start, there are steps you can take right now that will help alleviate the pressure you feel in managing your finances. Here’s what you need to know.
Make a Budget
It sounds simple, but making a budget is the backbone of personal financial management. While dentistry is time consuming, and you likely have limited availability to focus on budgeting, taking a few moments to write down your income and spending to gauge where you stand financially is a great first step.
Don’t panic about what turns up, and know that you can and will turn around your finances with the right plan. Try starting with a great rule of thumb: the 50/30/20 rule, where 50% of your budget should go to fixed costs like rent, utilities, car payments, and student loan payments; 30% toward flexible spending, ie, variable costs such as groceries, entertainment, or shopping; and 20% toward financial goals like building an emergency fund or saving for retirement.
If that’s not right for you, there are plenty of options available to help you budget. For example, you can use an app that makes it easy to track your expenses and identify overspending, or an online tool that helps with budgeting guidance, like Laurel Road’s Financial Insights. These are great for helping to save time too, as some of these apps update automatically and track spending for you.
Other budgeting paths include using spreadsheets or automatically moving money into separate accounts. Ultimately, though, any kind of budgeting is going to help you. While it may seem time consuming at first, as you get into a groove, you’ll find ways to build up your savings and start to pay down your debt.
Not All Debt is Created Equal
When you’re building a budget, it’s important to understand the difference between “good” and “bad” debt. Determining whether or not a debt is “good” or “bad” sometimes depends on your individual financial situation. “Bad debt” is generally considered to be debt that doesn’t benefit your financial future in a positive way, such a large purchase that immediately decreases in value, or credit card debt—particularly with a high-interest card if you’re not paying off the balance each month.
“Good debt” usually refers to debt that is used to pay for something with long-term value, helps you generate income, or could increase your net worth, such as home mortgages or college, dental school, or practice loans. But even “good debt” has its limits, of course, if it’s taken for the wrong reasons or in excessive amounts.
One critical difference between the two is that “bad debt” may block your path to financial security and “good debt” can benefit your ability to grow your finances. Another important thing to consider in categorizing debt is the interest rate, as you should seek out as low of an interest rate as possible on all debt you carry.
Separate your “good” and “bad” debt when building your budget, pay down both when possible, and make sure you understand how your debts line up to your long-term financial goals.
Refinance Your Student Loans
By creating a budget that separates your different kinds of debt, you are now in a place where you can start to manage your “good debt” in a way that will benefit you paying down your “bad debt.” One way to tackle your student loan debt is to refinance your student loans, which is an option no matter what type you have (dental, undergraduate, private, etc).
Options for refinancing student loans can be overwhelming or challenging to navigate. In fact, recent research from Laurel Road found that among respondents with student loans, over half (53%) had no idea how to navigate their student loan financing options.
The good news is that refinancing is actually a very simple process that may potentially save you money in the long term, especially when you work with a digital lending platform that makes the process simple and personalized, like Laurel Road.
If you could refinance your student loans to a lower interest rate or a different payment plan, you could potentially save on student debt and, in doing so, reduce your overall monthly expenses.
However, it’s important to recognize that you’ll give up certain programs like Public Service Loan Forgiveness, Income-Driven Repayment, and the current COVID-19 payment relief by refinancing your federal loans. For some, these programs make it worthwhile to keep their federal loans, while others may find refinancing better suited for their situation.
Check Your Professional Options
Last but not least, use the resources you have around you to find deals on refinancing and further opportunities for saving. As a dentist, you have the opportunity to tap into your professional network for help in managing your student loans.
For example, the ADA offers a number of different resources on student debt management, and it has a partnership with Laurel Road to offer a discount on student loan refinancing. If you work at a larger practice, there may be options available to you through your employer, such as loan assistance.
It’s difficult to deal with student debt in the best of circumstances, and even more so when you’re juggling everything involved in a dentistry career. All financial journeys are different, and these solutions for managing student debt may or may not work for you. Try your best and see what does. Then stick with it and watch your financial security grow.
Mr. Bamundo is the senior vice president, head of business development and marketing partnerships at Laurel Road, a digital lending platform and brand of KeyBank.
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