$1million Debt from dental school

[Starburst]

I came across an article from The Wall Street Journal where this orthodontist got himself in $1mill+ in debt from student loans. Is this very common and what do you guys think?

https://www.wsj.com/articles/mike-meru-has-1-million-in-student-loans-how-did-that-happen-1527252975#comments_sector

[orgolover]

There is very little specialization in Dentistry therefore, your income as a Dentist will not increase much after graduation. With MD, it is a totally different story. More area of specialization = greater income. Thus, MD can pay off those student loans pretty quickly.

[BROSCIENTIST]

Seems like a lot of that debt could have been minimized. He made poor life decisions.
-attending USC for prestige
-cost of living in Cali
-benz and tesla
-ortho school right after graduating
-2 children

[rmorelan]

yeah sounds like he was digging quite the hole. Living like a well established professional while still a student - not wise. 

 

 

[KlayThompson]

"Meru, who earned $225,000 as an orthodontist in 2017, makes monthly payments of $1,590 against his debt on a government-sponsored repayment plan, but that isn’t enough to cover the interest. His debt grows $130 a day, meaning his loan balance will exceed $2 million in two decades.

After 25 years, Meru’s remaining balance will be forgiven at taxpayers’ expense."
 

Paying $1590 per month for the next 25 years ~ $477,000 will almost cover the principle. His remaining debt will be forgiven and the burden will be placed on US taxpayers. But in doing so, he completely destroyed his credit score which will affect his ability to buy a mortgage and establish a practice.

The article hits home when it suggests insane tuition is driving away dentists from specializing:

A few years in, he started to panic and considered dropping out. "I'm sitting here saying, 'Holy crap! Should I really be doing this?'" Meru tells the Journal. But Meru felt that orthodontics was his calling. (He had been embarrassed by his own bad teeth as a teenager and says "orthodontics changed my life.") To save on money, Meru and his wife lived with his parents and he drove a used Buick. By his third year he was $340,000 in debt, and then he entered a residency program. Of his growing debt, he says, "I just wouldn't look. The only thing looking did was create stress." In all, he borrowed $600,506, which topped $1 million after interest. Today, Meru makes $225,000 working in his field, but the debt is unrelenting. "If you thought about it every single day," says his wife, "you'd have a mental breakdown."
 

US dental future doesn't look too swell; a lot of dentists will be under pressure from day 1 to generate tons of income. It's insane to think where dental tuition is going to be in 10 to 20 years from now. Luckily, for us Canadians, it's as big a problem here, but it seems as though UBC, Western, and UT are slowly creeping up. 

[rmorelan]

4 hours ago, KlayThompson said:

"Meru, who earned $225,000 as an orthodontist in 2017, makes monthly payments of $1,590 against his debt on a government-sponsored repayment plan, but that isn’t enough to cover the interest. His debt grows $130 a day, meaning his loan balance will exceed $2 million in two decades.

After 25 years, Meru’s remaining balance will be forgiven at taxpayers’ expense."
 

Paying $1590 per month for the next 25 years ~ $477,000 will almost cover the principle. His remaining debt will be forgiven and the burden will be placed on US taxpayers. But in doing so, he completely destroyed his credit score which will affect his ability to buy a mortgage and establish a practice.

The article hits home when it suggests insane tuition is driving away dentists from specializing:

A few years in, he started to panic and considered dropping out. "I'm sitting here saying, 'Holy crap! Should I really be doing this?'" Meru tells the Journal. But Meru felt that orthodontics was his calling. (He had been embarrassed by his own bad teeth as a teenager and says "orthodontics changed my life.") To save on money, Meru and his wife lived with his parents and he drove a used Buick. By his third year he was $340,000 in debt, and then he entered a residency program. Of his growing debt, he says, "I just wouldn't look. The only thing looking did was create stress." In all, he borrowed $600,506, which topped $1 million after interest. Today, Meru makes $225,000 working in his field, but the debt is unrelenting. "If you thought about it every single day," says his wife, "you'd have a mental breakdown."
 

