Reader Case: Dentist in Debt

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Hey FIREcracker & Wanderer,

My friend strongly recommended I read your “Quit Like a Millionaire” book, and it’s definitely inspired me to at least become FI. Thank you for putting your blog out into the world! While I wish I had read your blog & book (probably would have saved me some weird financial choices), I’m glad I’m reading it now. 

So here’s my situation:

  • Gross/net annual income – ~$125000 USD. I recently got a job in the public sector, but am hoping to get a part time job in the private sector to supplement my income.
  • Monthly spending
    • Rent – 1225 (just moved to a cheaper place. I live in PDX.)
    • Disability Insurance – 216
    • Cellphone service – 36
    • Internet – 38
    • Electric – 70
    • Hulu – 1.99
    • Renter’s Insurance – 11
    • Car Insurance – 66
    • Malpractice – 82
    • Gas – $90
    • For “fun” spending, I try to keep it between $1200-1400 per month (I’m working on curbing that more…mostly reducing clothes shopping)
  • Debt
    • Dental School Loan
      • The interest rate    – 3.1%
      • Your minimum monthly payment  – $1573 (I refinanced ~2 yrs ago)
      • The outstanding balance – $198,874.17 (sigh)
    • Car Loan
      • The interest rate    – 0.9%
      • Your minimum monthly payment  – $441.87
      • The outstanding balance – $2058.50 
  • Fixed Assets
    • Just my car. It’s a 2017 Subaru Forester, and I just did a KBB estimate on it, and it says it’s $16200. I intend to drive this car until the wheels fall off.
  • Investments/Savings
    • Checking account – 47581.89 (I have to keep at least 20% in this account to ensure that I hold on to my 3.1% interest rate for my student loan, although that was prior to COVID, and the bank says they’ll “work” with people if they have a hard time maintaining 20% balance.)
    • Savings – 12194.26 (interest rate is 0.8% right now [hahaha])
    • SEP IRA – 4381.27
    • 401k – 12694.23
    • Brokerage/Investing account – 516.59
    • Roth IRA – 31065.92

Several things to note:

I will be eligible for opening up a 401K with my new job in March, and I intend to max that shit out since they match 25 cents to each dollar contributed *With my new job, I’m eligible to apply for loan repayment through my state, so I’m trying to do bare minimum on payments until I am awarded something because they award 25% of the balance.

I like to think that I’m not super effed, but that student loan is daunting, and I don’t like that it’s eating up all this money I could be investing instead. I tried to read through step 6 of the investment workshop, and am still confused on how to make my investments grow tax-free (my ROTH & Brokerage account is through Vanguard).

Ultimately, I’m not sure how keen I am on retiring early. I like working as a dentist, but I don’t want to feel like I have to work in the private sector in order to pay my bills. The job I got in the public sector is 3 10 hour days, and that’s the perfect amount of working for me, while still getting to work with a demographic that I love. 

All advice is appreciated! Thanks again!


Alrighty then. So our reader here is a dentist who earns a pretty decent salary in the public sector (which is odd right off the bat), has a pretty sizeable student loan balance, and would “like to think she’s not super effed.”

Which, at the end of the day, isn’t that what we all want? To not be super effed? That’s what I aspire for, anyway.

That debt balance does look worrisome, though. I mean, I know you Americans love things super-sized, but every time I see your student loan numbers I get a little light headed. $200k in student debt? Yowza.

There’s also another interesting wrinkle in her situation. She was able to refinance her loan to 3.1% (great job), but the conditions of her loan require her to keep 20% of the balance sitting as cash in her checking account. That’s kind of strange, and kind of screws up my usual analysis because I have to keep part of her money sitting as cash doing nothing rather than investing it all. Plus, that amount decreases over time as her loan gets paid off, so that all makes this analysis super weird.

But weird is good. I like weird. So without further ado, let’s…

Math Shit Up!

OK let’s sit down and figure out these loans. The car loan is only $2k, so it’ll get paid off within 4 months, so that one’s not a big deal. The interesting one is the student loan. At an outstanding balance of $198,874.17 @ 3.1% and a monthly minimum payment of $1573 (or $18,876 annually), this is what her loan schedule looks like.

