Managing your Dental Student Loans with Travis Hornsby from Student Loan Planner

Hey, dental associates and new practice owners. Welcome to the Associates on Fire podcast, powered by Practice cfo. This is the podcast that teaches you what you never learned in dental school, the financial side of dentistry. We cover topics from planning for ownership, buying a practice, to student loans, taxes, and all things financial for the hungry to learn. Dental associate. So let's light it up.

Welcome everybody, to a new Associates on Fire podcast episode. I am psyched to have Travis Hornsby with us today. If you have student loans, you should be listening to this podcast. Because I've been in dental now for 13 years and I don't know anybody who even knows anybody who knows as much as Travis Hornsby does about student loans. And he is a cfa, a certified financial analyst, a very difficult credential to get. And usually it's only really, really smart, analytical people who get that credential. And he is at some point back. And Travis, maybe you can tell us, but he pivoted his entire career to helping.

Those with student loans, particularly those with higher student loans, evaluate what is the right student loan program for them. How should they seek forgiveness if they are approaching or want to achieve forgiveness, and should they refinance their student loans and even broaden out to some general and really helpful financial planning advice for dentists? Now, I will say that working with hundreds of dentists over the years really drew at this point. You know, we've been working with thousands of dentists since 2009, and virtually all of them, not all of them, but most of them have a significant amount of student loans. It's just the law of dental school these days, I guess, and they come out with 5, 600,000. In fact. I was at USC talking to a group of dental students about a year or two ago, and I asked them to raise their hand. How many of you have 600,000? Virtually every hand in the room went up, said, how many have 700,000? Still, there were some hands in the room that went up. And then some of our clients who are specialists, like oral surgeons, for example, or orthodontists, I've seen that up to a million dollars a year. So student loans are no small thing. And the unfortunate thing is that they're a bit complicated knowing how to address your student loans and all the government sort of programs that have evolved because it has been an evolution of adding here and adding there and changing laws on this, and that has created just, just some confusion on the subject of student loans. And yet student loans are such a powerful motivating force for early stage graduates and Especially for professionals like dentists. And it's kind of drive some of their early decisions about who they work for, where they work for, just so that they can feel the security needed to be able to cover their student loan payments. And so I would like in this podcast to give some really beneficial information to you associate dentists and even dental students. And even if you're an early stage dentist and you still have student loans, which most of you do, who are early stage practice owners, I apologize that this. You can have something to walk away from this podcast and say, okay, I'm in the right situation, or there are some things I need to do to change up my situation to improve my overall economic situation related to my student loans. So, Travis, welcome to the show. Can you give us like a, like a 60 second bio why you got into student loans and what you're doing these days?

Sure. So I thought I was going to be an economics PhD and be a professor, and then I took theoretical math and found out that no, I shouldn't be. And I really love the applied math. And so I became a bond trader and then decided that, you know, no offense to my bond trader friends, but it wasn't a lifestyle that I thought I could do successfully long term and still, you know, have a, have a quality lifestyle, I'll put it that way. And, and so then I met my wife who had a lot of student loan debt, and I found the intersection of higher education and finance and student loans just happened to be so complicated that I could save people a lot of money doing it. So that's how I kind of got into the space. And, you know, dentists have the largest debt of all. So that's probably how we stumbled upon one another myself into the dental community and dentists finding us.

Out of curiosity.

It sounds like you work with a lot of dentists. What, what share of your overall consults do you do or with or with dentists?

Probably 30 or 40%. It's not the majority. It's not the majority for sure, but it's still.

That's a lot.

It's a lot. I mean, yeah, I'd have to double check the numbers. It might even, it might be a little lower. It might be 25%. But, you know, if you think about the kind of people that are going to reach out, you know, we have a lot of different things with Student Loan Planner, you know, that we cover and, you know, if somebody's got a very obvious refinancing case, they're not necessarily going to book a student loan plan. And we don't want them to, you know, they're going to just go ahead and refinance, get the largest cash bonus on the Internet from our website and get a lower interest rate. And they're just going to, you know, pay their loan off and kind of use their own strategy, which is fine. You know, the people that disproportionately hire us are the people that are not sure if they should refinance or not. Right. Which means you probably have a little bit larger balance than if you just had say a hundred thousand that you owed because you got some help from like a military scholarship or something.

Well, I'll say I've consulted your website, studentloanplanner.com some of your blog posts, just really rich content and encourage all listeners just to get familiar with it as a resource for them as student loan questions come up. And just to stay current with some of the things happening, especially right now, the year of COVID 2020, there's some unique things related to dentists and his, his website is a great resource to stay current on his podcast. You do, I think weekly podcasts, some really, really good stuff. And people can even go on your podcast just like mine and submit a question vocally and then you'll play it and then you'll answer their questions. Really, really helpful way of doing that. Well, let's jump in. I like to divide the podcast into two segments. The first segment is addressing is really student loan basics, IDR plans and the three main types of IDR plans. I know that I had been working with dentists for, I don't know, a year or two before I even myself started to become familiar with pay and repay and the nuance differences with those and caps and what's subsidized by the government and the payoff date and which one is good for which type of scenario. And it can be confusing. So I like to try to clarify some of that for the listener so they understand if they are in the right IDR Income Driven Repayment Program. And then we'll talk about some of the banks that are doing student loan refinancing maybe. What do you recommend for those going into residency if we have time? I love to address that question briefly as well. And then number two, the second part of the podcast, I like to focus on today's environment and what's happening with the elections. We have a new, a new president coming in in Biden and what some of his policies are, how you think the landscape may change with student loans here over the next few years and maybe even longer when some of these IDR programs start to, we start to see that big wave coming in at the end of this decade of, of loans that could be forgiven. What do you think is going to happen with the taxability of those? And is the government going to try to change things? Because that's going to be a hit to the government's balance sheet when they suddenly have to lose a lot of money and assets on the government balance sheet. Right now, student loans are I think are around 1.6 trillion. Right.

We can start off with the first one which was, you know what, how to know if you're on the right IDR plan or if you should be in an IDR plan. Right.

Yeah. Let's explain, explain the difference between the three IDRs, pay, repay and IBR. Just sort of a quick summary of those and then let's talk about which scenarios might match a given borrower in their context.

