Minimizing and Paying off School Debt

[nfmp13]

Hey everyone. I’ll be heading to UofT this fall and was wondering how people minimize their debt through school? Is it possible to work at all (like one day/half-day on the weekend, or something online) to help with rent and if so do you recommend it? Also, once graduated how do people go about paying this off, considering competition and s*********.

Dentistry has always been a field that I wanted to work in, but I would be lying if I said the massive investment did not have me second-guessing my choice. I also have considered med, and I can see myself switching to that route after a year or two or dental (if I’m given the option), but at that point it’s hard to say if - financially speaking - that is even worth it.

Another note that may be useful is that I am also interested in potentially specializing after graduation. I am also from Northern Ontario and wouldn’t mind working up north for a bit, but I cannot say if I would like to live here for my whole life. 

I am aware that this is a topic that has been talked about before, but advice is appreciated!

 

[toothurty]

Almost no one works during dental school, there's no point. I know one girl in my class worked a bit on the weekends in first year but I'm not sure if she still does. The amount you would earn from a part time job would not even be enough to cover the interest on your loans so it's really not worth it when dental school itself is already more than a full time job. To minimize expenses, live with roommates, try not to eat out that much (easier said than done in Toronto lol), see if family can contribute anything. Going to UofT the biggest expense is not really the tuition, yes it's one of the more expensive schools in Canada but a $200k debt load shouldn't be hard to pay off as a full time dentist especially with LOC interest rates being around 2.2% right now lol. The expensive part of going to UofT is the living expenses. Working rural, going into a specialty, or working in the states are all things you could do to maximize your income later on but that might not be everyone's cup of tea. Also if you feel like you might want to switch to med after 2 years I would highly reconsider going into dental school now and set your sights on medicine. You DO NOT want to be 100k in the hole and then realize actually you dont want to be a dentist...

[Panerai]

Med school is still expensive (yes not as much as dental) so the smaller tuition fees should not be the sole reason to switch into med (there might be other reasons you have that I'm not aware of). I also agree with the above poster in terms of really thinking about the committment of dental school before starting it and then jumping to med. Maybe give dental a year instead of 2 years to really see if it's for you. At least you'll be in less debt and can really evaluate if it's for you. I get that it's hard to commit to a career that we all basically have no experience in. So maybe you can even talk to physicians and dentists to get a bigger idea of what they do on a day to day. I'm just tossing ideas around but wishing you luck. 

Switching back to your original question, I know of fresh dental grad associates who took multiple years to pay off their debt (not incredibly long) and they did this by working. And what I mean by working, they were willing to travel anywhere to find work and to work as much as they can even in multiple clinics. Also worth mentioning, during these phases I do know that they kept other expenses at an all time low which obviously would maximize how they pay it  back.

I'm entering dental school now and I obviously have the same worries as you. I agree I'd be lying if I said it doesnt phase me. But I know the first step now is to just learn to be a good dentist and graduate. Paying back the debt is a goal that will need to be achieved in the future and I'll cross that bridge once I get to it. Like all investments, it takes time to be in the positive. 

Cheers 

[nfmp13]

Thank you both for the wonderful advice!

[Zaandrei.]

There's many things to consider depending on if you're a US citizen or Canadian.

So for Canadians it's a lot more straightforward. Get an LOC, use it as you wish. Apply for OSAP, milk them as much as you can for that free money and free loans; then pay is all back after the grace period after graduation - the interest on the LOC is lower than OSAP by a landslide. Try to keep it reasonable. max limit is about 375k, don't get near it if you can help it; don't be a big spender during school. Enjoy your time off, don't go working, not worth it like someone else mentioned.

