No doubt, much of what you have been reading over the last few years about student debt paints a bleak picture for today’s generation of new dentists compared to prior generations. Be assured: This article will not provide a similar doom-and-gloom scenario. In fact, after reading this article, hopefully you see there is another — more optimistic — way to view your student debt, one that focuses on investment in your potential as a future practice owner.
According to the American Dental Education Association’s website (www.adea. org), “Average educational debt for all indebted dental school graduates in the Class of 2018 was $285,184. Forty percent of indebted dental school graduates in the Class of 2018 reported student loan debt of $300,000 or more.” That’s more than double the average of $120,437 for dental graduates in 2000, a historical figure the American Dental Association’s Health Policy Institute maintains in its online infographic library.
While these can be sobering statistics for today’s dental students and recent graduates, the career you have ahead of you could be long and successful, with significant earning potential over the long term. It’s quite possible you’ll earn more as a future dentist than past generations of dentists and students of other graduate programs with similar debt obligations and lower earning potential.
Additionally, finding a path to practice ownership through a practice start-up or purchase loan may help you pay down student debt faster than if you were working for someone else. How, you might ask?
The answer is a combination of effective debt management by taking a longer-term approach to paying off that debt with the proceeds from your business (i.e., no need for complete debt elimination right out of the gate). Selecting the right partners — such as a CPA, wealth advisor and lender for personal and business management advice is a good first step to ensure you are set up for long-term success.
Practice Ownership as a Debt-Repayment Strategy Student debt like we see today isn’t the same as sizable credit card debt. Student debt is an apple, and credit debt is an orange. Some lenders may view your school debt much differently than other debt and not see it as an obstacle on your path to practice ownership.
One option that some lenders find appealing is the practice of lowering monthly student loans payments through loan consolidation because it improves your cash flow. Those lenders may focus on actual practice income and cash flow when considering a credit application, not just the total amount of debt and assets an applicant has. This is also one of many reasons why effectively planning for and monitoring your cash flow needs is critical as you build your practice.
Also, the practitioner is often the most important part of the business, and lenders are motivated to help keep the practitioner engaged, productive and successful. If you’d like to research the pros and cons of loan consolidation, Wells Fargo’s College STEPS blog lays it out clearly. Healthcare-focused lenders like Wells Fargo Practice Finance do exist in the dental space, potentially opening some exciting financing opportunities for you to consider.
Additional Benefits of Practice Ownership
For newer dentists who become practice owners, there are other benefits to consider that may help expedite repayment of student debt.
As a practice owner, your hygiene program creates important income for you. It helps increase your practice’s monthly cash flow and creates a source of income that may help you offset your student debt expense faster.
As a practice owner, you might also manage your tax situation differently than if you were a staff dentist in someone else’s practice. And that is an aspect of ownership you would want to thoroughly discuss with your tax and legal advisors early in your journey. Your tax and legal advisors could also be helpful in determining your preferred lending and credit arrangements.
There Is Hope: You Can Be the Boss Sooner Than You Think
Student debt is likely a stressor for many, and stress-based decisions aren’t always the best over the long term. To help make informed decisions, try the following: Be kind to yourself, do your research, talk to lending professionals, seek guidance from tax and legal professionals, and expand your professional network to include dentists who have successfully made the transition to practice ownership. Hopefully, what you learn from them will be encouraging and reinforce the fact that practice ownership can be an option to accelerate your debtrepayment goals.
Try to remember that you have your entire working future ahead of you as a dentist. And depending on your personal career strategy, that could mean 30 or more years of practice income, made possible by your initial investment in yourself: your education. Whether working 20, 30 or more years, that is a considerable amount of time to repay your debt, establish yourself in your market and build a plan for succession and retirement.
Celebrate your educational accomplishments and frame the student debt challenge in your mind as something you can address with a sense of optimism:
Your youth and your longevity as a dentist may be your greatest asset, which means you can likely leverage a longer time horizon to chip away at your student debt by minimizing your monthly payments and increasing your monthly cash flow.
You can think about practice ownership as a vehicle to helping you repay your debt, rather than having to first repay your debt before becoming a practice owner.
And while it may seem counter-intuitive, practice ownership may actually help you accelerate your student debt repayment by creating revenue streams you wouldn’t have available to you as a staff dentist.