Episode 3: $10,000 Dental Student Loan Mistake With Samantha

Dental school loan debt frequently ranges from $200,000 to over $600,000. It’s on the higher end for specialties like orthodontics, OMFS, endodontics, etc.

How do you do everything you want to do like buy a practice, save for retirement, have a family, etc.? On this episode of the Student Loan Planner® Podcast, I’m interviewing to Samantha from TheDebtist.com. Samm graduated from dental school with over $550,000 in student loan debt.

She's also got a course on budgeting for high debt borrowers to check out.

During our interview, we discuss what role her school had in educating her about student loans and what options they gave her after she graduated. We’ll also discuss this age-old question: Is it better to pay off your loans more aggressively or take a more passive approach? Samm shares what she has done since graduating in 2016, what are her long-term goals are when it comes to continuing to pay $6,500 per month on her loans, and more.

In this episode, you’ll learn:

• How Samm is paying back loans in a way that I wouldn’t recommend, which is ok.
• Can you buy a house in California with this amount of student loan debt?
• How your loan repayment can go together with travel, mission trips, and other non-financial goals.
• Why and when you should refinance your student loans with a referral bonus:
• How family expectations can influence your career choices.
• What Samm would do differently with her career if she could do it all over again.
• What’s the future of the dental field?
  Does the dental profession have the same benefit options as other fields?

Links mentioned:

• Samm’s Blog: The Debtist
• A couple with a similar story to Samm’s: Amber and Danny
• Help From Student Loan Planner®

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Episode 3 Transcript

Travis Hornsby: Hey everyone and welcome to the Student Loan Planner® podcast. I'm really excited today to have Samm from thedebtist.com on the show to talk about how she is paying back her massive student loan debt. So any of you out there who are in dental school or just recent grads that have a lot of student loan debt this is going to be a really interesting episode for you. So Sam welcome to the show.

Samantha: Thank you. Happy to be here.

Dental School Loan Background

Travis: What I'd like this do to start off is just to get to know a little bit more about your background with accumulating over $550,000 student loan debt. So how did that happen? How did you decide that you wanted to become a dentist?

Samm: Yeah so I was actually one of those strange kids who knew I wanted to be a dentist since I was really little probably around eight years old. I was also of the rare kind that never changed my mind. I just kind of stuck with it. So I knew I wanted to be a dentist. I stuck on that path and I started applying to dental school right after undergrad.

Samm: I ended up getting into one of the most expensive dental schools in the country. It's a private school and I did what most other colleagues in my dental school did which was take out the maximum amount of student debt in order to pay for the tuition and the housing costs and the living expenses. I graduated with over 550,000 of student loans. It didn't actually dawn on me how large that sum was until I was in my senior year of dental school and about to graduate and about ready to pay all the money back.

Travis: And then you said oh my gosh.

Samm: Yeah. And then I had a little freak out moment.

Admission Department Conversations

Travis: So question for you. When you were applying to dental school what kind of conversations did the admissions department have with you about the cost of the degree?

Samm: Not very much. I actually didn't really talk to the admissions department about how much it's going to cost or what it's going to mean in the future or after I graduate and how it's going to kind of affect my life afterwards applying to dental school pretty much you just do it all online and you'll get a callback or an email saying if they want to interview you or not and if they don't want to interview you they'll just automatically kind of reject your application.

Samm: So if they want to interview you pretty much go to the school and they tell you what the school has to offer but they don't really go through like a course of like personal finance or anything like that. So you're kind of on your own you kind of have to know this stuff before you even start dental school.

Travis: That's unreal right. Like what are your feelings about the fact that they let you sign up for a half million dollar decision without so much as like talking about it first?

Samm: It's pretty unsettling if you think about it we have these essentially kids like 18-year-olds who aren't even allowed to drink alcohol because they don't have the supposed decision making skills to be able to do that. But they're able to sign documents saying you know tying them down to like thousands of student debt. That to me is a little bit unsettling looking back on it's kind of I would like to have seen some sort of program to what kind of these students through and saying like this is what you're signing up for.

Travis: Just so you know yeah and just for fun. Like if you were dictator for a day right you had unlimited power to change the seat alone roles in America in terms of the before school process before you start school.

How Should Conversations With Admissons Go?

Travis: What kind of disclosures or discussions or statements would you require to the prospective students before they agree to sign up for the state level?

Samm: I think you'd be good let's say in that interview process if they included something like a short course or discussion or whatever one hour PowerPoint presentation whatever it is to explain to them what their options are afterwards and how much it would actually be I mean it's hard to grasp that number when you're so young. I think taking out student loans is such an accepted part of our education system. So when you're signing up for it it's hard to grasp like oh my gosh this is going to affect me in so many different ways. I think just having a simple conversation about it just do at least get people thinking about what they're doing is just very important and will be very useful for future students.

Travis: That's so true. So you graduated in what year?

Samm: 2016.

Undergrad Debt

Travis: Ok and then we talked a little bit before. But you had some debt prior to October 2007 right.

Samm: Yes from undergrad.

Travis: OK so you graduate in 2016. What kind of initial steps did you take when you graduated? Like did you consolidate your debt? Did you just call your loan servicer and wait out the six month grace period? What were your first steps?

