MtoM #9 - Family Medicine Doc Receives PSLF

This is the White Coat Investor podcast, Milestones to Millionaire. Celebrating stories of success along the journey to financial freedom. Here is your host, Dr. Jim Dali.

This is Milestones to Millionaire podcast number nine. Welcome back. I hope you're enjoying these podcasts as much as we are. We love hearing your success story and we know they inspire others to do the same incredible financial feats that you are doing. If you want to be a guest on this show, you can apply@whitecoatinvestor.com Milestones. It doesn't matter what your milestone is. Maybe it's getting back to broke. Maybe it's paying off your student loans. Maybe it's getting your loans forgiven. Perhaps it's becoming a millionaire or a deca millionaire or a hundred millionaire. Whatever that is. Whatever your financial achievement, we want to help you celebrate it and use it to inspire other white coat investors to do the same. I estimate that 80% of doctors need, want and should use a financial advisor and or an investment manager. Some investment gurus, such as Dr. William Bernstein, think my estimate is way too low. At any rate, if you want to use an advisor temporarily or for your entire life, there's no reason to feel guilty about it. Just make sure you are getting good advice at a fair price. If you need help updating your financial plan or just getting one in place, check out our list of recommended financial advisors@whitecoatinvestor.com financial advisors. You can do this and the White Coat Investor can help. All right, we have a special guest on today. Let me get her on the line and we'll talk about her financial achievement. All right. Our guest today on the Milestones to Millionaire podcast is Eileen. Welcome to the podcast.

Hi, thanks for having me.

So I understand you recently received public service loan forgiveness for your federal student loans.

I did. It does actually happen.

Well, that's part of the reason why I include these on the Milestones podcast. There are a lot of people that don't believe this happens or that want to will ever happen. And so it's good to actually trot a doc out every now and then and show em that it does happen. It was really interesting when we hit the 10 year mark, I wanna say it was October 2017 was the first time someone could theoretically have gotten public service loan forgiveness. And obviously nobody got it in October 2017 cause nobody knew about it in October 2007. And so that made everybody worry even more. They're like nobody's getting it. And then they came out with all these articles about how only 1% of applicants are Getting it, and so on and so forth. There's a lot of problems with those articles and the way they do the counting, but certainly I've met enough docs now who received Public Service Loan forgiveness that we know the program is actually legit. So congratulations to you. How did that feel to receive that?

Well, it was pretty great. You get an email alert that you've got a letter in your account, and I actually got it on New Year's Eve a couple minutes after counting down the new year. So it was a pretty awesome way to start the year.

Oh, that is awesome. So how did you pay for medical school originally?

All federal loans.

All federal loans. And what's your specialty?

I'm certified in family medicine and neuromusculoskeletal medicine.

Okay, very cool. And do you remember how much you owed when you got out?

Yes. When I graduated, my total debt was just over $250,000. I went to an osteopathic medical school. Tuition at those tends to be a little higher than some of the allopathic schools because most of them are private.

Yeah. So last year, the average D.O. student graduated with 250. But you graduated with 250 a decade ago, so that was significantly higher than average at the time, probably. Okay, so none of that was private loans? It was all federal loans?

No, all federal subsidized and unsubsidized Stafford loans and some graduate plus loans.

And when's the first time you ever heard of pslf? Do you remember?

You know, we had a presentation at our school at some point prior to graduation, and it was just sort of a presentation like, hey, there's this program. You know, you might. You might want to look into it. If you work for a nonprofit, you can get your loans forgiven in 10 years. So I graduated in 2010, and as you mentioned, the program was announced in 2007. So at the time, there wasn't a whole lot of information out there about the public Service loan forgiveness.

And so there's not much out there. But for some reason, you decided to go for it, or did you not decide for a few years you just happened to enroll in an idr?

The program I had matched into was at a nonprofit hospital, and I did an integrated family medicine neuromusculoskeletal medicine residency, which is four years. And so I knew that I'd be at the nonprofit for at least four years, so I figured I'd go ahead and enter a qualified repayment program. And then sometimes at residency, I would figure out what I was going to do with the rest of my life and decide if I wanted to stay in or, you know, refinance my loans and pay them off aggressively.

So this was a conscious decision. You knew what you were doing. You understood the program. You didn't fall into this?