Sure. So the IBR plan is 25 years until forgiveness and it's 15% of your income. That's the oldest plan. The only reason you should ever be using it is if for whatever reason you're not eligible for pay as you earn. And even then there's only very specific reasons why you would use that. And they have to do with basically going for forgiveness and not being eligible for pay as you earn and being in a state with community property laws, which is nine states. So that's too technical. Probably people just need to know that you probably shouldn't be using that plan. That's probably not the right one because the other two, pay as you earn, which was around 2013, and revised pay as you earn, which is around 2016, are both 10% of your income. What's the big difference though? Pay as you earn, you can forgive after 20 years and you can exclude your spouse from the payment calculation. The revised pay as you earn is 10% of your income for 25 years. You cannot exclude your spouse, but it has interest subsidies where the government will pay 50% of all the interest that your required payment is not making. So at a high level, what does that mean? It means that people that are going for forgiveness should use pay as you earn. Generally, people that eventually plan to pay their loans off should use revised pay as you earn. And then people that are in a rock solid place where their required payment, if they did like a 20 year refinancing, would not interfere with a practice ownership situation, then they can go ahead and refinance. Even as an associate, I Just want to say that, like, we only ever tell somebody to refinance as an associate if you've got, you know, something that starts with a 100,000 something, you know, because if you take the 100,000 something and you do a 20 year, you know, even if it's like, you know, 150, 170, whatever, the payment would be around, you know, $1,000 a month or something. If you do a 20 year refinancing, that's not going to get in the way of anything from a practice ownership perspective. You know, anything with a, with the payment in the 2000amonth range or above, we definitely want to avoid. And the reason, you know, people want to figure out which one should I do? You know, it is a little bit of a long answer. That's why we have an hour consult service to go over which one it is. Right. It's not, it's not a tried and true for everybody, but I know you'll agree with this. I think, Wes, you know, a lot of times people focus on the wrong thing from a cost perspective, right? You'll not want to pay the, you know, X number of dollars a month for the more efficient billing system, but you don't think about the fact that you're spending $4,000 a month for somebody to manually do all the billing themselves and having an FTE in the seat to do it instead. Right? So that's one analogy. There's plenty of others, I'm sure. But the thing about student loan refinancing is people get so hung up on the cost of the interest and say, I don't want to be paying 6%, you know, I don't want to be paying 7%. I want to refinance it and get a lower rate right now, you know, and that's just not a good way to look at it because you could, you know, say you refinance 100,000 loan into a lower interest rate. Okay, maybe you saved, you know, 3,000 a year in interest or something. But what if that caused you to give up on the opportunity to more quickly make 30,000amonth more, you know, as a practice owner, Right. And so people get so hung up on the loans. And the main thing is the loans need to fit into your life, not the other way around. Right. And the loans need to fit into your plan for your practice and for your career and need to not, not basically be an obstacle to those plans, including buying a practice and also buying a house. I've seen a lot of problems with that. Just One more example because I know people love examples. So I had a case where it was an associate specialist. I don't want to say what city necessarily, but it was in the northeast. And that specialist refinanced to like a five year variable rate, like a five or seven. The required payment was $7,000 a month. This specialist had a child and both of the parents worked and the daycare bill was 3,000amonth. So they had $10,000 a month required payments. And the daycare doesn't show up in your credit score, but the student loan required payment does. And practice loan, you know, lenders as well as mortgage companies took a Look at that 7,000 required a month payment and they said, you know what, your back end debt to income ratio is too high, meaning that you cannot have more than. It depends on the mortgage company. I think. I don't keep track of it exactly, but I think it's, you know, 40% or something. Can't be more than that going overall to debt payments. And so if you look at, you know, your mortgage and throw in a $7,000 student loan payment, well pretty quickly you're not going to be able to get approved for a practice loan potentially or a mortgage for a house where you want to live. And so that's kind of like the loans driving the person's life versus the other way around. So a big part of what we do is making sure that never happens and people can live the career and the goals they have for their life regardless of what they owe.

So in our Associates on Fire program, one of the very first videos, if you go to associatesonfire.com for you listeners and you go to our video page, there's three fuel cells. Each fuel cell represents a stage in the life of a, of a dental associate. And the stage one or fuel cell one is pre ownership. Fuel cell two is going through the process of buying a dental practice, that acquisition experience and then fuel cell number three is stepping into ownership and running a dental practice successfully. Well, in fuel cell one we have a video called the overall timeline of events in the life of an associate dentist. And we, we divided up into I think about six segments and you come out of school and in phase in pretty much all of these phases until the last one we say keep living like a dental student, keep living like a dental student. Don't release that pent up consumerism I call it, which you're so tempted to do. But in all of these, the, the very last one in that sequence of events is to then maybe refinance their student loans out of a federal student loan program. Now, I want to emphasize real quick, just by way of basic definitions, that consolidating your student loans and refinancing your student loans are two separate things. Consolidating is when you're taking your existing federal student loans and you are simply combining them into one, but it's still with the government. The government is still acting as the bank. Refinancing your student loans is when you take it out of the hands of the government and you put it in the hands of a private bank and you can get a lower interest rate than the, than the government loans because on, and correct me if I'm wrong, Travis, but the private banks can underwrite you as an individual. And if you're a lower risk, then you can get of course, a lower interest rate where the government just has sort of blanket rates. Whether you have a low credit score or high credit score doesn't matter. And so there's good reasons to refinance into a private loan. But in this timeline of events video on our Associates on Fire webpage, we say you need to first just try to create some liquidity in your bank account. Liquidity is cash. Have an emergency reserve fund. Get that up to 50,000, get that up to 100,000, whatever it is. Because when you go to buy a practice, banks are going to lend to you if you, if they believe you will be able to pay them back. Now Travis, you were talking about that sort of debt to income ratio. You're exactly right. The banks look at this thing called the global debt coverage ratio. The global debt coverage ratio. And notice, global means it's not just what debt is in the practice. It means they want to know that the cash flow from the practice, the revenue after expenses, is it going to be able to pay not only the debt that they give you in the practice, but also all personal debt that you have as well. So in that example, Travis, somebody's paying $7,000 a month because they are just headstrong on getting their student loans forgiven. Good luck getting a loan from a bank to go buy a dental practice because your global debt coverage ratio is not going to be healthy. And so that's why I always say, I know it's painful to see your student loan balance going up in these early years because accrued interest is being added to added to your loan. And I know you hate that and I am debt averse just like most of you are. But we have to be smart about that as well and just know that there are bigger, bigger things we need to address and getting you into a healthy practice that is going to earn you that in your example, Travis, an extra $30,000 a month. Well then you know, you could use that extra $30,000 a month to maybe pay down your student loans. But, but I would say buy your practice and buy your home, make sure you're funding your retirement plan, getting tax deductions wherever we can. And then at that point we have extra cash flow if we paid off any cancerous debt, non deductible, high rate debt, let's make sure we have our emergency reserve fund. We own a practice, we own our house, we're sort of made it and we're stable there. Now we can consider as, as maybe the next rung on the ladder of building wealth is to refinance your student loans. But you always have to keep in mind that once you cross that bridge, there's no going back. And you don't have the flexibility to, to go on deferment or forbearance or. Not that I want you to go on forbearance or deferment, but you don't have the same flexibility when it's out of the government's hands and in with, with, with a bank. Travis, anything you want to add to that sort of sequence of events? I'm recommending to, to dentists.