YearStarting BalancePaymentInterest AccruedEnding Balance

The terms of this loan require her to keep 20% of the balance as cash. I’ve actually never heard of this kind of thing before, but whatever. Maybe dental loans are different from other student debt. So to keep track of this 20% requirement, we’ll create a new column called “Locked-In $” which she has to keep uninvested. The formula for this is simply Ending Balance x 20%.

This also creates an interesting dynamic where as her loan balance goes down, her Locked-In $ also decreases. Which means that every year, some of the previously Locked-In $ becomes freed up and available to invest. We will create a new column to track this, which I shall christen “Freed-Up $,” which is simply the difference of the Locked-In $ amount of the previous year.

Here’s what the loan schedule looks like with these two amounts tracked.

YearStarting BalancePaymentInterest AccruedEnding BalanceLocked-in $Freed-Up $

OK now we have to link these to her retirement projection. Let’s start off with the usual inputs.

Income$125k gross, $90,865 after-tax (assuming maxed out 401k)
Expenses$1836 (itemized spending) + $1400 (fun spending) = $3236 monthly, $38,832 annual
Assets$68,659.33 + $39,774.83 (locked-in $) = $108,434.16
Debt$2058.5 (car loan) + $198,874.17 (student)

Dentist-In-Debt’s car loan will be gone after one year, and her student loan will eventually be paid off in 13 years, so we don’t have to include loan payments in her post-FI spending of $38,832. This gives us an FI target of $38,832 x 25 = $970,800M. This is a bit high for one person, to be honest, but I’m not here to judge. That’s FIRECracker’s job.

We can also calculate her savings rate. Knowing that she lives in Portland, we can plug her $125k salary into a tax calculator and get her after-tax earnings. We also know that she plans on maxing out her 401(k) and that her employer gives her a 25% match. That means her savings rate is $90,865 + $19500 x 25% (401k match) – $38,832 = $56,908. This is her savings rate not including debt repayments, which we will track seperately.

So while we can start with a conventional FIRE analysis, we have to keep in mind that of her assets of $108,434.16, $39,774.83 is “locked-in” because of the 20% cash requirement on the loan, leaving $68,659.33 that can actually be invested.

We also have to add two more columns to our typical projection table. The first is “Debt”, which tracks how much she pays per year towards her car and student loans. Eventually, these loans get paid off so they will eventually zero out at year 13.

The second column we have to add, is Freed-Up $, which is the money that gets freed up by virtue of her student loan being paid down, and therefore her Locked-In $ being gradually released and being available to be used. These amounts have to be factored into her analysis.

When we do this, this is what it looks like…

YearNet WorthSavingsFreed Up $DebtROIEOY Net Worth

So based off this analysis, her debt gets paid off in 13 years, and then she hits FIRE just 1 year later at year 14!

Should She Pay Off The Loan?

Dentist-In-Debt is in a unique situation where her loan balance is quite high, but she also has quite a bit of money saved up. This may give us an oppurtunity to do things like tap her 401(k) to pay off her loan balance right away. On the other hand, because her loan’s interest rate is so low, it might make more sense to leave the money invested because she’ll likely get a rate of return higher than 3.1%. So this is a situation where the right answer isn’t obvious because there are factors pushing the analysis in either direction.

So to figure it out, we’ll run the numbers and see where they lead us.

Let’s say she takes every single penny she has and dumps it into the loan. Her loan balance goes down by $108k, and now her loan schedule looks like this.

YearStarting BalancePaymentInterest AccruedEnding Balance

And on her retirement projection, a few things happen. Her starting balance goes down to zero, which will make her FIRE journey longer. But her debt payments stop earlier too, which will make her FIRE journey shorter. So what happens when we put it all together?

YearNet WorthSavingsDebtROIEOY Net Worth

A whole lot of nothing, apparently. Her retirement projection doesn’t really change, indicating that the positive and negative effects of paying off her debt early balance each other out. So in this case, it actually doesn’t make sense to pay down her debt faster and instead keep paying the minimum.