US dental future doesn't look too swell; a lot of dentists will be under pressure from day 1 to generate tons of income. It's insane to think where dental tuition is going to be in 10 to 20 years from now. Luckily, for us Canadians, it's as big a problem here, but it seems as though UBC, Western, and UT are slowly creeping up. 

I mean someone that is earning 225,000 should be able to pay off more than 1590 a month in interest. That being said paying off that amount even 225K is just not realistic. And what was his interest rate during all of this for 600K to grow to a million during his training. 

In 25 years though his credit won't matter if he can secure a home now it would likely be paid off in 25 years, and by that point he should be liquid from his investments. In other words he won't need credit. I mean he should have his practice completely set up by then. It may actually be the best financial move to pay as little as possible and wait 25 years. It all sounds like a pretty messed up system. 

All this debit on the low interest rates - cannot imagine how that would pain out when they go to historical norms. 

 

[NeuroD]

12 hours ago, orgolover said:

There is very little specialization in Dentistry therefore, your income as a Dentist will not increase much after graduation. With MD, it is a totally different story. More area of specialization = greater income. Thus, MD can pay off those student loans pretty quickly.

More specialization does not always = greater income. Psych, PMR, neuro, path, peds etc....5 years of specialization + often with 2 years fellowships...very little (if any) difference in income from a 2 year residency in family.

[cleanup]

15 hours ago, orgolover said:

There is very little specialization in Dentistry therefore, your income as a Dentist will not increase much after graduation. With MD, it is a totally different story. More area of specialization = greater income. Thus, MD can pay off those student loans pretty quickly.

Not entirely true. Specialists in dentistry still on average earn more than the average GP (assuming similar hours worked) but outlier GPs earn more than anyone. And income generally increases gradually with time until people decide they don't want to do anymore. Like with MDs, it's all dependent on how much you work and what procedures you do, and what forms of ownership you have. 

I have classmates who paid off their loans (admittedly, frugal ones, say in the high 5 to low 6 figures) within a year or two. They busted their asses though.

[ploughboy]

14 hours ago, rmorelan said:

I mean someone that is earning 225,000 should be able to pay off more than 1590 a month in interest. That being said paying off that amount even 225K is just not realistic. And what was his interest rate during all of this for 600K to grow to a million during his training. 

In 25 years though his credit won't matter if he can secure a home now it would likely be paid off in 25 years, and by that point he should be liquid from his investments. In other words he won't need credit. I mean he should have his practice completely set up by then. It may actually be the best financial move to pay as little as possible and wait 25 years. It all sounds like a pretty messed up system. 

All this debit on the low interest rates - cannot imagine how that would pain out when they go to historical norms. 

 

Ya, his strategy seems to be to pay as little as possible, let the clock run out, and leave the bulk of the accumulated debt for the government to pay off.  Ballsy.

He's already paying 7-something percent on his debt, isn't he?  (I read the article yesterday).  Could be really ugly if/when that rate rises. 

[rmorelan]

1 minute ago, ploughboy said:

Ya, his strategy seems to be to pay as little as possible, let the clock run out, and leave the bulk of the accumulated debt for the government to pay off.  Ballsy.

He's already paying 7-something percent on his debt, isn't he?  (I read the article yesterday).  Could be really ugly if/when that rate rises. 

ouch ha, 70K interest on a 225K salary or roughly 160K after taxes. He would need to pay just to keep even almost 1/2 of his after tax income there .... and pay it forever as it wouldn't be getting to the principle. 

that is one mighty big hole to dig yourself into

US is extreme in tuition compared to here but this is still a warning about what can happen if we let tuition rise without check. At some point there is going to be a lot of blood on the floor.

[rmorelan]

20 minutes ago, malkynn said:

I don’t know that it began as his strategy, I think he just shoved his head in the sand and tried to pretend it wasn’t happening and that it would all be okay, and now waiting out the clock may look like his most attractive option. 

I think he just painted himself into a corner. I suspect there was a lot of denial along the way, a lot of just having faith that orthodontists make money and everyone has big dental school debt, and it will work itself out in the end...right?...right?

