Resident physician tips on optimizing loan forgiveness

Our fellow consultant, Rob, has all these funny one liners. And so I asked him once, I said, like, how much life insurance do you recommend people get? He said, well, he said enough so that your spouse doesn't have to marry a senior citizen millionaire, but not enough that your spouse can run off with a cabana boy. Welcome to another episode of the Student Loan Planner Podcast. Today, I've got a special treat. Dr. Mark R joins us from sunny California, I believe. Is that right, Mark? Yes. Yeah. Southern California. OK, so the best and most lucrative place in the country to be a physician, right? Yeah. And also the highest cost of living, say, for New York, I think. Just joking around. But but we're real excited here to have Mark on the show. Mark is going for loan forgiveness and is a resident, I believe, of PGY3. I'm really excited just to get another perspective and just talk through some of the things Mark's doing and then some of the things that he's experienced that can help, especially anybody in residency that's listening, that's going for loan forgiveness, specifically the PSLF program. So, Mark, maybe you could just start off telling folks a little bit about yourself. Sure. Yeah, I am a PGY3 psychiatry resident. I went to undergrad at UCSD, did my degree in physics, decided third year of undergrad to go into medical school. So it kind of switched courses, did a bunch of science classes and finished in six total years and then went to Loma Linda Medicine and then in the middle of there did a master's degree in ethics. So it took five years to finish medical school and then got a residency in psychiatry here at Loma Linda. And I'm in my third year. I'll be graduating in 2020 after four years of residency and then doing a one year fellowship. So total, we're looking at six plus five plus five. OK, well, six plus five plus five. That's quite a long journey. Yeah, I think I'm going to be mid thirties by the time I finish all the training. I mean, the good news is if you need to have a discussion about quantum mechanics or something and how it relates to somebody's condition, you can throw that in with a little bit of discussion on philosophy and ethics, too, right? Yeah, yeah. Just kind of all over the place. Yeah. And so I'm guessing that amount of education came with a little debt. Yeah, very much. I actually got away pretty good to start. I started at junior college and paid my way through junior college, worked odd jobs, worked at Starbucks for a while. I think I finished junior college, two years of junior college with no debt, maybe some credit card debt, actually definitely credit card debt, but transferred to UCSD. And that was very expensive. I think I got out of UCSD with seventy thousand dollars in student loan debt. And then medical school, it was seventy thousand dollars a year in debt. Even the master's program was paid for by the school. But I still had to take out loans for cost of living. So it was a significant amount racked up. When did you take out student loans in your own name for the first time? Oh, first or third year of undergrad. So after transferring from junior college to UCSD, I took out my first student loan to pay for my first quarter. I believe that loan was actually taken out in my dad's name. And then I later refinanced into a loan in my own name to pay off the loan for my dad. But during undergrad, definitely took out many loans. So would you say the first loan that you took out in your own name was after October 2007 or before? Before October 2007, August of 2007 was when I started third year at UCSD. So that loan would have been in my name in 2007. And that's why I do the repayee program. Sure. So pay as you earn is off the table for you then. Right. And let me ask this in terms of if you thought this far in the future for post-residency, do you have any goals about what kind of place you're going to work and what kind of location you're going to work in? Like what state? Yeah, I do. I'm staying in sunny California. My wife is from California. I'm from California. We have three kids now, all, you know, born and raised here in Southern California. We're definitely looking to stay in California, likely Southern California. Just because of my interests, I want to stay in academics. So probably in a university setting in Southern California. Maybe you can share a little bit more about your family situation, because I think it's really unique going through a lot of the things you went through while still, you know, in school. I was married in 2009, so I was in the middle of undergrad. My wife was doing nursing school at the time, and we had been dating since junior college days, and we got married towards the end of undergrad. You know, we kind of had this picture in mind of of having kids. I don't think we had a good timeline of it. I know when we got married, I was not planning on being a doctor. So that definitely put a wrench in life plans. But then started medical school. And I think, you know, my wife was working full time as a ICU nurse. You know, she wanted to start a family. And I was in the middle of medical school. And I said, OK, can we wait at least to the end of second year of medical school, step one looming and took step one. We decided to start having kids. And we had our daughter during third year of medical school, which for me was the master's program. So it was actually a really good time to have our first kid. The master's program was much easier than medical school in general. So I had our first kid. Technically, my third year of medical school had a second kid. I guess I'll be fifth year of medical school and then had another child. How old is she now? So second year of residency. So I've had all my kids during, you know, medical training. So third year medical school, fifth year medical school, and then second year training and then possibly another one coming up. We're still trying to figure out what we want to do. But I plan on having a big family. And when we had our first kid, my wife went from full time work plus overtime kind of to per diem here and there. And then we had our second kid at the end of medical school. And, you know, she decided not to work, considering my ridiculous schedule with medical school and residency coming up. So we definitely had family. The plan was there all along. We just weren't sure we were how we were going to make it work. And then as training progressed, we just decided to do it anyways and lived off of student loans. So my wife was able to save while she was working. And I think we talked about this later, but we were able to pay off her student loans while she worked. But ultimately, most of her money went to paying off those student loans, putting away some savings. And then the rest of our living expenses was all student loans. And then the first year of residency lived off of a lot of our savings. And then I was able to start moonlighting. And I really haven't been able to touch student loans with