PFFAP-PYP-23-0816-Physician Student Loans
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Welcome to the Physician Family Financial Advisors podcast, where physician moms and dads like you can turn to today's worries about taxes and investing into all the money you need for retirement in college.
Ben: Hello, physician moms and dads. This is Ben Uttley, certified financial planner and service team leader here at
Nate: Physician Family.
This is Nate Reiki, certified financial planner and primary advisor here at Physician Family. Today's
Ben: topic is the Barbie movie I. Oh psych. Actually, today's topic is physician student loans. What should you know right now? And we're fortunate to have a special guest, Nate Reineke, also co-host, who is our internal student loan specialist now.
Yes, Nate. There's been a lot of changes in the student loan space recently, right? [00:01:00]
Nate: Right?
Ben: Yeah. A lot. And there's, and, and not only that, there's some good news, so I'll share with the listeners. Um, I got an email from, uh, one of my longtime clients who's been with us about, oh gosh, six, seven years. And he forwarded me this message, and it was from the student loan powers that be saying that he had been granted student loan forgiveness.
That some of the payments that he made that were in forbearance had now been recounted as mm-hmm. Uh, Qualifying payments towards his 120 qualifying payments, and he'd gotten something like $40,000 in student loan forgiveness, and he was just shocked. So, mm-hmm. Uh, P S L F is real. And so I, I wanted to bring up this topic today along with the Barbie movie so that Nate could thrill us about some of the new stuff and student loans and urge you, our listener and the indebted student loan person, plus all of your friends who might have student loans to action.
Nate: So, yeah. Is it real God man? It certainly is. Yeah. The, the story that you just told is, [00:02:00] I, I'm assuming somewhat unique to you because a lot of your longtime, uh, physicians that you serve, they're either done with their student loans or they kind of didn't go for P S L F, uh, many years ago, are, or wasn't available to them, but I have actually had seen a similar story, but add a couple zeros to the end of that number, uh, at least four or five times this month.
Wow now. So hundreds of thousands of dollars being forgiven.
Ben: It was just like six months ago that everyone was thinking this is like never gonna happen, and totally impossible. Mm-hmm. And I mean, I dealt with a prospective client, uh, just last week who said, you know, uh, my husband and I are both physicians.
We don't, we don't think this P S L F is real. And uh, you know, we, we just wanna pay it off. What do you think? And I was like, I think you're crazy. I think that's the most insane thing that I've heard in today's world. They hadn't heard the news about what was going on.
Nate: Yeah. I I do hear that a lot [00:03:00] too. And, um, I think you, and I think that to give up on it is crazy, but, uh, living in it every day, uh, has sort of, I don't think it's all that crazy to have that perspective.
Uh, not that it's a good idea, it's just that they have been, um, sort of. I dragged through the mud constantly. Anybody with student loans is going through P S L F. They just don't know what's right. What's wrong there Starts there, stops. It is messy. It's really messy. And finally, um, some of those really messy aspects to people's student loans are getting cleaned up and they, people just can't believe it.
'cause it's been years of, of a mess. Right? So it's, it's here. And if, if you are at a nonprofit, And you're making, uh, income driven repayments, then you should seriously consider, P S L F and uh, even getting help from somebody who can [00:04:00] help you look back at, at, you know, the last several years of your work and, and, and get you really close to P S L F.
So even if it's not forgiven today, and it is in the short,
Ben: short future, even some of the definition of what's not for profit has changed. So one of the things that you were telling me in our last team huddle was that, uh, you know, folks that are physicians who work at Kaiser Permanente. Where, where truly you work for the Permanente Group A for-profit.
Part of the not-for-profit Kaiser organization that in the past they weren't eligible. But something has changed in the law now that that makes those folks eligible for public service loan forgiveness. As well as, uh, I spoke with someone just a couple days ago who is at another organization, uh, in California, and they had the same experience.