I understood what there was to understand at the time, yes.

Fair enough. Fair enough. And there wasn't a lot out there.

There was not a lot out there at all.

I mean, I wrote my first post about it in 2011, and there was nothing to look up. There were no other posts about it, so I just had to go dig the information out myself. I remember. So when you finished your training, you decided to stick with a 501c3 job of some kind in order to qualify for this. How much of the motivation to take that job or that type of a job was from your student loans?

Probably a good part of it. So I've worked in academics since I graduated from. From residency. I've always really liked teaching, and, you know, the job sort of fell into my lap. It was at the institution that I completed my residency from, and it seemed like a really good fit for me, but it was definitely, you know, in the back of my mind, hey, I'm going to continue to work for this nonprofit, and this will. This will keep me on the track for public service loan forgiveness.

Should your residents be worried that you're about to leave the program and go into private practice?

Well, so this is the funny thing. Probably not funny for them, but I actually did quit my job. But the new position that I've taken, is it in another residency program that's also a nonprofit?

Okay, fair enough. Fair enough. How much did you eventually have forgiven? You owed 250 when you got out. What was the total that was actually forgiven in the end?

So my total forgiven was just over 330,000.

So $330,000 forgiven. And how much did you pay off? Did you ever add up how much you paid off over those 10 years?

Yes, it was just under 90,000.

So you paid off 90, had $330,000 forgiven of the original $250,000?

Yes.

Pretty awesome. Pretty awesome. Big discount from 250 to only pay 90.

Exactly. And that forgiven amount is so huge because I went to school in that period of time when federal loans had very high interest rates. So my loans, the subsidized Stafford loans, were at 6.8% and the graduate plus loans were at 8.5%.

Yeah. A lot of people may not realize that. When I graduated in 2003, my classmates were refinancing at 1%. And once the global financial crisis came around, you couldn't do that for a long time. And you really can't even get 1% now unless you take a variable five year loan. And then rates go down after you take it. All right, do you remember, well, which IDR program did you use? Were you in pay or repay or a combination or what were you in?

So when I first graduated, there was only income based repayment and income contingent repayment. So I was in IBR for the first 5ish years. And then I think in about 2016 they added programs and that's when the repayee program came into being and I went to that and that actually lowered my payments. So that was nice.

Do you remember what happened that month you switched? Did you have to make a full payment or anything to switch programs?

So I actually, you know, this is one of the mistakes that I made along the way. I didn't get any sort of notification that there were. That there were other payment plan options now. And they went into effect actually the month after I had recertified my ibr, which is good for the year. So it took me about eight months to realize that there was another program. And so I submitted a new payment request and then was able to go to the repayee plan as opposed to IBR.

So what were your payments during residency?

The first year of residency it was $0. I filed a tax return at the end of medical school showing zero income so that I could have that $0 payment.

You really did know what you were doing?

I did, yeah.

All right, so what about the rest of residency?

The rest of residency? The next year I was about $75, and most of the rest of my residency it was about four to five hundred dollars.

Wow. Still a pretty good payment. Pretty good payment for a resident, especially back then.

I started moonlighting a lot my second year and that's probably.

That's what. Gotcha.

Yeah, that's probably really something that I should have considered. You know, the amount of income that I was taking in moonlighting versus the amount that that increased my student loans.

You know what some people do with that is they just make tax deferred retirement account contributions to make up for it. And that helps a little bit.

If I had known about White coat investor in 2012 when I was making these decisions, I definitely would have opened a solo 401k.

Okay, how about after residency, what were your payments as an attending?

Those were about $1,300 to just under 1,500.

Okay. And who was your servicer? Do you remember?

Myfedloan.

Myfedloan. And what problems did you run into getting pslf? How much of a hassle was it? I've had people tell me they spent 60 to 100 hours on the phone and writing emails to get this. What was your experience?

