By Mike Monfredi.
I had heard that dental school was “expensive.”
How expensive… eh? Didn’t have that exactly dialed-in yet. But as my wife (Monica – then fiancee) began applying to different schools, I became increasingly concerned with those annual tuition costs.
Minimize Student Loans Before You Need Them
We had done well throughout our undergrad work and while I went to graduate school.
I had some help from my (awesome and generous!!!) parents for undergrad, I earned an assistantship during graduate school (paid tuition and some living expenses), and we came out of Monica’s undergrad with just a few tens of thousands… Nothing ridiculous by today’s standards.
But dental school presented quite a different problem altogether
Here’s today’s version of total costs as advertised by my wife’s alma mater (tOSU):
Think that’s tough??? Try the out of state:
Are you F___ing kidding me?
For those with their jaw still on the floor, the 4-year (discounted) total for In-State is a measly $291,069.
If you’re crossing state lines, you’re looking at a total of $494,723 for your 4-years in dental school.
I don’t care if the average starting salary for a dentist is 6-figures, you’re still going to need some sophistication in your financial plan to get ahead of those student loan totals and interest rates (we averaged 7.9% starting out).
When we saw what those totals could be, we took action immediately
Why wait to accumulate the student loans and then act? In that plan, you’re just blindly accumulating interest (depending on the loan type) and digging deeper into the hole. We weren’t down with that.
We decided to take action before we took out a single loan. And yes, my wife was going to dental school – but these tips are independent of the curriculum. We’re slaying this student debt dragon together. You in?
These are the 6 courses you’ll take to slash student loans before you need to borrow:
Loan Slashing 101 – Make a budget
Whether in road tripping or personal finance, if you’re not sure how you’ll reach your destination – there’s a good chance you won’t. Your budget is the financial equivalent of an atlas (that’s Google Maps for you younger millennials).
Actually sitting down and making a budget is the ‘101’ foundation you’ll need to identify what income you’ll have during the school year (if any) and what your expenses will be. And once you’ve sorted through each upcoming bill, lab fee, and tuition payment, you’ll know exactly what your financial baseline is.
So, if you’re going to need to take out student loans for tuition and living expenses or for just a portion of your tuition – your budget is the tool that will provide that information. And now that you have your roadmap, you can highlight the various interstates that will take you to your destination (just follow the blue line…).
Loan Slashing 201 – Borrow textbooks from the library
When I started undergrad (14 years ago…), one of the most ridiculous monopolies in education was the process by which textbooks were sold… It was a complete racket. You showed up a few days before classes began, the bookstore staff basically ushered you through the store and picked the titles off the shelf for you, and then you proceeded to check out. No bartering, no price comparison, just $500 credit card charges.
At least recently, the proliferation of Amazon and the like can help you with used copies and textbooks at a reduced rate. But even still, buying the books for your semester, quarter, trimester, (are there other terms for class durations?)…, can run you in the hundreds of dollars.
There was a guy I knew in college that basically lived at the library. He had great study habits, yes. But that’s not why he was there. Those same textbooks that I had just paid $500 for were also present in the library. And as long as they were available, they were yours to use – free of charge.
I would justify spending the $500/semester on the fact that I could “use the books whenever I needed to.” Which was not very often. All the while my friend got through 4 years of school only having bought 2 books (they were 1-use laboratory books that you needed to complete the course). $500/semester over 4-years with 7.9% interest…? $4,835!
Loan Slashing 301 – Identify other regular expenses to cut
This isn’t the time to live it up. Now is the time to think Spartan and get frugal. When it was our turn to scrutinize every budget line item, the process was equal parts discouraging and uplifting.
For example, we would look at what cutting $15 out of our monthly grocery budget would do in the short term and think, “Is it even worth it?” Then I would calculate that $15/month out for 4 years and apply 7.9% interest (our then interest rate), and we’d smile ear-to-ear (that’s about $873 in savings at the end of 4-years). That’s significant!
