The Elephant In The Room

“That is ridiculous!” “I’m so sorry.” “That simply doesn’t make any sense!”  “That’s more than medical school!” “You have to do the military! There is no other way.” “Why is it that expensive?!” I have heard these statements so many times it is absurd. People say these to me every time I mention the $400,000 elephant. Yes, that is a lot of debt.

The tuition alone for my school is $72,000 a year (I’m out of state.) That’s how much I am withdrawing and for those that are curious if I can claim in-state for the last 3 years… I can not. Here in the state of Utah, the medical and dental students cannot claim residency after the first year of school (Yeah, it’s pretty dumb). However, I am very lucky to have a wife that works hard and brings in enough to pay for living expenses. So I don’t have to withdraw more than the $72,000. Now, there is an extra $25K provided for living expenses. Withdrawing the full amount brings the grand total to $97K in student loans annually.

It is what it is. We will have a lot of debt once we graduate (unless you have the HPSP from the military.) Don’t make us feel bad for being in this much debt.

$400K Isn’t That Much…

Whoa, hold on, what do you mean 400,000 dollars isn’t that much?? That is more than I have ever possessed in my life!  Well, this is probably true for most, but hear me out. I was listening to the Shared Practices podcast the other day and the guest speaker made a comment that made me feel more comfortable with this large amount of debt.

The guest speaker was Dr. Howard Farran. He is a practicing dentist in Arizona and the founder of Dentaltown. Anyway, he said something along the lines of “Dental school isn’t expensive…You know what is expensive? Getting a divorce. My first divorce cost me 1 million dollars… and my SECOND divorce cost me $700k! I would have loved to have a settlement of $400K for either of those divorces.”

After he said that I felt a little bit better about the loans I am taking out to pay for school.  I also realized that the reason why this number is so large is that I have never dealt with numbers this large before!

While in undergrad I worked two jobs and the checks that I received were roughly $400 every other week. It was extremely difficult to make more than $10k in one year. So of course 400,000 sounds intimidating and bad. That number is 40 times more than I have ever dealt with before. So with that said, our perception causes that number to look extremely large.

Yes, it feels intimidating but if you want to be a doctor you have to take out the loans. There really isn’t any other way.

Good Debt vs Bad Debt

What is so difficult to believe is that not all debt is bad debt. Yeah, turns out there is such a thing as good debt. Well… unless you are Dave Ramsey then ALL debt is EVIL.  But this is something I completely disagree with, Debt can be good.

Let’s talk about the good first.  If you take out a loan for education purposes, then you are going into debt to enhance your skill set and make yourself more marketable.  By doing this you will receive greater returns than you are currently making, which is GOOD. Another good reason for going into debt is to buy a practice or start up your own.  The goal with this is to own something that will produce more than you are currently making. Debt in business is leverage for earning more money. Weird concept but it is true when done right.

If you had 400,000 dollars in debt and it isn’t from a mortgage, student loans or business loans that is BAD.  Man, that would be straight up horrible. You should never take out a loan (or finance) for consumer purposes.  If you don’t have the money to buy it, YOU CAN’T BUY IT.  Just because they have a finance plan for the 4k Ultra HD 75″ TV, does not mean you can afford it. Or just because they can somehow find a way to lower a monthly payment for that fancy BMW M3 of your dreams, does not mean you should buy it!

Taking out a loan for lifestyle is bad debt.  It is sad, but we are surrounded by a society that views this manner of living as normal. It should not be viewed as normal and should be viewed as stupidity.

Remember debt can be good if it is going to make you more money in the future.

Control The Elephant

Now just because you end up with a large sum of debt doesn’t allow you to justify to go into more debt.  It will be easy to justify taking out more loans than that which is needed. How many times have you heard “Ah you are already in so much debt… what is a little more going to do?”

It’s going to do A LOT ok… It is going to develop a poor and bad habit, which will damage your financial future immensely. If you ever want to achieve financial independence (believe me you want this) you cannot form this poor habit.

We can become numb to the feeling of having debt. That insensitivity is extremely dangerous and can become a lifestyle. You do not want debt as a lifestyle. It will become a burden and hinder all other goals you may have.

So remember, it is very important that you take out as little as possible. You should learn how to live on a budget if you’re not doing so already.

I budget to the dime. Once a month we look at our expenses and figure out where we can cut or what we have to add to our budget. At the end of the month, we quite literally have $0 left over. We spend on our needs, save for the future (for gifts or personal expenses,) invest what we can, and do not take out any loans.  Also, we have an Emergency Fund that could easily cover our manner of living for about 6 months.

Living on a budget, living within your means and being frugal, will allow you to control the elephant and not have it control you.

What To Do With The Elephant After Graduation

This is all personal and will be different for everyone depending on their situation. Just know that there are more options than just paying back the federal loans you withdrew.