During dental school, get a financial advisor/insurance broker, typically they can do it all: find you a job, get disability isurance, help you with your resumes, retirement savings, buying a practice... anything. You get a bunch of this in 3rd/4th year as they start hunting you down. They can usually point you in the right direction, what to focus on, what to pay off first, where to find a job, how to invest, retirement planning etc. Paying off your LOC is actually fairly low priority since its low interest rate. I don't believe you have to 'keep costs at an all time low' after you're done school. Interest on 200k-300k loan is about $700-1200 a month right now. If you're on the bottom end of a dentist's wages at about 100k/year, there's still plenty of headroom. No need to worry about your LOC during school at all, and not even much after finishing school. Focus on school while you're in it; just don't go buying a brand new Audi RS7. I'm a AEGD resident in the US right now and I'm strolling around just fine with an income of about 50k USD/year; that's covering my interest and some of my principal as well. I'm certainty not eating out every night of the week, but also not eating boxed noodles for dinner every night (not meant to be offensive at all; eat what you like!).

Working in the northern part of Ontario is known to be very, very lucrative for new graduating dentists; some of our classmates do that for a 1-2 years and make a killing doing that; heard of people paying off their loans in 2 years doing it. Everyone's different. But also don't work yourself to death. Breathe a little, life is short.

[Panerai]

Hey Zaandrei. 

Thanks alot for the info!

Cheers 

[HopefulDDS]

I agree with everyone above. Losing a year of dental tuition before starting med school will do way more damage than any part time job can come close to making up for. Assuming you stay in one program all 4 years and you manage your budget I think it is possible to also make extra cash on the side. I know students who work at gyms, the school library, and of course TA previously taken courses. If you are hankering for supplemental income I would suggest something where you can choose your own hours like teaching ESL online. This means no commitment so you are never stretched too thin. There are also lots of research positions you can aim for where most if not all of the work is in the summer.

HOWEVER, any supplemental income should only be seen as easing current budget restrictions (ie dining out more, planning a trip, buying your favourite whatever, etc.). I would not look at it as going towards your debt because it truly won't make a dent. It should be for self care, which means working shouldn't come at the cost of stressing over time management for dental school.

Hope this take on things is helpful

[AncientDentist]

To add on to what Zaandrei said, and I think I've mentioned my perspective on this in a different thread, but LOC should honestly be the least of your worries. The interest on your LOC is actually comparable to some mortgage rates, and you see people take out sizable mortgages of upwards of 700k these days in Toronto and often they're making nowhere near a dentist's salary. It's all about your priorities and how you choose to budget your income after you graduate. You often see people post about how long it is gonna take them to pay off their debt and making statements like "for 10 years you'll be living off a nurse's salary because of your LOC payments, etc." I honestly could not agree less with this perspective. If you choose to rigorously pay off your debt, it's because YOU'VE prioritized paying off your debt over other things you could have chosen to spend your money on. Let's say for the sake of argument you're paying 15k interest on your debt per year and you choose to never pay down the principal (not something I advise, but for the sake of argument). Meanwhile however, you're putting your extra money into CE, a home or practice purchase, other investments, you name it. You may see the return on your investment is much greater than the 15k your throwing at the bank. No one's situation or priorities are equal however, you may be the type of person who hates debt and wants to retire at 40, so you decide to live frugally and pay off your debt in a few years and focus on retirement savings. You may one day own 15 clinics and look  back at your 300k debt as trivial. Heck, I know a dentist who spent another 100k after dental school on an MBA and I know he isn't hurting at all for money.

Obviously living financially responsibly is a skill you want to maintain through dental school and the rest of your life, but in my opinion, if dentistry is what you're choosing to do, commit yourself fully to it and don't give the debt a second thought.