They'd had gotten a memo. About the, the status of the organization with regard to not-for-profit. It wasn't Kaiser Permanente. So do you want to mm-hmm. Say just a little bit about that?
Nate: Yeah. So, um, this is a new regulation from Department of [00:05:00] Education. This is July 1st, 2023. Mm-hmm. Uh, Kaiser ki it's, um, a little bit tricky and I have become very gun shy in giving out this advice because things change all the time.
But essentially what? What this regulation says is that, and I wanna be really careful here at the listeners, this is in California and Texas. Mm-hmm. Which is huge. You know, Kaiser's all over California and Texas. Yeah. We have Kaiser and Oregon
Ben: in
Nate: Washington. Yeah. Right. And so essentially the, the way that Kaiser is contracted through not-for-profits or non-profits has given, um, Department of Education, sort of a nudge to count their service.
Mm-hmm. 'cause really they are doing a public service. They're working. For the public. It just happens to be that that's the way they structured these, these, you know, businesses. So, right. It's like, I
Ben: guess it's conceivable that, uh, other, other legislation will follow, [00:06:00] you know, once 'cause California's kind of a bellwether and, uh, Texas these days is a bellwether as well, so it's, If conceivable, that other legislation will follow.
But it's, it's, you know, the thing that strikes me is this is an unfolding story. It's something that, it's always changing and I'm honestly, I'm amazed at how you keep track of it. And I feel fortunate to have you on the team because I, I have a nodding familiarity. What I have is the 120 qualifying payments, which, you know, there's seven caveats with that.
And you always seem to know at least six of 'em, so you know. Yeah, yeah. I'm amazed. So it's something you have to stay on top of.
Nate: Right. And, and so for these pe so that's an important piece of this, of a physician's story or their journey with student loans is that it's an ever, you know, the plot is always changing mm-hmm.
And with student loans. And so the, the question that I get all the time is, should I refinance? And it used to be so obvious, it, it feel like four or five years ago, it was, are it a nonprofit? And, and with the amount of [00:07:00] money compared to your student loans, does it make sense? Mm-hmm. Does it make sense? And really, the big, the only tough question was, should I switch back to a nonprofit?
Mm-hmm. If, if that, you know, that made sense as far as the math and financially goes. Mm-hmm. Now, now with the way interest rates are today and with, with the way things are constantly changing, it is tough to recommend that somebody completely get out. Of the forgiveness, uh, world, like totally take their loans out of the, the federal government's view.
Just go private and and com and nix their chances completely at forgiveness. Well, well,
Ben: speaking of forgiveness and switching around, I understand that there's also a new, uh, repayment plan that's, that's been announced recently and, uh, I mean, it's, it's super fresh and hot off the presses. Uh, do you wanna just speak to the parts of that that we, we really know about?
Yeah. Like what,
Nate: what's it called? So it's called save, [00:08:00] s a v E. And, um, this is, it's, it's somewhat, you know, it's a change and we we're always nervous about change, but it, in reality, uh, most physicians won't have to do a whole lot to benefit from this change. And I'll tell you why. Um, save is actually replacing a repayment plan called repay.
R E P A Y E and R E P A Y E. And most physicians, most, some are on the other two plans, but most physicians, if they're going for public service on forgiveness, are on pay. P A Y E. Mm-hmm. Or repay. Right. And and pay excludes a lot of physicians, you have to have very specific loans when you took out your loans.
A lot of physicians can't get on pay, so they're already on repay. And Save is replacing it. So soon enough, you know, they kind of are, they're doing everything. They're rolling everything out in [00:09:00] stages, but soon enough, you'll just automatically be over on the Save program. And I've only found one instance, one very unique instance where it didn't save that person money.
So, I'm not gonna get into the math because it, it's not really, uh, it's gonna confuse, it's too complicated folks, or it's, it's too complicated. Not really worth it, but it's personal. It's what
Ben: makes personal finance personal, right? It's one
Nate: person. It actually, it, it actually is personal how much you save.
