Dental School Loans: How to Refinance and Consolidate

Dental school is expensive. Enormously expensive. Reports indicate a dental school education is the most expensive of all the higher education fields. And the vast majority of new practitioners emerge with such enormous debt loads, it makes some wonder:

Is dental school worth it?

Financing a dental school education is not an idle concern: 80% of 2016 dental school graduates emerged more than $100,000 in debt.; 30% were in hock for more than $300,000. This is not a situation that will soon go away. The American Student Dental Association reports newly-minted dentists graduated with a record high $287,331 dental school debt in 2017.

Notably, debt owed by dental school grads wears a crown of money borrowed for a four-year degree, in addition to four years of dental school.

Looking for a reason for the surging debt rate?

Prices to matriculate are going up, driven by the simplest of economic principles: supply and demand. Enrollment in predoctoral dental education programs reached almost 25,000 in the 2016-17 academic year, a 2% increase over the previous year.

Still, students with plenty of options continue to pursue dentistry as a career for a variety of reasons. Dentistry can be lucrative, or at least financially secure. Many dentists are their own bosses. Dentistry also can be personally rewarding. Many dentists provide pro-bono services to needy patients in their communities and overseas.

Moreover, those of us with teeth — particularly those who wish to keep them — need the inflow of new dentists … and we need them not to be distracted by their student debt when they’re poking at our molars. Luckily, there are strategies for managing that dental debt that are more than a mere veneer over the problem, potentially set all our minds at ease.

Private Student Loan Refinance Options

Private lenders will refinance any sort of student loan, including federal loans. While their terms for the length of a loan might not be as long, the interest rates are likely to be lower, saving the borrower thousands over the life of the loan.

Two of the student loan refinancing lenders are SoFi and LendKey.

Typical features of SoFi refinance loans include:

• Five-, seven-, 10-, 15- and 20-year terms
• Fixed and variable rate loans
• Variable rates as low as 2.615% APR and fixed rates as low as 3.35% APR with Autopay
• No origination fees, applications fees, or prepayment penalties
• Consolidation of existing student loans (federal and private) into one monthly payment
• $300 welcome bonus
• Career strategy services, member events, and a referral program

LendKey serves as a digital liaison between hundreds of small banks and credit unions that want a piece of the student loan marketplace, but lack the IT knowhow or personnel to create and maintain nifty websites and infrastructure of their own. By bringing them under its umbrella, LendKey unlocks refinancing opportunities in your backyard.

That said, eligibility rules — primarily geographic — may limit which of the LendKey members can partner with you.

Typical LendKey refinance features include:

• Five-, seven-, 10-, 15- and 20-year terms
• Variable interest rates from 2.76-7.90% APR. Fix rates from 3.15-8.54%
• Loan amounts: $5,000 minimum. Maximum $300,000 for medical, dental, or veterinary degrees.
• Better credit scores get better rates, but scores as low as 660 can qualify.
• The minimum debt-to-income ratio, not including housing costs, is 33%.
• Borrowers must have graduated from an eligible school, one that participates in the federal government’s Title IV federal student aid programs.
• Unlike many private lenders, LendKey includes a forbearance clause for struggling borrowers — up to a year in four-month chunks for shorter-term loans, up to 18 months total in six-month bites for 15- and 20-year loans.

The American Dental Association (ADA) offers private loan refinancing through Laurel Road Bank. Among the key highlights: Qualifying members get a 0.25% rate reduction as long as they remain ADA members, with potential savings in the tens of thousands.

Other top-rated private refinancing lenders include CommonBond, Citizens Bank, and Discover Student Loans.

Generally, private lenders do not include the same flexible repayment terms included in federal student loans. However, private loans also tend to run two to three points lower than federal loans, and this could work to your advantage.

Consider a $250,000 loan scheduled to be paid off in 10 years.

• Private loan at a fixed 4.0% would have a total cost of $303,735.60 in 120 payments of $2,531.13 each.
• Federal loan (subsidized) at a fixed 6.8% would have a total cost of $345,241.20 in 120 payments of $2877.01 each.
• Federal loan (subsidized) includes $95,241.20 in interest. Private loan includes repaid interest of $53,735.60, a savings of more than $41,500.

How to Qualify for Dental School Loan

Qualifying for refinancing is much the same as with any other non-collateralized loan. First and foremost, lenders want to get repaid with as little hassle as possible. Here are the key areas they inspect:

• Credit score. Lenders want to see that you have a history of meeting your financial obligations. Most require a minimum score in the high 600s.
• Do you have proof of stable and recurring monthly income and cash flow? When you subtract recurring expenses from after-tax monthly income, is there room for a student-loan repayment plan?
• Other debt. Lenders will have a look at what you owe.
• Debt-to-income ratio, or the ratio of your total monthly income vs. your monthly debt obligations. Someone with $10,000 of monthly income and $3,000 in monthly debt costs has a debt-to-income ratio of 30%. Anything under 30% is considered very good.
• Most lenders want to know you are employed, or have a written job offer.

