When I work with newly graduated dentists, there’s one thing I hear more than any other: securing a full-time position as a new dentist is a tall order.
The early career of most new dentists I work with is defined by part-time positions at two or more practices as they work towards a single full-time job, and it has serious implications for their finances – and their student loans.
As a new dentist, you’re carrying more debt (on average) than almost any other medical professionals. That amount of debt means you’re definitely wondering about what the best way to manage your loans is, especially given the amount of marketing messages you’re getting about “just refinance!” or “just consolidate!”
Before you do anything, here’s what each option means – and what your unique career path will mean for each one.
Consolidation
If you’ve got multiple different dentistry federal student loans, with multiple servicers and multiple monthly payments, you know that keeping track of them all can be a pain. If you’re looking to simplify your loan management, consolidation might be a good option.
When you consolidate multiple loans, you bring the total of all of your loans into one big loan – but you also bring each individual interest rate with you. Your new loan will charge you the average interest of all of your previous individual loans, so consolidation won’t save you any money during the course of your repayment.
It’ll give you one payment to make every month, and streamline the process, but if you’re looking to get a lower rate on your loans, that’s where refinancing comes in.
Refinancing
Before you refinance your loans, the most important thing you need to consider is whether they’re private loans or federal loans.
If you have private loans…
Refinancing private loans is a fairly straightforward discussion for dentists: you should do it.
When you refinance private loans, you don’t lose access to any programs or benefits like income-based repayment plans, and generally, the terms of your loan will be largely the same.
The only thing that will materially change is the interest rate you pay on your loans, and with a loan balance the size of a mortgage, a lower interest rate can mean saving tens of thousands over the course of your repayment.
If you have federal loans…
Refinancing federal loans as a new dentist isn’t such a straightforward conversation.
Your federal loans do come with benefits like income-based repayment plans, which could be a huge benefit to you early in your career.
As a new dentist, if you’re still working one or more part-time jobs at different practices, you’re not yet in a secure place in your career – and while you will be in the future, right now the access to those programs could end up being very useful if your job situation were to change for the worse.
That’s why by and large, I recommend new dentists wait until they’re in a more secure full-time job before refinancing any of their federal loans. The added peace of mind and flexibility that comes with federal loans is worth the extra interest for the next few years, and you can always refinance down the road.
What should I do next?
If you do have private loans you want to refinance, I’ve worked with clients who have had positive experiences with both SoFi and Earnest. Both of them are loan refinancing options that are geared towards young professionals, and they’ll both be able to help you secure a more favorable rate on your dentistry student loans – and no, I’m not affiliated with either one.
That’s the benefit of working with an independent financial advisor, especially as a new dentist. Given your unique career path, high debt levels and in many cases, the lack of a steady full-time position as you begin your working life, questions like “should I refinance my student loans?” are bound to come up, and impartial advice can help you make an informed decision about what’s best for you.
There’s also other financial topics you should start thinking about as well, like how you plan to address retirement savings and health care during your period of part-time work. And sure, you’re an expert in many things and you have the student loans to prove it, but financial planning doesn’t have to be one of them – which is where I come in.
If it’s time to get your portfolio on-track for financial success, schedule a call with me to start the discussion.