Written By Travis Hornsby, CFA®, CFP®
The hidden cost of education grows each year. Between tuition inflation, accrued interest and origination fees, your student loan balance at the end of your program can balloon more than you think.
Dental programs are one of the most expensive programs out there, and one school is charging over $700,000 for a dental degree. Is it worth it?
Yes, I think it is. Here’s why.
Hidden costs of attendance schools don’t tell you about
I like to look at the cost of going to school for various degree programs to calculate the total cost of attendance. But the one thing you need to know is that these cost of attendance estimates from colleges are notorious for being very inaccurate.
Tuition inflation
The vast majority of graduate programs in America engage in tuition inflation. The schools know they're going to inflate tuition prices year after year. Yet, most of the cost of attendance estimates you’re given don’t include the expected cost increase from inflation in the total amount you’ll have to borrow.
The cost of accrued interest in education
Besides expected tuition inflation, schools often don’t disclose the amount of accrued interest you’ll have at graduation. Because of the COVID forbearance, student loans have zero interest through December 31, 2020. But normally, your loans collect interest while you’re in graduate school.
It’s a simple rate of interest, so it isn’t as bad as it could be. But it’s still substantial.
For example, if you borrow $100,000 at 6% interest for dental school, you’ll pay $6,000 in interest for one year. Multiply that by four years, and borrowing $100,000 costs you an additional $24,000 that’s tacked onto your balance because of accrued interest.
Origination fees
Origination fees don’t have as much impact on the cost of borrowing as tuition inflation or accrued interest, but it’s still a problem.
If you take out a Stafford loan, you pay a 1% origination fee that’s usually financed into your loan. Grad PLUS loans, which is generally used for everything you borrow over $40,000, the origination fee is closer to 4.25%.
If the average origination fee you pay is 3% and you borrow $100,000 for school, that’s an additional $3,000 per year in financing fees. And that’s on top of tuition inflation and accrued interest that you’re already paying.
America’s first $700,000 degree
New York University (NYU) has a $700,000 dental degree – a DDS degree – for a four-year program. The total cost of attendance we calculated at $700,000 is based on projected numbers, so an individual student’s budget can influence the final price.
But based on our calculations, NYU Dental School is the first school in America to offer a degree at over $700,000 if you finance it yourself and don’t receive assistance to offset the cost.
The total educational expenses are listed on NYU’s site. The first year is $99,562 while the second, third and fourth year is about $98,600.
Based on historical data of previous years’ tuition prices (thanks to the Wayback Machine), today’s cost of $99,500 will likely be $104,000 next year, $108,000 the following year, and then $112,000 and so on.
That price is only for the educational expenses – it doesn’t include living expenses or financing expenses.
This is why you ended up graduating with so much more debt than you thought you were going to have: the tyranny of all of these expenses can really add up.
If you look at the total cost for four years of dental school for someone who has to borrow to cover the entire cost of their education, the cost sums up to $705,977. That’s the projected cost we arrive at considering accrued interest, tuition inflation, living expenses and other hidden costs that schools don’t like to tell you about.
Why I think a $700,000 dental degree is worth it
We know that high student debt causes a lot of anxiety. Many of our clients say their anxiety is considerably less after booking a consult with us. Still, the amount of debt that borrowers carry around can lead to worry, guilt, fear, shame and depression.
Many borrowers wonder if they’ll ever be “okay” because of how much student loan debt impacts their daily life.
So why do I think getting an NYU dental degree is worth it?
First, I want to caveat that it's only worth it if your options are (1) become a dentist, or (2) don’t become a dentist and do something that's much lower paying.
It’s because of how the federal student loan system works. With income-driven repayment (IDR) plans, you’ll pay the same 10% of your income whether you go to NYU and spend $700,000 or the University of Alabama (UAB) and spend $200,000.
Your payment for both degrees will be nearly the same because it’s based on your income.
The bottom line is you shouldn’t let debt control your life. If you have student loans and aren’t sure how best to tackle it, I encourage you to book a consult to get a custom student loan plan. Our team of experts will analyze your loans, review your options and find the right repayment plan for your situation.
Not sure what to do with your student loans?
Take our 11 question quiz to get a personalized recommendation for 2024 on whether you should pursue PSLF, Biden’s New IDR plan, or refinancing (including the one lender we think could give you the best rate).
This episode’s got me thinking about it 2 weeks later after I listened to it . As much as I’d love to not have like 300-700k loans (thanks to being a Tx resident), I’m slightly regretting my life choices thinking if I should have just splurged on life like others in my school. Please tell me that it did make a difference between them owning 250k and me owning 150k as a result of this haha…
It could make a difference – it depends on your income and student loan repayment strategy. But what’s done is done, so the only path is forward. Not “splurging” like others in your school likely taught you some valuable life lessons, and those are priceless.