The first place you should go, if you are already applying to dental school or have already been admitted, is the University’s Financial Aid Office. The Financial Aid Office at your dental school can help you begin planning for the enormous debt that you are about to take on. The Financial Aid Office at your dental school will be able to help you to become familiar with the options that are available to you and the good points and bad points of each option.
This enormous debt you are about to amass can be managed if steps are taken early to make sure that you are prepared to repay those debts. If you have some time before you apply, then you have the added ability to start planning now, creating some savings and preparing for your education. For every dollar you save for use in your dental education you will reduce the amount of repayment (from loans) by many times that amount, due to the wonders of compound interest.
Compound Interest & the Rule of 72
In finance there is a useful tool caled “the rule of 72”. The rule of 72 is simple; If you devide the number 72 by the percentage of the interest rate on a loan you will get a number that is equal to the number of years that it will take for your loan to double.
- So let’s assume the example of $141,000.00 of debt at 6% interest:
- 72 / 6 = 12
- That means it will take 12 years for your $141,000.00 to turn into $282,000.00!
So, you can see how easily that debt can build upon itself. for every six years you take to pay off the debt, the number will double. Of course this assumes you are making no payments, but it let’s you know how important it is to find the best possible interest rate, and how important it is to reduce the principle of the loan.
The best way to combat this is to keep the loan amount as small as possible. How is that done? You should start by planning how much you will need to borrow. Determine the amount of money that you will need each month in order to pay for your living expenses, then add in the amount of your tuition, books, supplies, instruments and expenses and you will have your total need for the year.
To help you determine your estimated expenses, I have created an excel document that allows you to plug in your figures and determine an estimated need for each year. This is only given as a guide, and you may have expenses that I did not consider, so be aware that your figure could vary by some degree.
*ADEA Survey of Dental School Seniors (2005)