Debt Repayment Steps After Graduating

Samm: Actually so before we graduated from dental school we had this mandatory quote unquote exit counseling course but it's really just like a one-hour session where you were supposed to come in on your lunch break and like sign into a piece of paper.

Yeah they just quickly went through your options and what you can do to pay back the student debt. And they made this like blanket statement of like well if you have over $400,000 then the best path is to just wait the 25 years and do the loan forgiveness so a majority of us took out the max so obviously we all had over half a million dollars in debt.

Samm: So when I graduated dental school I was on that path. I was signed up to do that and there is like a six-month grace period where I was trying to really figure out what I wanted to do and everyone I talked to was like No this is the only path.

Samm: This is the only way you could pay back the debt. I was told to consolidate my loans so I did. I consolidated all my loans into one. It wasn't actually until a couple of months. I want to say after the six month grace period was over when I decided to pay the loans back aggressively.

Travis: This is one of the big points of discussion that we're going to have in the show. So you had $550,000. What was your starting salary when you graduated?

Starting Salary

Samm: The first year I only worked, October, November, December. So that year my salary was really low is like $24,000 but then my first full year of working as a dentist It was $125,000.

Travis: Ok. Which is typical for like Southern California right? Pretty saturated.

Samm: Exactly. Yeah.

Travis: So a $125,000 and then one of the reasons why I know that you were interested in paying the loans back in full was because of getting married. So maybe you can tell us a little bit about that discussion? When you guys started talking about finances and you revealed you had this debt amount like how that went? What kind of discussions you had about that?

Relationships and Debt

Samm: Sure. So I actually met my now husband back in undergrad so he was with me when I signed up for this so he kind of already knew there was this huge debt tied to me. He knew it was coming. He did. But I think I didn't really understand how much it was going to affect us as a married couple because he's a pretty frugal person. He actually spent a majority of his adulthood like not accruing any debt whatsoever.

He's good at saving. And so I come in with like this much student debt just because of the I guess career I chose to pursue and I thought it wasn't very fair to bring that into the relationship and he's been the motivating factor for me to really just get rid of it get out and just be free from the debt.

Travis: That's cool. So his mentality was I want to have this for 25 years. I'd prefer if we put your entire salary towards this or what was that conversation like?

Samm: Yeah. So it was actually me pushing it to get rid of the debt as well. And I had no problems at all with you know this is what I wanted to do for a living so I understand it's not such a bad thing if I just put all my salary into it and we just live off of one person income because that's what both our parents did.

So to us it was like if our parents were able to do this with children to live on like a single household income then we can do it too. Then we will just bite the bullet and get rid of it as soon as possible less than 10 years and then we'll be free to continue on with our lives.

Aggressive Debt Repayment

Travis: So how much are you paying currently a month towards loan debt?

Samm: Currently we're paying $6,500 a month.

Travis: Ok. So on $550,000 you're really paying off a lot. So you paid initially $550k. How much do you have now.

Samm: Actually the initial number was $574,000 and now we're we're down to $494k.

Travis: So you made it below $500k.

Samm: Yeah. So we're pretty excited about that. That was like a big moment.

Travis: Like big psychological victory. So one is the things that we talked about. Obviously was my goal is to always give people all their options and it's not my job to select what path you should take. I do feel like it's very important for people to be fully informed about the consequences of all of the different decisions that you're going to make with student loan debt.

Obviously, when somebody has that amount of debt and you live in a community property state like California you know you can file taxes separately and pay like somewhere between $800 and $1,300 a month and you can do that for 20 to 25 years in your case you're not eligible for PAYE. So you can do a revised PAYE or IBR for 25 years and then at the end of that let's say you owe you know a million bucks just hypothetically.

Travis: Well we're not actually talking the exact numbers but then you have to pay $400,000 in taxes all at once. If you look at the cost of that in terms of present value in terms of the cost in today's dollars obviously that's cheaper assuming a couple things right. You would have to probably not become a practice owner at least one that makes more than like $300,000, $350,000 something like that. A town in Southern California like that's actually a very high probability that you're not going to hit that incredible right.

Samm: Yeah because there's so many of us.

Owning a Practice

Travis: One of my clients one time he's like you know it's terrible is three bad Yelp reviews could end my practice. It was like in Beverly Hills really are you kidding me because I talked to the dentist over like rural Iowa and they're like wait Yelp like What's that?

Travis: Yes it's hilarious because it's like amazing how easy it is so your customers would like your choices. Drive two hours to the nearest extraction spot. Or you could just go to and talented you can just charge whatever you want.

Samm: Yeah, but here it's like oh there's a dentist like right across the street. I could see them.

Travis: Yeah. Yeah exactly like. Oh well they have a dentist across the street will do a cleaning for $50 when it costs them $60 to pay for the staff expenses. You know so yeah to one he's losing money.

Travis: So like if we're having this conversation normally I would advise very much against that. But there's a side to paying back student loans that is emotional that's not necessarily all numbers right.

Career Aspirations

Travis: You made that decision that you want to be debt free want to pay back the debt. You don't want to put it towards investments or retirement. Tell me about your practice ownership goals. Like do you have any of those in particular? Are you down to just be an associate long term? What do you want for your career?

