I Have $520K in Student Loans. Where Do I Start?

It will take many Americans more than a decade to earn $520,000 (before taxes), so the idea that someone can have that much in student loan debt before starting a career is astounding.

The guy who posted to Reddit about his half-million dollars in student loan debt went to dental school. And while dentists earn a lot of money, $520,000 in student loans is still a massive sum. (Dentists’ salaries range from $75,003 to $229,091 and rise rapidly during the first five to 10 years of their careers, according to PayScale.)

As this new dentist wanted to know, where do you start with that kind of debt?

You attack it ASAP, with the intention of getting rid of it as soon as possible.

Six-figure student loan debt is a lot for most people but not entirely unreasonable for a dental student, if you go by the rule that you should graduate with no more debt than your starting salary. Four years of dental school roughly runs from anywhere between $23,000 to $275,000 just for tuition, costhelper.com says (there are a lot of additional expenses). The average debt load of a dental student who took out loans was $200,111 in 2010, according to research by the American Dental Education Association. This dentist is starting with $129,000 a year, so his debt load is more than four times his salary.

He has all federal loans, which tend to be less expensive than private loans, but graduate and graduate PLUS loans carry higher interest rates than undergraduate loans. This particular borrower (whose total debt includes some from undergrad) wrote he’d pay about $38,000 in interest annually.

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A situation like this Redditor’s would shake out something like this, according to the student loan payment calculator on Finaid.org: A $520,000 loan balance with an estimated interest rate of 7.4% would result in a $6,145.39 monthly payment if the loan term is 10 years. Again: That’s six grand a month, just for student loan payments. Over 10 years of repayment, the borrower would pay more than $200,000 in interest, resulting in an education bill upwards of $730,000.

Any way this dentist can accelerate his payment schedule will mean huge savings. Options for doing so may sound really unappealing, but that’s the reality of massive debt. (Here’s a story of how a lawyer did it.) As a 20-something, this dentist could see if he could move in with his parents as a money-saving strategy, or at least keep rent as cheap as possible (perhaps he could get other debt-ridden dentists to split the cost). He could also look into consolidation.

“Continue living like a college student as long as you can to pay off as much debt as you can,” suggested Gerri Detweiler, Credit.com’s director of consumer education. “Don’t live like a high-salaried dentist; you’re not there yet.”

Even small student loan balances can have a large impact on your finances, so it’s crucial to stay on top of payment, especially if you’re dealing with massive debt. Late payments will result in fees (as if you need to pay any more), and missed payments will be reported to credit bureaus, show up on your credit reports and damage your credit score. Student borrowers should check their credit scores as soon as possible, preferably before they borrow or enter repayment, so they can track how their debt affects their credit standing. Credit.com has e tools that allow you to check two of your credit scores for free, with updates every 14 days.