The story of an orthodontist making 6 figures with $1 million in student-loan debt shows why doctors and lawyers are no longer the richest people you know

  • Despite the six-figure salaries, working as a dentist, doctor, or lawyer isn’t the path to wealth it once was, thanks to staggering student-loan debt.
  • Mike Meru, an orthodontist who went to dental school at the University of Southern California, owed over $US1 million in student loans as of Thursday, according to The Wall Street Journal.
  • Meru is just one example of the rising cost of a professional degree in the US.
  • Many of the richest people in the US today work in tech or business – an MBA is often a better return on investment.

Student-loan debt has reached staggering heights, with graduates in the US owing more than $US1.3 trillion to the federal government.

But perhaps few have felt the burn of student debt more than Mike Meru, a 37-year-old orthodontist who owed $US1,060,945 in student loans as of Thursday, The Wall Street Journal reported.

It’s a small sum compared with the $US2 million loan balance he’s expected to face in two decades. That’s because Meru pays about $US1,590 a month – 10% of his monthly income, but not enough to cover the interest. At this rate, his debt grows by $US130 a day, according to The Journal.

Meru is a graduate of the University of Southern California’s Herman Ostrow School of Dentistry, one of the most expensive dental schools in the US. He attended from 2005 to 2012, including his orthodontics residency, for which he paid tuition.

During this time, interest rates for graduate students were as high as 8.5%, The Journal reports – a sizable increase from the 2.77% the federal government set for students in 2004, when Meru calculated that given the expected salary, dental school would be a good investment.

Five years ago, only 14 people in the US owed $US1 million or more on their federal student loans. Now, 101 people owe at least $US1 million, the report says. And Meru’s situation shows that despite high salaries, becoming a doctor, dentist, or even a lawyer isn’t the path to wealth it once was.

Tuition hikes, again and again

At graduation in 2016, the typical dental-school student with loans owed $US287,331. The average indebted medical-school grad the following year owed $US190,694.

Those numbers aren’t surprising considering the cost of tuition.

Dental school is the most expensive professional-degree program in the US. During the 2015-16 school year, private nonprofit dental schools charged on average more than $US71,000, while public in-state dental schools charged about $US38,000, according to the Urban Institute.

Dentistry medicine law tuition comparison v2Andy Kiersz/Business Insider

During Meru’s first year at USC, tuition was $US56,757, of which he owed $US43,976 after his wife’s tuition discount as a university employee, according to The Journal.

By the end of his second year, tuition at USC had increased by 6%, and interest rates were triple what Meru had planned for, the report says. Tuition increased by 6% again his third year, and before long, Meru was deep in six-figure debt.

Average tuition for private medical schools was cheaper than that for dental school in 2016, but not by much. Private programs charged $US53,240, and public in-state medical schools charged $US28,720.

Law-school tuition isn’t far behind. Private law school cost $US47,450 on average in 2016, and public in-state tuition was nearly $US19,000 less.

Student debt doctors dentists v2Andy Kiersz/Business Insider

Though dental school has the highest price tag on average for a professional degree, dentists aren’t the highest-paid professionals. The median-earning dentist in the US makes $US151,440 a year, and the median-earning physician makes at least $US208,000, according to the Bureau of Labour Statistics.

Plus, while doctors are paid during residency, dental specialists usually perform their residencies at universities that charge tuition.

Tech and business pay well too

While dentists, doctors, and lawyers make six-figure salaries, many have student debt that outweighs their income.

A master’s degree in business administration also comes with a pricey tuition, but traditional programs are only two years compared with three years of law school or four years of medical or dental school, not counting residency. With common six-figure starting salaries and average signing bonuses ranging from $US16,000 to $US30,000 for graduates from top US business schools, the return on investment for an MBA can be quite lucrative.

For example, the cost to attend Stanford’s business school is $US119,000, and MBA graduates from there make an average starting salary of $US125,000, according to The Princeton Review. That’s an estimated 325% return on investment over 10 years.

Even MBA graduates from public schools fare well. Arizona State University’s Carey School of Business has a total program cost of $US68,000, and graduates earn an average starting salary of $US98,000, turning up a 250% ROI over 10 years, according to The Princeton Review.

Meanwhile, software and IT services ranked as the highest-paying industry in LinkedIn’s 2017 “State of Salary Report.” The average mid-career employee at a Silicon Valley tech company makes well over $US100,000, HuffPost reported. Even employees less than five years into their career at the biggest tech giants, like Google and Facebook, are earning six figures.

Employees in fields related to artificial intelligence – either fresh out of school with a doctorate or with less education – can be paid from $US300,000 to $US500,000 a year or more in salary and company stock, according to The New York Times.

What’s more, many workers at Amazon, Google, and Facebook show up with just a bachelor’s degree. Though they may carry student-loan debt too, their balance is likely to be much lower than that of professional-school grads, who typically have higher interest rates. Loans are also unsubsidized for graduate students, meaning they begin accruing interest when the borrower is still in school.

Spending a lifetime in debt

Meru took out a total of $US601,506 in student loans over his seven-year education, according to The Journal. He has repaid $US39,000 since consolidating his 50-plus student loans for the second time in 2015.

Though Meru has a lowered interest rate of 7.25%, his loan balance has grown by $US148,948, escalating to over $US1 million today.

The expensive education did help Meru land a lucrative job earning $US225,000 a year at a corporate practice – higher than the $US208,000 median income for orthodontists, according to the BLS.

But that six-figure salary isn’t all it’s cracked up to be when there’s nearly a lifetime of student-loan debt to shoulder.

Meru is now on a government-sponsored repayment plan of monthly payments capped at 10% of his discretionary income, so he can have enough money left over for his family of four, The Journal reported.

When his 25-year repayment plan ends and his balance eventually reaches $US2 million, that amount will be forgiven. The Journal estimated that could cost Meru more than $US700,000 in income tax payments at the current tax rate.

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