a family in residency. Makes sense. I mean, how long have you all been married approximately? This is our 10th year. Wow. Congratulations. Thank you. That's pretty cool. And one of the things that you shared with me when we were kind of chatting is that you and your wife really have not had a ton of conflict about money. Is that right? I think we have our normal marital conflicts over things that come up. But one thing we do not have an argument over is money. And that was that was pretty intentional. I remember when we were engaged before getting married, I did not have a job. I had quit working part time jobs to focus on school, to get into medical school. And we got married and I got a call for my first, I think, medical job while we were on our honeymoon. I got a call back to work as an EMT. But really, we got married with no money, just some, you know, savings and probably about $10,000 in credit card debt, which was all mine because she's responsible and I'm not. And I personally was looking into, OK, well, how can we, you know, make sure we manage our money appropriately? I remember researching a ton at the time and came across a few different apps, which I tried out and I ultimately settled on. You need a budget. That's the one that worked best for me, made sense to me. And we've been using that for 10 years. And, you know, we have a weekly money check in. We sit down, we open the budget together. We go through it line by line. We make sure that we're on the same page on long trips is usually our brainstorming time. You know, where do we want to go with our money? What do we want to do with it? And in the in the back, I tend to work on the student loan stuff. But yeah, no, that's something that we talk about very openly. And we have disagreements on what to spend the money on, but it's all out in the open. Not a lot of arguments about money. I don't think there's any surprises. So you got an emergency fund. Have you started any retirement or brokerage accounts yet? Yes. Yeah, I do. I've played with a bunch of different types of accounts. Ultimately, I had just a general savings account. I keep most of my money just in a checking account and then emergency money, that I don't plan on spending. And if I did, I wouldn't need to for a couple of months. I keep in a savings account. And then after that, we have retirement money that, you know, I don't plan on spending for years. We use some of that to buy a house recently. But I think I have a decent game plan of of where the different accounts are and and how the different savings rates in each of those accounts are reaching the goals that we're aiming towards. Oh, you bought a house? Yes. Yeah. Yeah. Cardinal sin, right? Oh, tell me about this. We rented a house right near where I do residency and right across the street with almost the exact same house for sale. And we like the street that we were on. My wife's friends and all their little kids live right on the same street. But the place we were renting, we weren't sure how long that would be an available rent. The person that owned it was across the country. So we decided to get this house and we literally had a bunch of friends over and we walked all of our stuff right across the street. So it was an easy move for us. It was expensive. You know, you mentioned Southern California. It was over four hundred thousand dollars for a three bedroom house. You know, we have what are they called? An extra unit in the back that we rent out. And then depending on when we go to fellowship or where we move to after we plan on renting it out, expect to be able to make the payments on the house with the rent that it brings in. But yeah, we definitely we bought a house. And that was a big discussion over the course of months whether to do that. But ultimately, it made sense. We liked where we were. We wanted to stay where we were. I think that if I hadn't been married, I would be fine just, you know, renting an apartment or renting a room. But I had a family to think about. And we wanted the space for three kids and maybe more. And then we also like the area. Are you planning on moving back to that house after fellowship? Yes. Yeah, we plan on. I told my wife this yesterday. I plan on staying here until it gets very uncomfortable. It's small. I think on a resident salary, even with moonlighting, it seems like a stretch at some times. And then looking at attending salary, it doesn't seem that significant. So we plan on being there as long as we can. Yeah, I mean, it's fine. Like anybody that wants to make a decision on housing, it's your decision, right? I generally tell residents not to do that because it's very difficult sometimes to predict where you're going to end up with an attending job. And if it works out and you get an attending job in a similar area, it's going to be and you stay in that house a long time. It's going to be a good decision, probably. I think I tell people not to buy a house and then I did it myself. Yeah. Yeah. I mean, it's not going to be something that's going to make or break you. I mean, like I would say that the biggest thing would be if you stay in that house when you become an attending, that will be a good decision because presumably you'll make more than two hundred thousand as an attending. Right. Right. Right. So then you're going to be under that two to one rule. Definitely. And also, I think that the cost of the house definitely outstrips what the costs were when we rented. We had a good rental situation. We just weren't sure if we were going to be able to stay there. And then in buying a house, you realize all the stuff you have to pay for with the house that I did my best to research before. And it still catches up with you. And when things break down, you you pay for all of it. So that's definitely a surprise when it happens, even with an emergency fund. But it does lower my adjusted gross income, which ends up lowering my student loan payments. But it's hard to justify paying extra for a house just to get a little bit of a discount on student loans. But that has been one nice benefit of owning a house. Tell me what kind of deductions you're getting on your house that affect your AGI. So before we owned the home, we were doing, you know, short form taxes and just taking the standard deduction. Now owning a house because the mortgage interest goes a long way towards that standard deductions. We overshoot that now with and I also a lot of my moonlighting money is 1099 income, so I can deduct a lot of the expenses involved with that. That would be for a corporation, though, right? So that wouldn't affect your standard deduction. Taking the 1099 income should just be the revenue minus the expenses. And that would be your net income, right? I'm just thinking like 24,000 of standard deduction. You must have some very large mortgage interest plus charitable contributions to be able to get you below above 24,000 of deductions now. It goes over 24,000. Yeah. Wow. Well, I guess that's California for you, folks. Yes. Yeah, exactly. Well, yeah, so