MtoM #2 - Pediatric Intensivist gets PSLF with No Hassle

This is the White Coat Investor Podcast. Milestones to celebrating stories of success along the journey to financial freedom. Here is your host, Dr. Jim Dali. This is the Milestones to Millionaire episode number two, a PSLF success story. Welcome to this. I hope you're enjoying this new podcast we've got. It obviously runs once a week, kind of opposite of the regular White Coat Investor podcast. They're shorter episodes where we highlight a listener's recent financial achievement, whether that is paying off a mortgage, paying off their student loans, getting back to broke, becoming a millionaire, becoming a DECA millionaire, or getting PSLF like we're doing today. If you would like to be a guest on the show, you can apply@whitecoatinvestor.com Milestones and we'll get you on. If you're looking to boost returns, lower taxes, and build wealth, join the WCI monthly Real Estate Opportunities list for tips and strategies to maximize your real estate returns. And for introductions to exclusive investment opportunities, expect educational emails that introduce you to syndicators, fund companies, online courses, and online real estate platforms. Go to whitecoatinvestor.com reopportunities to sign up today. You can do this and the White Coat Investor can help. All right, let's get our guest on. All right, we're on here today with our guest with Yu Kawaii. I pronounce the last name right too.

Yes, that's perfect.

Awesome. Who is here today because you recently received public service loan forgiveness. So congratulations on that.

Thanks.

What do you do for a living?

So I am a pediatric intensivist at the Mayo Clinic Children's Center.

Cool. And how did you pay for medical school?

So my total tuition, insurance fees, the annual budget was anywhere from 55 to $65,000. And I went to Case Western for medical school and I received about $35,000 in grants, but the remainder was student loans and that's how I financed it.

So what did you owe when you got out?

$192,000.

And how much of that was federal.

Versus private, so 81% of that. So that ends up being $155,000 in staffer loans. And Case also offered a private loan, which I had $37,000 at the time of graduation.

What'd you do with the private loan? You still have that?

No, I actually paid it off last year.

You paid that off. Okay. But you've been in income driven repayment programs for a number of years now?

Yes.

And recently applied for and successfully got public service loan forgiveness. How much of your debt was forgiven?

So $182,000.

Okay, so you came out of school owing 155 or so in federal, and you got $182,000 forgiven.

Yes.

So tell us how that worked. Tell us about the years you've been training for a long time and been doing something the last three or four years, I assume. So tell us through the last 10 years what you did.

Yeah. So internal medicine and pediatric residency for four years, followed by pediatric critical care fellowship for three years. So I was in training for a total of seven years at University of Michigan, which was a nonprofit institution. After graduating from fellowship, I went straight to work at the Mayo Clinic Children's center, which also happened to be a nonprofit. So I've been doing that for the last four and a half years.

Okay, so how much were your payments in residency and fellowship? Do you remember?

Yeah. So the very first year, it was only $150 a month. And that's because I started to pay in 2010. 2009 is when I started residency. So my adjusted gross income was only for that half year since I was an employer in medical school. But then after that first year, it went up to $350 per month. All the way up to $550 a month at the time of graduation from fellowship.

Okay.

And after fellowship and when I started my career here at Mayo, my monthly payment went up to 1,100. And then the most recent monthly bill was for $1,500. That was back in March prior to the CARES act being initiated.

So everything from 100 something to 1,500.

Yes.

And of course, the last few months when there were no payments due and they still counted toward your public service loan forgiveness. That certainly helped.

Exactly. Yeah, that definitely helped. And I think that got stretched out to September now. So for those of you in PSLF program, it will be forgiven all the way up to September 31st and perhaps even beyond.

Yeah, maybe by the time they hear this, that'll be true. I don't think that's actually been signed in yet, but that's certainly what President Biden is talking about. So I think by the time they hear this, what you're saying is probably true as we record it. I don't think it's quite true yet. I think right now it's only through the end of January, but certainly everybody expects it to be extended through September. Okay, so who was your loan servicer? Do you remember?

Yeah. So initially it was on the total higher education, and I think their service was a Great Lakes Educational Loan. Services. And then I consolidated to what they called Direct Loans initially. And then Direct Loans switched over to Fed Loans. I think it's the same servicer, but the name just changed. And that was in 2013.

Okay. All right. So everybody I've talked to that has gotten Public Service Loan Forgiveness had to jump through a lot of hoops. Tell us about the difficulties you had getting Public Service Loan Forgiveness.

I actually did not have any difficulties at all. I was meticulously reading anything that was published for pslf. Following the directions to the table, I consolidated the direct loans at 2010 and then switched over to Fed Loans. I mean, that all went smoothly. And I've been making timely monthly payments using the IDR program that they recommended. Initially income based repayment. Then I switched over a revised pay as you earn when I became attending at Mayo Clinic. And then basically the website will tell you exactly how many payments qualify for the 120 payments. And they sent me a notification that I met all 120 payments. Then I submitted the application, which is very simple. It's basically one last time to certify your employment. Then there's maybe a couple additional questions. But the application itself is not complex at all. When I submitted it, I did call them to see how long the process would take. And they told me two to three months for the process to evaluate the application and all the payments and potential forgiveness. I just made that one phone call to determine the length of time for processing, but otherwise I just waited and they were right.

Two to three months or how long did it take?

Yeah, so I submitted it on September 8th and I heard on December 17th. So that's just short of three months.

Cool.

So they were pretty right on. And they did mention that it's because of COVID that it's taking two to three months. It's typically a one month process. And I received the email saying it was forgiven.