He was certainly irresponsible and naive, which is why his case is extreme enough to end up in the news, but he’s not that far off the financial naïveté of most dental students and new grads, and it highlights how dentistry is not a financial sure thing in all cases and that the math needs to be examined carefully before diving head first into mortgage-sized debt. 

For many, it’s no longer just “get in, don’t worry about the cost, it will all work out.”

and ha also the bankers that allowed someone to take on that level of debit - that doesn't sound like a good play either. 

not that there is much he can do about it but it is dangerous to bank on any government policy for forgiveness etc - governments have a history of wiggling out of things or changing the rules. 

[Stethescope]

Schools are simply taking advantage of the government's willingness to provide practically unlimited loans for students. Rising tuition wouldn't happen to this degree if the schools knew students would have a difficult time paying for their education. 

[NeuroD]

1 hour ago, Stethescope said:

Schools are simply taking advantage of the government's willingness to provide practically unlimited loans for students. Rising tuition wouldn't happen to this degree if the schools knew students would have a difficult time paying for their education. 

Recently Mac students asked the administration why they pay the same tuition in the last year, despite being at Mac for 1/3 less time (unlike 4 year schools where the last year is the same as the first). Believe it or not, the answer was essentially "we charge you more so you qualify to borrow more" . Needless to say, people were a little shocked and the original answer was deleted. It's no secret that the increase in tuition has outpaced inflation for decades, largely due to the availability of government funding, but no one expected to hear it stated so bluntly by a school admin.

[rmorelan]

14 minutes ago, PhD2MD said:

Recently Mac students asked the administration why they pay the same tuition in the last year, despite being at Mac for 1/3 less time (unlike 4 year schools where the last year is the same as the first). Believe it or not, the answer was essentially "we charge you more so you qualify to borrow more" . Needless to say, people were a little shocked and the original answer was deleted. It's no secret that the increase in tuition has outpaced inflation for decades, largely due to the availability of government funding, but no one expected to hear it stated so bluntly by a school admin.

ha that is so out of touch it is funny Like the banks restrict based on the tuition amounts (schools that charge more don't get a bonus).

I could buy the argument about government money if it in anyway was close to the true cost of medical school. Even with the recent OSAP changes. The increases have outstripped everything for 20 years now. 

They charge more because they can, and that money helps keep the lights on when other degree programs haven't been able to keep up with costs. It is basically a tax on the future incomes of relatively high earners. That might be fine - but don't lie about is actually going on. 

[ploughboy]

3 hours ago, malkynn said:

I don’t know that it began as his strategy, I think he just shoved his head in the sand and tried to pretend it wasn’t happening and that it would all be okay, and now waiting out the clock may look like his most attractive option. 

I think he just painted himself into a corner. I suspect there was a lot of denial along the way, a lot of just having faith that orthodontists make money and everyone has big dental school debt, and it will work itself out in the end...right?...right?

 

Ya, agree.  At some point he realized that a giant wave of poop was bearing down on him, and he decided to try and surf it.

[ploughboy]

3 hours ago, rmorelan said:

and ha also the bankers that allowed someone to take on that level of debit - that doesn't sound like a good play either. 

not that there is much he can do about it but it is dangerous to bank on any government policy for forgiveness etc - governments have a history of wiggling out of things or changing the rules. 

"I am altering the deal.  Pray I don't alter it any further."  - D. Vader

[Stethescope]

And I'm genuinely curious/worried: what's stopping Canada from experiencing the education bubble the States are going through right now? 

The winner of the fiasco becomes for-profit healthcare corporations (e.g. Aspen, Heartland, etc) and the loser becomes those that spend nearly a decade of their lives obtaining the degree but most importantly, the patients, as corporate dentistry may have greater inclination to over-treat.

[letsrobem]

He makes 225 k a year, he is in the top %1 of earners, in a low taxation country such as the states. If takes 25 years, so be it. People work to the age of 70. He will have enough time to save for retirement. 