Everyone wants to know like, how much will I save? And it's, it, it really depends. So, but the reality is that it, your payment is based on, in all of these income driven PA plans, your payment is driven by your income. Mm-hmm. So how they calculate that as a percentage after some formula, percentage of your income.
And this, the save program is simply calculating it on a lower percentage. I see.
Ben: So it's still I b r, it's still income-based repayment, but it's, it's a new, a new
Nate: calculation. That's right. [00:10:00] And, and, uh, the only situation that I've seen, Where save didn't save people money is when they were doing a very complex sort of, should I file my taxes separately?
Both physicians had loans and they had different incomes, and it was complicated, but all the other 10 times I've looked at it and ran these numbers out, it's saved quite a quite a bit of money. Several hundred dollars a month. So,
Ben: so speaking of 10 times, I'm not sure if that's how long the, the repayment was extended for Covid, but it seemed like it was 10 times I felt like we're, you know, that thing had more lives than a cat and just kept dying and coming back and dying and coming back.
But September 1st is slash was the official, uh, time that it died. And so everyone is going to have to start repaying their loan. So, um, what do we need to know about that?
Nate: Yeah. So there's a couple things that, uh, you'll, that physicians need to know, and this is not a plug. To [00:11:00] have me help physicians with their student loans.
But it is sort of a plug potentially to have someone help you with your student loans. Yeah, because what I've noticed is I can do all the reading I, I can possibly find out there. I can look up all the blogs, I can go to all the student loan thought leaders, I can read the student aid.gov website.
Nothing gives me more knowledge. Then being in the trenches with physicians who are looking at their student loans and calling these student loan outfits with them. Right. So what I want to, I want to talk about kind of what people need to know from what they read online, but also what I've seen happen specifically with, with folks on the phone and, and maybe what they should
Ben: ask when they, when they call the student loan agencies.
Nate: Right. Oh yeah, sure, sure. So, um, the first, the first thing that you need to know is payments are restarting so you can be sure that they're restarting. In fact, [00:12:00] that's everyone's preparing when you call in to, uh, you know, hila. Mm-hmm. And, and you try to figure out when your payments restarting. They're all now being trained to give you a real answer.
Mm-hmm. Okay. And, um, Something. Basically when you log in, you can see when you need to recertify your income. Okay. So you need to show them your income at some point, and they will calculate your payment. Mm-hmm. Um, the key here is that a lot of people have payments that are calculated from way back when, maybe in residency.
Mm-hmm. And, uh, you don't want to be recertifying your income too early trying to get all your ducks in a row because you might get to benefit from a really low payment for several months. So let me, lemme get
Ben: this straight, make a payment. So like mm-hmm. Uh, back when I was a resident and I was making, you know, 60 or $80,000 a year, um, they calculated my payments based on that.
[00:13:00] Now I'm making somewhere, you know, 2, 3, 4, $500,000. And when they recalculate my payments, My payments are gonna go up a lot, probably more than just 10 times. Right. But
Nate: if I Maybe, maybe quadruple.
Ben: Yeah. So if I can drag out this recertification thing, then I'm gonna get to make some more qualifying payments on at that low payment rate.
Is that, is that the gist of it?
Nate: That's the gist of it. Wow. Good to know. Yeah. And you know, I think that people kind of understand this, but it, but it usually is powerful to explain it in, in kind of real dollars. Mm-hmm. Um, when you, let's say your payment was 500, now it's 2,500. Mm-hmm. And most of the time with debt, you're just kind of kicking the can down the road.
Mm-hmm. If you can make a low payment, an interest only payment, we gotta pay it back someday. Mm-hmm. That is not the case with public service loan forgiveness. If you can save six months from going five from 500 2500, that [00:14:00] is 12,000 after tax dollars in your pocket directly, which is like
Ben: 18 before tax dollars, which is like a whole month's worth of
Nate: labor, it's a whole month's worth of labor because you just just took a deep breath and relaxed and didn't try to get ahead of anything going on with Mo Hila.
