WCI #176: A Public Service Loan Forgiveness Success Story

This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high.

Income professionals stop doing dumb things with.

Their money since 2011. Here's your host, Dr. Jim Dali. This is White Coat Investor podcast number 176, a success story with public service loan forgiveness. We're recording this. Let's see, it's August 25th. We're going to run this on September 17th. So if anything in it sounds a little bit dated, that's sometimes when I go on trips, I gotta record episodes a little bit early and that's just what happens. We've been having a great time this summer with the family. You know, it's interesting with this coronavirus pandemic, it doesn't really keep me from doing a lot of the stuff I want to do. You can still go backpacking and rafting and rock climbing and canyoneering and boating because all of those are safe activities. Unfortunately, it keeps us from doing a lot of things my wife wants to do, which is like going out to restaurants, going to see plays, traveling internationally, et cetera. And so it's been a little bit more of a rough summer on her than it has been on me. I hope all of you are weathering this okay, especially with kids getting back into school the last few weeks. As a White Coat, you have valuable knowledge. Various companies want that knowledge and they're willing to pay you for it. That's why we put together a list of recommendations for companies that pay you to take surveys. If you're looking for a profitable side gig for not too much effort, getting paid for surveys could be the perfect solution for you. You can make extra money, start a Solo 401 and use your medical knowledge to impact new products. One of the WCI columnists makes an extra $30,000 a year just doing these surveys. Sign up today and use a fraction of your downtime to make extra cash. Go to whitecoatinvestor.com mdsurveys you can do this and the White Coat Investor can help. Let's do our quote of the day too. This one comes from Charlie Ellis. He said the hardest work is not figuring out the optimal investment policy. It's sustaining a long term focus, particularly at market highs or lows, and staying committed to your optimal investment policy. Boy, isn't that the truth. You know, I've said a lot of times that beginning investors have hard time staying the course at market lows and intermediate investors have trouble staying the course at market highs because they feel like they got to get out because it has to go down because you're at market highs. They forget that market highs are what the market is at most of the time. Thanks for what you do. Your career is not easy. That's why you get paid so much. With this podcast, we hope to help you to optimize that income and use it in the ways that are going to make you most happy. But the truth is, the underlying economic engine for your income is something that is very good and very helpful to the world. So if you haven't heard thank you from a patient or a client lately, let me be the first to say thank you very much. All right, we're doing a promotion over the next week or 10 days here for the Medical Degree to Financial Freedom course. This is the one put on by my friend Jimmy Turner at the Physician Philosopher. He's an anesthesiologist in North Carolina and has put together this course to help you get a step by step financial guide that makes money simple, eliminating financial stress and helping you get on the same financial page with your partner or spouse. It particularly focuses on your cash flow, allowing you to pay off your student loan debt sooner than you can imagine and finding the financial freedom to practice medicine because you want to, not because you have to. In a lot of ways, he describes it as kind of the introduction course to our fire your financial advisor course. And so we're running a promotion on it from now through the 28th of September at Midnight Mountain time if you buy the course between now and then and don't return it because like most of the courses we promote, it comes with a 14 day money back guarantee. But if you buy this course, we are going to give you a whole lot more value than what you're going to get just from the course. We're going to give you in addition to that course, our WCICON 2018 course. This is the Park City course. It's 13 hours of awesome stuff from people like William Bernstein, Jonathan Clements, Mike Piper, and we're going to throw that in for free if you buy a medical Degree to Financial Freedom. In addition to that, we're going to give you a discount if you want to go on after this course and do our fire your financial advisor course. This is our eight hour course that helps you draft up a financial plan. We'll give you a coupon for for $100 off that course. So $400. An additional bonus stuff if you buy Medical Degree to Financial freedom in the next 10 days between now and 28 September. Like I said, the course comes with a 14 day guarantee, so there's literally no risk to you. Try it out. If you don't like it, just ask for your money back and you get your money back. No big deal. Aside from that content that Jimmy's produced with these whiteboard style lectures, he also allows you to have it in other formats if you prefer, including audio or even plain. And he's included some bonus content from Ryan Inman, Sarah Catherine Gutierrez, Justin Harvey and Larry Keller. A couple of those people we've had on the podcast and they've also spoken at WC Icons in the past. It also includes some worksheets and calculators to help people individualize the plan to you. He also throws in office hours. He's got an hour office hours every Friday that allows you to come in and ask whatever questions you want. So you get that access to him as well. You can check that out@whitecoatinvestor.com MDFF medical degree to Financial Freedom. If you wanted to learn more about it, there's a cool webinar as well. It's been Pre recorded@whitecoatinvestor.com MDFFwebinar and that's totally free. You can check it out and if you like Jimmy's style, you can buy the course. But we're going to throw in those incentives to really have a good promotion of this from now until the 28th. All right, we got something awesome today. I've been totally looking forward to this interview. Let's get these people on the line and talk to you about public service loan forgiveness and what it is really like to go for it and to receive it. All right, so we have two special guests on the White Coat Investor podcast today. We have Dan Dahl and Mariko Nakasone and I am thrilled to have them on the podcast. I have been waiting to do this podcast now for at least three years. Try and find somebody to come on to do this podcast. And the reason why is an email that Mariko sent me back in June. It said, I wanted to write you a piece of good news during these crazy times. After 10 long years, multiple phone calls fixing many mistakes that Ed Financial had made, we finally got the notice at 10:30pm last night that our loan was forgiven in full. Thank you for everything you do for the medical community. So we're talking here about public service loan forgiveness, right? I've been getting this question for like three or four years. Have any doctors gotten public service loan forgiveness? Is there a doctor out there that's gotten public service loan forgiveness. And for various reasons, there are a bunch of people that aren't going to be eligible for it until 2021, 2022, 2023, you know, just because the program was not very well known when it first came out in 2007. And it's a long training pipeline for doctors. And so I'm excited to bring you somebody today who has actually received public service loan forgiveness. So, Dan Mariko, welcome to the White Coat Investor podcast.