I think it's fine that you made that decision just for the folks listening. You know, I do not at all recommend people buy a house like as a typical rule as a resident. And when you do buy a house, two times your joint income. So that's a good rule to follow. But sounds like you're going to fall within that rule when you become an attending. So seems fairly dependable. Almost falls within that rule as a resident, too. I mean, I've just been blessed to have opportunity to moonlight a lot with moonlighting. I tend to make more than some attendings in some of the lower paid specialties. So I think I'm at two and a half times income about. OK, that makes me feel better. I kind of wasn't really thinking about how much you can make moonlighting. That's kind of interesting. Has that been a challenge for your certifications with PSLF? You just having to send in tax returns for that? Oh, yeah. So that definitely was a big surprise just last month redoing the income. But, you know, one of the things that we thought of as a family is, you know, my wife as a nurse was making with overtime and stuff, 30 to 60 dollars an hour. And then as a resident moonlighting, you know, can make a minimum of 70 to 200 dollars an hour. So really, her being able to stay at home means I work two times. I work as a resident and then I put in moonlighting up to that about that 75 to 80 hours a week between my residency job and then moonlighting. But really, that's two incomes. So we're able to support our family off of that. But yeah, I know it's a significant amount of income that this last year was the first full 12 months that I earned that income and doing the income recertification. My student loan payments went up from about 150 dollars a month. And the next payment due is going to be almost 900 dollars a month. Almost 900. Well, that's that's a big jump. Like a resident typically makes around 60, right? And then so you're probably making 150 ish 120 to 180 or something for AGI, basically. Yeah, yeah. Right around there. Yeah. So have you ever heard of the breadwinner loophole or thought about that before? No, I haven't. And I see you mentioned it. I've never heard of it. So I'm going to see if I can poke some holes in the strategy here a little bit, OK, just for some fun. Basically, this is kind of how it works. So basically, if you live in one of the nine community property states, then this applies to you or can apply to you. So nine community property states, basically the West Coast. If you want to think about it geographically, draw a line from Louisiana to Los Angeles. Every one of those states is a community property state. And then draw a line from Los Angeles to Seattle minus Oregon. So those states are community property states. So it's mostly on the West Coast. But I'll just say a couple of them off the top of my head. So Idaho, Washington, California, Nevada, Arizona, New Mexico, Texas, Louisiana and Wisconsin. Hopefully I didn't miss any on the top of my head. But those are the states. And Alaska is an opt in state. You can opt into community property rules. But the reason why community property rules matter is because in a community property state, when you file taxes separately, that makes you have to equally distribute your income on both spouses tax returns. OK, so let's say you make 150,000 just hypothetically. If that's your income, then on the revised page, we're in plan. You're paying 10% of your discretionary income based off of your total spousal income. Right. And if so, if we assume that 150, we assume kind of a family size of five, then just putting in some rough numbers like it does come out to around 900 a month, it's about 882. It depends on what the exact AGI is. Right. So we're not going to we're not going to go into that. Sorry, listeners. But that makes sense. That's about 900 a month. Now, if you filed separately for taxes in California, you have the option to equally distribute. Actually, I think you're required to. You don't even have the option. You're supposed to equally distribute income that's earned in the marriage across both spouses. So instead of 150,000 on your tax return, you're supposed to make 75,000 for you and 75,000 for your wife. Now, why does that matter? Revised pays you earn is 10% of your income and income based repayment. IBR is 15%. The hack comes into the fact that 15% of income that's split in two is going to be less than 10% of your joint income. Oh, and this is an important hack, because what you always have to do when you're comparing filing separately to filing jointly is what are the tax penalties for filing separately? You don't want to pay $10,000 in tax penalties to save $200 a month on your student loans. Right, right. Like, that'd be silly. And if you were filing separately in a regular state like New York, then your tax penalties for filing separately would be pretty enormous. Just to put it in to look at my estimator, just to see probably be about $650 a month, and that's a lot. However, in a community property state, you have that option to equally distribute the income, right? So instead of $150 on your return and $0 on your wife's, if you put $75 on each, you're already phased out of the student loan interest deduction. So that's not really a thing to think about. There might be some child tax credits potentially that you would want to review with the CPA to see if that could affect your eligibility. But if you file separately with $75K of income each, then that tax penalty goes from about $650 a month to $0. Well, that actually might be something to look into this year. Yeah. So it's so it's a $0 tax penalty. And in terms of what the payment would be, the payment on the repay plan is about $900 a month. And the payment under income based repayment would be more along the lines of about $467 a month. So that's savings of about $5,000 per year. Right, right. And under public service loan forgiveness, correct me if I'm wrong, but it just has to be an income driven plan. It's OK if you switch between repayee to IBR. Exactly. It's any income driven plan, right? Let's say you become an attending. What would you guess your income for an academic psychiatrist? $200,000 to $300,000. OK, so let's maybe do like $250,000 or something. So one thing that I think is is interesting is what would be the cost of the total cost difference between the two different strategies, right? So if I compare the total cost of PSLF and you started PSLF in about 2016, right? Yes. So the total cost of income based repayment using this breadwinner loophole is about $71,000 over seven more years. And if you do filing jointly, it's about it's almost $120,000 because the difference in that income matters even more when you start becoming an attending. So for an example, let's say, you know, five years down the road, you're an attending making, you know, significantly more money. And then that split is kind of magnified in terms of the effect. And so your payment would be like about $1,800 on repay versus about $1,100 on