Samm: Yes. So I never wanted to own my own practice. When I graduated from dental school I knew I wanted to work as an associate. Right away I didn't do a residency before downscale I worked as a dental assistant. So I went back to work with that dentist and his two offices where I used to work and I already knew that business.

So I was comfortable there. My dream is not to do dentistry here in California forever. I'd really love to actually travel the world and go back to third world countries and do dental work pro bono in third world countries. Once the debt is paid off. So that's one of the reasons too I don't want to buy into a dental practice as well to make sense.

Moving Abroad With Massive Debt

Travis: So one of the points of like you know fun discussion that we had we were chatting was moving abroad so moving abroad when you have this kind of student loan debt the answer that I would give to you if I didn't know how passionate you were about paying down your debt was that you could use the foreign earned income tax exclusion and you could make your adjusted gross income instead of saying like whatever it says you can exclude up to I think it's a little over $100,000 of income you earned overseas that your adjusted gross income can be zero. And so then you can be making qualifying payments towards loan forgiveness with payments of $0 a month.

Travis: Say you have like $150,000 that you would put into the loans already in a brokerage account you could take that $150,000 and pretty well assume that it would grow to cover your tax bomb in 25 years. So you know an alternate path to somebody who really wants to go do that missional type of work right now would be to cover the tax bomb first and then to move overseas and use the foreign earned income tax exclusion to pay zero dollars a month on your student loans on a plan like revised Pay As You Earn.

Samm: I do have a question about that too. So if they choose to do that, would it make sense for them to stay outside of theU.S. for the rest of their 25 years? So they're kind of like committing to being outside of the U.S. or can they always come back and it's like they're still saving money because those few years they're paying $0 interest.

Travis: So the deal and trying to figure that out is this you need 25 years worth of credit. So let's say that your goal is to go over there and serve overseas for 10 years and maybe have the freedom to come back to the states. You can absolutely do that by simply doing the revised work and then you would both get that $100,000 write off on your taxes in the US because presumably you're paying taxes overseas and that's why that is set up the way it is. So your combined monthly payment in that case for your student loans would be zero dollars a month.

Travis: If you come back to the U.S. after having 10 years or more of credit on loan forgiveness under a plan like one of these plans that we've been talking about then you might only have like say 10 or 15 years left to go where you'd have to be making payments that are based on your income. So if you went overseas like now for 10 years and paid $0 a month like on the revised Pay As You Earn your interest subsidy would be 50% of all the interest.

Travis: So instead of you know 7% or whatever your average interest rate is would be cut in half. And so you would be in a position to have interest that's accruing not compounding at a rate of like 3.5%. So what that means is instead of the interest growing on an exponential rate it be growing at a linear rate. And so you would maybe leave with you know say hypothetically you just left with $574k in debt.

You could probably come back in ten years with you know I have to run the numbers but maybe like you know $700,000 for example instead of like having it have doubled on you or something like that. And so then if your goal is to do this kind of work and you have the ability to do it now without waiting is that worth it. Right.

Travis: Is that something that you would be willing to sacrifice and change your approach for that reason so that's like one of the reasons why it's so important to know all your options. Because you know once you know all of the options then it's like well ha if I could go over to Southeast Asia or Europe or South America or wherever I wanted to go and perform services I can do that right now. And as long as I have my tax bomb put away at the very worst I have that money put aside that's going to cover the tax consequences.

Travis: Even if something happened to loan forgiveness I can always come back and put that big lump sum towards my debt because the debt only grew at a linear rate and then potentially refinance at that point if interest rates in the economy are such that you can get a lower rate through refinancing. So that's just like an example of how I don't know if you've ever thought about that but you could actually if you were willing to abandon the strategy that you laid out then you could actually move overseas right now and start doing this kind of work.

Repayment Options

Samm: Yeah that's a really good option. I think for us it's like we just want to get rid of it. Which is totally an emotional decision obviously.

Travis: So part of the decision that you made could have been optimized more so from a financial standpoint for sure.

Samm: I think even just staying with the regular loan forgiveness program is still a more financially optimized strategy than paying it down in less than 10 years. I think that 10-year thing that we chose was very.

Samm: Just like the psychological weight of having that we just want to get rid of it.

Travis: Yeah. I understand it. So for a more optimal approach. So say you graduated from USC and you have the big debt. So with the consolidation instead of waiting and the consolidation but what I would have done is consolidate that debt immediately after grad school and then if you did that then you would be able to honestly state that you have a $0 a month income. The rules back then were a little bit more permissive of you know stating your income is lower because the previous year's tax return seems like they're kind of getting a lot more strict with that. So for that reason you know it's best to try to consolidate as soon as you get out of school so you can use the prior year tax return to say that you have $0 income.

Travis: You're not technically working yet. And then what you can do is get the $0 required payments on revised Pay As You Earn. Well if you're if you have almost $600,000 of student loan debt that your interest charges let's say it's $35,000 a year. So if you are on income-based repayment which you were on you when you graduated I think then filing taxes separately. Right, Samm?

Samm: Exactly. Yeah.

