For many students, the choice between doing a residency and going straight into private practice is a tough one. In today’s world of growing student debt, it’s important to be aware of the costs and benefits of each.

Here’s a simple model. The American Dental Education Association says 2013 dental school graduates had an average debt of $241,000. If you graduate with the average debt and do a one-year residency, your debt will generate around $15,000 in interest during your first year out. (This assumes 6.8% interest rates.)

If you can live on $30,000/year, a residency that pays $45,000/year will let you pay off your first year of interest but none of the original debt. This is kind of like teleporting forward a year and popping out with increased earning power and no added debt. Doing this in one year instead of dragging it out through expensive CE doesn’t sound too bad, right?

Think in the long term. If you’re deciding between a residency and a $100,000/year job, the job would put you $55,000 ahead. A resident would probably make that money back over ten years—but what if those $55,000 were generating investment returns over 30 years instead of 20? If you invest $55,000 in a mutual fund with an average annual return of 8% over 30 years, it grows into $553,446. After 20 years, it generates $256,353. That can be a big difference at retirement.

But Megan Mathers, JD, of Pesavento & Pesavento, says the numbers don’t tell the whole story.

“That $100,000 associate job might not be a great fit or it might be up for renegotiation after a year—it depends upon the practice,” she says. “If you are the only associate, though, and could see yourself buying the practice within a few years, it may be a safer choice financially.”

We could plug in numbers for other sorts of residencies—ones that charge tuition or are unpaid—but the takeaway is simple: Don’t do a residency for the money. Even if you want to ignore the world’s collective wisdom about chasing dollar signs, you should know a residency graduate and a dentist practicing straight out of dental school could make a similar living over their lifetimes. But if you want to do deep sedation, place implants or perform molar endo on teeth with fishhook roots, doing what you love is worth the money.

Do you have any suggestions for weighing the costs and benefits of a residency? Share them in the comments below! Also check out my article on Simplifying the Terms of Student Debt in ASDA News!

~Christian Piers, Colorado ’16, editor-in-chief