17 Jun Six-figure incomes require debt

According to an old adage, “There are two ways to get rich in this world, either be born rich or marry rich”. If you are already rich you don’t need to read this article, but if you count yourself among the less fortunate millions (that would be people and not dollars), then this article is for you.

There’s another old adage, “It takes money to make money”. If you were not born rich or married rich, then there are only two ways for you to get money, earn it or borrow it.

Generally, in order to earn the most you can over your lifetime, you have to invest in yourself by obtaining an education. It is well known that for most everyone, there are distinct parallels between the amount of education you receive and the amount of money you can make over your lifetime.

This creates an interesting conundrum. Higher education to earn more money requires money. But you don’t have money (which is why you desire the higher education), so the likely option for most of us is to borrow money to go to school. You borrow money to invest in yourself through higher education, gambling that your future earnings will be enhanced enough to pay off this educational debt and allow you to live a better lifestyle. An interesting conundrum indeed!

If you choose to avoid this educational debt, your future earnings will suffer. So, you made a wise choice. You chose dental school debt in exchange for increased knowledge and increased future earning power. That makes your educational debt, in actuality, an investment.

The April 1999 (Vol. 130) issue of 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. Findings from an ADA study said “Ninety-one percent of [student] respondents said, “I can not afford to purchase a practice.” In addition the article stated, “There has always been some professional conjecture that high student debt forces new graduates to select dental delivery systems outside of the traditional fee-for-service modality. Twenty-three percent 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 substantial effect on them financially for the next 10 years.”

There indeed is a problem, however, the problem is not the fact student debt exists or in the amount of the debt that has accumulated. The problem is what these students opt to do after graduation in their attempt to service their 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.


Most dental school graduates have made a substantial investment into their education and are relatively heavy in debt when they graduate. These new dentists need to earn a substantial income to be able to service that debt and cover their basic living expenses. As mentioned, according to the ADA findings, 91% believe they can not afford to buy a practice, so, they typically decide to take the associate route. But, with the average annual associate incomes being in the $90,000 to $110,000 range, most will not earn what they need as an associate.

Typically what happens to most new graduates is that they scratch around looking for that dream associate position. But they eventually discover that the dream position simply does not exist. They 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. They will get job offers to work the capitation patients of a practice. Some will land true associate positions working with some quality patients but they will discover that the annual income is still not high enough to satisfy their financial needs. Unfortunately, most new dentists who don’t acquire a practice will not earn enough to cover living expenses as well as pay-off student debt.

It generally takes two to three years for these new graduates to discover that there is no easy solution to this debt problem. Many of them spend years going from place to place looking for that non-existent dream position or end up in dead-end associateship positions. They often find themselves even deeper in debt (the interest has compounded on that education debt) and no legitimate prospects for making a decent living.

The most frustrating part of this scenario is that it so unnecessary. To earn enough money to pay off their existing debt and sustain a decent lifestyle, these dentists need a steady source of income that much more than can be earned in an associate position.     This is easy to solve. They need to invest in the one thing that will provide you

with the income to ultimately get you totally out of debt… a dental practice. You have to love the irony of the solution. Being in debt requires a dentist to go further in debt to obtain a dental practice so the dentist can get out of debt!

Virtually all of PARAGON’s new practitioner clients have educational debt. And generally lots of it! Once these doctors finally understand that they cannot afford NOT  to buy a practice, they are on the right track to solving their problem. Our recent graduate clients are wise enough to realize there are no dental jobs that are going to pay them enough money to live as they deserve as doctors as well as provide the funds needed to pay off their student loans. These young doctors are wise enough to invest in themselves once again, by purchasing a practice that will provide them with the income needed. They are not afraid of going deeper into debt to invest in themselves.

Education costs are high, but not at all out of line with any other investment that can pay a high rate of return. If a dentist will use his or her head and grasp the logic of this article, then they will not waste years coming to this conclusion. The JADA article said it took $150,000 to educate one dentist. Well, if that dentist chooses not to waste a lot of time and invests in a practice immediately, then that dentist’s gross income can easily exceed $17,500,000 over his or her practice lifetime (35 years of practice, $500,000 gross per year, not adjusted for inflation). That makes the cost of the education less than one percent of total future revenues, which is less than the telephone expense for the typical dental practice over the same time period.

The problem with higher education in dentistry is not the cost. The problem is the misguided information provided to dental students relating to sound business decisions. One percent of the total future revenues for education is not an expensive investment, it is a real bargain. The cost is the misinformation provided to these students, misinformation often supported by the instructors themselves and articles such as this that appear in JADA. Students are not being told of the importance of time and income, of starting out their career as a practice owner, not an employee. Our first-year practice purchasers have an average pre-tax income of $175,000, after all, expenses and practice-related debt service. Compare that to any job offer where you will be lucky to make $100,000 your first year.

Your education is a threshold expense. Financial success requires additional investment and therefore additional investment debt. If that additional investment debt gets you in front of high-quality patients and provides you with a healthy six-figure income your very first year after graduation, then none of this additional investment debt will ever be a problem. Delay and you will only end up costing yourself more money. You will eventually purchase a practice, just later than you should have!

It’s time for someone to inform these students about the TRUE financial facts of life. It’s time to talk with PARAGON!


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