MtoM #159: Surgeon Gets PSLF Via the Waiver and Finance 101: Probate

This is the White Coat Investor Podcast, Milestones to Millionaire Celebrating stories of success along the journey to financial freedom. This is Milestones to Millionaire podcast159 surgeon gets PSLF via the waiver Getting quality disability and life insurance should be the first financial chore for a doctor to complete. Most docs don't have the ideal policy for their gender, specialty, state or health status. And one in seven doctors gets disabled at some point during their career. Because these policies can only be purchased through brokers, we put together a list of vetted agents who are experienced with working with the specific needs of medical professionals and who have your best interest at heart. If you have questions about insurance and what kind of policies would be the best fit for you, check out our insurance recommended list@whitecoatinvestor.com insurance and feel the peace of mind that comes with knowing you have the optimal policy in place. You can do this and the White Coat Investor can help. All right. You know what we do need help with though? We need help with champions. WCI Champions. These are the folks that pass out copies of the White Coat Investor's Guide for Students to their classmates. Okay, these are first year students, mostly medical and dental students. You know, MD do, DDS, whatever. But we are also, if you have a US based school, we will even send these out for PA, NP and pharmacy schools this year. All you have to do is volunteer to pass them out. That's it. That's what makes you a champion. We send you a few boxes of books, you pass them out to your classmates, you get some swag. That's the whole deal. But by getting this information into the hands of your classmates early, you can change their lives. You can help them be financially literate, become financially disciplined. And when you apply that to, to the high income that they're going to have eventually, it will make all the difference in the world. Hundreds of millions of dollars of value that you can provide to your classmates by being a WCI champion. You can sign up whitecoatinvestor.com champion. We only need one for each school, but we do need one, so please sign up. By the way, you're running out of time. We need time to print the books and get them out to you. So the deadline ON this is March 15th. You've only got a couple more weeks. All right, we've got a great guest today, and this is kind of a, I don't know if it's an unusual milestone. We've had so many different milestones. We've certainly had somebody on before that got public service loan forgiveness, but I don't think we've ever had somebody who got it in this particular way. It's a very interesting story, and I think, particularly if you're going for public service loan forgiveness, you will find this one absolutely fascinating. Stick around. Afterward, we're going to talk about probate, why you might want to try to avoid it. All right, our guest today on the Milestones to Millionaire podcast is Shauna. Shauna, welcome to the podcast.

Thank you. I'm happy to be here.

Tell us what you do for a living and how far you are out of training.

I am an acute care surgeon and I've been out of residency for about five years now.

Five years out. Okay, so this is all adding up correctly. Five years in training as a surgeon. Five years out. Ten years total. Tell us about the milestone we're celebrating today with you.

So the big one is public service loan forgiveness. So student loans are paid off. And then I've been thinking about signing up for milestones for a while because we hit back to broke and now close to half a million in net worth also. So a couple other milestones there.

Awesome. Congratulations. You've been knocking them down just like you're supposed to, one at a time here. You mentioned we. Who's we? Is there a partner or something?

Yeah, I have a husband. We've been married for going on 12 years now.

Okay, so what, halfway through med school or so that sound about right?

We got married right after medical school. So training was six years for residency with a research year thrown in and almost six years out from training.

Very cool. What does your husband do?

He's a mechanic.

Mechanic, okay. All right, so let's start with public service loan forgiveness. How much did you get forgiven in total?

It was about $245,000.

Wow.

That was almost all medical school loans. I had about, I don't know, probably $18,000 of undergrad loans that I graduated with that were in payment basically from the time I finished undergrad with the exception of being in medical school.

So tell us about the journey. Some people particularly going for public service loan forgiveness. Maybe not as much nowadays as a few years ago. It wasn't that easy to get public service loan forgiveness. Tell us what kind of problems you had getting it.