Travis: So in that scenario, you would have had a zero dollar payment that you would have gotten that interest subsidy of 50% of all of the accrued interest that the payment you're required to make is not covering with the monthly payment.

Travis: So instead of paying like tha $35,000 in interest for that first year your interest would've been $17,500. Right. So that's just under the REPAYE. So that's one kind of illustration of how important it is to make sure that you're on the right repayment program for what your long term goals are.So that's okay. Like we discussed kind of right now why it's even a good idea to probably have you switch to a revised pay as you earn instead of income-based repayment because you're required payment would still be drastically less than the $6,000 something that you're paying. And you'd be getting interest subsidies that would cause more of your money to go to principal instead of interest.

Travis: So Samm one of the things I'm interested in is key. Tell me a little about the repayment program that you were on when you were exiting dental school in the past couple of years?

Samm: Yeah. So I was on the IBR repayment program which is one that requires you to pay like 15% of your discretionary income every month which it doesn't even cover the interest of course that you're accruing on a loan. This large and then this goes on for 25 years I believe. And at the end of 25 years you know the government will pay back the rest of the loans which will be bigger than what you started with because the interest is accruing over 25 years and then you have to pay for the taxes on that they paid off for sure. Yeah. And I think I don't really remember why we chose it.

Samm: I think it's because it has versus the REPAYE it has like that filing separate tax returns and on that on that first year I since it was only like three months of work I think I only made like $20,000 verses like if I had done the REPAYE and my husband's income was included it would have been like $150,000 and it was like a big difference but I'm not sure if that was the smart thing to do for that first year or not. But I think that's why we did it.

Travis: Sure. So it's interesting with that is you know with IBR there's no interest subsidy right. So if you're not going to go for forgiveness and there's absolutely no reason why you would care about what your required payment would be. So with Revised Pay As You Earn if you can get the lowest payment possible then you get a higher interest subsidy because that subsidy is based off of half of the interest that's left over after your required payment is accounted for.

Samm: So we had switched to paying it off aggressively. So no interest is really accruing then. Then when it matter let's say someone did choose the path we chose and then they pay the $6,500 a month then no interest would accrue because they're paying they're covering that interest. Then would the REPAYE still be beneficial.

Travis: Yes it would. So that's true. But the way that most of the servicers are accounting for the interest right now is they calculate what the subsidy would be at the very beginning of your repayment period a month and they apply that subsidy automatically monthly. Basically they calculate the interest that you're responsible for and then any extra payments basically are going more towards principal instead of the interest.

Samm: OK. So this is regardless of what you choose to pay per month?

Travis: Yes. So it's really yes it's very powerful and it's a very powerful program. It's a very common misunderstanding or misconception. So for someone out there who wants to pay back their loans in full refinancing is not the right plan yet for them then going for revised pay as you earn is definitely a much better strategy than doing IBR because you're having to pay back less interest and more of your money is going towards principal and that after all that's the goal right. Is that as soon as possible.

Travis: So in terms of doing the kind of work that you wanted to do which is going overseas and serving people overseas if it was possible to go over there much much sooner than you thought like. What would have to be the case for you to potentially do something like that? Do you think that you know getting out of debt is so important to you that there's just no way that you would do that until your debt is mostly paid off.

Samm: I think from us from our personal standpoint I think we want to just get rid of the debt and then once it's out then we'll go ahead and pursue that.

Starting a Family With Massive Student Debt

Travis: Now to ask a personal type question. Are you guys thinking about like having a family in the US? How does that come into play with your loan strategy.?

Samm: Yes. So currently we don't have any kids and we don't have any plans to have a family in the US. So it's kind of helping us actually with the repayment because yeah I'm sure once you start thinking about future family and like shaping your future it definitely affects your plan.

Travis: Right. That's why I think that I would never recommend this path to your typical person who has your kind of debt, your kind of income, because the thing that will typically happen is you will sustain this for like a couple of years and then if you are a typical dentist in Southern California then you might have family right. Then regardless of whether or not you're able to sustain life the same income with like getting paid maternity leave or paternity leave or something like that you definitely will have daycare expenses unless you have a family living in your area that can cover that.

Travis: So that's an additional usually $2,000 a month if not more just for daycare. And then you know tackle it like all the other expenses of having a child like diapers, baby formula, all those things all of a sudden paying you know $6,500 a month turns into paying like $3,500 a month. And if you're paying $3,500 with that kind of a debt size you're kind of more on an extended type of repayment program and if you're on an extended type repayment program then why not go ahead and roll the dice with loan forgiveness if you're gonna take 25 years to pay it off anyway.

Samm: You know definitely what I think people who just graduate with I feel like you have to choose right when you graduate or really close after. Because obviously if you do the loan forgiveness you got to pay like as small as possible and to raise your debt. And if you do it the other way you have to be as aggressive as possible and if ever you flip flop in the middle you end up losing a lot of money.

Travis: Yeah right. Really bad.

Travis: The cool thing though is saying that knowing about that foreign earned income tax exclusion and the ability to pay zero and have the interest accrue like that more slowly. So you got really excited by that. One thing that I tell you in like undergrad economics classes is like sunk costs or sunk costs you can't change the past but you can always change the future. So if you wanted to like immediately move to another country and be a dentist there like you could do that as long as you can get all the visa stuff worked out and that's OK, and if you want to pay off all the debt over first before moving overseas that's okay too.