Which brings me around to the last interesting part of her case: the possibiltiy of having part of the debt forgiven. Normally, I’d suggest she use the Public Service Loan Forgiveness Program (PSLF), but because she re-financed her debt to a private lender she’s likely not eligible. However, she does mention that her workplace may dismiss up to 25% of her debt, which would be awesome. In fact, if such programs exist it counterintuitively makes it better to not pay it down faster so more of it will be forgiven. I know, I know, it’s weird, but that’s the law of unintended consequences, isn’t it?

If she manages to get 25% of her debt forgiven, that will have a huge impact on her FIRE journey. Here’s what her debt schedule would look like…

YearStarting BalancePaymentInterest AccruedEnding BalanceLocked-in $Freed-Up $

So her debt gets paid off in 10 years instead of 13. It also frees up more of her existing cash earlier as the 20% requirement would be 20% of a smaller starting number, so her starting balance changes to $108,434.16 – $149,155.63 x 20% = $78,603.03. Roll it all into the projection and here’s what her FIRE journey would look like…

YearNet WorthSavingsFreed Up $DebtROIEOY Net Worth

Her debt gets paid off in 6 years, and then she hits FIRE in 12.


Baking in debt forgiveness into your financial plan is always dicey since you never know if the program will get taken away right when you need it, but in this case it’s not critical to her FIRE plan. Since she refinanced her debt to such a low interest rate, it doesn’t make sense to stretch to pay it off early. So she might as well keep paying the monthly minimum on it. If she manages to get part of it forgiven through her workplace, great! But if not, that doesn’t really change her game plan.

So is our reader “super effed”? Not at all! Kill the car loan, keep paying the monthly minimum on the student debt, and try to get part of the loan forgiven through your work. Don’t get into any more debt and you should be able to hit FIRE somewhere between ? and ? years.

What do you guys and gals think? Is there anything else Dentist-In-Debt should be doing to supercharge her FI journey? Let’s hear it in the comments below!

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20 thoughts on “Reader Case: Dentist in Debt”

  1. This is a pretty good place to be! I’m impressed with that spending rate, even considering the “fun” spending (which seems to include little things like eating). Most people I know with terminal professional degrees seem to find ways to spend far more than that. I’m also impressed with the distribution of current assets, checking account notwithstanding. Might be worth dumping the savings account entirely into the brokerage and maintaining no liquid cash outside of checking.

    ps hey Wanderer maybe update the summary paragraph:
    “should be able to hit FIRE somewhere between ? and ? years.”

  2. I think your analysis is spot on, but if I were in the dentist’s situation I am certain I would just crush the debt. I would definitely push super hard to get that 25% forgiven but beyond that I would just wipe it out in like two years saving every penny possible. I would probably get that extra work she talked about as well to do it. It might not make sense financially, but I know psychologically I would love the feeling having it behind me.

  3. Very good analysis Wanderer. I just want to add that 13 years is a long time and any future plans to get married, start a family etc could impact the FI date for DinD one way or another depending on the financial position of her partner.

  4. I’m wondering if having to keep that cash balance keeps the rate lower, but maybe the rate goes up a little bit without it? Would be interesting to determine if using that money to pay down principal or invest in the market could offset such a high cash balance requirement. The “locked-in” money seems like it’s letting the bank have additional principal to use as they please.

  5. There’s also another interesting wrinkle in her situation. She was able to refinance her loan to 3.1% (great job), but the conditions of her loan require her to keep 20% of the balance sitting as cash in her checking account.


    This sounds in some ways like tide-selling. A bank can’t refuse a loan on the basis whether you deposit funds with them. If pressed on this, a bank is highly likely to back off on this condition without impacting the interest rate and release those funds. The employee at the bank who did this is looking to jack your revenue profitability. Don’t forget, bank account gives zero to little interest but cash in bank accounts is a cash cow for a bank. It all sounds crooked.

    Worst case, she should shop that loan around. A dentist is like gold for a bank. Don’t be complacent. Get a few comparables. If you get better elsewhere, flush your current bank.

    1. You’re right, A dentist is like gold for a bank.

      The bank would want to establish a lifetime relationship with her. (Car loan, Mortgage, Investments, Equipment loans, etc.)

      She should shop around and play one bank off another.

  6. That student loan sounds crazy. It’s a great time to refinance those. A lot of banks are offering transfer/refi bonuses of up to $1k. Highly recommend she do that. That makes no sense to me at all to keep a minimum in the bank- if she had that money, wouldn’t the bank just want it? Sounds predatory to me.