My story is very unusual, and I basically did everything wrong every step of the way and then really lucked out with the waiver that they released a couple years ago. So I didn't actually ever sign up for income driven repayment during training. We were in a Very high cost of living area, didn't feel like we could even make income based repayments. And so I just sort of put my loans in deferment that whole time for six years, which is horrifying to think of now, but I just buried my head in the sand and figured it would all work out one day.

It turns out you were right.

Of course it worked out, but I wouldn't necessarily recommend it. But I would like to sort of make sure that people know that sometimes things don't work out even if you don't make the right decision. Starting from day one. I wish that the white coat investor had been around from the time I was in medical school. I think it started around the time I finished medical school and started training, but I wasn't aware of it. But certainly the last five years I've done a lot of education and would do things differently if I were going back, but that's okay. So I was about to refinance my loans when Covid interest pause was announced. In fact, fielded a phone call from the person I was working with to refinance maybe a month into that 0% pause. And I said, I'm going to wait just a little bit and see what happens rather than refinancing. And then a little bit later they announced the waiver. And as details about the waiver came out, I thought, oh, maybe I can just get my undergrad loans forgiven. I've paid on those for 10 years. And then more information came out that they would consolidate everything together and credit the longest payment history. And then sort of with that, all of my loans would get lumped together. And so it was a pretty painless process for me because I was quite close to that 10 year mark of payments by the time I even applied. I applied for consolidation in like November or December of 2021, submitted the PSLF application in January, and then six or nine months later or something like that, everything was forgiven.

Wow. So this is pretty wild. I mean, how many years did you actually make payments on your medical school loans? You're talking about being in deferment for five or six years and the student loan holiday was like three and a half years. How many years of payments did you actually make on those student loans?

So I only ended up making payments from about December of 2019 to whatever whenever the pause went into effect. So March of 2020.

March, yeah, like four months.

Well, like a year and four months. But yeah, not a lot of time. And at the time we moved, we bought a house. When I moved for My attending job, which is also not the right move for everybody. It was the right move for us, but it's not the right move for everybody. And so I sort of put my. I put everything, like, on the lowest payment possible, that like, 30 year extended graduated repayment, which would not for everybody, worked out in my favor. So I really paid very minimal on my loans at the end of the day, I think when I went back and did the math, I was paying my undergrad loans the whole time I was in residency.

And that's what enabled you to get the rest forgiven was you had all these payments that counted.

Exactly.

It's an interesting loophole. That really worked out well for you.

Right? So it worked out great for me. It's worked out well for other people that I've try to encourage to look into this. So I have many friends who I've reached out to and said, hey, like, see if this will work for you. And for most people it has, which has been huge. And I think, from what I understand, they've extended the consolidation waiver. So I think that there are still some people, if you're listening to the podcast, who might, you know, still have federal loans, look into whether they might still qualify for that.

Yeah, I think currently it's going through April, is my recollection. And by the time this runs at the end of February, that still gives people, you know, at least all of March to still basically qualify in this way.

Yeah. And my understanding is as long as they apply to consolidate before that deadline, everything else sort of should apply. So that might help some people.

Did you have any private loans or anything?

I had maybe like a 10 or $15,000 private loan that I paid minimum payments on through residency and then paid off. Sort of prioritized paying that off earlier rather than my federal loans because that was at a higher interest rate after I started working. And then actually the medical school that I went to did institutional loans, so those were all subsidized at a lower interest rate than my federal loans. And so those I knocked out after the public service loan forgiveness, they were on just sort of an auto payment.

Very cool. So do you. I mean, do you remember back when you were in medical school, how do you feel about, you know, all this debt? You're borrowing hundreds of thousands of dollars. You remember how that felt?

There's part of me that wants to say it's felt horrifying, but really it didn't. Just didn't feel real.

It's Monopoly money.