Like a, I wanna, I wanna
Ben: just break in here for just a second. So, yeah, there's this thing that, that I get, and when I talk to prospective clients, it's clear to me that they don't get this. They're like, okay, I'm just gonna repay my student loans. Screw P S L F. It's not ever gonna happen. You know? And they're like, I'll just pay it off.
And I'll say, well, how much do you owe? And they say, well, we owe $400,000. And I say, okay, that's 400,000 after tax dollars on a pre-tax basis. That's like $600,000. Mm-hmm. And, and that's like, that's years and years and years of labor. 'cause it's not just $600,000 pre-tax dollars. It's like if you made [00:15:00] $600,000 a year, you'd say, oh, that's one year.
It's not one year. It's, it's, you know, in that year you have to make your house payments, you have to pay for private school, you have to pay for your car payments, all those other things. I mean, this adds decades to a person's debt repayment years. And with the flick of a switch, you know, with, with just going in and having the curiosity to check this out, run a calculation, talk to somebody about it, you could save a physician
Nate: decades Yes.
Of having
Ben: to show up and endure what's going on in our healthcare system right now. That just seems like a really small price to pay, but for some reason there's such a high level of ignorance out there among these very educated people. I just, I just implore them. Please, please, please
Nate: look into this.
Look into it. Yeah. Yeah. And we've seen this, I mean, firsthand, I've seen, uh, physicians go from what seems like crippling debt to the next day. They're like, okay, I'm gonna buy a house and start saving for retirement. Yeah. Yeah.
Ben: It's a, it's a game changer. I mean, [00:16:00] this is what the president intended. This is, you know, when Biden kind of started making these student loan laws happier for everybody, this is what he was intended, is to give a, a jolt to the economy.
So you would start saving for retirement. So you would start buying homes, you know, you'd have some money to spend, right? This is intended. Yep.
Nate: Okay, so I'm off my soapbox now. Okay. Yeah. No, but that's, that's really true. They, and the reality is that physicians, uh, many of them share this just disdain for debt, which I like.
It's just that they, they, they have never heard, 'cause they're, they are unique with this P S L F thing. This public service loan forgiveness thing is not for everybody. So they have just heard, Hey, buckle down, pay it off. Yeah. They think that's a kind of admirable right thing to do, but it, it's. It's not in a lot of cases.
Right. Okay. So the other thing, so you, you need to know that just pump the brakes and recertify your income when they ask. Now here's the, that's, that's what you are reading online? Mm-hmm. I'm [00:17:00] gonna tell you a cautionary tale of what happened when someone called in a little too early. I had a client, he is.
Bit of a nervous Nelly. He likes to call in a lot, make sure everything's in good order. 'cause he wants these things forgiven, which good aut him, right? Mm-hmm. And he calls in and he gets, uh, someone on the phone in the public service loan forgiveness department, which is a little cheat code. You, you call the public service loan forgiveness department, not the main line.
And the person says, Hey, you haven't recertified your income since 2020. And he goes, yeah, I know that the payments were all stopped in 2020. And she goes, yeah, but you need to recertify your income now. And he said, I thought I reified in a few months. She said, well, yeah, that's for everyone else, not for you.
You never re-certified your income way back when. Oh. And he was like, that doesn't make any sense. And she goes, so you're not gonna recertify your income. And they just went back and forth Right. 10 times. Mm-hmm. And he, uh, luckily hung up the phone. And called me and I said, yeah, that doesn't [00:18:00] make any sense.
Call 'em back. Called back, got a different person on the phone. She said, oh, that was just a computer error. Let me fix it. Oh wow. Okay. So this is the kind of stuff that you will deal with and calling these service centers.