IBR. So the annual savings when you become an attending are almost $8,000 per year. So the total cost savings over the seven years from doing the breadwinner loophole and doing IBR and doing this married filing separate strategy where you're equalizing your incomes, the total projected savings would be in the neighborhood of $50,000. OK, well, it just gave me some work to do. I did not know that. Yeah, thank you. Well, there's a lot that you exchanged emails with me that show that you are very knowledgeable about the public service loan forgiveness program, right? Like, you know a lot about this. We'll talk about some of those tips, because this is a unique thing. This is a one off thing that applies to your specific situation. Right. But I do think that this stuff can be a little hazardous to try to figure out on your own because you're somebody that is extremely knowledgeable and studied physics. And this is just a random loophole that if you live in one of the nine specific states that could potentially apply if you have a stay at home spouse, feel free to ask questions about this, because I'm sure it's kind of crazy to hear it for the first time. Yeah, no, I mean, it definitely is. I mean, this kind of goes to why having somebody who knows what they're talking about, you know, on your team is helpful. This is the first year that I'm no longer doing my own taxes. We're paying somebody else to do it. You know, I was planning on having a review. As graduation came in, maybe it makes more sense to do even earlier. But I think that the knowledge that I have on public service loan forgiveness is kind of just out of sheer determination, trying to figure out as early as possible the changes, because like you're showing right now in calculations, the dollar amount for making an important change early, it really adds up as the payments progress. And, you know, that was a big reason for trying to start making income driven payments as early as possible, because for every payment as a resident, that's one payment as an attending. I wouldn't have to make. But you're right. You know, whatever knowledge I have on this topic, there are these tips and tricks and loopholes that make a big difference. The earlier you can get them started. So, yeah, no, I appreciate it. I think that's definitely something I'm going to have to look into. So one point about having somebody else do your taxes, accountants always know about the tax code, and that's where their knowledge, in my experience, often stops. So a lot of times we'll have, you know, accountants and community property states that they'll basically say, like, well, why would you file separately? Because filing separately is almost every single time worse than filing jointly because you lose the Roth IRA, you lose some deductions. Oftentimes you maybe lose some different credits. So it's almost always more expensive or at least it's cost is like zero, right? So it's going to be zero or more expensive in terms of the penalty of filing separately versus married filing jointly. So that part accountants are like, well, the only legit reason in their minds to file separately is maybe you have some sort of legal situation, right, where somebody's suing you and you're trying to insulate your spouse or, you know, that stuff makes sense to them. But the reason why you would do this for student loans totally escapes someone. And so we've actually seen cases, too, where people go to like a mass market tax shop and the taxes are even done incorrectly and they don't equally distribute the income because some of the people that are not CPAs and even we've even seen this problem with CPAs, they just don't ever really have people that file separately. So they don't bother to like double check the rules and the software that's out there doesn't really catch this very well either, because it's just a rule that you're required to do that. And TurboTax and H&R Block have articles about this where they say this is how you're supposed to do it. But it's a pretty rare situation. So you've got to really be the one leading the discussion with your accountant on this, basically saying, hey, this is a community property state. We have to equally distribute our income. Now, the thing that I would do is I would ask them to run it both ways. Right. Run it. Married filing joint. Run it. Married filing separately. And tell me what the cost difference is. Right. And if the cost difference is like ten grand, there's a very good chance that they did the taxes incorrectly. And if it's a couple thousand than that, I would believe that because there's there may be some credits that you're taking, especially since you're itemizing that could run the cost up a little bit more in terms of when you would switch. And this gets into some stuff we'll talk about later in the episode about just income certification in general. But in terms of when you would switch, the problem is you've got these nine hundred dollar a month payments that are cheaper than what they would be if you switch to IBR right now because you don't have a tax return that can prove it filing separate. Right. Unless you put it off. I'm assuming you filed in April. Right. Yeah, I did. Yeah. So you filed in April. So the next opportunity you'd have to present a tax return that has a lower income from splitting it up like that would be in probably February of 2020. But, you know, doing it like this, even with the nine hundred dollars a month for this next year, there's still less than I plan on paying as an attending. So I think that filings, they're possibly filing separately this next time around, seeing how it affects it. It's a cost of a couple thousand dollars instead of tens of thousands of dollars over this next year. So, yeah, I think that's definitely something I'm going to have to look into. Yeah. Like, basically, I would not touch it for now because those nine hundred dollar a month payments are a lot less than what you would pay as an attending, even with this loophole. So you definitely want to keep doing what you're doing, at least up until February. But yeah, I mean, this and this, you know, loopholes can get closed. Right. That could go away. The thing that I would say to that is you have to make payments on an income driven program and you have to honestly show all of your income. And if you were filing separately using this loophole that exists in these community property states, you are 100 percent being legal and truthful about your income. There's nothing that you're doing that's unethical or illegal. You're just basically saying I'm filing separately. The income based program allows me to file separate and exclude my spouse's income. And because I live in one of these states, my spouse's income is this instead of this zero. Right. Yeah. And it's a thing that it feels like so messy and it feels so weird if it will work. And under the rules, there's not a gray area, in my opinion, that this works. The only way that they would be able to close this is if they just made a regulation