Liz Weston

Dear Liz: What are your recommendations for a recent dental school graduate, now practicing in California, who has about $250,000 of dental school loans to pay off but who also knows the importance of starting to save for retirement?

Answer: If you’re the graduate, congratulations. Your debt load is obviously significant, but so is your earning potential. The Bureau of Labor Statistics reports that the median pay for dentists nationwide is more than $150,000 a year. The range in California is typically $154,712 to $202,602, according to Salary.com.

Ideally, you wouldn’t have borrowed more in total than you expected to earn your first year on the job. That would have made it possible to pay off the debt within 10 years without stinting on other goals. A more realistic plan now is to repay your loans over 20 years or so. That will lower your monthly payment to a more manageable level, although it will increase the total interest you pay. If you can’t afford to make the payments right now on a 20-year plan, investigate income-based repayment plans, such as Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE), for your federal student loans.

Like other graduates, you’d be wise to start saving for retirement now rather than waiting until your debt is gone. The longer you wait to start, the harder it is to catch up, and you’ll have missed all the tax breaks, company matches and tax-deferred compounding you could have earned.

Also be sure to buy long-term disability insurance, even though it may be expensive. Losing your livelihood would be catastrophic, since you would still owe the education debt, which typically can’t be erased in bankruptcy.