Thanks for having us.

Welcome.

Okay, so first question. How did you pay for medical school?

Medical school was mostly student loans. I was fortunate enough to be one of only four grandkids for my grandma, and she had started 529 plans for us or college funds when we were kids. So she would donate $10,000 a year to each one of us. And it was for undergrad, but I went to a public university for undergrad, and it wasn't as expensive as some of the other private universities. So I had some money left over after paying for college, which paid maybe my first year of medical school or most of my first year of medical school. But then after that, I just took out loans.

So about how much did you owe when you came out?

I think it was around $167,000.

Okay. And how much of that was federal loans? Was it all federal or was some of it private?

Well, I was trying to think back.

It's been a long time. Unfortunately, that's the nature of the program.

I graduated medical school in 2008. I think my older brother graduated medical school in 2004, and I believe when he graduated medical school, student loans were like 1 or 2%. His student loans are like 1 or 2%. By the end of my second year of medical school, they recommended everybody consolidating loans because loans were going up. So I consolidated all my loans at like, 4.75% at the end of my second year. And then I think by the end of my fourth year, my loans were 6.5%. I think I did, like the 8,500 of subsidized federal loans and then whatever the unsubsidized loans were, but then I think whatever beyond that was private loans.

So you had some private loans anyway. And when was the first time you learned about public service loan forgiveness? Can you remember?

Yes, because I graduated Medical School in 2008. I had called my financial aid officer at my medical school a year later because I had a question or two for her, and she had mentioned it to me. She Said it was new. So she never talked to our class about it. So I know it started in 2007. I'm not sure if it started in 2007 positions or if it started more in 2008 or 2009. But she mentioned it to me then. So I'd already been paying a year worth of loans. I know you could write off up to $2,500 worth of taxes. So she had suggested that when I graduated in 2008, and I think I was paying maybe $500 a month. So I maybe put in $6,000 worth of loans before I even applied. But then when she called me in 2009 or when I talked to her in 2009, I first heard about it. So then I switched to the income based repayment. But I had to first consolidate all my loans into the federal loans. I had to consolidate them all into federal loans. So I then did that about 15 months into my first residency.

So you learned about this relatively early. I mean, it came out in 2007, really, and you knew about it by 2009. I mean, the white coat investor wasn't even born until 2011. And so you learned pretty early on about this program. When did you really decide to go for it, that you decided, this is the way I'm going to pay from off my medical school loans right then in that conversation, or was it later?

No, I mean, it was right then. I then applied for it. She had said it was still kind of a work in progress and there was always a risk that it would get canceled, but she had suggested doing it. So then I went ahead and did it at that time, starting it with my fingers crossed, hoping that it would continue on for the full 10 years with a lot of people telling me that it was never going to make it that long and you're going to end up getting stuck with the loans in the end.

