Hopefully, the thrill of being accepted into dental school hasn’t been overshadowed by how you’re going to foot the bill. The cost of tuition for a four-year degree from a Canadian dental school can run over $200,000.1 But the good news is you’ve got options. A student loan and/or line of credit can help pay for your tuition, and when managed responsibly, help you achieve your future goals as well.
Perhaps you’re hoping to open your own practice or buy a home one day. Managing credit wisely and understanding the features of different types of credit can help ensure you have access to funds when you need them and don’t get over your head in debt.
Chances are you already have access to a limited amount of credit via a credit card. While a credit card is handy for short-term credit needs, a loan or a line of credit will provide you with a lower interest rate and typically a higher credit limit. Each option provides unique benefits, so deciding which one is best for you depends on your particular situation, what the funds are to be used for and how soon you plan to pay off the debt.
Here are five key things to consider:
- A student loan provides you with a lump sum of funds
Once you’ve been accepted into dental school, you’re eligible to apply for a government student loan. The amount you’re eligible to receive comes in the form of an annual lump sum based on your tuition fees and living expenses. The advantage over other forms of credit is that government student loans are interest free until you graduate.
- A line of credit provides access to credit as you need it
A line of credit differs from a loan in that instead of providing you with a lump sum, you have access to a fixed amount of funds. It provides you with the flexibility of being able to draw money up to the set limit whenever you need it. Matthew Greeley, Scotiabank Healthcare & Professional Advisor, says, “a line of credit may give you the security of knowing you’ll be able to cover unexpected educational expenses or clinic equipment costs should they arise.” Unlike a student loan, it offers some flexibility of only drawing on it for your tuition and educational needs as they come due or arise. “While there’s an advantage to this flexibility, one has to be disciplined around borrowing as ultimately it all has to be paid back and you want to ensure your have coverage for the duration of your dental studies,” says Greeley. It’s why he advises you create a budget and only borrow the amount you really need.
- Loans and lines of credit have different repayment schedules
You have to start repaying a Canadian government student loan six months after you finish school.2 However, depending on which province your loans are from, interest may begin to accrue during your six-month grace period before repayment starts.3 In the case of a Scotiabank student line of credit, there is a two-year grace period before you have to start making payments, unless you’re over the limit. Interest on the line of credit begins to accrue from the time the money is drawn. It’s therefore wise to start repaying the debt as soon as possible. It’s important to keep your borrowing in good standing and stay within the limit of your line of credit. With Scotiabank, under the Healthcare+ Dentist Banking Program, dental students receive preferred rates for their dental studies and beyond once they go into practice.
- What are your plans after graduation?
“When considering your credit needs, think not only about your current requirements but about your future needs as well,” says Greeley. For instance, there may be a benefit in transitioning your student line of credit over to a revolving line of credit post schooling to help finance the opening of your own practice or the buying of a home. “The key,” says Greeley, “is to speak to your Advisor to understand the options available to you and create a financial plan that will set you up to have access to capital now and in the future.”
- Credit should be part of your overall financial plan
Being smart about debt management is important. Not only will it save you money on interest payments, but responsible debt management will affect your credit score, which impacts your ability to apply for credit in the future. That’s because lenders use your credit score to help determine how financially responsible you are and whether or not to approve you for a loan.
Scotiabank Healthcare & Professional Advisor, Lynne Owen, says she helps dental students consider both their current and future borrowing needs and compare credit options and interest payments. “This can help you choose the best option for your specific requirements. Plus, it will enable you to see how much total interest you’re being charged and the positive impact of creating a plan that will enable you to pay your debt off sooner.”
As a dental student, you’re most likely going to be graduating with some debt. But with the support of a Healthcare & Professional Advisor and a financial plan that’s tailored to your needs, you can set yourself up for future financial success. A dedicated Scotiabank Healthcare & Professional Advisor with expertise in your industry can simplify this process and advise you on whether a loan, a line of credit or a combination of the two makes the most sense for you.
For customized advice and solutions to help you access and manage credit to help fund your education and launch a successful dental career in the future, contact us today.
