Loan Forgiveness
Loan forgiveness strategies are often the most effective way to handle student loan debt. We run calculations to estimate the amount of loan forgiveness you may qualify for based on the different loan repayment strategies available.
Factors such as family size, income growth rate, tax deductions, tax filing, spousal income, and where you live, all affect your long term student loan strategy.
From our experiences, dentists with over $300,000 in federal loans have a strong chance for loan forgiveness if navigated correctly.
Opportunity Cost
Opportunity cost is the loss of potential gain from other alternatives when one action is chosen. In other words, what else could we have done with the money that was used for the extra loan payments.
The inital thought is to invest it in the stock market. Depending on the loan's interest rates, that may make sense, but not always. The average stock market returns are pretty close to grad plus loan interest rates. Investment returns in the stock market are not always guaranteed however, whereas interest on debt is constant (excluding government intervention).
So if investing it in the stock market isn't always the answer, what is?
Practice Ownership Potential
The single biggest factor that drives our student loan strategy is your timeline on business ownership. If business ownership is a goal that you want to achieve in the next few years, then we need to properly prioritize that. Sometimes than means not making extra payments towards your loans.
If the priority is to build up a large 5 figure or 6 figure level of savings for a practice as soon as possible, then making large additional loan payments doesn't make sense. Once that loan payment is made, you cant get it back.
Practice Ownership Preparation
For potential business owners that are a few years away from ownership, we have several strategies that are customized to you. Depending on your level of risk aversion, we can look at your potential investment options. High yield savings accounts and low risk investment portfolios are typially best when we are only a few years away.
After factoring in your growth assumptions, we can calculate that monthly savings needed to hit the desired funding goal.
Associate Dentist Strategy
If you have been practicing for a few years and are confident that business ownership is not for you, we have some other strategies in place.
If you will not qualify for loan forgiveness, refinancing your debt may help save thousands of dollars by locking in a lower interest rate. It may also free up some monthly cash flow to focus on your investment accounts.
If refinancing is not an option, we will create a strategy to target pay the higher interest rate debts while reviewing your potential investment options.