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Student loans and the myth of the "minimum payment"

Nov. 1, 2020
When you take out that dental student loan, do you really know how much you’ll be paying back to the lender? Dr. Sam Shamardi explains what you need to know to reduce your burden and stay in control of your money.

As tuition continues to rise throughout the dental education system, so are the debts that students are graduating with. Student debt of more than $400,000 for dental school is no longer uncommon. Add a specialty certificate and another few years to the plate, and you are easily above $500,000 in debt before you ever treat your first patient as a doctor.

These numbers are staggering and sobering, but, sadly, they tell only part of the story. Hidden within is the silent killer: the interest rate. Depending on what type of loan you get and what lenders that particular year are offering, interest rates can vary significantly. But their impact is monumental.

Interest is a loan expense charged for the use of borrowed money that’s paid by a borrower to a lender.1 The expense is calculated as a percentage of the unpaid principal amount of the loan. A lender is the organization that created the loan (borrower’s school, bank, credit union, etc.).1 The lender will set the interest rate for the particular loan being offered, and there is little to nothing students can do about it. Given the choice of accepting the loan and the interest rate the lender offers versus paying the tuition on their own (likely by their family), it’s not a difficult decision.

At the time, all of this doesn’t really seem to matter much. The true effects are noticed once you begin practicing—that is, if you are paying attention. 

When reviewing your student loan repayment bill, a few numbers tend to stand out for the average borrower. The big one is the overall balance of your loan, and the second is the “minimum payment due.” As far as most are concerned, as long as that minimum payment is being met, things are on track and your loan is being repaid. Or is it? This is where the interest rate number becomes the silent killer.

Take a simple hypothetical example. You have a $100,000 loan with a 5% interest rate on the loan, set to be repaid over 30 years. Your “minimum payment due” for your monthly repayment schedule on that loan might be around $2,500 per month.

If you look closer at the actual breakdown of the payment, however, you may notice that $1,700 is going toward the interest and only $800 toward the principal. What does this mean? It means that despite paying $2,500 of your hard-earned money, the total principal of your loan only came down $800! Project this over many months and many years, and a new reality becomes clear. By following the “minimum payment due” recommendation, you are not only paying the lender a significant amount extra, but your repayment of that loan will take much longer than you expect.

So, what are your options to solve this issue? There are a few. For one, you can always try to consolidate your student loan through companies such as SoFi and others. The goal of consolidating your loans is to collectively lower the interest rate on your loans, resulting in less interest per month. However, most companies will not offer this option when your balances are significantly high, which is where most dental graduates find themselves.

A second option is to pay your higher interest rate loans off quicker. Remember, the lender suggests a “minimum payment” that is good for them, but by paying more, you can turn the tables and make it good for you. It doesn’t take a significant amount more—even $100–$200 per month more can reduce your overall repayment time on the loan by several years. 

A simple way to figure out your options is to call your lender directly. Ask the lender to provide the amount that will cut your repayment period by half. Again, the number may not be as high as you think. Don’t feel pressure to do this with all of your loans; focus solely on the ones that have the highest interest. By contributing more each month and paying off your loans quicker, you will save yourself a significant amount of money in the long run.

But what if you can’t afford this option, much less afford paying even the minimum amount on your loans? In this situation, you have two options—deferment and income-driven repayment. Deferment is a temporary postponement of payment on a loan that can be done in six-month increments for a maximum of three years.1 However, it is essential to point out that your interest may continue to accrue during this time, which goes against the extra fees we are trying to avoid.

With income-driven repayment (IDR), you have more flexibility. There are four different kinds of IDR options, yet all apply only to federal loans. In general, they each provide a monthly repayment schedule based on your income, family size, and loan debt, along with giving a loan forgiveness on any remaining balance after 20–25 years.2,3 This repayment schedule is reviewed annually, so it can be adjusted to your yearly income. Though it is likely you will pay more interest over the life of the loan, the forgiveness option and the reduced monthly pressure provide a potential lifeline for those in need. Each of the four IDR options have slightly different characteristics, so it’s important to do your due diligence to see which is the best fit for your individual situation.

Student loan repayment is a significant financial barrier we begin our careers with, and it’s one we carry with us for many years. Lenders are like casinos—in their world, the house always wins. High interest rates and more attractive minimum repayment dues put them in a position to collect far more from us than we ever planned, if we aren’t careful. But by paying a higher amount each month on your loans, you can take back the reins and be the one calling the shots on your terms . . . or at least take advantage of IDR options to put your loan repayment on a more level playing field. Don’t wait another month. Make your move today and take back control of your money!  


  1. Glossary. Federal Student Aid. Office of the US Department of Education. https://studentaid.gov/help-center/answers/topic/glossary/articles 
  2. Student loan repayment. Federal Student Aid. Office of the US Department of Education. https://studentaid.gov/manage-loans/repayment 
  3. Loan repayment plans. Finaid. https://www.finaid.org/loans/repayment.phtml 
Sam S. Shamardi, DMD, is a diplomate of the American Board of Periodontology and Implant Surgery and practices full-time while teaching as a clinical instructor at the Harvard Dental Division of Periodontics. He is the founder of Dental Innovations LLC and has been recognized as a dental entrepreneur for his revolutionary EarAid product. He is the author of The Financial Survival Guide for Dentists: Everything You Needed to Learn, but Were NEVER Taught, in Dental School, available at fsg4dentists.com. Contact Dr. Shamardi at [email protected].

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