Managing debt and wealth: Tackling your loans

By | May 22, 2018

Brace yourself: the average student debt after graduation is about a quarter of a million dollars. Grace periods are typically 6 months. You’ll want to choose a repayment strategy and start as soon as possible.

Understand key concepts —

Interest: Interest is the rate charged to borrow money. The interest on your loan begins as soon as your lender disburses funds to you or your dental school. Interest on your loan accrues daily and you will continue to pay interest on your loan until it is paid in full.

Capitalization: Capitalization is the addition of accrued unpaid interest to the principal balance of your loan. Capitalization happens when a grace period for a loan ends, or at the end of a period of forbearance or deferment.

Amortization: Amortization is the process of paying back an installment loan on a fixed payment schedule. Even though your payment under a typical installment loan is the same each month, the amount of your monthly payment allocated to principal and interest changes over the life of the loan. During the early years of repayment, more of your monthly payment goes toward interest than toward the principal.


Repayment Strategies — Here are a few ways to make your student loan payments work for you:

  • Avoid capitalization by making payments on interest as it accrues, especially on loans that are in deferment
  • Make extra payments to reduce the principal on high-interest loans
  • Make sure lenders are applying any extra payments to the loan of your choosing (if you have multiple) and to the principal balance of your loan

Refinancing — If you have good credit, you can apply for a private loan with a better interest rate or terms to pay off all of your current loans. You’ll need to choose between a fixed or variable rate of interest. A variable rate can start out lower but go up. An interest rate reduction of 2.5 percent on a typical dental school debt can save $70k.

Laurel Road student loan refinancing for ADA members — ADA members can save thousands of dollars by refinancing their dental school loans with Laurel Road. Laurel Road’s student loan consolidation/refinancing program, which ADA exclusively endorses, provides ADA members the opportunity to refinance existing federal and private student loans from undergraduate or graduate school at a 0.25 percent lower rate than Laurel Road’s already low rates. Visit to view rates and apply.

Loan consolidation — Consolidating combines multiple government-sponsored loans into one with a weighted average. It converts non-direct loans to direct (only direct loans are eligible for public service loan forgiveness). It can also increase the payment term to 30 years, which can cost more unless you actively pay it down sooner.

Public Service Loan Forgiveness — Going on to practice in an approved shortage area or non-profit clinics can win you some debt forgiveness, as well as be rewarding as an end itself. State programs like Maine’s FAME can be very competitive, but they can take an $80k bite out of your debt in just a few years.

Income-Driven Repayment — Loan repayment programs are scaled to your income and can help you to pay down big chunks of your loans early on. They are a very good means of getting into a healthy repayment strategy early on. Remember that smaller payments mean longer loan terms and larger overall interest.

Additional Resources

3 thoughts on “Managing debt and wealth: Tackling your loans

  1. Larry M. Smith DDS

    Crushing Debt? No. Smart investment that will be easily amortized over ones career. Absolutely.

  2. Jim Sarji, DDS

    I agree…these days very hard to find a proper job even after university that pays acceptable money.

    Dental school is tough, loans are big, but the payments you cannot think about….work hard and you pay it off soon.

    Jim Sarji, DDS

  3. Robert Raible

    Thank you. This is critical for state and federal policy makers to understand if they want to attract dentists to underserved areas.


Leave a Reply

Your email address will not be published.