No, you're absolutely right. You know, the, like I said, the student loans are actually a relatively minor piece of your overall potential losses. Your number one loss is going to be taxes. I could say for personal experience that's the most, that's the. Now maybe that's not technically true. The number one loss is like opportunity cost of not becoming an owner. I mean that's probably the number one and then number two is probably taxes. And then you know, I would say an incorrect student loan strategy. I would probably put that number four behind not or making bad investment decisions. Maybe, maybe bad investment. You know, it's really debatable what the order is. But yeah, student loans, it is a big obstacle, but it's one that you can get a plan for where it doesn't block you from doing these important things. So the only thing I would add is so say somebody wants to pay off that loan super fast, right? You can consolidate, get on the revised pay as you were in plan. Let's say that we're not in this zero percent interest world that is such this weird world that we're living in right now and that they normally that the things are normal again. So what would normally happen is your payments would be 0 for your first 12 months. About this payments would start about 12, 2 months after school. So you're a new grad. June, you take your new job in, you know, July, August, now your payments are zero. So from like August after you graduate till a year after that, your payments are zero on repayment, your interest is 50% subsidized. So if you have like a 7% rate, you actually have 3.5. Well, 3.5 is even better than a 10 year refinance rate, you know, so you've got that zero payment and like you said, that gives them the money to go fill up that emergency fund. So in a perfect world, I mean, I like people trying to buy a practice after a year or two, as long as they feel like they're, you know, in good shape, they can do clinical work, they have an idea of what, where they want to be long term, there's nothing necessarily holding you back. And a lot of the most aggressive, most successful people we've worked with, that's what they've done, is after a year or two, they go in and they buy a practice that's really large one, that's really doing a lot of revenue. In some cases they'll do a startup, in which case we say we'll just take what you thought you needed for an acquisition and double the cash because it might be a little slow. So I think that that's just an example of how you can get to where you want to be and buying a practice very quickly and then say after a year you're killing it. Well, you'll probably just need one year's worth of tax returns to get a good deal on refinancing. And that second year you can use half of your income instead of all of your income and calculating that payment for the repay, which means that you actually get a subsidy that's better than refinancing, probably for the second year too. So for literally two years after dental school, if your goal is to pay the loans off, fine, go get a practice, go be a practice owner. And then once you have that tax return that shows a good income after that first year as a practice owner, then go refinance the loans, but not before that.

So a good rule of thumb, and again, I recommend any dentist listening to this to get tailored advice to your particular situation by going to studentloanplanner.com and getting one of their consults is very unique to you. But a rule of thumb would be to that if you're planning on paying it off because you're planning on working hard and earning a great income. And so you're planning on pay it off. Go with the repay, the revised pay as you earn option because there will be some period of time maybe where the government will pay for half of the interest. A minute ago I mentioned how you're waiting to refinance into a private loan until all these other things are done. In the meantime, you're going to see your balance going up, most likely. So maybe best to just be, be in the repay. Let the government pay for half of the accrued interest. And then eventually when you're making so much that your 10, you know, 10% of your income is higher than your, than your 10 year plan.

At that point. Travis, what, what happens when your 10% of your income is greater than your 10 year standard plan? Do you, are you still capped there at your 10 year rate that's sort of pegged when you come out of school or does it just keep going up?

Yeah, you're capped on the IBR and the pay plans, but the repay plan, it keeps going up. You know, the honest to goodness truth is if you go to a private, expensive dental school, it's going to be really difficult to justify refinancing even if you're making gobs of money. And the reason is most of these private schools are not in the middle of nowhere, Iowa. They're in the middle of like Los Angeles, right, or New York City or something. And then when you graduate, you tend to stay in that area. And you know, as you know the overhead in these areas, it's a lot more expensive, right? If you're going to buy a corporate building to run your practice, you're going to have a lot more write offs because you're going to have to pay so much money for the building, you know. And so you know, it just, the thing is, is like if you want to make a gobs of money and pay the loan off directly, even if the numbers don't suggest you should do that, that's okay. But we're just seeing more and more people, particularly in these like coastal areas or like Chicago or you know, expensive big cities where dentists really love living that you, when you locate yourself in an area with tons of competition, you have a little bit more of a cap on earnings than if you live in the middle of nowhere, you know, and you have no competition at all. And so yeah, I just want people to know that like you can be really successful, engaging, you know, somebody like you guys to say, hey, I'm making 300,000, I've got 500,000 of student loans and I could pay it back, but like, maybe I should do a defined benefit plan and put, you know, 10,000amonth away pre tax for that instead, which will lower my adjusted gross income, which will get my, you know, payments, my student loans, way lower than they would be. Right? So what we tell people is your student loans are basically an income tax. It's 10%, but it's 10% of your AGI. And they also give you a deduction for your family size. And then in certain states, like California, you can even get it even lower by filing taxes separately. Like if you have a stay at home spouse, there's this loophole where in California you list the income. 50, 50, you know, if you file taxes separately because of community property rules, well, they go off of just your AGI. So if you do that, then you can get payments way lower than if you lived in say, Oklahoma. So there's these weird nuances where, you know, it's like an income tax and like anything, if you guys have, if a dentist has somebody like you guys in their corner, you guys know the tax rules so they don't have to learn them because they're really complicated and they can save a lot of money that way. Right. So that's how I try to explain it. If I try to make it real simple. It's kind of like say you got a 10% income tax and you've got super smart people in your corner that can help you write your income down. Really low paying 10% of your income might be a great deal to do that for 20 years. But if you know that you're making so much money that a 10% income tax sounds awful, but relative to the amount that you have that you owe, then that's kind of where you can kind of see, okay, maybe it does make sense to try to pay these suckers back.

Yep, that makes sense. I mean, if you get to a point where your adjusted gross income is say $700,000, and we work with a number of dentists who are AGI of 7, $800,000. Certain specialists are up around $1,000,000 that time and even some GPS can, can get up there as well. If they, you know, if they, they just have sort of a booming price practice, then at that point, 10% of, let's say, 800,000, $80,000. Well, 10%, if you're on the repay program, you're going to end up paying probably paying your student loan off over time anyways. But what I would say is after you go through that series of events I mentioned of getting out of dental school, buying your practice, buying a home, funding your retirement plan, then kind of lift your head and say, okay, what are the next rungs on the ladder in my, in my, in my pathway to financial independence? And for some people, depending on where they are, it might be setting up a defined benefit plan like Travis mentioned. It might be, I don't know, investing over in the piece of real estate over here. It might be just investing in a brokerage account and putting $15,000 a month or $8,000 a month into a normal taxable brokerage account and let, let the government sort of bear the risk of this student loan that they're, that they're holding, that they lent you money, and then if you end up having it forgiven, great. You know, if there's some left after 20 years, great. Or maybe there's no way it's, there's going to be anything left after the 20 years. So let's go ahead and take it from, who knows, a 6%, 7% rate and let's get into, into a 3% rate with a private bank. There's just a lot of uniqueness to your situation that I think has to be addressed from somebody like an advisor here at practice CFO or@student loan planner.com, they can look at a number of things as well. We're the, our, our role as sort of a CFO is going to be very kind of comprehensive. What are your taxes calculated be, what's your overhead in your practice? How can we restructure your practice debt? What's your personal budget like? What happens if you fund a retirement plan? And we sort of look at all these levers and then we say how can we shift these levers in the optimal arrangement to maximize your.