Yeah, it just felt like Monopoly money. And I wasn't, certainly was not like extravagant as a medical student. You know, I had friends who went on ski vacations and like, I never did any of that. Like it was a big deal that I went to a friend's wedding one year and that was it. But I certainly also probably could have done a little bit more to be more frugal. Looking back, turns out it worked out. It didn't really matter all that much, but it was definitely a head in the sand felt overwhelming. And I just had to kind of trust that one day I was going to come out and make enough money that it would all get paid off. And that was the case. If I hadn't been eligible for loan forgiveness, I would have refinanced and aggressively paid loans off and probably still be paying them for another year or two. But I was sort of going to look at five year maximum term to do that.

Yeah, well, you've been doing a lot of other stuff. Let's turn now to some of these other things you've accomplished. I mean, when you came out of medical school it sounds like your net worth was what, minus $250,000 or so?

Sadly, it was more than that. It was, you know, it was probably closer to 350 total. Between other, you know, other student loans. We had like loans on our cars, we had, yeah, probably closer to negative $350,000. And so I think.

And you've gone from that to a positive $500,000 over the last five years.

Yeah, and I just, I was doing bad math when I said 500. It's a little bit more than that now from appreciation on our, on our primary house and then also obviously like aggressively investing over the last few years also. We're actually even over the half a million mark. So it's quite a swing from negative 350 to over positive 500.

Yeah, I mean that's almost a million dollar swing in five years. How did you guys manage to do that?

Well, we had a big shovel, so, you know, surgeon salaries are pretty reasonable. I worked a lot extra as well and you know, we did a pretty reasonable job I think, of automating savings, you know, trying to save 20% of our net income, prioritizing, paying off of any debts and then also trying to enjoy life as we went along. We've had a rough few years family wise. Both my and my husband's fathers have passed away and so we've taken some time to time and money to spend time with family, to prioritize, taking trips with families, making Memories and doing some things that if we were only focused on wealth accumulation, we probably wouldn't. But both of our dads died fairly young. And so we sort of try to find that balance of enjoying things while we have it and while we can and while we have the people around to enjoy it with and prepared for the future.

When did you and your spouse decide we're going to take this money stuff seriously. We're going to try to get rid of our debts, we're going to try to build wealth. When did you guys really kind of decide this is something we're going to do?

It was really after I came out of training and we started what felt like real life with a real job. My spouse is well compensated, but I think especially in residency, you're just so focused on working and learning. And he was focused on working hard, worked very hard and long hours too. And we were just kind of treading water. And once we got that some time to breathe and to learn, I started devouring all the financial content. I could so have read the White Coat Investor book, a lot of the blog posts on the Reddit community, listen to every podcast, probably.

Very cool. Did you guys ever have a major disagreement about your finances or have you kind of been on the same page the whole time?

The only disagreement we had really was sort of the very early on disagreement where I was told by my medical school financial aid counselor, oh, really look into this loan forgiveness thing. It's a new program, but try to make these payments. And you know, my husband was sort of like, I just don't think we can swing it with the cost of living. Like we just don't have the money to do it, you know, and that was probably the only thing that we had a disagreement on early on. Otherwise we've been on the same page. We work together. Yeah.

So what's next for you guys and your financial goals? I mean, at the rate you're building wealth, you're going to be millionaires in a year or two.

So, gosh, that's wild to think about. Millionaire doesn't mean as much today as it did 20 years ago, which is notable. We are currently building a house that will have space for my mother in law. So we're, we're sort of, that's the biggest project right now and that's more of a personal than a financial investment. But, but I hope, I think there will be some sort of positive financial implications there. And I would like to get to a point where I feel secure that I have enough saved that I can decide how and when I want to work. I don't anticipate really cutting back anytime soon, but I would like to sort of have the power to say I don't want to do XYZ and I don't need to. So that would be. I think that's sort of the next target. So I don't know what dollar amount that's going to be. It's certainly more than 1 million. It's probably closer to 5, which will take some time.

But yeah, very cool. Well, you guys are off to a great start. Congratulations on getting public service loan forgiveness. Some of that obviously due to some of the relatively recent rule changes in that, but congratulations on that. It must feel good to be rid of those student loans.