So how much did you actually have forgiven?

So by the time my loans were forgiven, I hadn't even covered my interest. I think my loans were worth 180,000 at the time. They were forgiven this spring.

And over the years, how much do you think you paid toward them?

I think I paid over $120,000 of interest, basically, yeah.

So you paid over $120,000. You had $180,000 forgiven. You started with 167,000. So that's pretty typical. You end up getting the amount forgiven about what you owed originally and you cover the interest. I think most people that go for public service loan forgiveness will find the numbers to be similar if they have, you know, typical doctor incomes and typical doctor debts. Now you switched at some point, I don't know whether it was in residency or later from family practice to radiology. How did that affect things? When did you make that switch and did it affect your situation at all?

So it did affect my situation. I think based on the income based repayment, the highest you can pay is a standard 10 year payment. So I think based on when I first applied, the maximum amount I could pay per month was $2,000. So I graduated in 2008, finished family medicine residency in 2011, and I practiced family medicine until 2014. So a couple years in there, when I was doing family medicine, I was paying $2,000 a month. When I switched to radiology, I went back to a resident salary and my loan payment went from about 2000 to about 500amonth. So it dropped by about 75% and it may have been less than that. But where I went, they provided housing and the housing was included in taxable income. So that was about an extra 2,500amonth that looked like I had an income. So it was about another $25,000 worth of taxable income that was put towards that. Then during my residency, I also did moonlighting and things like that. So during residency and fellowship, my payments gradually increased from probably about $500 a month to about $1,000 a month.

Understood. And what do you think about this plan, Mariko, when he starts talking about let's get to pay off these loans?

Well, actually we felt pretty good about it because what we'd heard from. I felt pretty good about it, but I'm more of a risk taker, perhaps. We had heard people say that if the government starts something, usually they'll grandfather people in. So we were banking on that. And then our other plan was we live like residents even now. So we knew that if we end up being stuck with the loan in the end, that we'd be able to pay it off pretty quickly without being too scared. Because our plan was to live really simply so that if we got stuck with the loan, we wouldn't be completely out of luck.

Though one risk is we probably would have paid it off sooner because just with that 6.3% interest rate for loans, it kind of accumulated interest. So the one risk was just paying it off later, as opposed to paying it off earlier and having to pay more interest.

I figured it was a good gamble to let the government finally pay me back.

Yeah, it clearly paid off. Who was your Federal Loan Servicer.

So that was a good question because it's been jumping through so many hoops. Originally it was ED Financial and then eventually it was switched to Direct Loans. And then eventually I think it had to be switched to like Fed Loan servicing, I believe when I was going into public service loan forgiveness. So that became part of the obstacles we encountered during the process.

Let's talk about those obstacles. Tell us about the problems you ran into getting public service loan forgiveness. I mean, you've been out of med school now for 12 years, right? It's supposed to be 10 years of payments and then you get it, but it was really 12 years before you got it. Tell us what happened and what kind of problems you ran into and all the emails and phone calls you made, etc.

Yes, when I first started, about three years in, when I was renewing my income based repayment for the year, the boxes that you had to check online were kind of confusing. And it said one of them was to put me in the category that was most financially advantageous and the other one was just to renew my public service loan. And I clicked on the one to choose one that was most advantageous. So then they kind of reapplied from New and then they looked at my income and said, I no longer qualified. So I got a letter saying, you no longer qualified? I was taken out of income based repayment. And I tried to call and talk to Budge. They said, no, you no longer qualify. You basically are out of luck. So then I contacted my financial aid representative from medical school and she said you got to contact us on Pledzmann because they're the ones who deals with this if there's disputes. So I contacted them, they opened an investigation. And then a couple, a couple days later I got an email saying, I guess you can stay in the program.

Yeah, that's a huge thing. They throw you out of ibr, all of a sudden your payments don't count anymore, right?

Exactly. So that was kind of a few days of heated frustration for me. Other things that came up is like I said, when I went from ED Financial to Direct Loans to Fed Loan Servicing, every time they did that, they put you in a forbearance while it was transferring over, but they would continue to automatically draw your payments out because it was an automatic withdrawal. So each time that happened or one of the times that happened, there was, it was like a couple month process. So I made two payments, but they said they didn't count because technically, and it was, it was an administrative forbearance which I didn't know about and which I didn't do. They automatically did it when they were switching lenders.