Your rate of speed of becoming financially independent? And there's just a lot that, that goes into that. Okay, here's, here's a question for you, Travis. Let's see, let's say we decide for somebody it's in their best interest to refinance into a private loan. Who are some of the main players out there in the banking world that, that will refinance rates? What are the current rates looking like? And then what are they looking in a potential borrower? And by way of liquidity and credit score and debt to income?

That's a great question.

So in terms of what banks, I could give you a list. There's a Bunch of them.

I'll just mention a couple. There's like Earnest Laurel Road, SoFi, Alpha Common Bond, Credible Lending, Key First Republic Bank, Citizens Bank. There's a whole bunch of them. For more experience on our site, we have a page studentplanner.com refi like R E F I. And what we do is essentially take lower commissions than other places do to get cash back rebates or cash back bonuses when people refinance. That's not the reason you should refinance at all. But you know you're going to get a better deal going through us than you would go get anywhere else. So that page has got about 98% of all volume represented that does student loan refinancing. And we put the people that do the vast majority of that 98% near the top. So you don't have to apply it like, you know, 10 different places. You can only apply to like two or three. And you probably get, you know, the best rate available in terms of what they look for. They want to see income, they want your debt income to be below 2 to 1. And we're just talking student loans. So for example, if you make $200,000 and they want you to have less than 400,000 in debt, that makes sense. That's just like a general rule of thumb. They're going to want a credit score above 650, but really they kind of like more like 700 or above, you know, anything. Yeah.

Right. That's not going to, that doesn't count mortgage or personal loans either. It's just student loans they want, you know, they basically want like no red flags, like no defaults or something. Plus you know, a student loan divided by income ratio better than 2 to 1. And really that needs to be on a tax return. So if you've got, you know, you tell them your income's 200,000 but your tax return shows 110 because you took a bunch of write offs and you had some losses for the business and whatever, then that might not work. But in general, you know, people love competing for dentists business. The rates that people will get as a dentist or dental specialist are oftentimes sometimes even lower than the minimum reported on the blender's websites. Because they will give a special deal to someone that they particularly like that might not even be public, you know, because they don't want to, you know, they don't want to tell other people kind of what their, what their competitors, what they're giving you in terms of what rates are currently right Now I'll say some of the best rates I'm seeing in the 10 year range might be like around like 3.7 ish, which is really kind of amazing. And the best rates for more like the 20 year loans are right around maybe like 4.2. And these are like the best of the best kind of situations for a five year rate, something like 2.6. And then you can get variable rates that are below 2. So if you think about the ability to lock in a barely above 4% interest rate for 20 years on an unsecured loan, that's really excellent if you need to pay back your student loans now, right now the federal interest on student loans is zero. I'm a little concerned that we might have some inflation once everybody starts booking cruises and Disney vacations. Again, I can't predict that. The bond market's certainly not predicting that. And that's supposed to be the most sophisticated view of what's going to happen with inflation is the bond market, even though that can be wrong. So what I'm telling people is wait until you. Maybe you're so first off, they're supposed to have payments start again January 1st. They're probably going to come out with an announcement within days. I'm expecting it to come out this week, the recording this November 30th. So they might come out with an announcement sometime in December that they will start interest again or they will extend that 0% interest period. So what I'm telling people is once you feel like you have an idea that the interest is going to end the following month, start applying because the rates are rate offers are good for 30 days and get your rate offers in front of you and then go ahead and sign something once that interest freeze has ended. Because it's just one of the most amazing times ever to lock in a low rate on anything. I mean, I'm sure you're telling people, hey, your practice loan, you haven't looked at that since 2017, right. Or whatever, 2018, you could knock off maybe a point off of that. Or you know, your mortgage, you can knock that down to below 3% and you haven't looked at it since it was 5. You know, so I mean, refinancing everything is, is probably a good idea right now to at least look into it. And student loans are no exception to that. The only thing is, it's just this weird zero percent thing that no one was expecting on the interest that's kind of slowing that down.

Yep, I think that's a good takeaway. And at the end of this podcast, we'll list some of the takeaways for you dental students or dental associates. What can you do with this information? One of them is depending on where you are possibly to look at refinancing given interest rates are, are so good right now. Now, I'd still say that's always in the context of the overall timeline of events and where you are. But, but if you're, especially if you're a practice owner right now and you already own your house, especially if you're already funding your tax deductible retirement plan right now, may not be a bad idea to, to go and get some quotes now. Are the banks looking for what, what credit score are they looking at at a minimum?

Yeah, like so 650 is the minimum, but like I said, you really need more like 700. And you know, for most dentists, like through our site, you're going to get a cash bonus generally of at least $1,000 from applying through us. If you apply, when you get something in the mail, you don't get anything and you'll get the same, and you'll get the same interest rate as well. So, you know, it's kind of like, you know, Cyber Monday, when they had Cyber Monday, there was this big coupon that they, you know, gave for buying a brand new desktop like dual monitor set that I, that I wanted to get. And if you like, just apply directly, if you bought it directly on the website, you don't get that. But if you enter the coupon code, you get it. Right. So that's kind of the analogy that I like to give to people because that kind of makes more sense to people. I think when I say you get up to $1,000 back, you know, student loan refinancing is very different from mortgage refinancing or practice refinancing. Like practice refinancing often has prepayment penalties from what I understand. So with student loan refinancing, there's never ever any prepayment penalties. You can pay as much as you want whenever you want. And the difference between a 15 year and a 20 year, right now, the 20 year is only 0.1% higher. So honestly, I find myself right now recommending people do the longest term you can right now just to lock in a low payment and a reasonably low interest rate. And what we tell people is I'm kind of conservative when it comes to debt. I don't like having debt necessarily, like unless there's a specific reason for it. And then I especially Hate non tax deductible debt. And student loan debt is not tax deductible, which makes it especially annoying. And so people can pay extra on their student loans while having a low required payment. So we've come, we've coined this term called the student loan refinancing ladder that we like to explain this with. Basically if you're on a ladder and you're walking down from a roof, you start at the top rung and you walk your way down. So what people can do is say you have a $200,000 loan, that payment on a 20 year might be like 1200amonth. If you did a five year, it'd be like 4000amonth or you know, something like that, right? So you get that $1200 payment, pay a lot extra if you're making gobs of money and you're putting some of it investments and then you just don't know where else to put it. So okay, might as well put it on my loans. And the thing is is imagine if you had had that shutdown with that $1200 student loan payment, you would have been in great shape. But if you'd had the $4,000 payment or if you wanted, you know, or say you just wanted to expand your practice or something, that might make you a little bit more risk averse, which we don't want to have happen. So start off with that 20 year loan term, pay it a lot down since there's no prepayment penalties, and then refinance it again. You can get another bonus if you want and then get like a ten year or a five year once you paid it way down. And then the payment won't be all that larger than it was before and you cut down the amount of time you were going to be in debt by a lot too.