So I did run into an issue a little bit more than midway through. So, like I said, when I graduated in 2010, really the only information was a little blurb on the. You know, on the FAFSA website, essentially that this program exists. And so the whole concept of filing an employment certification every year, that wasn't really a thing that was being recommended or advised. So I filed my first one when I completed my residency, and that went fine, but a few years, and then I got the response from them and then the statement that you really should be doing this every year. And so then I started filing them annually. And about midway through, I sent one in, and the start dates didn't match my previous employment certification form. And I'd worked for the same institution the entire time. And I think initially the start date that was used was my actual first date on payroll, because back in the day, residents didn't always start on July 1st. They started a little bit early, you know, depending on what the schedule the hospital needed to accommodate. And so I think my first couple forms that got sent in were my actual start date at the hospital. And then at some point, somebody put in July 1st as the start date, and it didn't really matter because automatically upon graduation, your loans go into deferment for, I think it's six months. And so I wasn't making any payments at that point anyway. So the start date of a couple weeks didn't affect how many payments I actually made, but the paperwork didn't match. And so then it probably took me a year and a half to get that corrected.

Wow. Any other big hassles?

No, that was the biggest.

So did you ever consider bagging the whole thing, refinancing your loans and just paying them off?

I did. I think that especially with the compounding interest, the amount just seemed really daunting to me. And especially as a resident, just the amount of what my loans would be at a full repayment amount just seemed really astronomical, given the amount of debt. And my specialty, primary care doesn't pay as well as some other specialties, and I was in academics eventually. And that takes you down another notch as well. But it's the job that I love, and so I really wanted to do it. And that's really why I felt public service loan forgiveness would be the best plan for me. But, yeah, I would talk to some of my classmates who said, oh, yeah, I refi'd my loans and my interest rate is 2%. And I'm thinking, oh, my goodness, what am I doing? If this doesn't work out, I'm gonna owe the government so much money.

Did you save up any kind of a PSLF side fund just in case you changed jobs or something happened to the program?

So I had a pretty significant emergency fund. And then also about halfway, halfway through this journey, maybe about six years in, our employer changed our retirement options, and I became eligible for a 457B. So I maxed that out, which was, you know, that's distributed after you leave your employer unless you can roll it into another employer because it's A non governmental 457B. And so there's a chunk of change in there that. That could have gone to this had I decided to leave and work for something other than a nonprofit.

But not $330,000.

No, definitely not $330,000.

Awesome. Well, Eileen, thank you for being a doc. Thank you for doing primary care. Thank you for your public service.

Thanks.

And congratulations on receiving PSLF forgiveness on your student loans. Your story will inspire others and let them know that there actually is light at the end of the tunnel.

Thanks so much for having me.

Thank you. That was pretty cool, huh? Eileen? She learned about the program. She did what it took. She qualified. She had 120 qualifying monthly payments in a qualifying program with qualifying loans while working full time for a 501 as an employee. And she made her payments on time. So she got pslf. It turns out the program actually works. You like that product placement? Those of you watching this on YouTube, you can see my WCI mug there. These may be available to you soon too. But a lot of lessons there you can learn from her story. One is to understand the program. It's not that complicated, right? 120 on time payments, qualifying loans, qualifying payment program, qualifying employer. Not that complicated. You send in a one page form every year. The end, you fill out an application which basically looks like the one page form. Yes, you should keep track of every payment you make because some of those servicers don't count to 120 very well. But mostly all you got to do is follow the plan. And all of you academic docs out there, this is how you get rid of your federal student loans. You still need to refinance your private loans and pay those off. But if all you have is federal loans like Eileen, this program really works well. So I love the fact that she didn't give up on it, that she kept track of everything and did a nice job getting that taken care of. As you can see, there will be more and more and more people in 2021, 2022, 2023 who are actually receiving public service loan forgiveness. But I hope this is inspiring to those of you who wonder if the program's really going to happen or not. And Maybe in another 10 years we can bring some people on that got some pay or repay forgiveness as well. But we're still a long way away from anybody ever qualifying for that. I estimate that 80% of doctors need, want and should use a financial advisor and or an investment manager. Some investment gurus, such as Dr. William Bernstein, think my estimate is way too low. At any rate, if you want to use an advisor temporarily or for your entire life, there's no reason to feel guilty about it. Just make sure you are getting good advice at a fair price. If you need help updating your financial plan or just getting one in place, check out our list of recommended financial advisors@whitecoatinvestor.com financial advisors. You can do this and the white coat investor can help. Keep your head up, your shoulders back. You've got this and we can help. We'll see you next week on the Milestones to Millionaire podcast.

My dad, your host, Dr. Daly, 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.

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