After we saw this forecasted calculation, every cut of $5 here or $20 there was celebrated with a frugal high-five! There were a lot of high-fives those days.
Loan Slashing 401 – Vow to use loans only for a portion of tuition
Back to the dental school example above. You see that both the “In-State” and “Out of State” loan amounts include, “Tuition, academic expenses, and living expenses.”
Whatever you need to do (see above and below), vow to use loans only for absolutely necessary tuition expenses. Tuition is an investment in yourself. And depending on the field, the price, and the manner in which you apply yourself – you’re likely to recoup gains on that investment.
But do you really want to pay 7.9% interest on your rent payments or groceries? No thank you. For that, there has to be another way…
Loan Slashing 501 – Work a job during school
I know you think that you’re busy during school… And by many standards, you probably are. But is your goal to be standard??? Or would you rather be extraordinary!?!?
When my wife was going through dental school, most of her days were jammed from 6:00 am – 8:00 pm.
She’d take classes, perform in her clinical rotations, stop at the house for a home-cooked meal (and a hug), and then study for hours at night. She was busy, as were all of her classmates. And she was able to keep that schedule and not take out student loans for living expenses because I worked to pay for our expenses (Option #1 – spouse/significant other works).
Alternatively, a friend of her’s in dental school used all of his breaks and many of his weekends to work part-time as a hygienist (a degree he had earned and a field he had worked in before entering dental school). Because hygienists earn a very competitive wage, our friend was able to cover his living expenses throughout the school year with this part-time work on breaks and weekends. He hustled and worked like crazy. But he saved himself tons of cash.
About $110,575 (with 7.9% interest).
Loan Slashing 601- Look at alternative options to student loans
Student loans do have some ‘benefits’ when compared with other financing options (they have more flexible payment options, can be forgiven, have borrower protections in place, etc.). But those benefits come at what cost? For us, it was an average 7.9% interest rate on a 10-year fixed term.
Mind you, this was at a time when interest rates were at all-time historical lows (3.75-4.25%)
If I had been buying a house, for example, my interest rate would’ve been cut in half. So why in God’s creation was the price of borrowing tuition money so expensive? Great question.
Your tuition payment is ultimately just another one of your bills… Probably one of the largest, but a bill nonetheless. And when bills come due that you don’t have the cash to pay for, you don’t have to just accept the first option that’s presented to you (e.g. 7.9% interest payment).
Here are some alternative options (all estimates below are based on a 10-year fixed term loan of $25,000):
- Take out a home equity loan – As of this writing, they are right around 5.78%. Compared with the student loans, you’d save about $9,625 in interest alone!
- Hustle your way to a scholarship – There are literally thousands of options out there, you just have to work to find some.
- Take out a personal loan from family – I know, “Don’t mix family with business…” I’ve heard the saying and I’ve gone against it more times than I’ll mention, but one thing holds true. If both sides are clear with the terms and relationship up front, your odds for a successful transaction dramatically improve. One of my wife’s peers in dental school took out an interest-free loan from her parents to cover the costs of tuition. Is that available to everyone? No. But it’s an option for some.
- Dedicate some time to serve your country in the military – There were a few dental students that had pledged to serve as a dentist in the armed forces after school. As compensation, the federal government covered the entire cost of their tuition, academic fees, and most living expenses.
- Agree to work in a shortage area – Some professions have state or federal assistance available if you agree to work (or practice) in a shortage area. For dentists, that was typically in rural areas or more difficult parts of the city.
This curriculum would be the equivalent of me taking English courses in high school… It wasn’t the most enjoyable time in my life, but because of those classes – I’m able to write for my blog and more importantly, communicate effectively as a business executive and boss.
If you’re willing to put in the work up front and slash your student loans before you need to borrow, your net worth will thank you exponentially in 30-years. Rather than taking out additional loans, paying interest, and climbing out of a deeper hole, just put the shovel away at the beginning. I hear this ‘delayed gratification’ thing pays off in the long-term…