Purchasing a Home With Massive Debt

Travis: The main thing is if you were going if there was any chance that you were going to deviate from that massive payment strategy then that would be a very costly thing to do. It would just take you about the same amount of time to get out of debt and then you'd also have that really crushing interest that you'd be paying instead of going for forgiveness. So let's talk a little bit about buying a house. So how does someone buy a house when you have a ton of student loan debt? Especially in a place like California.

Samm: Yeah we recently purchased a house. It's actually like getting student loans, very easy. So there's a 40% rule where you they would like your mortgage to be like no more than 40% of your total household income. But what they do is if you're under IBR or REPAYE they actually only look at you're like minimum monthly payments regardless of whether you're paying more than that or not. So they're looking at these teeny tiny monthly required payments under the IBR program and they say oh obviously on it's own time you're making more than 40% of what your mortgage payment would be.

Travis: That's cool. So how much more was the house than your combined income? About two times as much or three times as much..

Samm: So I'm totally happy to share numbers. Our combined income was around like $250,000 last year and the house was $500,000, which was funny because it's less than the student loans that I had.

Travis: I know and yeah.

Samm: This is in Southern California. So that was actually not a bad price considering how a majority of houses around here are like $800,000.

Travis: Right. So you know people buy houses in California usually freak me out because I see the mortgage I see the costs and I see the potential for housing prices to decrease with the new tax law change that happened. So the new Tax Cuts and Jobs Act caps the deduction for property taxes and state income taxes at no more than $10,000 and it limits the deductibility of mortgage interest to no more than a $750,000 mortgage. So if you're buying a house in California where like $800,000 and some people consider that entry level you could have gotten approved for that $800,000 house.

Travis: If you did that then you would have again kind of tied your hands behind your back where you're not going to have any money left over to cover your student loan debt. Then suddenly your plan gets on the longer term repayment plan because you're not paying as much. And then financial disaster. Right. So great job at limiting your house purchase price to no more than two times your joint income.

Samm: I just wanted to point out to the mortgage that we're paying on this house is actually like cheaper than when we were renting the same amount of square footage in the same city. And so that was part of our driving force as well. We're saving money paying on a mortgage then we were renting. Like the exact same thing. So yeah that's kind of interesting. Southern California I feel like the rent rates here are really high.

Travis: Well yeah and the only caveat that I'd say that is is I tell folks if you can rent a house for less than half a percent of the purchase price per month and monthly rent then you're vastly encouraged people to. Yeah I definitely would prefer that people would rent and not buy and if you can get a mortgage for basically your mortgage if the rent is over 1% t of the purchase price of the house a month then you're better off buying that house instead of renting it.

And if somewhere in between there. So maybe you have a $3,000 a month rent for $500,000 house then you're somewhere in the in-between stages. So if your goal is to move at any time in the next five I would even say that 10 years in a place like Southern California I would suggest people not purchase a house. But if your goal is to be there very long term you know at least a decade and you limited your purchase price no more than two times your income and you're willing to stay there no matter how tight or cramped it gets.

Travis: It's amazing to me how many people tell me there will come there but then they come there and they're living in like you know the two bedroom apartment that they can afford. Wow. Oh my gosh. Like having two toddlers is like so crazy I'm going crazy. I have to buy that four bedroom house because there is just not enough space for all their toys and I'm going to go insane. And to that I'm like well if you do that then like you're not going to have retirement you're not going to have all these other financial goals you want to accomplish right. So let me ask you this. What point are you comfortable giving up all these government protections giving up the revised Paye As You Earn, giving up all of these flexible options like moving overseas and paying $0 a month for doing a private refinancing to lock in a lower interest rate.

Samm: OK so currently our interest rate is 6.7% and we were actually considering refinancing our loans just recently when we made the decision to purchase the house. We kind of had to make a decision between refinancing and purchasing a house. And the reason for that is you know obviously one affects the other if you refinance. You have a larger loan so then your monthly payments are larger so you're less likely to get a mortgage for a house get approved for one and then vice versa if you get a house you're less likely to get approved to refinance the loan.

Samm: So we went with the House option and we were considering refinancing the loans. But just recently we decided change our mind just because of the flexibility that the loan forgiveness programs give us. You know we can still pay it off aggressively but if some crazy emergency happens where we need to for a month or two months or whatever go back to that minimum payment we can do that. It does create a safety net. So I think that's something people should consider as well.

Future Recession?

Travis: Yeah. And I think that we're probably on the cusp of having another recession at some point soon.

Samm: I've been hearing that.

Travis: That's easy for people to just say right.

Samm: You never know.

Travis: You can't predict the future.

Travis: So if you did a 15-year refinancing and got a five and a quarter percent interest rate that's about $3,900 a month and your job is pretty secure. You're not going to go anywhere with your job. Your husband's job I think is somewhat secure right. Probably not as secure as yours though I guess.

Samm: Right yes.

Travis: In that case you could certainly have a decrease in your income and you still have that mortgage payment that you have to make no matter what. So it would be very challenging in a really deep recession to make a $3,900 a month payment on your student loans and to pay the mortgage.