Sounds like they're getting a lot better at it anyway.

Yeah, I really had no issues.

They didn't miscount any of your payments or anything?

No, they did not.

Cool. Okay. So we talked before we started recording that the most recent statistics from a couple of months ago were that only 2.4% of people who are applying are getting forgiveness.

Yes.

What do you attribute that to?

So it actually tells you on the website why the applications were denied. And it looks like just looking at this Excel sheet, 59% had inadequate amounts of qualified payments, which is really surprising because the website really tells you how many of the payments are qualified. So unless there's an error in their reporting. It should be pretty clear how many payments currently that you have qualified towards the 120. But about 60% of the applications were denied because of that. And it further states that 26% had missing information on the application, which again, the application itself, at least when I completed it, was pretty straightforward.

It's one or two pages, right?

Yeah. Yes, it is. And then 11% had no eligible loans. So I think what that means is that perhaps they didn't consolidate to the appropriate Fed Loans or Direct Loans, or maybe they chose the wrong repayment program.

I mean, it sounds like 95% plus of people here just didn't understand the program at all and filled out an application for it anyway. I don't know if they're just getting bad information from somewhere or why that is. It's not 1% anymore, it's 2.4%. But it's still, you know, that number ought to be 80% and there ought to be a whole lot fewer people applying for it because if they look on the website and see they only have 80 payments, they're just stupid to apply for it.

Right? Yeah. There's got to be a systematic error here because the fact that 2.4% only qualified, I don't believe that 97.6% cannot follow the, the instructions. And if, if they can't, it's probably not their fault. There's got to be something wrong with, with the system or the way they do this.

Yeah. I wonder if some people are. Think they're sending in their annual employer certification form and are actually sending in the application or something. I don't know.

Yeah, that could be it because the applications look very similar to your annual employment certification. But I think that's, that's an important part, is that you really should do it annually or maybe once every two years. Definitely. When you switch institutions, you should do it because that's how they calculate the number of qualified payments is that you submit your certification and then they backtrack and count how many payments you made while you were employed. So you need to have that updated frequently.

Okay, so let's say we've got somebody listening here. They're an MS.4. They want to go into a pediatric subspecialty. They went to an expensive private school. They owe $450,000 in student loans or something. What's your advice to them?

My first advice is that to make sure that the forgiven amount isn't changing. They just published another proposed budget for the upcoming year and mentioned that Perhaps they're thinking about reducing the forgiveness down to 57,500, which that discussion also took place when Obama was the president. And it seems like that topic is coming up again. Again, it hasn't been approved yet, but there's a proposal for us, so make sure that you take a look at it before you invest the time to pslf. But if that's not the case and your entire student loans could potentially be forgiven, I think that you really should look into this program because it certainly worked for me and I'm sure it worked for others as well. One advice I would give is that once your training is over and you're searching for a job, you want to make sure that you apply for a job that is a nonprofit or a government institution so that you can keep making payments after your training to fulfill the 120 payments.

Now, there's some critics of the program out there that think it's a bad idea to forgive student loans that think that look at it as, hey, this is the taxpayers picking up the cost for, you know, an expensive education for somebody that makes a lot of money. What do you respond to them?

Yeah, I think this program was originally made for teachers and law enforcement and other lower paying employment. But at the same time, I think especially if you wanted to go into primary care or family medicine or other more lower paid physician positions, I think it's worthwhile to do it and I think they deserve it. Now, pediatric critical care, which is my field, isn't the lowest tier of all the physician positions, but it certainly isn't one of the top. And I think with my loans being forgiven, I can truly focus on my career and be happy with my work and my life balance because of what this forgiveness provided me. And I can continue to do the work that I want. And I think that ultimately the PSLF helped me become the doctor that I wanted to be without having to worry financially.

Awesome. Well, Dr. Kawaii, thank you for coming on the White Coat Investor. Thanks for sharing your story. I think it's going to give hope to a lot of people that have had their doubts about the program for the last decade. And I appreciate your time today. Congratulations to you.

Thanks for having me.

Okay, so what's the takeaway there? The takeaway is PSLF is real. It actually does happen. If it's the right thing for you, you should go for it. Yes. Keep a PSLF side fund invested just in case something happens or you change jobs or whatever. You can then pay off your loans. But if this is the right thing for you, you should still be going for it. And who's it the right thing for? Well, Dr. Kawaii is a perfect example, right? A pediatric subspecialist spends seven years in training, three years out of training, and gets even more forgiven than he owed when he came out of medical school. So pretty good deal there. Totally tax free as well. The other thing that I was super encouraged by is he hasn't had any of the hassles that a bunch of people that have gotten in in the past that I've talked to have had. You know, they counted all of his payments. They seem to be able to keep the paperwork straight. He only had to make one phone call instead of 60 to 100 hours of phone calls. It's pretty reassuring that hopefully they're getting a lot better at administering this program. If you're looking to boost returns, lower taxes and build wealth, join the WCI Monthly Real Estate Opportunities List for tips and strategies to maximize your real estate returns. And for introductions to exclusive investment opportunities, expect educational emails that introduce you to syndicators, fund companies, online courses, and online real estate platforms. Go to whitecoatinvestor.com reopportunities to sign up today. You can do this and the white coat investor can help. Head up, shoulders back. You've got this and we can help. We'll provide the inspiration on the Milestones to Millionaire podcast. My dad your host, Dr. Dalla, is a practicing emergency physician, blogger, author and podcaster. He is not a licensed accountant, attorney or financial advisor. So this podcast is for your entertainment and information only and should not be considered official personalized financial advice.