Life changing.

You guys also have a great start on building wealth and really getting off on the right foot. So congratulations to you both.

Thank you very much. We couldn't have done it without your help, the wci, the whole team's help and sort of going back to the live like a resident, make some reasonable decisions and remember that you have a big shovel and so even if you have a big hole, you can dig out of it fairly easily.

Awesome. Good advice. Well, thanks so much for coming on the podcast.

Thank you very much.

All right, glad you enjoyed that interview. It's interesting. We talk a little bit about moral hazard and this isn't talking about people being moral immoral. Right. This is an economic term that when incentives maybe aren't exactly what they should be, people make different choices. I mean, that's the first law of economics that people do what they're incentivized to do. And so there's a lot of people out there that feel like they played by the rules, they did the right thing. They refinanced their student loans in February of 2020 before the pandemic related student loan holiday happened. And now they're kind of bitter they didn't get those 0% $0 payments for three and a half years. Well, it's the same way for those who were really on top finances with their student loans, maybe paid off their student loans in two or three years. And then they're not so happy when they see somebody who maybe didn't manage their student loans properly and ended up getting more benefit than they did. It's as I always say when we talk about these rules that are laid out by Congress and by the irs, hate the game, but don't hate the player. If this is the way the laws are written, if medical students are allowed to be on Medicaid if they they're allowed to get food stamps. These are for low income people. Medical students have low income. Just like PSLF is not just for social workers. It's not just for firemen and cops. PSLF is for anybody that works for a 501. Whether you're making $800,000 a year as a surgeon or whether you're making $24,000 a year as a social worker, it's all for you. So if you are going to work for a nonprofit, if you're going to be an academic doc, if you're going to work at the and you have federal student loans, you ought to become an expert in all the rules regarding public service loan forgiveness. Now, remember this waiver thing, this thing that allowed this doc to get public service loan forgiveness. This thing expires in like six weeks. So if you are one of these people that qualifies because you've been making payments on undergrad and you can consolidate your loans and these sorts of things, you really need to get on it this month because it may not be extended again. It's been extended a few times, but it may go away, particularly if the administration changes. That wouldn't surprise me at all this fall that this sort of expanded public service loan forgiveness benefit would go away. All right, I promised you at the top of the hour, we were going to talk about probate. Probate is the legal process for reviewing the assets of a deceased person and determining who the inheritors are. It generally focuses on a will, if there's a will. Probate is all about making sure that the assets are passed out in accordance with the will. States also have laws of what's going to happen if you don't have a will. And this happens in most states, like you would expect. It all goes to your spouse. If there is no spouse, it goes to your kids, and then so on and so forth to other family members. But probate is one of those processes that a lot of people would rather avoid. It varies by state, but in some states can be pretty expensive. And it's a public process, so other people can find out what you own, what you were worth when you died. And it can be time consuming. I mean, it might take as much as a year for the heirs to really get what's coming to them. And so for those reasons, a lot of people do what they can to avoid probate for part or all of their estate. You know, it's interesting though, in some states it's not as big of a deal like when my parents went in and do their estate planning, they were basically told, no, this isn't worth trying to avoid probate. Probate is not too bad in Alaska, and we think you ought to just go through probate. Just get a will and go through probate. It's no big deal. And, you know, so I had some questions about that because I'm the executor. But yeah, that was the way it worked out in Alaska, but that's not the case in all states. So some ways in which you can avoid probate. Well, one thing is you can give stuff away before you die, right? Particularly if you're nowhere near the estate tax exemption. You can give things away. It's very effective. Anything you gave away before you died doesn't go through probate. There is a downside to doing that. You lose the step up in basis of debt. It's sometimes better for you to die and your heirs to get it with that step up in basis than for you to give it to them before they die. This is a big mistake a lot of people make. They put their house in their kid's name, right. Or they have both names on it and they think they're going to facilitate things. Well, what happens is that step up in basis of death goes away. That's not so good. All right, here's another way you can avoid it. If you're just not wealthy, you don't end up having to go through probate. In my home state of Utah, the limit is $100,000, not including vehicles registered in the state. If your net worth is less than that, you don't go through probate. And so that probably isn't going to work for most white coat investors. I hope it's not. But that is one option. Here's another option. You can have joint ownership in community property states. There's a few of those, most of them in the Southwest, but also Louisiana and Wisconsin. Anything that's acquired during the marriage is considered to be owned equally by both spouses. 