Dental School Loan Refinance Guide

Written by: Matt Kuncaitis
Updated: 4/08/21

If you’re studying to be a dentist or recently completed your education, congratulations: You’ve made a smart career choice. According to the U.S. Bureau of Labor Statistics (BLS), demand for dentists is growing. Additionally, dental professionals are well-rewarded for their work, earning a median pay of $159,200 per year (although some can earn significantly more depending on factors like location and specialty).

That said, the path to becoming a dentist isn’t easy — and it isn’t cheap. Dental school expenses are significant, and you likely have loans to pay. The American Dental Association (ADA) reveals that the average first-year dental school student can expect to pay $39,662 for public education and $72,271 for private education. Again, that’s the cost for the first year alone! Meanwhile, the American Dental Education Association (ADEA) reveals that the average dental school debt upon graduation is $285,184.

If you’re facing dental school debts, you may be worried about paying them back. Don’t stress. You have options, like refinancing your loan to lower your monthly payments. Loan refinancing can ease the immediate financial strain and even save money in the long run. This article offers a guide to dental school loan refinancing, giving you the facts you need to know if you’re considering this option.

Can You Refinance a Dental School Loan?

Some students or grads assume that dental school loan refinancing isn’t possible or worth the time and effort required. However, this can be a smart option. Refinancing your loan now can result in lower monthly payments in the immediate future, streamline your overall student loan repayment plan, and allow for a lower interest rate. With these benefits, you save money, simplify your finances, and alleviate stress.

It’s possible to refinance a dental school loan during residency or after residency. However, be aware that refinancing options during residency are more limited. What’s more, keep in mind that your loan balance is likely to increase throughout your residency because any payments you make on the loan likely won’t cover the interest. Even if you manage to defer loan payments throughout your residency, the money borrowed will still accrue interest.

Read on for more details about the possible benefits of refinancing to determine whether this is a viable option for you.

Is It Smart to Refinance Your Dental Student Loans?

Student loan refinancing is a significant financial decision that should be considered carefully. That said, the effort of refinancing is often well worth it. Here are some ways you may benefit.

Lower Interest

When you refinance your loans, they’re replaced with a newer loan. This loan will have new loan terms, including (usually) a lower interest rate. Say you have a $250,000 loan to pay, with an 8% interest rate, which you plan to pay off over 10 years. You refinance this to a loan with an interest rate of 5%. This can save you approximately $45,000 in total repayment costs, saving you about $380 per month.

This is a significant amount of money, especially when you’re first getting your career off the ground and may not be a high earner yet. Take the time to research student loan refinancing options and compare different interest rates. Comparison shopping will help you secure a more favorable rate.

Lower Monthly Payments

While dentists tend to be high earners in the long run, it takes time to establish their careers. Refinancing your loan now to lower your current monthly payments gives you a financial cushion, alleviating immediate money worries until later — when you’re earning more and are better positioned to pay off the loan comfortably.

You can often secure a lower monthly rate by refinancing to lower your interest rate, as described above. You can also refinance your loan and extend the payment term. While extending the length of repayment will likely result in higher borrowing costs over the long term (since you’re paying interest on the loans for a longer time), having a lower monthly payment in the short term can be key to managing your budget when you’re starting out as a practicing dentist. Most student loan refinancing products have no prepayment penalty. That means you can always accelerate repayment once your income starts to increase..

Faster Repayment

Refinancing your dental school loans can also allow for faster repayment. If you find it stressful to have debts looming over your head, this can be a big bonus. Refinancing your loan to cut interest rates will increase the likelihood that you can pay off your debts faster. As the above example shows, interest can add to your total loan costs.

Private dental school loans can be especially challenging because they are generally unsubsidized and start to accrue interest as soon as the loan is disbursed. The interest is then rolled into the loan if it goes unpaid. This is referred to as capitalization. The total loan amount is thus made up of the principal (the amount of actual money borrowed) and the interest that has capitalized. Learn more about capitalized interest here.

One Student Loan Payment

In addition to the financial benefits, refinancing student loan payments can alleviate administrative burden and stress. If you have multiple existing student loans, refinancing them into a single loan streamlines your finances. It also means that you only have to pay one interest rate instead of multiple interest rates, possibly saving you additional money.

Co-Signer Release

When you first took out a loan for dental school, you may have had a co-signer, like a parent or a spouse. At the time, having a co-signer with good credit may have been necessary to secure a favorable interest rate (or even get the loan at all). Refinancing a loan later, when you’ve built up a strong credit score of your own, can release your co-signer from their obligation.

This can bring peace of mind to both you and your co-signer. When a person co-signs a loan, they agree to take on liability for it. That means that if you didn’t pay your debt back, your co-signer would have to — or risk their own credit score suffering. Refinancing into a new loan without a co-signer alleviates this mental burden for both of you.

Is There a Downside to Refinancing Dental Student Loans?