That's solid advice. Going with a 20 year gives you flexibility. And the rate differential is so marginal there it's probably worth paying just slightly more from an interest rate perspective to give you the flexibility to back off.

The amount you're paying per month if another rung on the ladder, going back to my analogy, emerges as being a better option or a better use with your dollar. Becoming financially independent is a lot like thinking like a bank, which is how do I take my cash, my surplus cash, and, and apply it in a way that I get the most return on that dollar as possible. And it may not always be what it is today, may be different to tomorrow. So if you do a 20 year loan and then go and pay the Extra as if it were a 10 year loan or heck a 5 year loan, whatever you want. And then you need to back off that cause you need to go buy the next CAD Cam and you don't want to take on an equipment loan to do that or whatever then, then you've got some cash to, to be able to do that. I know one of the banks we had come across a lot and even referred over to a bit was First Republic bank and they had required Doctors to have 30% of the amount being refinanced in cash. At least that's here in Southern California. I don't know First Republic is like that globally. Is liquidity important having cash on hand important when you go to do a refinance only with them?

So they don't really care. Maybe, maybe, maybe Earnest might, might care a little bit. I know they're public about, you know, using alternative, you know, metrics when approving someone. They might be care more about you having assets and things like that. But no, they really care about your credit score generally and just having that income that's needed to cover the debt, you know. And maybe in some cases, like if you're in an expensive area, they might look at 120,000 income in Southern California very differently than 120,000 in Iowa. But in general they're going to care just about your credit score and your income and just not having any red flags. And that's pretty much it.

Got it. Here's a question that I think a lot of dental students have or associates have that I not sure if I entirely know the answer to. Sometimes I think I do. But how, how much are you able to as an associate dentist or as a borrower with the federal government almost manipulate the amount of earnings that you are that you report to them? In some cases I hear all they look at is your W2. And let's say you're an associate and you're set up and you're being paid as an independent contractor and you have a corporation and your corporation takes your 1099 income and then you pay yourself, let's say it's $300,000 but you only pay yourself a W2 of $50,000. Now that's pretty aggressive, but let's just run with that example. Can you just show that W2 or at least a recent pay stubborn and then suddenly your student loan payments go way down based on that even though you're going to get a K1 out of that corporation so that the combined both sides of the teeter totter the K1 and the W2 equal 300,000. Because I've had a few cases where doctors wanted to buy a home or a practice, and they just went and reported something that was sort of in the moment but didn't represent the full year's income and, and were able to temporarily get their student loan payment down lower to give to the bank. So that the bank says, all right, your debt is pretty low. Your monthly payments on that debt are low at least, and let's go ahead and give you this loan.

Yeah, that's technically not legal. It's very explicit that you must include all sources of taxable income in the calculation of your student loan payment. Now, that doesn't mean that you can't use tricks to minimize it. So I'll give you an example. If you quit your associate job and you just recently started up your practice job job, maybe you ask them to recalculate your payment based off of, you know, some sort of P L that your accountant puts together. Right? Like your best guess. I mean, there's ways to do it where, you know, you don't have to just give them the W2. Now, I'll say that the Congress, back when there was some talk about doing the higher education reauthorization, there was some talk about just making it where you would just have to pay 10% of only what your W2 said. And it was going to be a payroll withholding. So they were just going to do 10% withheld directly from payroll. That would be the dentist sole get forgiveness act of 2020, if that were to ever happen. Because every dentist that owns a practice would just set up an S corp and pay themselves 120,000 and then pay, you know, 10% of that 12, you know, a thousand dollars a month. And virtually everyone has more than 200,000 in dental school death these days. And they were going to have no tax consequences on the forgiveness too, with that. So then everybody would just essentially pay the same price for school. If you went to Georgia at Augusta or NYU paying 700 grand. But, you know, I get this. I get another question. I want to deduct the interest. Can I have my student loans be like a business expense or something? And, you know, from what we've talked with CPAs, no, it's. That's a personal benefit, and it's not. Just because, you know, you put it through your business doesn't necessarily mean that it's tax deductible. So I've. I've found no way to make the interest tax Deductible on student loans for a dental sized debt. You know, it's just not what the rules say. And a lot of dentists, one of the most popular requests is that Congress would make it tax deductible. But I would say be careful what you wish for because every time they make some sort of rule that helps student loan borrowers, the schools take advantage of it. It's case in point, NYU Dental school, we're projecting now is the first dental degree, first degree period in the United States that we're projecting to cost more than $700,000 for the four year DDS degree. So that's just staggering. And you know, if you could deduct your student loan interest, I would imagine they would realize that too.

Yeah. It seems like any benefit ultimately feeds through to the next generation going to school because the school is just charged more because they know they can. Because you got the deep pockets of the government who are basically subsidizing to make that happen. All right, let's move into what's happening right now. And you started to touch on this, Travis, when you said that come January or I guess. Yeah, yeah, January is when student loan payments will need to resume. Covid government has stepped in, said student loan borrowers, you're automatically on deferment. Except for the fact that it's not exactly deferment because it's not accruing to their loan right now. Correct. The government is actually paying the tab in the meantime.