change that said that, you know, we're not going to allow this going forward. And it's something that applies to so few people. It's probably getting overlooked. I say so few people, it probably applies to hundreds of thousands of people. But it's something that you are not going to know to look for it unless you've done a lot of reading and a lot of listening in the first place to resources like ours and some other websites out there. I mean, I think it would apply to a good number of people. I'm thinking I have a good cohort of fellow parents that moonlight a lot that their spouse, you know, either works minimally or stays at home with the children. I can think of a good number of of residents making in that low six figure range that this would probably apply to. So, yeah, this would be helpful. And your case is a little unique because you didn't qualify for pay as you earn. Right. If you had qualified for pay as you earn, then the difference would have been even more ginormous because if you can pay 10 percent of your income, but based on just your half, for example, the the difference would be looks like six hundred dollars a month difference as a resident, maybe about a thousand a month as a as an attending. So the 10 year cost instead of about seventy one thousand, you know, on IBR filing separate on pay as you earn, it would have been about forty seven thousand. Right. So that's quite a large difference. So for folks that are filing joint out there in these community property states that are newly eligible for, well, they're eligible for pay as you earn. The difference between getting the right tax status for your student loans, that's like a 70 or 80 thousand dollar decision. That's like a brand new. What's the most expensive kind of car like a Mercedes? Like, yeah, well, this is Southern California. So we all want Tesla's, right? Tesla's. That's right. Oops. Silly me. What's the most expensive? Basically, like the most expensive Tesla. That's actually equivalent to because of the tax rate that you're in. Right. Because California, you've got if you're, I think, over 100 K as a general rule, as a couple over 50 K as a single individual, you're in the 22 percent bracket for federal. And I think at least eight percent for California. So that's about 30 percent. And then you tack on ten for your student loans, and that's 40 percent. So you're already in a 40 percent tax rate for California for the kind of savings we're talking about for a typical resident. That's equivalent to two years of take home pay in California. So getting the right tax filing status for PSLF could be worth two years worth of you driving in to work at 80 hours a week at the hospital for free. Yeah. Yeah. When you put it that way, right. It drives the incentive to to look into this. Yeah, it's pretty brutal. Now, that said, you know, I don't want to just make it about the breadwinner loophole, because that applies to maybe 10 to 20 percent of people going for public service loan forgiveness. And the folks listening to this podcast or, you know, broader audience than that in terms of your debt, see, you know, got a little over 300 something, a federal debt, but you also had some private debt and you're able to refinance that while you were in training. You got a really attractive payment. So I'm curious about how you did that. I know you had a residency relocation loan. Let me talk a little bit about did they let you include that residency relocation loan in the refinance? You know, you refinance multiple times, I think. So maybe you share a little bit about that, because I think there's a lot of people out there with, you know, some private loans that they are trying to pay off, but get a better rate on. Yeah, no, I'll put it into perspective. I have have you need a budget open right now so I can say real numbers. Fed loans, $380,000 private student loans, $60,000. So kind of where those numbers come from is when I was an undergrad, I took out loans with Wells Fargo. Honestly, I don't really remember much of my borrowing habits in undergrad, except for they were uninformed, to say the least. So I borrowed in undergrad private loans, and I think some of those were parent loans. And then the last year of medical school, you know, we were coming to the end of student loans. We were also looking forward to starting residency and not being able to moonlight. So we knew that there was going to be a gap where we probably were not going to be able to afford our lifestyle to kids in Southern California. So Sally May had a resident relocation loan. I took out $20,000 and I, I believe the interest rate was seven percent. It might have been even higher. But one of the nice things they had is you did not have to make payments until it was either no payments until the end of training or is a hundred dollars a month payments. I don't remember which of those two. But after I started residency at the time, DRB was the only private loan company doing resident loans. And I think they're now Laurel Road. And I consolidated my undergrad student loan, my private student loans, my parent student loans and the Sally May loans into a resident loan or into a private loan where as a resident, I only had to pay a hundred dollars a month. Since then, I found a different company who does the same thing, except I only pay seventy five dollars. So that's sixty thousand dollars really is a mix of undergrad loans, parent loans and the resident relocation loan, all private that I was able to refinance now twice the decent interest rate. I think it's in the four percent range. And then with only seventy five dollars a month of payments on those, and then that's going to be our first target once, you know, we become attending is to pay off those private loans. And then the government loans, you know, originally I came out with about three hundred thirty thousand dollars. During that time, during medical school, we took out the max amount of loans we could. Again, had I to do it over again during medical school, I probably would have figured out a way to not borrow as much. But one of the things we did during that time was pay off my wife's student loans. She had private student loans for undergrad. I want to say it was somewhere around fifty thousand dollars. So with her working full time and then, you know, me taking out the max amount of student loans, we were able to completely pay off of pay off her student loans. And kind of my thought behind that was if all the student loans are in my name, first of all, it simplifies things. Second of all, you know, God forbid something happens to me. She's not you know, she doesn't have all of her own student loan debt to deal with. So it simplified things a lot for me to kind of put everything in my name. And then when we finished, when I finished medical school, that's roughly three hundred thirty thousand dollars. I consolidated, I had it through a bunch of different loans and different interest rates. I consolidated them all into one. I actually think Fed loans has two