Starting the Arduous Task of Paying off Student Loans

Okay everyone! You know that David is a dentist. You also know that he had to go through 4 very expensive years, after undergrad, to become a dentist. Now, we are starting our journey to dig ourselves out of the hole Dental School put us in. If you are uncomfortable talking about finances and money, then I suggest you skip this post, and future posts about our progress in getting out of debt. I am not sharing our story to brag or seek pity. I just want to remember what we did, how we did it, and have "someone" to be accountable to, since this is a goal we are setting and trying to achieve. It is common knowledge that, in setting goals, it helps to have someone you are accountable to, to help keep you going. Well, blogging world, you are that someone.

I am also writing this in the hopes that someone going through, or who will go through, a similar situation, can get ideas for how to manage the debt load, and find encouragement.

Okay, let’s get to the nitty gritty. This is the part that hurts the worst. To pay off all David’s Dental School loans right now, the payoff amount would be: $308,808.55. Yeah, you read that right. Just shy of $310k! And the sad part is, we are on the low end of the scale! We have been out a year, and we know friends graduating this year with closer to $400k!!!! So, we do feel lucky, sort of. It “helped” that we got resident/in-state tuition, but even so interest rates are high and tuition was increased every year (one year the tuition increase was 12%!).

The first year after Dental School, which we just completed, David decided to do an AEGD (Advanced Education in General Dentistry)—also referred to as a Residency. We got a salary, but it was enough to live on—nowhere close to being enough to start making payments on loans. So, when our loans entered “Repayment” in December/January, we applied for the repayment plan called “Pay As You Earn” (PAYE). Basically, you submit your previous year’s Tax return and a decision is made how much your monthly payment will be, based on your income from that year. So, we applied at the end of 2014 which means that we submitted our 2013 Tax Return. Since we made next to nothing, as a family of 4, in 2013, our monthly payments have been $0. What this means is that our loans did enter “repayment” and the interest we accrued during Dental School did get capitalized in December/January, and since our payment is $0, we are still accruing interest. However, the interest we are accruing now will not be capitalized onto our principal again, like it would if we had done a forbearance. So for those looking into repayment plans and residencies, etc., we highly recommend PAYE.

We will once again apply for PAYE at the end of this year and our monthly payment might be more than $0 a month, but I doubt it because we will be a family of 5 and our wages for 2014 were slim too.

Now, if we were to ONLY pay the payments required by PAYE, for the rest of our lives, we would not be finished getting out of these pesky student loans for like 25 or 30 years. I have NO interest in being in debt that long. In fact, I plan to have us start paying off loans in the next few weeks.

GOAL: To finish paying off David’s student loans by our 10th Wedding Anniversary (November 2019).

Yeah, I know that is a lot of money to pay off in just over 4 years, but I have a plan. And I want to share that plan with you.

The “Standard” Repayment plan is a 10 year repayment—meaning you will be out of debt in 10 years. I am using the “minimum payments” for this repayment plan as I make our “Get Out of Debt” plan. For our loans, the monthly payment on the Standard plan is $3,451.93. That is almost 3 house payments a month! And, it is equal to more than 1 entire paycheck David will be receiving over the next few years, at his current salary with the clinic.

So, how are we going to do it? Well, we are going to use Dave Ramsey’s method and the Debt Snowball. I have also found this spreadsheet: http://www.treesfullofmoney.com/?p=837 very useful in planning our debt payoff.


1) We are going to live frugally for several years. I have already created a budget, and it is tight, I’m not going to lie. So even though we are making quite a bit more, on paper, than we did while David was a resident, we are going to continue to live like we did this last year.


2) We have had a lot of large purchases in the last few months (House, van), and a baby to prep for coming soon. But after all that, we have about $10,000 to put towards loans right now. I plan to pay off the lowest few loans in full, and get them out of the way. Since we will no longer be bothered with the minimum payments on those loans, we will be able to use the money we would have spent those minimum payments towards paying off the next loan on our list.


3) We live in a rural area, which qualifies for loan repayment. There are two such plans we have applied for, a state and a national one. We already found out we did not get the state loan repayment this year. We are still waiting (and crossing our fingers) that we will get the National loan repayment this year. If we do, the National requires a 2 year service commitment in an underserved area (easy, since David signed a 3 year contract), and they will give us $50,000 up front to help pay off loans. I am planning on us getting that this year and will make that $50,000 loan payment in October, when the money comes in.


4) That $50,000 will free up more “minimum payments” from other loans, which we can use on to the next loan on our list.


5) David is paid bi-weekly. This means that two times a year we will get a third paycheck a month. This paycheck will go right into paying off loans.


6) David is working at a clinic. This means that, compared to dentists in private practice, he isn’t making as much money. The clinic realizes this. To help compensate for that, they offer bonuses. If David sees more than a certain number of patients in a quarter, or over the course of a year, he receives $40 per extra patient. These bonuses, when earned, are paid at the end of every quarter. So, every time he gets a bonus---yep! Right into loan repayment.


This plan isn’t going to be fun, by any means. It will be hard, but so worth it! Dave Ramsey says to be Gazelle Intense when paying off loans. We plan to do just that. I know it will be tempting to skip paying the “extra payments” every now and then, but we will have to stay strong and focused. Again, this is why I am posting this: to make us accountable to more than just ourselves. Any encouragement we can get along the way would also be helpful. :)

That is all for now. Bravo if you made it to the end! I plan to keep updating with we hit different milestones in our debt payoff journey, so you all will be apprised of our progress. Stay tuned!


P.S. Some may be curious how we have almost $310k in debt, just bought a house and a van and still have money left over to put towards loans. I’m not positive myself, but I can tell you what we did during school to get us here.

Okay, so this is what we did while we were in Dental School:


1) We did live off of student loans. Not ideal, but we had Eli after the 1st year and we knew we wanted me to stay home.


2) In living off student loans, I realized that the new semester would come, and a new loan check, and we hadn’t spent all of the previous semester’s loan money. We lived frugally! We didn’t take any big trips (unless family paid for it), and we didn’t spend a ton on extras.


3) Every time we got a Tax Refund, it went right into the bank—no fancy trips, no fancy nothing. And, earning next little and living on loans, refunds were very generous.


4) For 2 years I worked as an Apartment manager. This gave us “free” rent and some additional income. Doing so allowed us to cut back on how much David took out in loans every term. It wasn’t a substantial decrease, but every little bit we didn’t have to pay interest on helped.


5) Before we got married, I had a nice car that we sold. We drove David’s dying beater car up until almost graduation of Dental School. The money we got from the nice car sat until we just bought our van.


For our house, David’s grandpa gave each of his grandkids a large monetary gift many years ago, with the express intent that it be used for purchasing a house. So, that is where most of our down payment came from.

If you are curious, or have any questions, please don’t be afraid to ask. :) My hope, like I said, is to be open and encourage others going through similar situations to find hope and encouragement as well, and know it can be done!