Resource Article
What does $400,000 in loans look like?
Let’s take a simple example. Dennis the aspiring dentist takes out $400,000 in loans over his 4 years of dental school. That’s $100,000 each year. First year, he borrows $50K at the start of the fall semester, and another $50K at the start of the spring semester. He continues this 2nd year, 3rd year, and 4th year…$400,000 in total.
Of the $100,000 that he takes out each year, it will roughly be composed of $50,000 in Federal Unsubsidized Loans (interest rate of 8.08%) and $50,000 in Federal Grad Plus Loans (interest rate of 9.08%). For a more detailed explainer on FederalLoans for dental school students, read this.
Interest starts to accrue the day you take your loan out. That interest is capitalized (added to your principal) when repayment begins. Repayment typically begins about 6 months after your graduate dental school or a residency program.
So back to Dennis the aspiring Dentist who took out $400,000 of loans for dental school. His grace period will end 6 months after graduation. This is when repayment begins. So what does his $400,000 loan look like now? Interest has accrued on the loans he took out for as much as 4.5 years. That’s $94,000 of interest that will now be added (capitalized) to his principal. So now he has a $494,000 loan. What does repayment on that look like?
If you pay it back over 20 years, you’re looking at monthly repayments of about $4300. Over 15 years, it’s about $4900 a month. On a 10 year plan, it’s over $6100 a month.
What about if you pursue a residency after dental school? Post grad residences last between 1-4 years. Depending on the type of program you are in, you are able to extend your grace period until after graduation. While this delays your repayment, additional interest continues to accrue.
Back to Dennis the dentist and the $400,000 loan he took out for dental school. Each additional year of residency training amounts to about $34,000 of additional interest. This can turn a $400,000 loan into a $529,000 loan with a 1 year residency (AEGD/GPR), $563,000 with a 2 year residency(Peds/Endo), $597,000 with a 3 year residency (Perio/Ortho), or $632,000 with a 4 year residency (OMFS). As the table shows, this can have dramatic effects on your monthly repayment.