To apply, visit several student-refinance lenders’ websites to review their offers and terms. Shop hard, while making certain you’re comparing apples to apples. When you have identified likely candidates, apply to multiple lenders through their websites.

Consolidation Options for Federal Loans

If you have an assortment of federal student loans, you may want to consider consolidating them into a single loan. The upside is the feds don’t have a minimum credit requirement, and you’ll be bringing all your federal student loan debt into a single loan, potentially with a lower payment.

Reasons you might choose to consolidate with Uncle Sam:

• You’re in student loan default and you want to get back on your feet
• You want a single payment, and aren’t desperate for it to be drastically lower
• You need to consolidate to qualify for income-driven repayment or public service loan forgiveness.

Here’s how it works:

• Under federal consolidation, Washington pays off your federal loans and replaces them with a single loan.
• You become eligible when you earn your diploma, leave school (for whatever reason), or drop below half-time enrollment.
• The Department of Education does not charge for this service. Avoid companies that charge fees to do what the feds do free.
• You get a new interest rate, equal to the weighted average of your previous rates, rounded to the next highest one-eighth of 1%.
• You get a new loan term ranging from 10 to 30 years; repayments typically begin within 60 days of when your consolidation loan is initially disbursed.

Here’s how you do it:

• Visit gov, use your login, and click “Complete Consolidation Loan Application and Promissory Note.” Review the “What do I need?” section before you begin, because you must finish (it’ll take about a half-hour) in one session.
• Enter the loans you do, and do not, wish to consolidate.
• Choose a repayment plan. Want an income-driven plan? Fill out the Income-Driven Repayment Plan Request form.
• Review and send your application. Continue making your student loan payments until you are notified the consolidation is complete.

Assorted opportunities are available for turning your dental skills into a loan-repayment generator, including serving in the military, committing to serving with certain not-for-profit, tax-exempt organizations, or others that provide certain types of qualifying public services, all of which fall under the Public Service Loan Forgiveness Program.

Additionally, through the National Health Services Loan Repayment Program, health professionals willing to commit for a time to a medically underserved area (MUA) have a chance to trade on their well-earned skills in exchange for debt reduction. General or pediatric dentists who land a two-year gig at an NHSC-sanctioned site can earn up to $50,000 against their dental school debt. Good to know: Roughly 41% who apply are approved.

Lowering Your Monthly Payment

Squeezed at the end of each month to make all your finances work? Lowering your student loan monthly payment(s) might help. Fortunately, a variety of options exist.

• Stretch your repayment schedule. This option is available only for federal student loan borrowers, and there’s an obvious downside: The longer you stretch out your payments, the higher your total interest payback will be.
• Choose a graduated-payment plan. If you expect your income to grow in coming years, this might provide space in your current budget.
• Look into one of four income-driven repayment plans, which cap payments as a percentage of your discretionary income.
• Consolidate your loans. We mentioned above that, under certain circumstances, consolidation can result in a lower monthly payment.
• Refinance at a lower interest rate. If principle and the length of the loan are equal — $250,00 and 10 years in our example above — refinancing at a lower rate will save you money every month, and over the long haul.
• Set up autopay. You could trip 0.25 points off your APR.

Paying off Your Student Loans Faster

Don’t wait to graduate to begin tackling your student debt. The sooner you cut into them, the sooner you’ll be out front under. This pertains especially to unsubsidized loans, which begin accruing interest the instant the funds are disbursed. With unsubsidized loans, all the while you’re learning, the principle is earning … interest, interest that is being rolled into your loan, a process known as capitalization.

Students: If you work part-time, or work during the summer (or during any break), consider throwing at least a portion of your paycheck at your loans. Ditto if you receive unexpected cash; denying yourself now will mean getting out front under debt sooner.

Practitioners: Look for opportunities to apply your skills and expertise outside your regular office hours. See if you can affiliate with a hospital to provide odd-hours emergency room dentistry. Or affiliate with another practice that offers after-work or weekend opportunities.

Above all, resist the urge to splurge at the prospect of significant money coming your way. Yes, dentists are frequently listed on lists of top earners, but the best way to be successful long term is to postpone your living-large ambitions.

Direct the dollars you’d otherwise spend on a big house, luxury transportation, country club membership, expensive jewelry, exotic vacations, or even your own practice, to whacking away at your student loan debt. The sooner you’ve buried your loans, the sooner you will be able to take a healthy bite out of your best possible life.

We know dentists don’t get the respect they deserve. Key moments of the iconic “Yadda-Yadda-Yadda” Seinfeld episode pivot on tongue-in-cheek “antidentism.” But improperly managing dental school debt can add injury to insult.

Now, drill down on the plans that suit you best, and extract that debt from your life.