And you didn't ask to be switched, they just switched you automatically.

Right, exactly. When they were switching from one letter to the next. So then I bought that. They said, no, you're. You're in forbearance. You can't be in forbearance, you have to be in repayment. So I had to get the ombudsman involved again. And then eventually they gave in and said, since you didn't do it, they like talking to them online, talking to the ombudsman. They eventually said, well, we'll go back in and retroactively take you out of forbearance, since you weren't technically choosing to be. So they went in there and this was like, after talking to them for probably about three years, where those three months didn't count, finally I got a hold of the ombudsman and she said, oh, I can go back in here and retroactively take you off forbearance.

And.

And then when the committee reviews it, they won't see that. So they should, they should allow those three months. And they did. Thankfully. The other issue one time, the handwriting of the person who filled it out at my hospital, it was 7:1, 2014 or something like that. And they said it looked like a nine, not a seven. So they didn't, they didn't count July 7, July 1 and August 1, because they said my start date was September 1. So I talked to them online, they said, oh, fill out another one. I fill out another one. I check back with them three months later, they'd say, oh, it's still September 1st, because what you put it right away is what counts. Doesn't matter what, what you say. So they said, well, have someone from your. A certified person from your hospital send fax a formal thing saying your start date was really July 1st and not September 1st. So she did that and I called, they said, no, we never, we don't have that, or that didn't count. So I went round and round with them and eventually, I don't even remember how it worked, I eventually got them to allow those, but it probably was. I would literally have to talk to them on the phone probably three to four times a year for probably a couple hours of time. So I was probably putting in six to ten hours a year trying to get those things straightened out. So I probably spent a good 70 to 100 hours on the phone with them. Over 10 years trying to get things cleared up.

Wow, that's so depressing that the system's that bad. I only hope that it gets better as they work out the kinks and get more people through it. But the stories I hear, it doesn't seem to be getting much better. Most people have this sort of an experience having to send lots of emails and have phone calls and get things corrected. And the loan servicing companies can't seem to count to 120 correctly and so on and so forth. It sounds like yours is the typical experience to me.

Right. You just have to be persistent and you also have to keep good records. I had a kind of Excel spreadsheet of which months they weren't counting and one month actually counted. Or they said it didn't count and they just said they don't have any record that we paid it. And I'm like, what do you mean there's no record? It was getting taken out automatically. They're like, well, we just don't have the record that it was. We see that you were employed at that time, but we have no record that you paid that month. So I had to dig up in my bank account and fax them my bank statement saying that I paid them on this date before they counted. I don't know how that fell through the cracks, but there was always things like this where it was just not running very efficiently. And unless you had proof to or persistence or someone to give you the contact information for the Ombudsman, I think I would have gotten side derailed or eventually would have given up. But thankfully there are people who gave me contact information where people were able to step in and troubleshoot for me to help get on back on track. Because unless someone is an advocate for you or you, you know, with the Ombudsman, they were really stern saying they'll know there's no way you can get back in, there's no way we're going to count this. But then all of a sudden you contact the ombudsman and they were able to troubleshoot a lot for me.

Now tell me what you mean by the Ombudsman? Is this somebody at your medical school? Is this somebody at the loan servicing companies? Is this somebody in the federal government?

This is someone at the loan servicing company.

You can't call them up and say connect me to the Ombudsman.

You maybe can, I don't know. I didn't even know what an ombudsman was or anything until the financial aid lady from my medical School told me, she said there's an ombudsman who kind of litigates or like if there's any, if there's any disagreements between things, they, they settled the dispute. So you have to open up a case. If you're contacting Public Service Loan Forgiveness or Fed, I don't know, I don't remember what organization it was because Public Service Loan Forgiveness is different than Fed Loan Servicing, I believe, like some of them are different, I don't know exactly. So it was one of those, I think it was Public Service Loan Forgiveness had an ombudsman or Fed Loan Servicing, I don't know. But you could probably ask them for the ombudsman and they would give it to you. But I heard I got the number from, for my medical school.

So still in there there's a 12 year time period, right? Did you have a year or two where you weren't working at a 501c3 or did it take them two years to actually approve the application? Or was there a time period you didn't make payments or what happened, what happened to those two extra years?

Well, like I said it when I first started my medical financial aid lady said it didn't start for medical doctors until 2009 is what I was told when we my, my graduated medical class. They never told us anything about it. I just happened to call her a year later into 2009 and she said it was new for doctors. It had been around for a couple years, but it was new for doctors. So I paid probably $6,000 back my first year.

