098 | HyperDebt Debtist

098 | HyperDebt | The Debtist

Samantha Keith, author of The Debtist blog, explains what it means to have more than half a million dollars of student debt, and how she plans to pay it off in less than 10 years.

  • Samm lived her first 8 years in the Philippines, in relative wealth, before her father accepted a job offer in the United States.
  • Does Samm consider her family’s move to the U.S. to be a good thing in her life?
  • Samm’s father was a mechanical engineer, and also worked as a janitor and a retail associate, to provide for the family.
  • Samm didn’t spend much time considering how much dental school would cost, until she reached graduation and had to set up her loan-repayment plan.
  • Currently, University of Southern California’s dental school costs $136k a year.
  • Is there anything Samm would do differently looking backwards?
  • What is the income range for the average dentist?
  • With $550k of total student loans, Samm opted to pay down her debt as soon as possible, instead of the more popular IBR (Income-Based Repayment) plans that forgive remaining debt after 25 years.
  • How much does someone pay, in monthly payments, when they opt for the IBR plan?
  • Does Samm know anyone else who is paying their student loans fully instead of IBR?
  • For loan repayment through an IBR plan, customers pay taxes on whatever loan amount is forgive at the termination of the IBR period, which includes additional interest that has accrued.
    • For Samm, that would’ve been $400k of taxes.
  • In just more than a year, Samm’s paid off $84k and hopes to pay it off in less than 10 years.
  • How did starting with the IBR plan give Samm more flexibility?
  • Refinancing from an IBR plan might secure a lower interest rate, but will lock her into a higher minimum monthly payment.
  • When did Samm find minimalism and the FI community?
  • What does living with less look like for Samm?
  • How do Finance, Freedom and Frugality overlap in Samm’s world?

Listen to Brad and Jonathan's thoughts about this episode here.

Links mentioned in today's show:

The Debtist

“The Ever Growing List of Things I’ve Given Up in the Name of Frugality” – The Debtist

Reading My Tea Leaves

“Hashtag JOMO: Joy of Missing Out” – The Debtist


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14 thoughts on “098 | HyperDebt | The Debtist”

  1. As a dentist myself, this was a shocking episode. She has such a great attitude about it but, the debt is really just a huge, huge burden on the new dentist. She didn’t say what her husband did for a living or made per year, but wow, a $550,000 ball and chain! I graduated 21 years ago and my debt was $30,000. Seemed like a lot back then but this is the problem with dental school now. The debt load has gone up by an order of magnitude but for the ratio to be the same now, every dentist would need to make, on average about 1.3 million per year. The dental schools are really screwing it to the students! I would advise anyone thinking of becoming a dentist (without rich parents paying their way) to only consider their state school AND going into the military so the military pays for that schooling. Afterward they will still pay you fairly well while giving back the 4 years, you will gain a lot of really good experience, you can take advantage of many of the programs from Episodes 95 and 95R. There is just no way to justify going half a million in debt to get a job that pays $125,00 per year! No dentist coming out of school like this is going to reach FI at some age where RE is even an option.

  2. Wow. I always thought dentistry would provide an ROI that was similar to a good law school. I went to a decent law school and graduated with $190k of debt, which I thought was terrifying. At that time, the standard starting salary out of law school was $160k, which grew pretty quickly to the $250-350k range. We were not intentional with money and had a kid/bought a house in the first year out of law school. Even with being spendy, I was fortunate to pay off student loans in four years or so. Hearing this episode, it sounds like you have to be way more intentional with your money as a dentist if you want to avoid destitution or a huge tax bomb.

  3. What a great episode! It hit close to home since I am in the dental field as well. My question for Samm is would she go with the IBR and not pay so aggressively if she had children and her spouse didn’t have an income? Also my take on it being in debt similar to Samm (plus having 3 kids, and my spouse doesn’t have an income) is that instead of paying 6-8,000 a month to loans. We will pay around $1,000/month and then save $1,500/month for the tax bomb in 25 years and then invest in vanguard VTSAX 4,000 a month. Maybe this isn’t the smartest idea but we figure when the time comes in 25 years I will be have enough saved up to pay the tax bomb and will have a significant nest egg in my vanguard account for retirement. Also we will be maxing out my 401K in the process. Please let me know your thoughts. Even though I will have loans still I will plan that in my FI number and would love to reach FI in 15 years.

    • I agree with you Seth. Everyone’s situation is different, but having a spouse with an income to live off of does allow someone like Samm to pay off her student loans more aggressively; not everyone has that ability. I also agree with your thought process on saving and investing as opposed to paying down your student debt. The opportunity cost of paying student loans off aggressively today is the missed opportunity to invest and have that amount compound over years. I have struggled with this decision over the past few years as am a PT that left with almost $140k in debt. I guess what scares me is the tax bomb that comes from the forgiven amount…but with today’s volatile political scene, who’s to say that tax bomb will exist in years to come. If it doesn’t, it definitely will impact my decision on paying down my debt aggressively. But I was glad to see someone else raise the same questions I had while listening to this episode.

  4. I have heard there is bi-partisan support in congress for eliminating the taxation on forgiven student debt. It may or may not happen but that tax bomb may not ultimately happen.

