Money Practices: Four tips for young professionals with student loan debt
Young professionals looking to build careers in cities from Seattle to San Diego face a conundrum: how to buy a home or commercial property while student loans beg to be paid down? Capable of earning six figures early on, many professionals including doctors, dentists and attorneys often face considerable student debt.
The average educational debt for all indebted dental school graduates in the class of 2017 was $287,331. Law school grads face an average of more than $140,000 in student debt and medical school graduates have an average of nearly $210,000, in combined undergrad and grad school debts.
While a first-year practitioner may not be in a rush to buy a home, the idea of home ownership often gains sway. Competitive housing markets make it a challenge. The median 2018 home value in San Diego, for example, is $623,700, having increased 8.1 percent over the previous year. And it’s expected to rise – a trend impacting potential homebuyers in cities like Boise, Los Angeles, Portland, Sacramento and Seattle.
Just as owning a home is part of the American dream, owning a practice or partnership is also a powerful ideal. For professionals who set up a business or buy an existing practice, the decision to lease or purchase commercial property adds to the puzzle.
Here are a few considerations:
Pay off student loans? Maintaining a repayment schedule is essential. For many, paying off student debt early is a priority. Crunch the numbers with a banker you trust to see how much you’d save paying off these loans in 10 years versus 20. Ask if refinancing is an option, and look into loan repayment assistance for your profession through your school or the federal government.
Rent or buy housing? If home ownership is important, some of the best advice is old school: build a budget and watch expenses. Holding on to your car longer, rather than buying a luxury vehicle, is the type of idea many can embrace to pay off debt or buy a home.
Purchase commercial property? This long-term investment gives you the option of selling or renting as part of your retirement succession plan. Be sure to analyze the numbers and your personal values. Not everyone is cut out to be a landlord.
Get sound advice. No one approach fits each situation, so you’ll want a team of experts—an accountant, attorney, banker and financial advisor—who’ll take time to understand your needs and provide solutions.
In addition to financing, your banker should offer free advice, recommend products and connect you to other experts at the bank to help you pursue your goals.