But it wasn't in an income driven repayment program.

Right. It wasn't until about 15 months in my residency, even though I've been making payments, you had to switch them all over to like a federal, you had to consolidate them into a federal, you know, federal loans. So that first 15 months didn't count. There were a couple times I think where when I was switching, when I was applying for Public Service Loan and it switched lenders, it went into forbearance and they stopped the payments. So those ones where there's like a two or three month gap when it was switching lenders, those months didn't count. There were, there was one or two situations where they continued to draw payments and at that time those counted. Also when you reapply for how much you owe, basically you have to give how much you made that year to renew your Public Service loan and sometimes you renew it and while they're sorting out how much you owe for the Next year, they take a month or two off while they're trying to sort it out. So those months don't count. And I think those months I didn't necessarily pay. If I did pay, I fought it and some of those I won. But it was things like that where eventually. So the first year, 15 months, I didn't pay. The next couple times it was in the process of renewing the income driven repayment, or it was in the process of switching lenders.

Did it feel like they were incompetent or did it feel like they were intentionally trying to screw you out of what you deserved?

I just think it's like any federal government, it's just kind of incompetency. I don't think they were intentionally trying to screw you over. It's like, oh, you didn't dot your I. So in the book it says we can't qualify it. So I'm sorry, that's just part of the deal. It's like they follow a cookbook thing and they don't really use a lot of common sense.

When did you fill out the final application for forgiveness? How long did it take between then and when you received the letter that you were. That you received it?

The first time I filled. The first time I filled it out or the five time I finally got approved, I think I had to fill it out like three times.

You know, that's not uncommon. In 2017, they ran a few articles saying 99% of the first cohort that applied for this were denied, and a big percentage of them filled out the application wrong. What is it about the application that makes it so hard to fill it outright?

Well, I was arguing with them that two or three of my payments that I had documentation that were paid that they previously denied. I knew I was at 120 payments, but according to them, I was at 117 payments. But they said if I filled it out and submitted, then they would review the ones that previously didn't have documentation. And when they reviewed it, they would, they would adjust it, but they didn't. So then they said to submit it again. So I had to get back on the phone, talk to them, show them that they were proven. So basically I overpaid by like three months. And then. And they said, well, those three are still in dispute. So you have to make three more payments so that you're. So that you're for sure then. Because we know you have 117 that count. There's three that are pending. The three that are pending could take a year to be resolved. So in the meantime, you have to make the three more payments. So then I was at 123 payments, and then they said when you got to that, then they would have to resolve all the ones that were pending. So then at that point in time, when I applied, they went and reviewed them and saw that there was documentation. So then they actually reimbursed me my last three payments.

So you got that money back eventually?

Yeah, that actually went pretty smoothly. I was surprised. I thought when it would get repaid, you'd have to jump through all these hoops to get repaid. But it's just eventually you just got an email saying, oh, you are qualified, your balance is now zero. And then within a month, the last three payments I paid just showed up back in my bank account that they were taking out automatically. So that was actually the smoothest part of the whole thing.

It was the only easy part.

The only easy part. So did you ever consider bagging the whole thing, refinancing and just paying off your loans?

Only during those few days when they said I was no longer eligible.

So for the most part, you kept faith in it and stuck with it?

Well, yeah. I mean, especially I went back. Since I went back to residency, it was worth the gamble because my payments went down for over five years. They went down to $500 to $1,000 as opposed to $2,000. So it was worth the gamble.

So do you recommend public service loan forgiveness to others in similar situations? You're one of the few doctors out there who's actually been through the whole process. Is this a good thing or should people just forget about it?

I mean, I would definitely do it. It's most advantageous to do it when you're first out of medical school, because I think the first year you basically have no payments because you have no income from the previous years. So if I would have applied right away, that first year basically would have been zero. You wouldn't have paid any money, basically. And then the next year would have been the least amount of money you made anyway. So it might have only been a couple hundred dollars. I mean, once you're finally out and making a lot of money or making more money, it's basically a standard 10 year repayment. So if I would have applied for it when I was out and already having to pay the $2,000 a month, maybe I'd have to do the math. It maybe would still be beneficial, but it's definitely the biggest bang for your buck. If you apply during your fourth year medical Students and start off right from the get go because medical school, your income is a lot less, so you're paying a lot less. And then you get those first few years under your belt at very little cost.