Yeah, I mean, we're in such a gray area right now. Just, you know, it was an act of Congress for the CARES act that it was zero interest, zero payments, and it all counted towards forgiveness. And then President Trump issued an order. You know, I'm a little cynical about all politicians, so I'm just going to say this like this is not a view of how I think politically either way. But, but I don't think he had the power to do that. I think that that was something that he did and pretty much any politician would do running up immediately on an election. Right. I think he would have let that expire if they had not had an election literally in like a month after the student loan payments and interest expired. In fact, the first due date for loans was going to be October 30th. That's when all the payments would have started again. So find me a politician that wants 42 million people to have their payments start again five days before an election. That's the reason why they did it. And he promised that he would extend it beyond December 31st on or after December 1st. So that's within the next couple of days. They've already said that they're not going to extend some of the emergency lending programs that are out there. There's not a lot of support for extending the enhanced unemployment, I think, in the Republican side. So who knows what will have happen there? So theoretically, President Trump used that power that some people say the president has to make student loans, zero payments, zero interest. And the question is, if Biden decides to use that on January 20th, you're gonna have 20 days where there's interest charged. And will Biden telegraph to people, hey, you're required to make the payments by law. But January 20, the first thing I'm going to do is come in and slam the brakes. That's a lot of whiplash. You know, I mean, I feel I shouldn't say this because people get pissed off because everybody hates loan servicers, but I even feel bad for the student loan servicers because how the heck are you stopping, you know, tens of millions of people's payments and interest and then suddenly you start them all back up again and then there's this like period of time where you're supposed to start them and then you have 10 days notice. You gotta pause all that mechanism in place. So it's just a disaster. And even when they start, even if they extend it to September 2021, it's like, I see all these media pieces that are like, oh, it's gonna be so many people are going to have so much trouble paying their loans again. Well, that would be true if you did it like until 2025 or 2021 or whenever. So it's going to be disastrous no matter what, because the system was never, ever designed to all stop and then all start. And so it's just going to be such a mess. So in terms of what Biden might do with student loans, I think he'll probably try to do the payment and interest freeze. I think he'll try to extend it. Our call is that he'll probably try to do it till September. I, I don't know. September of 2021, that is. And I don't know if the Republicans are going to challenge it or not. They might try to challenge it if he does that. And the thing in terms of what, policy wise, he might do, basically the only thing he's going to get done is through executive order. You know, I mean, it's pretty clear Senate's very narrowly controlled either way, Republican or Democrat. So you're not going to get big legislative stuff done with student loans. The only thing that's going to pass is something that has broad bipartisan support. And the thing is, the devil's in the details. So bipartisan support for reforming student loans, making them simpler? Well, Congress and the White House administrations of both parties are the ones that got us into this mess. So what are the chances that, you know, they make it simpler? It's certainly possible, but it just. Is it probable? I don't know. I mean, I guess it's possible that they make it simpler and they make one repayment program and they probably would leave the old loan options in place if they did that and make a new loan option. And the Republicans are not going to want that to be more generous than what's available now. Biden will. So who will win? I don't know. You know, so I mean, he'll probably try to do a lot of stuff, the executive order, and then they'll probably appeal it to the courts and, and then probably, I would assume a 6, 3 Supreme Court would tend to say, no, you don't have that power. And that's probably what you'll see in general the next couple of years with the political landscape. So basically, what I can tell dentists is, you know, if you have debt that is more than your income, you probably need to think about forgiveness. So this is like a great takeaway for someone. You want to think about the innocent, till proven guilty, like, thing, right? In a court of law, when you're charged with a crime, you're innocent until proven guilty. When you graduate with dental school debt of six figures, you're. You're basically needing to go for forgiveness unless you can prove otherwise. Even if you're going to make a bunch of money because, you know, you might think you're going to make $400,000 a year, but have you really run the math on what general, you know, dentists make in Southern California, for example, you know, so in other words, you want to think about what you want in life and have the general view that probably you'll go for forgiveness unless you can prove it otherwise. And I love proving it otherwise because that means somebody can get out of debt, be debt free, not have to worry about it. They can focus on making a ton of money first and then set the stuff up on repay to get the loan interest low while they build up that money and then they can pay it all back and have a strategy in place for that. Right. It's just the debt's growing much faster than inflation for every new grad class that comes out, and you shouldn't feel bad about that because the government's basically decided we're going to make a super complicated income tax in exchange for us paying for all of your education for every level. That's really the takeaway.

And for most of you listening given the Associates on Fire podcast is for early stage associates. Most of you aren't even at that point in your timeline where you would even consider refinancing yet because of those events. We recommend beforehand. Now, Travis, there's two areas that I'm wondering if there is bipartisan support for, and I honestly don't know the answer to this. But the first one is the that the tax on the discharged debt after 20 years or 25 years on the repay the tax bomb as we call it, is there bipartisan support at some point to remove that from taxability? I know it's going to IRS is they want their sticky paws and everything. So this is going to have to be a legislative override of anything the IRS is going to do on this. Just like what's happening with the PPP loans right now. The IRS is saying this is taxable, although I think legislation may come out and override that and say it's not taxable. Same thing on the student loan bomb. Is there a bipartisan support for that? And maybe they're just waiting for another four to six years till we sort of get to that point when suddenly a lot of people are going to have to have to pay taxes on the forgiveness and they want to use it as a political kind of card to use when they're running for election or whatever to say we're going to forgive all of these? That's the first one. The second one is do you think they'll make.

Employer paid student loans as a benefit that becomes tax deductible to the employer excluded from income from the employee slash borrower like a health insurance, a group health insurance plan plan. Can you address those two questions?

Yeah, sure. So the first one is the tax bomb. I think it's extremely unlikely that you're going to have the tax bomb actually be assessed on this generation of dentists. And I'll tell you why. It's because the student loan system is an absolute mess and you're going to have millions of people, not just dentists, but every single major profession with a three or four year graduate school degree is being vastly overcharged because the schools are getting away with murder and they're charging whatever they want because there's unlimited Borrowing. Right. And so millions of people, tens of millions possibly will have a huge tax bomb. And I would say millions will owe a six figure tax bomb. It'll be single digit millions, but it'll be a lot. And those single digit millions of people will be highly educated people in their 50s, 60s and 70s. That's the most valuable demographic group as a voter. Right. So I think it's extremely likely that politicians will say no tax bomb at some point. The only question is when. Now on the flip side, if you make the 10% of your income 20 years pay plan, if that's in place and you do no tax bomb, then 90% of people going to graduate school would go for forgiveness. Do policymakers want to be in a world where there's no limits on borrowing and 90% of people would go for forgiveness with graduate degrees with high incomes so that all taxpayers are subsidizing high income professionals to not have to pay the cost of the degree? That's a problem. At some point I think you might see bipartisan consensus that graduate school shouldn't be unlimited borrowing. Right. Or if it is, it should only be for groups of low income backgrounds or something like that.

Right.

And at some point you'll have the tax bomb go away. The Republicans answer is well, let's make 15% of your income for 25 years and no tax bomb. That's been a discussion. The most recent one, Senator Lamar Alexander was the head of the Education Committee. He's Republican, he wanted repay, which is 10% of your income for 25 years with no tax bomb that would still make most people still go for forgiveness. Because that's again just a really valuable no tax bomb thing. That's great. Then it's just very clearly a 10% income tax with no complication. So I think that there's some serious possibilities that you would see some bipartisan consensus that might pass in the next two to four years on this on the tax bomb and then on, on simplifying things. And then the other question you asked was, are they going to give, make it like health insurance where employers can make pay student loans and deduct it? They might. They did that in the CARES Act. They said you could do up to $5,000 as a, you know, up to $5,000 basically as a tax free payment towards student loans approximately. And, and it's tax free on the employer and employee side. So it is very attractive. But if they did that, they would put a cap on it. So it would be limited to no more than whatever number probably 5,000 or 10,000, that would be the maximum. So that does not mean that you're going to get to pay your student loans through your corporation tax free. If anything, you might get a four or $500 a month kind of benefit that you could add. And maybe if you did that, maybe it would probably look more like 401 rules rather than, you know, health insurance rules because, you know, 401ks, you have to kind of treat a lot of the employees kind of somewhat equally. Right. There's some like compliance rules involved. Right. And there's a lot of companies, startups in this space that are getting into this space expecting the rules to get super complicated and bureaucratic so that they can then provide solutions to offer employers student loan repayment, you know, employer benefits basically. But there's pushback on the conservative side of things because they know that if they did this tax break, then that means that they would have, you know, they would essentially have a subsidy again for the schools. If you don't limit the borrowing, it's just a backdoor subsidy for the schools. So the higher education groups really pushing for this and reflexively, I think the Republicans, whenever the higher education groups push for something, the Republicans reflexes to resist. So, you know, I get that a lot of people want that benefit, but it was only added in the CARES act kind of as a, let's see what happens. And you know, I had people tell me during the March, April, May, June time frame that 0 employers were interested in this because everybody was focused on keeping people employed. You know, and then maybe December, maybe some people are trying to do it last second because the year was better than they thought it was going to be, but unlikely. I think they do it long term with something that means something to people.