50, 50. And both spouses may pass on their share of property, their chosen heirs. Similar to tenancy in common title, you can have community property with rights of survivorship. You can have joint tenancy with rights of survivorship. Right. So this stuff isn't going through probate because there's a right of survivorship. It goes to the person who has that right of survivorship. Tenancy by the entirety you've probably heard of. This is usually something used from an asset protection standpoint, you know, but it also obviously keeps it out of probate if it's going to that married couple. Okay, so basically leaving something to your spouse keeps it out of probate. Obviously, it's a much bigger deal when the second spouse dies, but that works fine for keeping things out of probate. For a lot of things, you just need to designate beneficiaries. Your retirement accounts, annuities, life insurance policies. Designated beneficiary, and that passes to them outside of probate. Doesn't have to go through probate even for taxable accounts, brokerage accounts, and bank accounts. A lot of times you can make. You can title them with a payable on death designation. So it just automatically goes to that person rather than having to go through probate. Sometimes it's called a transfer on death account. Another commonly used technique is a revocable trust. Revocable trust, you can put stuff in, you can take it out, no problem. You can use it however you like. Taxes on that asset are payable on your personal tax return. But the point of a revocable trust is it helps avoid probate. So anything that's in the trust is distributed in accordance with the instructions in the trust rather than going through probate. So it's a good way you can get some privacy, maybe reduce costs and distribute it, probably most importantly, faster after the time of death. Obviously, any other trust, an irrevocable trust is just like giving money away, right? It's no longer yours, it's no longer in your estate. It doesn't go through probate. It's distributed in accordance with the rules of the trust. Now you can get into some more big ticket items to avoid probate. A little bit more complexity in your financial life. But you can use a family limited partnership or a family limited liability company. These sorts of structures also help to avoid probate. A lot of times they can facilitate estate planning. They may be able to help with estate taxes. They have some asset protection benefits as well. But those are kind of all the ways to avoid probate. When you think about estate planning, there's really three reasons to do it. One is to make sure your stuff goes to who you want it to go to and make sure your minor children are taken care of. You designate somebody to take care of them as well as somebody to manage the assets. The second thing is to, of course, avoid probate, particularly if it's expensive or onerous or you really want that privacy. And lastly, of course, is to avoid taxes. You know, estate taxes, but also potentially income taxes. Those are the purposes of estate planning. And, you know, avoiding probate is often a motivation for people to do some estate planning. All right, Getting quality disability and life insurance should be the first financial chore for a doctor to complete. Most docs don't have the ideal policy for their gender, specialty, state or health status, and one in seven doctors gets disabled at some point during their career. Because these policies can only be purchased through brokers, we put together a list of vetted agents who are experienced with working with the specific needs of medical professionals and who have your best interest at heart. These folks sell hundreds of policies to White Coat investors every year. They know the ins and outs. They can help you get the policy that's best for you. If you just want to have your current policies evaluated to see if you need to make a change, or if you know you need a policy, go to whitecoatinvestor.com insurance and feel the peace of mind that comes with knowing you have the optimal policy in place. All right, this has been the Milestones to Millionaire podcast. If you'd like to apply to come on this, you can do so whitecoatinvestor.com Milestone we'd love to have you. We wanna celebrate your milestones with you and use them to inspire others to do the same. Till the next time. Keep your head up, shoulders back. You've got this. We'll see you next time on the Milestones to Millionaire podcast. The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.