What do you think, Mariko? Do you recommend it?

I would recommend if we were back in the same position, I would do it again. I would just tell myself if I knew everything now. I'd say keep every piece of paper they send. Keep meticulous notes, make sure you have everything documented. Because it definitely saved our butts quite a few times.

Yeah, I've been telling people at least the last few years since I started hearing stories of people running into these problems. You got to keep a record of every annual certification form from the employer, a record of every payment you made. Just because I keep hearing these stories, people got to go back and prove three payments or five payments or 18 payments or whatever that didn't take place. Any other tips to help it go more smoothly for others?

The big thing is it's got to be a 501 organization. So I think some people don't really know that and they think they're. And you have to consolidate all your loans, I think, into a federal borrower before you do it. So you have to do that, which takes a while. So if you're making payments while it's being consolidated, they're not going to count. You also want to make sure you're working for a 501c3 organization. Another thing that different financial aid people swore up and down was that the interest wasn't going to be forgiven. I know a lot of the people that I went to residency with said the interest wasn't forgiven and that they would never be able to afford paying the taxes on the interest the last year that it was forgiven. Because some people are five or six hundred thousand dollars in debt. They're like, I can't pay the interest on that or I can't pay taxes on that. I'm sorry, pay taxes on the income forgiven. But it's tax free forgiveness. I didn't have to pay taxes on the $180,000. And I think there's a lot of misconception regards to that because some people say, well, if I get $500,000 forgiven, I'm not gonna be able to pay taxes on that. I'll never even be able to afford that. That's why I'm not doing it. I don't know. I mean, if you're lazy, it's not worth it, or if you're not organized it's not worth it because there's a lot of hoops to jump through. It's like medical school. The hardest thing is filling out the application to get in.

Yeah, there's a lot of truth to that. It' mention that because there are forgiveness programs that have taxable forgiveness. You know, if you make the 20 to 25 years of payments with IBR or with Pay as you earn or revised pay as you earn, that forgiveness is taxable. But under public service loan forgiveness, as you note, it's tax free. It's tax free forgiveness.

And I think you'd mentioned earlier or in one of your questions, what kind of income driven repayment did we do? We did the income based repayment. When I went back to residency. I had heard that the pay as you earn would have been less monthly payments, but that wasn't around when I initially applied and so I didn't qualify for it. But I'm not exactly sure how they decide whether you qualify for pay as you earn versus income based versus income. There's an ICR too. I can't remember what that one stands for.

Yeah, I think IBR was your only option because you had loans from before 2007, right?

Probably.

So you were in the right program for you. But you're right that later people could have even lower payments than you had and thus have more money forgiven.

Right. From what I've heard, pay as you earn is probably the best one if you qualify for it. If you're a newer.

Yeah, they've got an even. They've got an even newer one out. Revised pay as you earn that they'll even subsidize your interest somewhat. So they keep getting better. You're definitely not in the best one, but you're in the only one you qualified for, unfortunately.

So it worked out. I mean, I mean, I think it was pretty fair in the long run. I mean, I paid, I didn't pay all of it, but I would have. I didn't pay all my principal, but if I would have stayed in family medicine, I probably would have paid about what my original loans were and then not the interest. Basically. I would have paid basically what the original loans were when I first got out.

Awesome. Well, Dan and Mariko, thank you for coming on the podcast. People will be that are in this program will be thrilled to hear your story. They will not be thrilled to hear about the obstacles you had getting it, but they will be thrilled to hear that somebody actually found the light at the end of the tunnel. So thank you for coming on and sharing your story and congratulations on all of your success.

Thanks, Dr. Dallas.

Thank you. Thanks for having us.