Samm: Right.

Travis: So doing revised pay as you earn in getting the interest subsidy at least until your debt balances below $400,000 is probably a lot safer.

Samm: Yeah.

Travis: Also like let's say the next recession happens and we come out of it like I guess the one downside is like you might see a lot of these student refinancing companies like collapse because you know there are a lot of them are funded with venture capital funds and the credit spreads in the economy which just means like how much investors have to receive in order to lend people money that are not the government that have some sort of credit risk that gets a lot more expensive to borrow. So I think you could see the opportunity to refinance not be there in a recession potentially but I still think that it would be much better to have that flexibility around being able to pay as a percentage of your income.

Refinancing

Travis: So with Revised Pay As You Earn luckily you still get a subsidy probably until your debt is well below the $400,000 level. You know you have to run the numbers to be sure but that's exciting that like even though hey you know if we could go back in time which nobody can be on revised Pay As You Earn we would have. Well actually you could be on that now an still save some money and that's kind of significant.

Travis: Like I think when I look at the numbers I was like $10,000 a year that you would save at least for the next year. So you paid out like a $100,000 again then the interest subsidy might only be like a few thousand bucks but it's still kind of making your 6.7% interest rate look more like a like a five something.

Samm: Yeah exactly.

Travis: Which is what you get with refinancing anyway. So one concern that I have is you qualify for refinancing the best deal that I know of in Southern California is First Republic Bank and we have like a $200 refer a friend link on our site. That gives you at the time of the podcast recording as low as like a 3.95% rate in 15 years which is really good. But they will only do a maximum of $300,000 in refinancing.

Samm: Yes and that's what I've been finding with a couple of actually right. Still on refinancing companies. They have a max, and so with people graduating from like the same school, I graduated from. It's kind of you know we go over that max.

Travis: Right, exactly. So that is telling you that the private sector is basically telling you don't pay this back. Right. So again if you want to do what you're doing I think you can make that decision but you just have to know if somebody is doing this prospectively like what you're getting yourself into what you're committing to.

Samm: Of course. Yeah because the worst you could do is commit to it and then, later on, be like I actually can't do this.

Travis: Right exactly.

Travis: With the refinancing like you would also have to have. I think it's like 15% down to do a $300,000 refinancing for first probably to feel comfortable and you probably want to see as a debt to income ratio below 2 to 1. So what you probably have to do to get the max interest savings is you probably have to refinance with a national lender and probably get like a mid 5% type of rate once you got below the level where you're getting an entire subsidy on revised pay as you earn. So you know you knock it down to below like $400,000 and then maybe refinance $300,000 something.

Samm: Yeah.

Travis: Maybe you pay it down to like the $300,000 level and then maybe having another conversation with you know a First Republic bank and get it refinanced to the lower rate and you know obviously I know on thedebtist.com you have refinancing links, and on Student Loan Planner® we have some refinancing links as well to get people cash back bonuses for refinancing.

Would You Do Things Differenly?

Travis: So much appreciate you all using one of our links when you do refinance your student loans because you'll get a better deal. That's really interesting though that there are all these nuances right where you have to like refinance at this level and then be on REPAYE until this level and then maybe look for another lender that's a specialty lender that's based on where you live. Again when you hit another level. So let's talk a little bit about if you could do it all over again. You know obviously, no one can. Say you could. What would you do differently about your path in dental education? Like in any regard financing, your school, like all of it.

Samm: Yeah. I mean I would do a lot of things differently. First off the two schools that I got into were both private schools one in Ohio one in California and they cost about the same. But when I started already at the school I went to I actually got an offer to like a public school but I was already paid for the first year supplies I paid for the first trimesters tuition so I was looking very like short term I already paid early sign a lease for like apartment complex near the school I was going to.

Samm: So I was looking short term and like I was looking at the inconvenience of losing that money and choosing a public school. But in the end, I probably should have done that because it would've saved me like $100,000 or a little over $100,000 in student debt But there's a lot of little things too like I think I could have just been more frugal. I was the typical 20 year old who is like oh yeah let's go to happy hour, let's go eat out, let's go get some drinks. Or whatnot and I could have done a lot better life choices as I was going to dental school I could have been saving money instead.

Samm: As far as paying back the student debt once we got to that point I'm pretty happy with our decision to pay back in full. I think it's just like I said be more of like. It would have been a psychological weight if we had kept it for 25 years or if we had chosen to keep it for 25 years. So that kind of has worked out for both of us really well.

Paying Student Debt Aggressively

Travis: Yeah you know you should check out deeplyindebt.com too which is another similar story of a dentist who had a ton of debt in his family. We see the numbers I ran the numbers for them too and I'm like forgiveness was the best strategy from a math standpoint and they thought about it and they're just like you know what. We just cannot get comfortable with that for them. I think it was also partly faith-based. They just had like this view of debt that was not a positive view of debt and they just didn't like the idea of it. And basically what I like to do Samm is like I like to try to be kind of mean and like make somebody feel really bad about the idea of paying back their debt. If the math says that they shouldn't. And I like to be kind of a jerk and then. If you survive the meanness then it's like OK well then you're committed enough to make it a potential thing that can actually happen.