One of the reasons I ask that is because right now there's a trend.

You're in the world of dental a bit with a number of dentists you work with. A lot of them are working for large group practices. There's a lot of consolidation in the industry right now and.

There'S a lot of failed consolidation and there's some successful consolidation as well. But it's definitely a trend in that world. And we, one of the benefits that I'm seeing emerge are for larger groups to entice the, the ambitious, the, the, the clinically strong, you know, students is to come work for us and we'll help pay for some of your student loans. So if that can be excluded as a benefit from income up to some point and tax deductible to that large group dental practice, I could see that almost strengthening what is the existing trend, which is student loans are driving a movement toward consolidated dental groups because of the sort of the security of income because they, one thing they know how to do pretty darn well is get, get people in the chair. And if there's people in the chair and you're doing some clinical work, you're going to have a baseline level of income that you can count on as opposed to going to a private practice where you're just crossing your fingers that somebody shows up because you got a dental. I mean you got a student loan, you got to pay. So that's one of the areas I'm kind of the troubled areas I'm seeing that dentists are.

Yeah, let me just, let me just say I'm against anything that's not better financially for the dentist where it gives them more freedom, more flexibility, a better life and allow them, allows them to be their own boss and make the decisions. Right. And so, you know, I got a lot of requests actually from major employers and lobbyists that wanted to partner with Student Loan Planner to co sign on a letter basically of support for making this a tax deductible benefit. And I said, absolutely not. And they said, what? Why would you oppose that? And I said, I don't want people to be even more tied to their jobs and incapable of doing entrepreneurship and starting their own businesses, of being their own bosses. I don't have an interest in making sure that you have a extremely captive, risk averse labor force. That's what you want, you know, and that's, that's what they wanted, is they wanted, you know, because think about health insurance. Health insurance ties people to jobs so hard because you think, oh my gosh, I cannot lose this health insurance because the ACA bill is going to be 20 grand or something really high, right? And so people overvalue it mentally, you know, compared to the actual value. Same thing that would happen with student loans. You know, they just want a way to create another benefit to tie you even harder to the job in a world where a lot of millennials and Gen Z people are doing a lot more entrepreneurship than you would expect with this level of student debt. So I hope they don't do it. I know a lot of you out there, a lot of your listeners probably want it to be deductible because it save you some money. But, but I would suggest that you, well, maybe, I don't know, maybe you should root for it because then you'll have less Competition, you'll just have all these big groups and you'll be even more of a craft beer kind of a, you know, a business than you already are.

I don't know. Well, a lot of students coming out of dental school, they, the larger group practices give them a real safe place, place to go and hone their clinical skill set. And, and it sure does make us make a lot of sense for a lot of people. And so many of my practice owners now be, prior to that they were working for a larger group dental practice and, and really, really became efficient and quick at, at being clinicians. But, but I also don't want the tail to wag the dog. I mean you shouldn't be working there just because you have predictable income to pay your student loans. When so many of these amazing benefits that come with practice ownership exists and still exists today in spite of this trend in consolidation. I mean in medical. Medical consolidated heavily a long time ago, but there's still a segment in medical where a lot of medical doctors want to own their own practice. And there's always going to be some consolidation and then some fracturing and it almost like pulses, ebbs and flows over, over time as people want different things. Well, we're definitely here to support the private practice. We believe there's a lot of great things to come out of the private practice. And I'd say even maybe, maybe the optimal scenario for somebody who's wanting a good income, a good life, control their clinical output, they're wanting to control their culture and their experience in their career and just have more of that hands on approach. Obviously practice ownership is the place to go. Even though I mentioned in some podcasts I think there will be a place for consolidation of outsourced services for those private practices to get some of the benefits of scale. I think we'll see a lot of that in the industry as well. We're coming up on an hour here, so let me, let me have a send off by just talking about the student loan servicer landscape. And there was going to be a big change. I haven't been current on this Travis, so get me current. I think it was going to be in September of this year that they were going to consolidate the, what is it, nine student loan servicers. I can't remember exactly how many are out there. They're going to consolidate them and into, I think three. And there's going to be a lot of migration of data from one, you know, one company's one servicers hardware over to another one. And maybe we should Be downloading some of that to have it on our locally, on our own computers now in case something doesn't look right when it comes out on the back end after that conversion. What's happening in that landscape and what should doctors be doing right now?

Absolutely nothing. So December 3, 2021, is the first date you need to worry about it because they decided to just extend all of the servicer contracts by year. We predicted this because we knew that all the servicer contracts expired December of 2020. And there's no way that you would transition all of these accounts to all these new servicers in the middle of the most chaotic suspension and implementation of a student loan policy in history.

You did call that. I remember in your podcast you predicted that.

Yeah. So it's just like, what's going to happen? I mean, it almost seems. Almost sure that what's going to happen is the payments and the interest will start up, you know, at least by December of 2021. Why do we know that? Because they do not have the option of extending the contracts as is at that point, which means they have to do new, new places. They've already kind of awarded some contracts. Who knows that those contracts are like, honored with the new administration that didn't negotiate them? You know, I think that the contracts are like, heavily tilted towards this Ed Financial and Mohela companies located in some, some key senators, states on the Republican side of the aisle. I don't know if that went into the decision of what, who to award the contracts to, but it was a really big surprise to me that they chose those two companies because they have no track record of managing huge amounts of loans successfully. So the thing is, for Dennis is it's not going to matter. Your payment strategy is going to be the same. Your strategy overall in your loans is going to be the same. If it does transition over, it's going to affect everybody. What I tell people is don't call the servicer because you're going to get a different story every time you call. You can call for basic factual stuff. When did my payment. When was my last payment posted? You know, what is my daily interest accrual? Is my address on my account correct? Can you help me log into the website? You know, those kind of like very basic things. You should sure call them, but don't ever trust them with anything they say about you should do this plan or this is how you should do the consolidation or, you know, this is the interest subsidy that you're getting, because these are folks that turn over constantly. That make, you know, $15 an hour, $20 an hour, something like that. And, you know, it would be kind of the equivalent of you trusting your financial future to, you know, the assistant that sits at the front desk or something. Right. Nothing against that person. They're probably a nice person, but they don't have the training and the qualifications to give you good, detailed, complex advice. Right. Maybe occasionally you'll get somebody really good that actually will be able to give you good advice, that sits in that role, you know, but it's, it's just you shouldn't expect that. And that's what a lot of the Internet, you know, if you read the Internet, that's what they say is, oh, never pay for student loan advice. What's. Because they're talking to that person that's got $30,000 of loans, that makes 20,000 a year. They're not talking to a dentist that's got 400,000 of debt with all the complications that dentists have.