separate loans. I don't I don't know why. When I originally did it, I tried to consolidate it into one. But every time I get my monthly bill, technically there's two separate loans. But yeah, they break it out. They break it out into consolidation, unsubsidized and consolidation subsidized to make sure all the types basically get consolidated into the same new type. And and that matters because let's say that your goal was to pay back the loans. You know, if you'd consolidated, you wouldn't want to lose those three years worth of 100 percent interest subsidy on an income driven plan, right? Right. So that's what you can get on one of the income driven plans is the subsidized loans get subsidized for three years at 100 percent. That's why I mean, it's kind of irrelevant if you're going for PSLF, but that's why they do it. And I think going back to the private loans, when shopping around, really the things that we cared about was cash flow is, you know, how do we make the minimum amount of payments, especially as an intern? I was ideally looking for somebody who just let me not pay at all, but I didn't want to go into, you know, forbearance or anything. So finding a company that let me pay 100 dollars a month was the most important thing, actually more important than interest rate kind of at the time. Since then, I care a little bit more about interest rates, still trying to keep cash flow low. And then once we finish residency and fellowship, my plan is to refinance to the bottom interest rate that I could find. I think all of the two times that I refinanced the private loans, I got some deal and it was like 500 dollars cash back. I think those incentives have grown or that the type of incentives have grown since then. But basically what I care about now is cash flow when it comes to the private loans and then lower interest rate once I start to aggressively pay them back. That makes sense. What's the second company you refinanced with? Lending Key is who I went through and the bills are coming in through Aspire. I think it's it got sold to somebody else. Lend Key, maybe. Yeah. Yeah. That makes a lot of sense that the refinancing bonuses really do vary all the time. I know we've got, I think, the best one that exists for Laurel Road. Studentloanplanner.com forward slash refi. If you want to check that out, it's up to 750 bucks. As I record this podcast, it could change. But if you're doing a 250K or above refinances, lower cash back below that. You know, the companies are getting a little bit more sophisticated about those cash back bonuses because a bunch of people from Reddit were refinancing 5000 dollar pieces to get, you know, 500 dollar bonuses at every single place. You know, that's obviously not very profitable to pay off 10 percent of somebody's loan. I have colleagues in like emergency medicine, internal medicine, family medicine, and they are refinancing hundreds of thousands of dollars with these private companies, with the plan on paying them back very aggressively. So I think, you know, those models make sense for somebody in that situation. My goal is just to refinance this chunk of private loans I had and decrease the monthly cost while in training. So even with the decent cash back, I only pay, you know, seventy five dollars a month instead of 100 or 200, like some of these companies want. Yeah, I think for the cash back bonuses, you know, people that aren't in the business maybe don't know this, but those are very expensive to provide. So, for example, myself, a lot of the other people out there that refinance student loans that do offer bonuses, like we take that out of what we make to give it back to the reader. And I do it partly because I want people to get the best deals on our site and feel really happy from that. We don't have every single lender on the site because some of the ones we can't come to terms with and it is what it is. But the goal is that you'd apply a lot of places because a lot of times the one place you've heard about before that your friend refinance with might not give the best rate. And so especially if you're refining like for 60 K, I agree with you. You know, just cash flow, getting it done, getting everything included, including the residency relocation loan. That's the main thing. But if you've been refinancing, say you're going into private practice and you're financing your three hundred something K, then I would have certainly applied three or four places at least. Yeah, definitely. That's what my data suggests, is that the cashback bonuses significantly increase the likelihood that somebody is going to apply multiple places, which that's going to result in a better interest rate. So in terms of let's talk about just the stuff that, you know, for non-community property states, folks in regular situations. So a lot of people that are listening to this are graduating around this time. So tell us about consolidating everything right after you graduate and how you got a zero dollar payment by doing that. This is the big reason why, you know, I wanted to take the opportunity to talk with you this time of the year as a resident. I have medical students that rotate with me and, you know, I'll give them lectures on psychiatry. But I also sit them down and kind of walk them through this situation because there's specific things that had to be done at the end of medical school and at the very beginning of residency that just have such a big impact in total dollar amount. So the first thing that I did last year of medical school in April was to file taxes. And at that time, I had a little bit of income as a contractor. For our school. And then my wife had a little bit of per diem income. So it made sense for me to file taxes. But even, you know, medical students that aren't having in don't make income. I'm still filing taxes to show what their adjusted gross income was for that year. It ends up being really helpful after. So I file taxes. Interestingly, our school offers student loan education in May of your fourth year of medical school, which at the time was great, except it was a little bit too late and the taxes had already been due. So most people didn't go back and submit them after the fact. So the issue came up as soon as I graduated. I remember sitting in orientation. They were talking about student loans. And I thought, OK, well, I want to start making my public service, making qualifying payments towards public service loan forgiveness as soon as possible. So how do I do this? And I went to the studentaid.gov or, you know, I went to the website and consolidated my loans through Fed loans. I literally did it June 28th, 29th, whenever orientation was in 2016 and got the ball rolling on that. And one of the first things they ask is either what was last year's adjusted gross income or what is your current income? At the time, I would have put my current income, you know, being $50,000 a year roughly or the adjusted gross income from the year before, which is just a couple thousand dollars. When Fed loans