He does job he enjoys (very few people enjoy their jobs) and is paid well. He only deals with patients, he doesn't have to deal with a crappy manager. Being in a stable and high income career. What's there to complain about really. Thousands of people wish to be in his position. If people out there face the same prospects this dude faces, I say go for it. Opportunities only come once and you may regret it later on if you don't take your chances to be doctor or dentist imo. 

[rmorelan]

6 hours ago, Stethescope said:

And I'm genuinely curious/worried: what's stopping Canada from experiencing the education bubble the States are going through right now? 

The winner of the fiasco becomes for-profit healthcare corporations (e.g. Aspen, Heartland, etc) and the loser becomes those that spend nearly a decade of their lives obtaining the degree but most importantly, the patients, as corporate dentistry may have greater inclination to over-treat.

the short answer to that question I feel is the students themselves I feel - at some point we cannot be as passive about it as we have been. No one else is going to really step up here. We even have Quebec to show us an alternative way.

[Ostracized]

Frankly I’m glad that Canada doesn’t offer this kind of debt forgiveness.  Americans can go neck deep into student debt and ignore most of the consequences but we have to be more realistic about our finances.  

[indefatigable]

1 hour ago, rmorelan said:

the short answer to that question I feel is the students themselves I feel - at some point we cannot be as passive about it as we have been. No one else is going to really step up here. We even have Quebec to show us an alternative way.

I don't think the QC model can be applied blindly across Canada.  Not only is taxation much higher (which helps subsidize tuition for IP students), but at least where I am, I'm pretty sure there's significantly less spending on medical education.  The "bells and whistles", like a dedicated anatomy lab at UofT, a giant neuro-anatomy visualization pad at UBC, Western's "hands-on" material for learning just aren't used here.  Sure, for a program with a stated focus on regional primary care, learning out of texts (or synthesized study notes usually) may be sufficient, but I doubt at schools which consider themselves at the vanguard of medicine, cutting so much would go over that well.     

[rmorelan]

14 minutes ago, marrakech said:

I don't think the QC model can be applied blindly across Canada.  Not only is taxation much higher (which helps subsidize tuition for IP students), but at least where I am, I'm pretty sure there's significantly less spending on medical education.  The "bells and whistles", like a dedicated anatomy lab at UofT, a giant neuro-anatomy visualization pad at UBC, Western's "hands-on" material for learning just aren't used here.  Sure, for a program with a stated focus on regional primary care, learning out of texts (or synthesized study notes usually) may be sufficient, but I doubt at schools which consider themselves at the vanguard of medicine, cutting so much would go over that well.     

well it isn't perfect ha - and I don't want to paint that picture. Your points are valid but point out other agents that would be disadvantaged (the schools won't like it almost on a pride level, and the "taxpayers" (I still hate that term) won't like paying more), but that doesn't mean the burden to achieve those goals should be entirely on the students. Not much give and take really in Ontario with respect to med school tuition in the past 20 years or other professional schools for that matter. Some balance would be nice.  

[Starburst]

On 5/28/2018 at 2:01 AM, letsrobem said:

He makes 225 k a year, he is in the top %1 of earners, in a low taxation country such as the states. If takes 25 years, so be it. People work to the age of 70. He will have enough time to save for retirement. 

He does job he enjoys (very few people enjoy their jobs) and is paid well. He only deals with patients, he doesn't have to deal with a crappy manager. Being in a stable and high income career. What's there to complain about really. Thousands of people wish to be in his position. If people out there face the same prospects this dude faces, I say go for it. Opportunities only come once and you may regret it later on if you don't take your chances to be doctor or dentist imo. 

Frankly he should be making much more than 225k so i'm not sure what he's doing. But you made an excellent point, he's doing what he enjoys but unfortunately it's at the expense of taxpayers :/

[ploughboy]

Topic recently discussed on White Coat Investor, for those who are interested (I just read the summary, didn't listen to the podcast, don't know if it's high yield or not).

 

https://www.whitecoatinvestor.com/is-dr-mike-meru-crazy-podcast-59/