All right, that was great having Dan and Marico on here. I am so excited to see a doctor get public service loan forgiveness. I've heard of one other, but they're the first ones I was able to get to come on the podcast and share their story with you. So this is going to become more common throughout this year, next year, the year after that, year after that, especially 2022, 2023. There are a lot of doctors who are planning on public service loan forgiveness. There's a Facebook group out there just for doctors going for public service loan forgiveness. If you're doing this, you probably ought to join it. But when they poll themselves, you see that the numbers of those who are going to be eligible starting in 2022, 2023 is going to be much, much higher than it is now. So it's exciting, I think, for a lot of people who have been holding on for a long time, trying to keep faith in the program and, and watching in many, many times their debt go up and up and up as they're going for the program. You know, this is one of those things I view like every other government benefit and tax deduction. You know, you don't write the rules, and if the government's going to give you a benefit, you know, if you qualify for it, I say you should get it. You know, whether it's good legislation or not, I'll leave in the hands of Congress. But the truth is this is a pretty big government benefit for doctors. And if you're willing to work in an academic center or some other 501C3, you qualify for it. So you might as well take advantage of it. So that's the public service loan forgiveness program for you. I'm going to finish this podcast up, taking a couple of questions off the Speak pipe. Remember, if you'd like to leave questions to be answered in the White Coat Investor podcast, just go to whitecoatinvestor.com speakpipe. The first one comes from Tim.

Hello, Dr. Dali, thank you for hosting this great podcast. I wanted to ask your thoughts on preferred stocks. You recently had Rick Ferri on your show. He mentioned during the podcast that he had around 20% of his portfolio in preferred stock funds as a means of fixed income. I realized that preferred stocks hold similar risks to common stocks, so I was surprised that he was holding a fairly significant percentage as what he considered fixed income, with bond yields offering little return. What are your thoughts on holding these funds as an alternative source of yield. I'm currently 10 to 15 years from my projected retirement and have been gradually increasing the bond holdings in my portfolio to hedge risk. But I'm concerned that they will not generate enough income to get the returns I need. Thanks for your time and expertise.

All right, so Rick's Ask or Tim is asking about preferred stocks. Rick Ferri was on a few podcast episodes ago. He mentioned that 20% of his fixed fixed income, not his entire portfolio, is in preferred stocks. He used to work with those a lot when he was in the industry, so he feels really comfortable with them and invests in them. I don't invest in preferred stocks. Rick also invests in junk bonds. I don't invest in junk bonds. All of these involve some equity risk. In fact, just a corporate bond involves some equity risk. That's partly why it pays more than a Treasury bond. And a junk bond pays more, a little bit more. And preferred stocks and convertible bonds pay a little bit more. But basically you're just taking a little bit more equity risk in your fixed income. So when you take more risk, you expect higher returns. Now, in this time of low interest rates, when bonds are paying pathetically low rates, you can see why people are tempted to reach for yield, to go for anything that offers a little bit higher yield than what you're getting out of a bond. So, and so I can understand why people be interested in that sort of stuff. If you feel like the risk you're taking on you're being adequately compensated for, then I think that's a reasonable thing to do. In a diversified portfolio like we're talking about here, what are the downsides? Well, some people say it's the worst of both worlds, right? You've got more risk of total loss, like when you're a stock investor, and you've still got a cap on your earnings, like when you're a bond investor. So a lot of people think preferred stocks or Conversations convertible bonds are kind of the worst of both worlds. You know, there are a few mutual funds or ETFs out there that invest in these things that can help you diversify them. They're not the most tax efficient things in the world. And so keep that in mind. It may be something, if you're going to invest in it, you want to keep it in a retirement account. But I don't invest in them. I kind of like the Larry Swedroe approach to bonds. He basically advocates that you should take your risk mostly on the equity side. So my bond holdings include The Federal TSP G fund, which is basically a money market fund on steroids. A TIPS fund or ETF that invests in Treasuries, treasury inflation protected securities, and a high quality municipal bond fund. For those bonds that I hold in my taxable account, that's in the Vanguard Intermediate Muni bond fund and those are my fixed income holdings. I figure if I'm going to take risk on the fixed income side, I might as well go big. So the only thing that's close to that is in my real estate section of my portfolio, I have 5% of my real estate portfolio, 5% of my total portfolio, which is 25% of my real estate portfolio that is invested in basically real estate debt. So these are first lien loans. These are private funds that invest in first lien loans to developers. So I develop, comes in, takes a loan, a private loan, a hard money loan, whatever you want to call it, from the fund, and probably pays something like 10, 12% plus a couple of points for a six to 15 month loan. And of course the fund gets their cut and pays their expenses and I get what's left. And so these funds tend to have returns of 6 to 12%. And so I figure if you're going to really reach for yield, you might as well reach for a little bit more than you're going to get out of a preferred stock fund. I prefer these real estate debt funds for that section of my portfolio. But remember, those are not risk free, they're not Treasuries by any means. And in a real estate downturn, a real estate debt fund becomes a real estate equity fund as they foreclose on these properties and have to finish up the development of them themselves. And so you better make sure if you're going to invest in one of these funds that it knows how to do that as well, because in a really bad situation, which you'll eventually hit, it's going to become a real estate equity fund, not just a debt fund. All right, let's take our next question off the speak pipe from Jordan.