finally got done with everything, my first payment was due in August of 2016, and it was zero dollars. Putting that time in in April, doing the taxes and then at the very literally as soon as I graduated, I was, you know, eligible to consolidate these loans so that I can make my first pay. My whole goal was, you know, how quickly can I make my first payment? There's a grace period which by consolidating was waived. And so I got to make my first payment as soon as possible. So my first payments were zero dollars starting in August of 2016, my intern year, and that went all the way through. And then in May they do the income recertification process. Well, because I had done taxes towards the end of intern year, my adjusted gross income from the year before was roughly 25,000 because I had only earned income for one year. So when the income recertification came around again, I did not earn enough to owe any money. So my payments for the next year were zero dollars again. And then at the end of second year, the process came through again. And I think by that time I had gotten some moonlighting in, but being married with two kids at the time meant my payments were about $150. You know, I basically got two years of zero dollar payments and then a year of $150 payments. And now finally, my adjusted gross income really reflects not just resident pay, but resident pay plus, you know, significant moonlighting. And now my payments have jumped up to $900 a month. But really being able to put in that significant amount of time early of zero dollar payments and low hundred dollar payments, ultimately means those aren't payments that I'm going to have to make later as an attending. I have colleagues that are asking questions about student loans as they're graduating and they've been paying. Most of them not paying the 10 year rate. Most of them got onto some sort of income driven plan. Some of them just went into forbearance. Like, I can't deal with this. I can't make these payments. I can just tell them I can't and they'll let me. So, you know, I've now at this point made dozens of qualifying payments where somebody who waits, you know, even just a few months really misses out on the opportunity to save thousands of dollars each payment. Yeah, really common. Hundred thousand dollar error is somebody put the loans into forbearance or deferment during residency and then realizes once they get a not for profit job as an attending like, oh, should I just refinance? Because I like left it in forbearance during residency. And the math usually says, no, you should still do PSLF. But the problem is, as you know, you're adding all those attending level payments that you could have had at resident level payments. And so that's usually a $30,000 per year that you left it in forbearance mistake. So 30,000 times three to five years for a lot of training periods. And that's if you don't do a fellowship, you know, there's $100,000 mistake. I know we talked about like the breadwinner loophole maybe being a $50,000 savings, but that's a hundred thousand savings. I think, you know, a lot of residents are getting a little bit more sophisticated about this stuff. The residents of like 2012 didn't really even know about PSLF for the most part. That's like, I think, very accurate. If you look at just the general knowledge that people had back in the day. Now, I would say the majority of residents and fellows know about PSLF and know about the importance of getting an income driven payment. So I don't necessarily see that mistake that often. And certainly anybody listening to this podcast knows about that mistake. It shows the difference between somebody who's paying attention to their finances and somebody who's not. And the results are that you worked for the hospital for free for a couple years. One of my thoughts, too, was just because of my family situation, it really didn't matter if I was going to do public service loan forgiveness or not. I needed to be in an income driven plan to minimize payments. And then always making sure it was based off of my adjusted gross income of the year before meant the payments trailed by a year. And that actually became really important this year. And one of the suggestions I make for anybody that moonlights is to set aside 10% of their moonlighting income because they're probably used to making the payments based off of their resident income, which is depending on family size, a couple hundred dollars a month. But the moonlighting income, you know, I'll work a shift on a Saturday, make twelve hundred dollars. I set aside one hundred twenty dollars of that because like I'm dealing with this year when the payments come due, it's a big jump from zero to a couple hundred dollars was one jump. But this year, the jump from one hundred fifty to nine hundred dollars a month was managed to save a year's worth of student loan payments this last year because I expected to have to pay 10% of my moonlighting income. Yeah, it's a good point. Now, as a ten ninety nine contractor, one thing that I would do if you wanted to get real fancy with it, especially if you're going to do it for a couple of years, is to start a solo 401k. I don't know if you've given that any thought, but are you kind of familiar with how that works, Mark? I've given it thought. I think it's hard to carve out that much money to set aside. Yeah, but yeah, definitely. And as an attending, I plan on probably having some ten ninety nine income and doing that as a resident. You know, it's more difficult, especially with the family size that you have. But, you know, it's just something to think about, because 40 percent tax rate, even as a resident, if you're making over fifty thousand or if you're 100 K or above that level, if you're married, 40 percent tax rate, that's some big savings, you know, to put that money away. And you can, of course, maximize your four three B. So if you're not going to max your four three B, I would definitely not fool with it. But you can contribute if you're doing depends on the way you structure it. But a lot of times you can take a quarter of your earnings of your wages from the ten ninety nine gig and put it into a solo 401K in addition to maximizing the four or three B. It's just an extra hack. Well, so in terms of big kind of risk that I see, that's probably even a bigger risk than any of the financial stuff about starting the investment account, starting the retirement account contributions and all the buying the house and everything is. And somebody like your situation, having really excellent insurance coverage is extremely important. Have you figured that out? And how did you figure that out if you already have? Yeah, that's one that I definitely wish I would have got on sooner. I know our residency offers pretty minimal life insurance policy and then a decent disability insurance. It's hard to get a disability insurance that reflects your your future earning potential when you're a resident. But that is something that I'm actually working on this week and kind