You can Pay As You Earn (RePAYE), you could go for Public Service Loan Forgiveness (PSLF), or refinance your loans with a private lender.

I think you should be somewhat aggressive with paying off the student loans but don’t overkill your payments.  After spending on your needs, don’t put all of your money that you have left over toward your student loans.

Instead, save some of it. Build up an emergency fund, max out some of those retirement accounts, save for a future down payment on a house or business. If you are strictly paying off student loans there will be many opportunities that will pass you by.

[Side thought: if you have a credit card balance of any magnitude you should pay that off ASAP. Then put money toward other things like a future down payment, IRA, 401K, HSA.]

No matter how you tackle this large sum of debt, it will disappear and it won’t be a burden in the future.  This debt is necessary in order to obtain our goals. Do not be deceived that you have made a poor/dumb choice for going into the profession you desire just because you had to take out 400K dollars to do so. This debt is good debt, not bad debt.

How big is your elephant? Is it 200k, 300k, 400k, or is it more? How do you feel about your student loan debt? Do you plan on refinancing your student loans, why or why not? If you have paid off your student loans, what have you done?  Were you aggressive in your payments or did you pay the minimum? Did you do PSLF, HPSP, RePAYE, or IBR? Tell me in the comments below!


9 Comments on “The Elephant In The Room”

  1. I can’t think of any worse financial decision than student loan debt for a veterinary degree. At least dentists can earn a significant income and have lower startup costs to be an entrepreneur.

    I supported my wife through vet school and she didn’t enjoy the stress and low pay, that was 100% bad debt.

  2. So there is a number where the student loan debt doesn’t make sense anymore.

    What do you think that number is?

    For me – unless you are going to specialize – the number is abou $600,000. Top that and I’d skip dental school. It accruing interest just pounds you down. ESPECIALLY if you aren’t willing to geographically sacrifice. Please tell me you don’t want to stay in Utah or live in a coastal city. Wages are so depressed in Utah and desirable cities.

    I’m an orthodontist and dug out of $600,000 of debt. It was doable with the higher salary, but if I was making $120,000 – I don’t know man.

    1. I’m not staying in Utah and I’m avoiding Cali like it’s the plague. My wife is from Florida so we have our debates about that. But I’m willing to move anywhere there isn’t snow (wife doesn’t want snow anymore).

      And I agree there is a point when it simply doesn’t make any sense.

      Anything above $600,000 for a GP would be ridiculous. So that would be a good cut off point to really consider if this is worth it. The most I’ve heard for just a GP is 480k. And I feel like that is pushing it. the worst part is the fees are going to keep increasing over the years and I do believe there will be a point when going to dental school won’t be worth it. Unless you REALLY want to work in someone’s mouth.

  3. I would do everything in your power to avoid private schools. I was fortunate to get in-State tuition for dental school and had an employed spouse. So I didn’t have to deal with dental school debt. I can however, imagine having $400k, $600k, etc in debt. The key is to earn and SAVE a lot of money. Dentistry can be very lucrative if you are a practice owner who also owns the buildings. Like any profession, there are wildly different incomes. Earning close to (or above) seven figures is very achievable AND at the end of the career I will have 2 buildings to sell/rent As well as a patient base for the purchasing doc. I specialized in Pediatric Dentistry and think that helped as well.

    1. I couldn’t agree more. I was accepted into two private schools before going to the U. Both of which were at least 10k+ more expensive every year. I wish I would have received instate tuition though. Would have been great.

      I like to think that I have an entrepreneurs mindset and will achieve that 7 figure after deducting overhead. It’ll be from multiple sources sure but that’s a goal of mine which I will achieve.

      Another goal is owning the building I practice in, like yourself. So it is that much more valuable when I decide to sell.

      I’m excited for the future and what it has in store for me!

  4. Definitely better to pay off student loan slowly, since/if interest rate on that student loan is low. One is because it’s deductible, two is why pay it off if you can get better return else where (comparing interest rate), i.e the stock market, whatever. After 10+ years of being out of school I am still chipping away at 20k student debt I had, $100 per month at at time, while building up my networth and invest in the market (should have bought a house when it was cheap). $400k is a lot of debt for school though, granted, once you done income will be high so at some point there will be a break even.

    1. If debt isn’t a burden then I agree taking it slow isn’t a bad thing and there really isn’t a reason not to take it slow. Take advantage and build liquidity, invest, put money towards retirement etc. and just pay the minimum. No issue at all.
      However, there are some people that lose sleep from the amount of debt they have. It becomes an emotional burden for them. If that’s the case then I would suggest paying that debt off quickly as possible for emotional reasons.
      But if the debt is managed well and is under control, there really isn’t any real rush to pay it off.

    2. Student loan debt is usually not deductible for doctors/dentists as they are ‘rich’.
      Student loan debt is not deductible above around $150K/yr income.
      Never mind the negative $400K net worth at age 29 that you have. You are ‘rich’

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