    I know people that have a separate debt-payoff account that they try to get up to their loan balance ASAP and keep making minimum payments with IBR program – if they get to a point of forgiveness then whatever isn’t used for the tax bomb becomes a significant free-and-clear amount that can be used for retirement or getting to FI target balance, paying off a mortgage, acquiring or starting a practice, etc.

    There are also some IBR programs that provide tax-free forgiveness after 10 years (non-profit or governmental jobs – many of which pay north of $200k for near entry level dentists).

  5. Military dentist here!

    Doing the military is the way to go. I got free school, a $2,000/month living stipend while I was in school, and a guaranteed job when I got out. I’m a 2014 dental school graduate with no debt and $150-200k net worth. Now, when I separate next summer, I’ll be in a totally secure financial position to buy my own practice and looking to be at FI within 5-7 years (for reference, I’m 30 years old). I can’t imagine being handcuffed to IBR for 25 years! Dentistry can be the ultimate FI hack, or the ultimate financial handcuffs.

    The two big “hacks” for being a dentist are:

    1. Go to the cheapest school you can get into
    2. Be willing to move to where the need is

    The military did both of those things for me. I went to a cheap *cost of living* area for school so I was able to save half of my $2,000/month in dental school for my first 2 years. Then, obviously the military moved me around, but it was all for free school and I’ve had incredible experiences. This is the way to go.

    I’ve been chronicling my journey for the last decade on my blog, just search for “Air Force Dentistry from College to Captain” and you’ll find it.

  6. After listening to this podcast, and now reading the comments, another dentist has to chime in. The biggest challenge here is not the debt load or spending, it’s the income. 120k is a low salary for a dentist working full time in private practice. When you take on a professional school, and its very large financial commitment, you also take on several years afterwards (or more than several), to financially recover. The biggest mistake is working for someone in the most saturated area in the country. If you are unwilling to move, then buy a practice. Taking on another $600-1million plus in loans sounds even more daunting, but you will be able to easily triple your income when you take into consideration tax advantages. You may still be on a ten year repayment plan, but after 10 years you can effectively pay off your student debt, practice debt, own a very large asset (a practice), and likely contribute to a large retirement account through the practice. You don’t need to constrain yourself to the military or other avenue, as this just delays your time to owning a practice and significantly escalating your income. I paid my school debt off in 2 years (200K), by working 5-6 days/ week, multiple weekend side gigs during residency, and continuing to live like a resident in private practice. I then was able to buy into a practice which immediately increased my income by 50%, when no longer working for someone. If you want to stay in an entry level, corporate job, then you are putting yourself in a really difficult situation. With a little extra work, you can conquer this quickly (I’ll go out on a limb and say instead of spending your time blogging, just work as a dentist, your per hour return will be higher).

    Shoot me now.

  7. The amount of debt people are leaving university with is frightening. Especially in the United States. Being from the UK it doesn’t seem quite as bad here. More thankful each day to have finished all my schooling, including a Masters, and having no debt left now. Well done to this young lady and all others cutting through the heavy load.

  8. I am now a dentist practicing in the military for 2 years. My fellow classmates were graduating with $400-450k in loans back in 2016. The military paid for all of my school and gave me a monthly stipend to live in in dental school. I’m currently making about $115k with about 40k being tax free for housing and food. Depending on where you are staying, pay could be around 100k in less expensive areas because housing allowance is based on your duty station. I projected that graduating dentists who maxed their loans would have to make over $325k per year for my first for years to be in the same financial position as me because student loans are mostly paid with after tax money.

  9. As someone who is paying off six figures of student loan debt and who has done quite a bit of research, I felt there was some misinformation and lack of detail in this episode. First, at one point, it is mentioned that the $550K would have simple interest, and at another point it’s treated as a compounding interest figure. But as I understand it, federal loans have simple interest. The pile of money that represents the accruing interest is kept separate, so the interest itself does not start accruing interest. It is sometimes even hard to find the total owed on the loan because servicers like Navient keep the interest amount separate from the principal amount on your statements.
    A piece of information that is very important but missing from this episode is that when you refinance or change payment plans, the interest is capitalized. This is a huge disincentive to refinance with a private lender, or consolidate your loans.
    Another consideration is that under IBR plans you have the flexibility to target loans individually for repayment. This is a huge advantage because you can allow interest to accrue on other loans while putting your extra payments towards one loan’s principal. If you are having trouble keeping up with interest, this tactic is especially valuable under REPAYE. In REPAYE the government offers a partial interest subsidy. So you can get the interest subsidy while paying off your highest-interest loan quickly. All these factors make private loan consolidation a poor choice in in many cases.
    Finally, the loan forgiveness program discussed in this and a previous episode has been very difficult to achieve due to the requirements for documentation. Many people thought they were on this path only to find that years of work were ineligible for the program. A deeper dive into this subject would be welcome as student loan forgiveness has been discussed positively on this show without mention of the serious problems with the PSLF program.

  10. About the option to pay for the loan with a minimum amount for 25-30 years and just pay then taxes on the remaining:
    I did this calculation with my GF’s loan (250K) and if she had done that, the loan amount just keeps growing more and more. after 25-30 years the amount you own in taxes is as high as the original amount you had to pay for the loan.

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