Although there are benefits to refinancing dental student loans, there may also be drawbacks. This is why it’s important to do your research before taking this step. Below are some of the potential disadvantages.

Interest Rate May Not Change

While it is often possible to refinance a loan to secure a lower interest rate, this isn’t always the case. It’s important to read the fine print and disclaimers on any loan offer, especially when it comes to interest. Just because you see headlines celebrating low interest rates doesn’t mean you’ll necessarily get one.

Why not? Keep in mind that the interest rate you secure also depends on your personal profile as a financial consumer. If you’ve graduated dental school and are working full time, can demonstrate a steady income, and have a credit score of 720 or higher, you’re more likely to get a favorable interest rate.

Impact on Credit Score

Your credit score is a measure of your creditworthiness that lenders use to determine whether they want to extend you a loan. It’s based on your financial history, covering everything from whether you pay your utility bills on time to former bankruptcy filings. A strong credit score allows you to get the funds you need to achieve goals like owning a car or house. Credit scores range from 300 to 850, according to the Fair Isaac Corporation (FICO) model.

When you’re shopping around for refinancing options, there is one step in the process that has the potential to impact your score negatively. When you apply for refinancing, the potential lender will likely run a credit check. Known as a hard inquiry, this can bring down your score. Why? It shows that you’re seriously pursuing an alternative loan option, and taking on a new loan can theoretically impede your ability to pay down existing loans. That said, the impact is minimal. You can expect a hard inquiry to drop your score by about five points.

Loss of Borrower Benefits

This is a major consideration for federal student loans. Refinancing a federal student loan into a private loan may cost you certain benefits, such as public service loan forgiveness (PSLF) or a federal income-driven repayment plan. Depending on your career plans, you may not want to give up these advantages. Say you dream of working for a nonprofit organization that offers dentistry services to disadvantaged populations, for example. In this case, a federal loan forgiveness program can help minimize your loan obligations.

Alternatively, say you plan to own your own dental clinic. In this case, you might not want to forego the advantages of a federal income-driven plan, which can minimize monthly costs. This allows you more financial liquidity to purchase and open your own practice, which will require various startup costs.

How Can I Pay Off My Dental School Loans?

CollegeFinance.com can connect you with resources and lender reviews to help you decide on the best dental school loan refinancing option for you. Possible options include the following.

Private Lenders

Private lenders are one refinancing option. Here are some of your options:

    • SoFi: SoFi refinance loans usually have terms of five, 10, 15, or 20 years. Both variable and fixed rate loans are available, with APR rates running as low as 2.6% (variable) and 3.4% (fixed) if you set up autopay. Get the details directly via SoFi for details on eligibility and more.
    • LendKey: LendKey offers terms of five, seven, 10, 15, and 20 years. Variable and fixed rate loans are available, with interest rates as low as 2.8% and 3.2%, respectively. If you have a good credit score, you may be able to secure a more favorable rate. Note that to qualify, you must have graduated from an approved school that participates in the Title IV federal aid programs. Get details via LendKey.
    • Laurel Road: The ADA provides a private loan refinancing option through Laurel Road Bank. If you’re a qualifying ADA member, you get a 0.25% rate reduction. You can qualify for an added 0.25% rate discount if you sign up for automatic monthly payments. You need to have a minimum loan of $5,000 with no maximum cap given. You can refinance both federal and private loans. Visit the ADA webpage for more information.
    • Splash Financial: Splash Financial offers terms of five, seven, 10, or 15 years. Fixed loan rates are available with interest rates as low as 2.63%. Through completing one application with Splash Financial, you can receive offers from multiple refinance lenders including Nelnet Bank, Laurel Road and PenFed.

    This list is by no means exhaustive, and you should do further research into what loan refinancing options best fit your unique needs.

    Public Service Loan Forgiveness

    It’s also possible to consolidate loans through the federal government. Why go this route? It can be helpful if you’ve defaulted on existing federal student loans, for example, or need to consolidate to qualify for PSLF or an income-driven repayment plan. Under federal schemes, the government pays off your federal loans, replacing them with one loan. You get a new interest rate and a new loan repayment term, ranging from 10 to 30 years. 

    As mentioned, your career goals are a major consideration when deciding between loan refinancing and repayment options. Federal loans are an excellent option if you want to work in a nonprofit organization in the future. If you’re more interested in private practice, they may not be as beneficial for your purposes. If you decide to consolidate federal loans, visit the StudentAid.gov website.

    CollegeFinance.com Is Here to Help You Explore Your Student Loan Refinance Options

    As this guide has hopefully made clear, you have many dental school loan refinance options. Savvy refinancing can help you cut interest payments, combine several loans into one, and save money over the life of the loan. Exactly which refinancing route you take is up to you. The best choice depends on your personal profile as a borrower and your preferences and career goals.

    At CollegeFinance.com, we demystify the process around student loans, helping potential and current borrowers understand their options. With our resources on federal and private student loans, we can help you explore your possibilities, guide you through the application process, and more.