[toothurty]

1 hour ago, AncientDentist said:

To add on to what Zaandrei said, and I think I've mentioned my perspective on this in a different thread, but LOC should honestly be the least of your worries. The interest on your LOC is actually comparable to some mortgage rates, and you see people take out sizable mortgages of upwards of 700k these days in Toronto and often they're making nowhere near a dentist's salary. It's all about your priorities and how you choose to budget your income after you graduate. You often see people post about how long it is gonna take them to pay off their debt and making statements like "for 10 years you'll be living off a nurse's salary because of your LOC payments, etc." I honestly could not agree less with this perspective. If you choose to rigorously pay off your debt, it's because YOU'VE prioritized paying off your debt over other things you could have chosen to spend your money on. Let's say for the sake of argument you're paying 15k interest on your debt per year and you choose to never pay down the principal (not something I advise, but for the sake of argument). Meanwhile however, you're putting your extra money into CE, a home or practice purchase, other investments, you name it. You may see the return on your investment is much greater than the 15k your throwing at the bank. No one's situation or priorities are equal however, you may be the type of person who hates debt and wants to retire at 40, so you decide to live frugally and pay off your debt in a few years and focus on retirement savings. You may one day own 15 clinics and look  back at your 300k debt as trivial. Heck, I know a dentist who spent another 100k after dental school on an MBA and I know he isn't hurting at all for money.

Obviously living financially responsibly is a skill you want to maintain through dental school and the rest of your life, but in my opinion, if dentistry is what you're choosing to do, commit yourself fully to it and don't give the debt a second thought.

Completely agree with this perspective. We're lucky to be going to school in Canada. I feel bad for the American students in the states paying 300-500k usd for dental school with federal loans at 7-8% with who knows how much undergrad debt and then going to work 9-5 at a corp ... 

[Censored]

I’m also going into U of T this fall and this was one of my worries.

If you are looking for a solo place in downtown with walking distance from school, ur looking at 24K for 12 months, thats roughly 100K for four years of rent alone. Since tuition is 200K, that a base debt of 300K for a graduating student.

but remember everything you pay for rent and tuition can be used for tax free credits later. I.e, if ur income bracket ends up at 150K for first year, u can use 100K of the 300K credit to pull ur taxed income bracket to 50K (150 - 100). Most dents are taxed at maximum rate which amounts to something like 45% tax rate, which you can avoid as long as u can use these credits. Remember that the interest payments on the debt is ALSO considered toward these credits.

Dont worry about debt. It will be used during your practice to boost your income and it all balances out in the end. Sacrificing quality of your life - I.e. commuting, roommates, etc - for the sake of reducing debt, may not be a sound decision. It’s four years of your life!

 

[Zaandrei.]

Federal tax credits for education was taken off the table back in 2017; provincial is separate. Just in case people didn't know; it was annoying that they couldn't wait until i finished my schooling

Also keep in mind the marginal tax calculation not using the highest bracket to assume you'll get taxed at the highest bracket. See below for Ontario (add these to federal). The effective tax rate for someone earning around $140k is about 32% before any deductions.

5.05% on the first $44,740 of taxable income, + 9.15% on the next $44,742, + 11.16% on the next $60,518, + 12.16% on the next $70,000, + 13.16 % on the amount over $220,000

Sources:

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-32300-your-tuition-education-textbook-amounts.html

https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html#provincial

 

Just in case people wanted a bit of information; seemed as though a lot of my colleagues had no idea what the difference is between effective (or average) tax rate vs the marginal tax rate.

[VivaColombia]

1 hour ago, Zaandrei. said:

Federal tax credits for education was taken off the table back in 2017; provincial is separate. Just in case people didn't know; it was annoying that they couldn't wait until i finished my schooling

Also keep in mind the marginal tax calculation not using the highest bracket to assume you'll get taxed at the highest bracket. See below for Ontario (add these to federal). The effective tax rate for someone earning around $140k is about 32% before any deductions.

5.05% on the first $44,740 of taxable income, + 9.15% on the next $44,742, + 11.16% on the next $60,518, + 12.16% on the next $70,000, + 13.16 % on the amount over $220,000

Sources:

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-32300-your-tuition-education-textbook-amounts.html

https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html#provincial

 

Just in case people wanted a bit of information; seemed as though a lot of my colleagues had no idea what the difference is between effective (or average) tax rate vs the marginal tax rate.

Can't imagine what the 2021 tax brackets will look like with all the free money and debt taken on by the government...thanks Zaandrei!