  7. “loan require her to keep 20% of the balance as cash”. Isn’t this always the case? Every student loan in the medical sector I know of requires that here in Washington. Besides, with current interest rates in savings accts, there’s really no difference between that and keeping in a checking. And Mr. Market, you know, only works in Excel, real investing rarely yields the 8% people use. Sometimes more (if you’re lucky), most of the time nah

  8. One more option is for her to pay 50% of the Freed-up money towards paying down the student loan debt every year. It reduces the principal and interest accrued. The remaining half may be used to paying down her car loan AND/OR added to her RothIRA.
    There’s a collateral benefit of even more ‘freed money’ after each year further speeding up the loan payoff. Once her car loan is paid off, that amount also be re-directed towards paying off the student loan. If the dentist can also reduce her ‘fun spending’ by 50%, the remaining 50% can be invested too..and the best way to force that is a pre-tax 401k contribution. The 50% money has already been moved to her 401k and thus won’t be available for ‘fun’ post Tax.

  9. I think taking her sweet time to pay the debt back over a decade and instead reinvesting her cash into the market makes a lot of sense as you said.

    The Feds will likely keep yields low until they can devalue the currency sufficiently, so you are increasingly paying it back with currency that is worth less and less in real purchasing power terms. If her loan rate is also locked in, then she also doesn’t have to worry even if the prime rates hike due to inflation.

    Also, there is the non-zero probability that the Democrats will do some sort of debt jubilee through their fiscal policies and student debt is the politically and financially low-hanging fruit. Not saying that’s gonna happen, but keeping your debt balance outstanding is basically a call option on that outcome with asymmetrical upside.

  10. $125K seems awfully low for a dentist. I just googled “dentists salary Portland”, and I’m seeing numbers like $150K-$260K on Glassdoor. If she switched jobs I wonder if she could start tickling something closer to $200K. This would drastically change the math. Maybe she could couch surf (or rent a room in a house). Do that for a couple years and totally pay off all debt.

  11. Personally I would rather pay off the debt ASAP, then start piling up the savings.
    It is unfortunate that medical and dental schools are so expensive.
    My son was considering medical school but decided against it because of the large cost – he went into engineering instead.

    1. I agree. Blasting large debt as fast as possible, and investing the previous debt contributions in index stocks consistently has worked very well for me. It has helped boost my retirement savings and emergency funds, and also helped fund my kids college education (100%).

  12. “$38,832 […] This is a bit high for one person”
    Is it really? A single person doesn’t necessarily get to split expenses with a partner. I don’t see this as being unreasonable.

  13. Wanderer, I wonder if you’re really doing the taxes correctly. Two points: it’s not clear if that $125,000 is before or after tax. Using the smartasset paycheck withholding calculator, Ms. Dentist-in-Debt would only be taking home $5460/month if was her net salary. If $125,000 was her take-home salary, then her gross salary would have to be a bit over $210,000. And the amount of taxes would vary depending on how much withholding is done. I realize that this is a case-study and not an exact plan, but I think it would useful to make sure that we know the gross and net salaries involved. Thanks!

  14. In your analysis, when she finishes making her debt payments… wouldn’t the $18k then roll into the savings column, increasing her savings to just under $76k? Thus further reducing her time to retirement in a few scenarios. Either way, not as effed as she thought. Best of luck!

  15. DDS in Canada here, fortunately for me, Dental school in Canada was a fraction of the reader’s costs and I was able to pay it all off by the 2nd year of F/T work. A colleague who studied at an Ivy school graduated with USD $400K of debt and is still paying it off nearly 10 years later.
    USD $125K/year is about right for P/T in a large city. I’m a GD associate in a HCOL city and also working P/T 3 days/week gross $140K/year, though definitely not 10hrs/day. As a dentist in Canada, you will often earn a lot more working in rural areas, an associate working 5 days/ week in rural Alberta could gross over $240K/year. I thought about rural life when I first graduated, but my husband’s business is tied to our city and he earns a lot more than I do. We are FI with 2 young children but do not plan on fully RE as we love our careers and I’m already able to spend a good chunk of my time with children. I would tackle the debt, starting a family will always change things.

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