Ben: It could have been 10 or 12,000 bucks just right there based on that one thing. So,
Nate: um, more.
And, and, and let me tell you another reason that another thing you need to know is that if you are set to recertify in the next few months, they are not really prepared to have the entire country reci recertify their income in the first six months. Yeah. So what they've decided, and this is, this is, uh, sort of hot off the press.
I don't, I'll say this, I wouldn't be surprised if they changed their minds about this. Yeah. But what I've heard is that the, the people in the first six months, Okay. If you, if you're set to recertify, let's say in October, they are gonna kick you out [00:19:00] 12 months from October. Hmm. So now it's October, 2024.
You will start, have to make, you will have to make payments, but you won't recertify your income until potentially 18 months from now. Wow. So instead of 12,000, it's like 40. It's 36,000. 40,000. Wow. Yeah. That's the kind of thing that you, you know, when you call these people and you think they're on my side, they're not against you.
They are ignorant. Ah, they don't know what they're doing. Uh, half the time. Imagine a brand new call center employee. I mean, they're just getting trained up. Mm-hmm. And I see this all the time. So for this barrage of calls, the keys here. Yeah. Yeah. The things you need to know, this is the, what you should do right now is keep pausing.
Keep just waiting it out. We're, we're a few weeks away. There's no need to jump the gun. Okay. Sit tight. You could sit tight, you can, um, wait till you [00:20:00] get on the save program. You don't need to do anything if you're on repay. Okay? If you're on any other payment program, other than pay or repay, you should reshoot the numbers to see if re if, uh, save would help you.
Hmm. Okay. Now, when you're reshooting these numbers, this is widely known to online. Uh, the payment calculator's [email protected] website. Nice. Yeah, so it's broken and you can't count on it, which is why, you know, I've just told a few stories on. People saving 36, 40, $20,000. You can go to someone like us or you can go to a student loan coach.
Mm-hmm. And they might charge you a thousand bucks. Okay. They built their own calculators. Yeah. So you, I mean, this is worth the investment, even if it just checks the box in your brain that I'm doing everything [00:21:00] right. Yeah. Okay. Makes total sense. So yeah, don't call in too soon. Make sure you got all your logins ready.
Determine whether or not you're going to be filing your taxes separate or together this mm-hmm. This without getting too deep in the numbers, this is a calculation based on your payment versus the taxes saved. Mm-hmm. And determine which payment pro program you should be on. And that's what you should be doing right now.
Okay. So
Ben: let's say for a moment that I'm one of those very sad people who gave up on P S L F. And refinanced all my student loans. So now I'm all private. Or let's say I'm a person who had so much debt that I couldn't get it all on public and I have some private debt, like, is there some sunshine for me?
Is there something I should be doing right now? Like, tell me about that too. 'cause it's, it all P ss l all the time is boring for everybody else. So what, what, what's happening there,
Nate: right? Yeah. So the, uh, the private student loan, Landscape right [00:22:00] now is a bit grim. Um, and that's just because rates are bad.
Mm-hmm. I mean, rates are bad with all debt. When, when rates get bad and you see rates are bad for mortgages, rates are bad for everything. What, what are, what
Ben: is the prevailing refi rate these days for somebody who's like average refi? Like, where, where are we at? Yeah. Because I know it used to be a low and now it's bad.
Nate: It used to be real low. Yeah. I mean, yeah. Um, I helped three physicians this week shop their student loans. Mm-hmm. And the rates came back at high sixes, low sevens, kinda like, uh, mortgage rates. Like mortgage rates. And here's the thing to know if you haven't refinanced yet. Okay. For the people that have already refinanced, I'm gonna talk about that in a second.
Mm-hmm. If you haven't refinanced yet, What you need to do is look at your student loan interest rates Hmm. On at mohe or at [00:23:00] wherever your loans are, and just see, is this rate even much lower than my federal student loan rate? Usually the rates, when you look at 'em, you know, kind of a weighted average of all your rates.