Travis: It's funny because like sometimes, especially when somebody is like I really disagree with their decision to pay it back like I will really work on them hard and if I can find any way to talk them out of it then I try to simply because like in my experience not every time but almost every time somebody who takes that approach where they should definitely have gone for forgiveness I'm not talking about a marginal case right. I'm not talking about somebody who has like $300,000.

Samm: Like the gray area?

Travis: Yeah like the gray area like I'm talking about somebody who has a $600,000 from like NYU or something you know and they're like I absolutely want to pay it back. And they come back in like six months or a year or maybe they had a kid and then they're like oh my gosh what am I doing?

Travis: I paid a $120,000 towards my loans and my loans went down like $80,000 and I have no retirement savings and I lived on rice and beans for a year. That's what we don't want to have happen.

Samm: Of course yeah.

New Grads Dental Work Options

Travis: One thing that I saw was it was really interesting that a lot of your thoughts on is about 10 years ago. I'm gonna be honest I'm somewhat making these stats up but I swear I saw him somewhere that was about 3,000 new grads a year for dental school that were coming out like 10 ish years ago.

Travis: Now that number has doubled to about 6,0000 per year. And we're obviously seeing that massive growth of corporate dentistry there. Heartland Dental's of the world, Comfort Dental, all these places that want to have a giant group of employees who are very committed to working for these organizations long term because they don't want to necessarily do their own dental practice. Do you think there's a bubble in dentistry? Where we're going to reach a point where the market is so saturated that incomes start going the opposite way instead of increasing this or decreasing on average. Do you think that at some point something's gonna give.?

Samm: Yeah so definitely it's kind of scary seeing how many then all students are graduating at this point and I know like for some other medical professions like pharmacy and stuff you know they're seeing so many kids graduating that they can't actually get jobs. So one or two things would probably have neither are income levels start to decrease or people are graduating from dental school and they can't find jobs. Currently, right now I think a lot of the dental students who I know who are graduating they're still able to find jobs but it's going to be one or the other. It's kind of unsustainable.

Pharmacists Troubles

Travis: Yeah I'm glad you brought up pharmacists because pharmacists for the people who aren't in that world I didn't know this until recently. Pharmacists are having a lot of trouble getting full-time hours and a lot of gases and that's shocking. I would guess Sam that if you asked like a random family member of yours what are the safest jobs dentistry would be probably one of the top three and in pharmacy would be in there too.

Samm: Right. Yeah. But it's not anymore. You know. And the crazy thing is they're still creating pharmacy programs because students are still signing up for him and students are still willing to pay for them. What happens is on the other side once they graduate it's like there's no jobs open. So It's kind of sad.

Travis: The concern that I have I see a lot of families that will encourage their children to go into these kind of professional programs when maybe it's not their passion and maybe you go become a pharmacist because maybe you're the second generation and your family has expectations what kind of job you're gonna do and you know you really do want to go be a doctor or a dentist or something so you got to be a pharmacist.

Travis: So the issue with that is if your skillset is not like I've been working my tail off to get into pharmacy school or dental school or if you're even like a little bit reluctant like your credentials might show that that you're a little reluctant and then the places that you're gonna get in are the easiest places to get in. In that case, if you're not super passionate about it.

Samm: Yeah.

Private School Costs

Travis: I guess what I've seen as people will oftentimes be like from my second generation families or people who are like first-generation college or folks that were career changers and these programs are popping up because there's no limit on the number of loans that can be borrowed for federal student loans at all. There's no limit. The schools have figured this out and so they're like well like as long as people are signing up why don't we just make a new program and charge like three hundred thousand for it and we just made this massive boost to revenue. We can hire more people, we can spend more money on our endowment. Whatever college's like doing right.

Samm: Right.

Travis: So I think the high cost private dental schools are huge offenders in this space. I think the prestigious ones like generic prestigious names that are big universities have really expanded their class sizes. I think that's been the case a lot of the private schools because it's such a moneymaking opportunity for them. But dental schools I'd love to hear your thoughts like I know that there's been a few that opened up recently. Do you know if there's any plans for new ones?

Samm: Not in California at least. I still think there's a lot of dentists who are graduating and you can tell because I mean it's becoming more and more saturated. I mean maybe I see that more because I'm in California. Obviously, there's like other places in the nation where you could go to be a dentist and there's not competition, but yeah at some point I think there's gonna be too many of us.

Travis: Yeah yeah. And so when that happens you will hopefully have no student loan debt to worry about right?

Samm: Hopefully it's all free.

Travis: Right. So you know there are so many opportunities there for you and your husband optimize your finances with your stated goals and that at the end of the day is what I'm hoping to accomplish with Student Loan Planner®.

Blog Goals

Travis: At the very minimum what would you want people to get out of thedebtist ?

Samm: Pretty much I just want to like show people that first money shouldn't be like the only deciding factor. You could choose to do that loan forgiveness path but then you'll be like really unhappy if you have this like that with youvs. just choosing the one that's gonna make you most happy I guess.

Travis: Absolutely and how can listeners get in touch with you if they want to learn more?