So some of the big ones are going away, right. Is, is navient.

Are they going extinct here, here with this transition nelnet, some of those bigger ones?

We'll see. Right? We'll see. You know, I don't see them going away because things are so complicated. They're so entrenched. They have so much of a track record with everybody's data and everything. I mean, it's going to be a mess no matter what they do. It wouldn't surprise me if they kind of decide last second, well, maybe we'll keep you at some level, like we'll keep half of the accounts over with you or something. I don't know if they're going away, though. Just know that your loans are just moving servicers. The, the owner of the loans is the same what, what happened before 2010 actually is the loans will literally get bought and sold around and your loans might transfer three or four different places because people are essentially buying all the loans from different places. Now, the owner of the loans is always the US Government. The only change is just who collects the bill. So don't stress about it. It's not worth worrying about.

Should, should dentists be downloading their, their file? I can't remember the name of that file from studentaid.gov just to have it in their records or we can feel comfortable that these student loan servicers are going to manage the accuracy of the data as it maybe moves. Moves platforms.

I wouldn't worry about it. The, you know, the physicians going for PSLF, which is very specific. 10 years until forgiveness, you have to work for public service employer have all that documented. That's who I would tell to download the, the forms and the credit but not, not somebody who's a dentist. They have it all backed up in a centralized database and you know, if that gets wiped away, you know, probably everybody's loans get forgiven, you know.

Great Travis, this has been really educational. Can't thank you enough. There's a lot of of thoughts that I had on, on different subjects like the PSLF that we didn't get into. Would love to have you back on the show to address maybe some of the more granular areas like, like that if we have time. And and of course your podcast studentloanplanner.com it's one of my regulars that listen to just to keep up encourage dent. I've encouraged a number of dentists to listen to that as as well and any, any final parting words of wisdom for, for dentists who have these high levels of student loans that they should be anything they should be doing right now to be, to be current and smart with their, with those loans, your.

Debt is an income tax worst case scenario. And if you make it, you're making so much money that paying an income tax is not really a good deal anymore. You have the luxury of buying out that income tax and just paying a flat monthly amount every month. That's a wonderful thing. And it means that your dental education is always a good decision basically because you're going to make way more money as a dentist or dental specialist after taking out that income tax hit for the loans but than you would make if you just did your bachelor's degree. Maybe not as much as if you'd gone to work at Google or Tesla or something, but heck, you know, I wish I could have gotten in on that too if I'd had a crystal ball. Right? So just be grateful for the decision you made. You're better off than, you know, 95% of Americans, even when you take into account the, the student loans because they're just an income tax. So no, you don't have negative 500,000 net worth. You have a 10% income tax for 20 years, which means that you have way higher earning potential, which means you're going to get a lot more money and save a lot more and invest and all that more than most people will.

So the actionable takeaways, something I'm wanting to do in all my podcasts is what are the takeaways? Well, number one is if you're, you know, early stage, you don't own a practice yet. You don't own your house yet. Don't really even think about refinancing your student loans. You've got bigger fish you're trying to catch and, and then eventually when you have all that, you have your retirement plan in place, then you can lift your head and say maybe, maybe refinancing my student lo is the next step. And if you do, given the 20 year rate, assuming at that point the 20 year rate isn't much higher than the 10 year rate, you might as well go with the 20, pay it off as if it's a 10 to leave you that flexibility of reducing your payment if needed. What else do we have? If your debt to annual income is pretty high, generally the repay option is, is your better option because the government will subsidize or pay for half of the accrued interest. Or if you absolutely know you are going to get out and be in the top 5 to 10% earners of dentists, it's very possible at some point you will pay off your loan. So go for the, go for the repay option at that point so that the government can pay for some of that while you're in route can toward the student loan forgiveness. If you think you are going to try to hit the forgiveness mark, go with the pay option which is only 20 years instead of 25 years. And the cap is there at 10% of your income. And so even if you are making more, it's still capped on how much you're paying on your monthly student loans. We didn't quite get to students going into residency but oftentimes they go into deferment or forbearance. I, what I say is no, just go on pay. 10% of very little is going to be very little and it allows you at least to start the clock of forgiveness whether you're doing the PSLF or a pay or repay. And, and that I think that's going to be a much smarter thing to do to do as well.

Real quick on that you need to ask for, you need to ask for an in school deferment waiver request form. So that's what you need to try to ask for. You're not guaranteed to be allowed to do that during residency, but it's worth trying.

And that form allows you to go on the pay program while you're in residency, is that right?

Potentially. And you know, repay if you think you're going to pay it back. Right. And pay if you think maybe I won't.

Got it. Okay. And, you know, as I sort of step back from all this sort of movement and things going on in the student loan world, you know, I just see there is a big, there's a big problem that our government needs to address, which is the cost of education seems to go up and up and up and partially because of this huge subsidy from Uncle Sam, who ultimately is going to pay for a good portion of these costs through forgiven amounts on, on these student loans. And there's $1.6 trillion. Now, I know the government throws around trillions like it doesn't mean much, but, you know, $1.6 trillion is a lot of money. And this is not a political statement, but when I hear of politicians talking about just making college free or just forgiving all of student debt, practically, as a numbers person and as a person who thinks about budgets and inflow and outflow, that would be pretty catastrophic for if the government were treated as a business, that would be catastrophic to that company, their balance sheet, to lose that asset because your debt is the government's asset. And I don't think that's a terribly practical approach. So I'm hoping that we can find a solution that fits, find that meets a practical kind of middle ground to help student and borrowers who are struggling, because there are borrowers who are struggling and have the right program that doesn't necessarily incentivize college cost university costs to keep going up, but can help the borrowers without necessarily creating a significant financial challenge of our government, which ultimately will likely mean more taxes for a lot of people, including many of you listening to this today will end up paying for that later. So hopefully there will be some things proposed that can help solve this problem. Travis, thank you again for being on the podcast and appreciate, really appreciate that. And we'll, you know, we'll keep in touch and have you on the show again.

Thanks, guys.