Mm-hmm. It's about, right now, it's close to the same, and honestly, in, at least in one case, the, the federal rates were better. So, so it, it is a long shot to say that PE-people working for private companies are gonna get their student loans forgiven. Mm-hmm. But even if there's just this 1% chance that something changes in the student loan laws five years from now, there's no sense in refinancing your loans if the federal rates are the same or better.
Ben: So what you're saying is if the rates you're paying right now is about the same as, or perhaps less than, The go and refinance rate. Just sit tight, cross your fingers and, and hope that something magic happens, and some of those loans are forgiven. Otherwise you just pay 'em off as you
Nate: go. [00:24:00] That's right.
Let me, let me tell you about something that's less than magic, but I've seen happen. Okay. Okay. So magic would be like President snaps his fingers and somehow we get this law through that everything's forgiven. That's like magic, but. What I tend to see with, with especially young physicians, but not even just young physicians, uh, physicians with young families mm-hmm.
Is that they believe that they know what their life will look like in five years. Yeah. They believe that wholeheartedly. And I've just seen it too many times where life is totally different. Not only five years, but one, two years later. Yeah. So you may think you have your dream situation, your dream job, your dream practice and all that, and life could just throw you for a loop and you could be at a non-profit tomorrow.
Yeah.
Ben: Seen it.
Nate: So yeah, I've seen it many times. So back when rates were [00:25:00] 3% or two and a half percent, And you think you're at your dream job, uh, it's hard to argue with that. You're gonna save a ton of money. Mm-hmm. On interest. Right. But now that's not the case. That's not where we're at today. And that could change again.
I mean, rates could go down and I may be telling people to refinance, but that's not the case today. Right. And for the people that have already refinanced, now's your time to collect your winnings. Mm-hmm. So I know it seems like everyone's getting this free money, but you just heard me say 7% interest for private loans.
Yeah. And so, yeah, you've been making payments this whole time. You've been making progress, by the way, toward paying down your debt. And it's been three years of them paying down their debt, uh, on really low interest rates. And for anybody looking to refinance, student loans are not the same as your mortgage.
It doesn't cost you a bunch of money to refinance them. Mm-hmm. You're just waiting for a better rate. And the only downside is a little bit of paperwork and a dinging on your credit, which is no big [00:26:00] deal. To refinance at a lower rate temp, temporary. So that's what you're waiting
Ben: for? Yeah. Mm-hmm. Good. So what you're, what you're saying then is basically people who refinance back when they were rates were 3%, you know, you should be doing a little happy dance that you're not, you're not
Nate: paying seven.
Yes. Now's the time that you get to sort of reap your rewards.
Ben: Okay. So, uh, we talked about. P S L F and all the good stuff there. We talked about SS a v e, we talked about, uh, new rates we talked about prior. We talked about, uh, is there, is there anything else in student loans or is that, is that pretty much it?
Nate: Well, that, that is what's going on today. And so, um, what have episodes kind of breakdown P S L F at a high level and, and go back and listen to those. But that's what we, people should be thinking about right now.
Ben: Alright, so, so break it down for me. Gimme the, the big square in the eyes. Takeaway. What, what should I, what should I, as the listener be taking away from today's,
Nate: today's show?
Yeah. The big takeaway is that public service loan [00:27:00] forgiveness is absolutely real. We have seen four or five people get forgiveness recently. Mm-hmm. Uh, your colleagues are getting their loans forgiven, and you should at least pursue the idea that it might be right for you. So do something about your loans today.
'cause now is the time. To make a plan.
Ben: Fantastic. Okay, so that's all for today, folks. Until next time, remember, you're not just making a living. You're making a life.
Vpiceover: Thank you for listening to the Physician Family Financial Advisors podcast. Are you getting all the tax breaks you really deserve? To find out, get your copy of the Overtax Doctor's Retirement Investing checklist [email protected] slash go.