Get in Touch

Samm: Yeah. So I write at thedebtist.com. And then I also have an Instagram thedebtist and I have an email. They can write to me if they want. I'm always happy to hear people's stories and chat. So my email is thedebtist@gmail.com

Debt Payoff Celebration

Travis: Awesome. So if you want someone to talk you out of doing a repayment plan. We're happy to help too at studentloanplanner.com/help. To learn more about our services and let me ask you the last question here Sam. When you pay off your student loans how are you going to celebrate?

Samm: Oh gosh I don't know. Probably just do what I do every day anyway. I don't think I would like do anything crazy to celebrate this. I think every day I'm celebrating it's fine.

Travis: That's good and that's the mindset you have to have. Well thanks so much, Sam for being on the show and if you have a lot of student loan debt. Be very cautious before we go into full repayment approach. But if you do decide that that's the approach for you take a look at what Sam's doing and realize how much you have to sacrifice to be as successful at what she's doing as she is right.

Samm: But you can do it. Maybe.

Travis: Yeah, and I'll tell you. You know max those retirement accounts have put away tons of money in that brokerage account instead and still put $6,500 a month away and make the minimum payments on your loans and that's that's the scenario that makes me feel most comfortable from a math standpoint. But as you said life is not all dollars and cents. You have to feel psychologically comfortable with your life right.

Deeplyindebt.com

Samm: Yeah yeah. And I can't wait to read about that deeplyindebt.com One that you recommended. Thanks for that. I'm gonna look her up right now.

Travis: Yeah. That's Amber and Danny's blog. Same kind of story but it's not easy and they don't make it easy like every year it's getting harder and harder to do what you're doing you know like the debt that entering D1 at like a Pacific or a USC or NYU and kind of a school that's going to come out within 2022 right now is approaching it's gonna be probably like $625,000.

Samm: Yeah.

Private or Public School?

Travis: Because of just increased interest rates and inflation and tuition and things like that. So if you know anybody that's gonna become a dentist you need to go to the cheapest place you possibly can. Is that right Sam?

Samm: That would be my most important advice is choose the cheapest school that you can go.

Travis: If you want to get financial independence like you said something about maybe like one day not having to do dentistry you can do that with loan forgiveness, in my opinion, more easily because you can get that tax bomb set aside like the $100,000 that you need to grow into the tax form and then you can always pay based on your income and then you have to start working on your investments. And once you have 25 times your expenses saved in investment accounts like a brokerage account retirement account plus that tax bond money set aside then you could actually quit dentistry and be totally retired. Now you have like a bazillion dollars of student loans.

Samm: Yeah I definitely would agree that if financial independence is your goal then the loan forgiveness programs is most optimized and actually wrote a blog post about that. If you can be financially independent don't pursue medical fields unless you really love it.

Samm: You know what I mean?

Dentist Story

Travis: Yeah I know. The one positive thing I can say is I did meet a dentist one time in rural Iowa. She was producing $2 million a year in dentistry which is insane.

Samm: Wow. That's Crazy. Yep.

Travis: She also was only taking home $250,000 and the reason she was only making like in the typical percentage comp for an associate is like 30 to 33%. And that's way below. She should've been taking home and I was like. Why are you making so little?

Travis: She gave me this like formula the employer gave her the formula that determined her compensation was extremely complicated in my opinion deliberately so0.

Samm: Yeah.

Thoughts on Owning a Practice

Travis: So that it would make her feel like she was making a lot of money even though she really wasn't at all compared to her production. So that's another reason why I do tend to say like I am kind of really encouraging of dentist's to go on their own practice and if you want to hit financial independence consider doing like a five year tour of duty in cow pasture Iowa or you know random plains of western Oklahoma or something and you will make a ton of money in a short amount of time and you could take out a practice line to get started with owning your own practice and then sell the practice once the practice loans once paid off and then you have like 3 or 4 million in assets.

Travis: So I don't think that necessarily you can't do health care but you can't be L.A. like is 90210 about LA or is that like Hawaii.?

Samm: Oh my gosh don't ask me I don't know. I have no idea.

Travis: I don't know but all I know is if you want to live in those areas you're much better off not going to a professional program having the flexibility you know student loan debt and just trying to pursue a job in corporate America or some like the entrepreneurial type of thing. Of all these customers are looking for services. And if you're unique and you have a unique business idea that you could be way better off trying to do that right.

401K

Samm: Right. Exactly, and you also have to remember dentist's They don't really have 401K matches and stuff like that. So if financial independence is your goal and what not you again to like a company that has a really good match and you have the benefits like dentists still had benefits. And so these are just things to consider you do have to pay for these things to do on the side. So yeah.

Travis: And I will say you can set up your own 401K and contribute way more than the maximum allowed that for employees. So you can hack the system but they don't make it easy. It's not meant to be easy. Well, thanks so much Sam. We could talk all day. People should go check out her blog. And if you're looking for a repayment program be cautious and don't do anything without an incredible amount of thought behind as long as you thought about it. You're comfortable with all the risks and the higher costs the might assume that's ultimately your decision. But I just want make sure you're doing it as most efficiently as possible. I'm sure Sam does too.

Samm: Yes I do. Thanks for having me.