There's an old maxim, "There are two ways to get rich in this world, either be born rich or marry rich." If you are rich, you don't need to read this article, but if you count yourself among the less fortunate millions (not dollars, but people), then this article is for you. There's another old maxim, "It takes money to make money." If you were not born rich and did not marry rich, then there are only two ways to get money, earn it or borrow it or a combination of the two. If you graduate from high school and go out and get a job instead of seeking higher education, you can earn money. In most cases, however, you will not earn a lot of money over your lifetime.

To earn more money, you have to invest in yourself by getting an education. Yes, there are distinct parallels between the amount of education you receive and the amount of money you can make over your earning lifetime. However, education costs money, and you don't have money, so what do you do? You know mom and dad can't pay for it all, so it looks like your only option is to borrow money. You borrow money to invest in yourself through education, gambling that your future earnings will be enhanced enough to pay off this debt and allow you to live a better lifestyle. If you choose to avoid the debt by not seeking higher education, your future earnings will suffer. So you choose debt in exchange for knowledge and future earning power. It's an investment.

The Journal of the American Dental Association published an article about student debt, written by its editor, Dr. Lawrence H. Meskin. This article stated that the average dental student graduates with debts of $150,000 (today, it is higher). Findings from an ADA study said, "Ninety-one percent of (student) respondents said, "I could not afford to purchase a practice." Also, "There has always been some professional conjecture that high student debt forced new graduates to select dental delivery systems outside of the traditional fee-for-service modality. That 23% of recent graduates derived more than 25% of their billings from PPO's, capitation plans, and these graduates don't see their debt disappearing in the near term. More than 75% say their student debt will have a somewhat or substantial effect on them financially for the next 10 years."

The problem, however, is not student debt, nor the amount of that debt. It's what students do after graduation in their attempt to handle this debt. Ninety-one percent of these students are unfortunately misled into believing they cannot afford to buy a practice when just the opposite is true. These recent graduates cannot afford NOT to purchase a practice.

These students have invested in their education, and now they are in debt. They need income and lots of it—more income than they are ever going to make working for someone else. Unfortunately, there are few jobs, if any, that are going to pay them more than a subsidence income. They will scratch around looking for that dream job, thinking that it will pay them enough money to live on while paying off that student debt. That job does not exist. Oh yes, they will get all kinds of promises from dentists who are willing to allow them to hang around their offices during off-hours (evenings and Saturdays), hoping to snare some emergency patients or perhaps do some grunt work the current practice owner does not want to do. However, it will never generate enough income to live on and pay off all of the school debt. It's always a commission job, so it does not cost the practice owner any money to have you in his/her office.

It usually takes two to three years for these naïve graduates to discover there is no easy solution to this debt problem. Many new dentists spend two to three years going from place to place, looking for the non-existent perfect job. And then find themselves deeper in debt (the interest has compounded on that education debt, and they live beyond their means) and no prospects for making a decent living. I have been in the dental business for over thirty years, and I have seen hundreds, if not thousands, of dentists go through this same scenario. The most frustrating part of it is that it is so unnecessary.

If you are in debt, you need a steady income source that provides you with more money than any job will ever pay. You need to own a practice with a large enough patient base to generate an income sufficient to provide you with a reasonable income and the money needed to retire that debt (for the education loan and the loan for buying a practice). The irony is that being in debt requires you to go further in debt. You need to invest in the one thing that will provide you with the income that will ultimately get you out of debt, and that is a practice.

All of our recent graduates/clients have educational debt. Once they understand that they cannot afford not to buy a practice, our graduate/clients discover they can borrow the money needed for a practice acquisition. Some of them are smart enough to realize there are no dental jobs that will pay them enough money to live on and pay off that debt. These people are smart enough to invest in themselves by purchasing a practice that will provide them with the income needed to get out of debt. They are not afraid of investing in themselves. They know they can do the work, they need the patient base to work on, and the income will follow.

Education costs are high but not out of line with any other investment that can pay a high return rate. If a dentist uses his/her head and grasps this article's logic, they will not waste years coming to this conclusion. The JADA article said it took $250,000 to educate one dentist. Well, if that dentist chooses not to spend a lot of time and invests in a practice immediately, that dentist's gross income should exceed $35,000,000 over his/her practice lifetime (35 years of practice, $1,000,000 gross per year in today's dollars). That makes the cost of that education less than one percent of total future revenues, which is just slightly less than the telephone expense for that practice over that same period.

The problem with education is not the cost but the misinformation provided to students relating to dentistry. One percent of total future revenues for education is not an expensive investment. If anything, it is a bargain. It's the hidden cost associated with the misinformation provided to these students. Students are not being told of the importance of time and income, of starting their career as a practice owner, not an employee. Our first-year practice purchasers have an average pre-tax net income of $165,000, after all expenses and practice-related debt service. Compare that to any job offer.

Your education is a threshold expense. Financial success requires additional investment beyond the cost of education, and therefore more debt is necessary. However, if that investment gets you in front of patients and provides you with a healthy six-figure income your first year after graduation, then none of that combined debt will be a problem. Delay only costs more money. Get off to a good start, and you can retire that debt within three years, not ten. It's time to inform the students about the financial facts of life. Call AFTCO today at 800-232-3826 or visit our website at for more information.
We look forward to hearing from you.

Print this Article