Understanding, Managing, and Repaying Student Loans for Dentists

[Chance]

Loan Repayment Programs:

The video below was recorded as a part of my FQHC lecture. I have included the video here because many young graduates have questions about NHSC and IHS Scholarships and Loan Repayment Programs.

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I am a general dentist and founder of Proximal Contact, LLC where we operate:

American Dental News, Embrasure Space, DentWoo.

[Chance]

Remember, this video was recorded in 2019.

For updated information about the NHSC program go here: https://nhsc.hrsa.gov/

For updated information about the IHS LRP program go here: https://www.ihs.gov/

nhsc.hrsa.gov

National Health Service Corps | NHSC

National Health Service Corps | NHSC

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I am a general dentist and founder of Proximal Contact, LLC where we operate:

American Dental News, Embrasure Space, DentWoo.

[Chance]

Public Service Loan Forgiveness (PSLF):

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I am a general dentist and founder of Proximal Contact, LLC where we operate:

American Dental News, Embrasure Space, DentWoo.

[Chance]

Private Refinancing

Deciding to refinance is a big decision. Refinancing is a private endeavor that can be redone but not undone. What that means is that a borrower can choose to refinance her student loans with a private institution to obtain either superior terms or a more favorable interest rate.

Over the last few years, many borrowers have enjoyed record-low market rates and there has been a “student loan refinancing boom” with the emergence of private lenders marketing their student loan refinancing departments to professionals – especially medical professionals.

As interest rates and tuitions rise, it is likely that refinancing will become less popular; never-the-less refinancing student loans is, and will continue to be, an option for dentists. When a dentist decides to refinance her student loans two things will happen.

1. The dentist will lose access to all of the IDR plans. This is a permanent loss and cannot be undone.
2. The outstanding interest will be capitalized.

Prior to deciding if refinancing your student loans is the right decision for you and your family, you need to calculate your effective interest rate under one of the IDR plans. Providing a tutorial to calculate the effective interest rate on your student loans is beyond the scope of these emails and requires that you run the numbers of IBR, PAYE, or REPAYE, calculate your estimated monthly payments and the sum that will be eligible for taxable forgiveness. From there, calculate the amount you will owe in taxes during the forgiveness year and equate the “total cost of your dental education”. You should then be able to calculate your effective interest rate and compare that interest rate to the rate offered by the private lender. Also, compare the total amount paid under the IDR plan and private refinancing. My bet is that you (and your CPA) will be surprised by how generous some of the IDR plans actually are. Only then can you make an educated decision regarding the benefits of refinancing.

***Remember, this was written in 2019 – rates have changed. Please consult with a professional prior to refinancing.

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I am a general dentist and founder of Proximal Contact, LLC where we operate:

American Dental News, Embrasure Space, DentWoo.

[Chance]

I often have a conservative outlook. I have met dentists with net incomes in excess of 350k as well as net incomes below 90k. One of the benefits of our profession is variance in practice and lifestyle. I must admit that the lifestyle appears to be changing. I personally believe that dentistry is a great profession and there is an abundance of opportunity for those willing to think differently about what being a DDS means. Unfortunately, I also believe that the viability of the traditional solo dentist private office serving middle-class families is in jeopardy. When it comes to repaying student loans, many students are stuck in an income-driven repayment plan. Nevertheless, there are four main strategies for tackling your student loans.

1. Refinance and repay debt quickly.
2. Enroll in an income-driven repayment plan and complete PSLF.
3. Enroll in an income-driven repayment plan and make minimum payments and save for the tax bomb.
4. Enroll
   in income-driven repayment, make minimum monthly payments, save for the
   tax bomb, and periodically decrease the debt load by making extra
   payments strategically to work towards a breakeven point and predictable
   tax bomb.

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I am a general dentist and founder of Proximal Contact, LLC where we operate:

American Dental News, Embrasure Space, DentWoo.

[Chance]

Is student loan interest tax deductible?

Yes, but with limitations that exclude the vast majority of dentists. Most dentists are phased out of the student loan interest tax deduction because their incomes exceed the program’s requirements. Even if we were able to take advantage of the interest deduction, it is capped at $2,500 per tax return (married couples filing a joint return are capped at $2,500 too, not $5,000 because they file 1 tax return). Phasing out begins with a modified adjusted gross income (MAGI) of $65,000 for single filers and $135,000 for those married filing jointly. The deduction is eliminated completely when MAGIs exceed $80,000 for single filers and $165,000 for couples married filing jointly. You can see why dentists don’t qualify. You can learn more about the student loan interest tax deduction here:

• https://www.irs.gov/taxtopics/tc456
• https://www.irs.gov/help/ita/can-i-claim-a-deduction-for-student-loan-interest
• https://www.fool.com/taxes/2019/02/10/your-2019-guide-to-the-student-loan-interest-deduc.aspx

irs.gov

Topic No. 456, Student Loan Interest Deduction | Internal Revenue Service

Topic No. 456, Student Loan Interest Deduction

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I am a general dentist and founder of Proximal Contact, LLC where we operate:

American Dental News, Embrasure Space, DentWoo.

[Chance]

References and Resources:

Partial Financial Hardship:

• https://studentaidhelp.ed.gov/app/answers/detail/a_id/332/~/partial-financial-hardship

Public Service Loan Forgiveness (PSLF):

• https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

Articles

1. The effect of education debt on dentists’ career decisions
   Nicholson, Sean et al. The Journal of the American Dental
   Association, Volume 146, Issue 11, 800 – 807: https://jada.ada.org/article/S0002-8177(15)00602-9/pdf

Books

• White, Ben. Medical Student Loans: A Comprehensive Guide. BWMD LLC, 2017.

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I am a general dentist and founder of Proximal Contact, LLC where we operate:

American Dental News, Embrasure Space, DentWoo.