Hey, Dr. Dali, my name is Jordan. I'm a first year medical student from Texas, a huge fan of the podcast and really everything you do, I think I've listened to every episode up until a month ago when medical school started and I have no time now. But so I'm four years from making residency money and maybe six after that from making attending money. I currently have about 5,000 saved in a Roth IRA and my fiance has no retirement savings. We'll be getting married next Year. And anyway, she's starting a job next week and they have an offer or they have an option for a Roth and a traditional 401k with a match up to 3% either way. So I was thinking if it might be better for us to take advantage of the Roth 401k over the next four to ten years while we won't be making nearly as much much. Her expected income's 45 to 60,000. And so, yeah, so I'm thinking it might be better to use the Roth and then roll it into a Roth IRA later on and make the adjustments there. We think we'll be able to get out of med school with about 20 to 60,000 in loans. So I was just wondering what you thought of this option, this plan. And also I've gotten some feedback in the Facebook group that maybe it'd be better to not save anything and just make sure we get little or no loans. Others were saying take out more loans and save as much as we can in the Roth now. So I'm sort of just looking for your thoughts. Thanks so much.

All right, so Jordan's in a pretty good situation here and Ms. One already has some money invested for retirement. That's great. Wants to know if his fiance should do Roth or traditional. Well, the first thing I'd say is it's her money, so let her do whatever she wants. Right. It's not your decision. So until you're married, I keep money separate. Once you're married, I combine everything. But if you, assuming you're getting married, I mean, she is your fiance, a Roth at this time period is going to be best. And the reason why is you're almost surely going to be in a higher tax bracket the rest of your life. And in retirement, I mean, she's only making 45 to 60 thousand dollars a year. The chances of you ever being below that again is pretty low. So Roth makes a lot of sense. Keep in mind also that once you're married, not only can she do that 401k, she can also do a Roth IRA contribution for you and a Roth IRA contribution for her. So you have all kinds of space to do Roth contributions. Unfortunately, you don't have much money. Right. She's only making 45 to 60 thousand dollars a year, and you've probably got that much just in tuition expenses every year. So what is the best thing you should do with money that you have? Well, once you're married and you've combined finances, a really great investment you have available to you is just borrowing less money from it medical school. And certainly that is a reasonable thing to do rather than doing personal and spousal Roth IRAs and doing her 401k. There's no real right answer there, but if you're borrowing money at 5, 6, 7%, that's a pretty attractive guaranteed return in my book. So unless you have some overarching plan to go for public service loan forgiveness like we talked about earlier, I would probably lean more toward using your money to keep the costs of the your education down rather than investing for retirement during medical school. You will have plenty of time to do that later. All right, we mentioned at the beginning of the hour this course from the Physician philosopher. Remember we got a special deal going on that through the 28th. The deal is that you get WC icon Park City totally free if you buy this course. And we're also going to give you a couple coupon for $100 off fire your financial advisor if you want to continue on with that. So check that out. You can watch the webinar for that@whitecoatinvestor.com MDFFwebinar if you're ready to buy it. Whitecoatinvestor.com MDff so be sure to check that out. Thanks. For those of you who are leaving us five star reviews, we had a review from Pedro V. About the you need a budget episode. We had a few episodes back. He said episode 167 is the best yet. Great place to start in the WCI world. Get hooked, get free. Five stars. Thank you for that. And those of you who are leaving us five star reviews, we really appreciate it. As a white coat, you have valuable knowledge. Various companies want that knowledge and they're willing to pay you for it. That's why we put together a list of recommendations for companies that pay you to take surveys. If you're looking for a profitable side gig for not too much effort, getting paid for surveys could be the perfect solution for you. You can make extra Money, start a solo 401 and use your medical knowledge to impact new products. One of the WCI columnists makes an extra $30,000 a year just doing these surveys. Sign up today and use a fraction of your downtime to make extra cash. Go to whitecoatinvestor.com mdsurveys you can do this and the White Coat Investor can help. Keep your head up, your shoulders back. You've got this. We can help. Stay safe out there and we'll see you next time on the White Coat Investor Podcast.

My dad, your host Dr. Dahl, 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.