of late to the game that I've now, especially the residents that are married and the ones that have children. I wish I would have got started on that earlier. Having significant life insurance and disability insurance. Yeah, because let's face it, right? Like if you make a bunch of PLS left mistakes, worst case scenario, maybe a couple hundred grand, which is not good. It's a very low probability that you pass. But if you did, holy cow, right? Because you're talking about having a fourth kid and your wife certainly could work. But four kids and a wife trying to she couldn't even afford the house. So the house would be gone. Obviously, you probably know that's kind of a weird thing to think about. I like thinking about weird things, though, just because it does make such a huge difference. So my general rule is like before you start trying for kids, get eight to ten times your income in life insurance. That's like a pretty much like a non-negotiable. Like, I actually think that you should do that before even saving for an emergency fund if you have a kid, especially if you have a spouse and children, depending on your salary. Yeah, yeah, that's definitely been a gamble to this point that I definitely would do differently if I could go back. As you get older, more medical issues start coming up and getting proper insurance is more and more difficult. I wish I could go back to when I was a young, healthy intern. And the medical screening questions were just no for everything. Yeah. But yeah, I mean, that is something that I wish I would have done earlier. I'm catching up to now and hopefully here within the next couple of weeks. It'll be taken care of. Our residency offers a disability insurance without medical screening. So I'll be getting that. And that'll be added on to the one the residency already offers. It'll be significant if that does become an issue. The nice thing about psychiatry is I can I really don't need my limbs or my eyesight to be able to do my job. But especially for, you know, my surgery or anesthesia colleagues, definitely very important. And then life insurance, of course, that's definitely been one that I should have gotten much earlier, especially now with three kids. But that'll be taken care of here soon. I would put that number one, definitely. Yeah, I got a million of coverage over a 10 year term for only 20 bucks a month, approximately. So I mean, that's dirt cheap. Our fellow consultant, Rob, he has all these funny one liners. And so I asked him once, I said, like, how much life insurance do you recommend people get? And he said, well, he said enough so that your spouse doesn't have to marry a senior citizen millionaire, but not enough that your spouse can run off with a cabana boy. Exactly. Yeah. And I was like, OK, it's kind of interesting. So, you know, you don't need to overinsure, but you definitely want enough to, you know, pay off the mortgage, fully fund all the kids' retirement accounts, provide enough of income that the spouse can kind of live a similar lifestyle to what they would have lived with you. So I just thought I'd mention it for anybody with kids out there because it's really easy to overlook. So in terms of your long term plan, do you think you're going to work as a psychiatrist just forever? Do you have any kind of early retirement goals or financial independence goals? Or have you given those any thought? No, I spend a long time listening to all these podcasts talk about fire and I have no interest in retirement early. I see myself working into my 70s, at least in some capacity. Education may be later on and definitely not being in a call pool as early as I can, but I enjoy work. I plan on doing it for as long as I can, but hopefully be independent enough that I can kind of dictate the terms of my work schedule, come in later, leave earlier, no call. That would be nice, but I definitely see myself working. I think a really good goal to shoot for then would be rather than having kind of a drastic savings rate, you could try to have maybe about a couple thousand a month going into a brokerage account when you become an attending and maximizing all the retirement accounts and then doing maybe about $200 a month and each one of the kids 529s. Yeah, that's something that we're still in the process of discussing is how to handle childhood college. You know, we paid our way through and we are seeing, you know, how much that costs and looking to see what it's going to cost for kids is just ridiculous. I think we're going to have some involvement there. And then as far as savings rate goes, you know, I am looking forward to the jump from resident to attending, because even if I give myself some more breeding room for our family, there's still going to be a significant amount of income. I'm hoping, you know, savings rate being somewhere in the 20 to 30 percent coming out of residency and that really not affecting our lifestyle. I mean, I'm even on a resident plus moonlighting salary. We're happy with our lifestyle right now. I don't really need much of an inflation from this. So when that jump happens, being able to use that extra money to to save and putting it in the correct accounts to minimize the amount that's going towards student loans. And then once it's forgiven, you know, using that difference to save so that I can have some at least some bargaining power as I figure out what I want to do for work for the rest of my career. Yeah, I tell people when you get that big jump from resident or fellow to attending, it's totally fine to increase your standard of living 50 percent. But don't do it more than 50 percent, because that extra earnings is going to go a long way to giving you financial stability. Mark, it's been so great to have you on the show. You know, I'm going to ask you if you want to share a place where people can get connected with you and if you have any last bits of parting wisdom for us. Yeah. And as far as connection goes, I'm off social media. I'm doing my own thing as a resident and parent. If you know me through other ways or, you know, you go to the same program, I'm always available to help students, other residents. But for everybody else out there, just, you know, use the resources that are out there and ask as many questions as you can and be vocal in those discussion boards to figure out what's going on. And hopefully you figure out stuff like we talked about here. And I think parting wisdom here is be diligent. And on top of this stuff, I know as a resident, it's really hard to be a resident and worry about this stuff. But making those early right decisions matters a lot. I think dealing with Fed loans has been an experience. I have kept every bit of correspondence between them because they forget things here and there or things are off by a month here and there, and that translates to a lot of money. I keep my own tables for how much I pay here and there so that I can remind them that I have made these payments and just trying to get on it as early as possible and keeping diligent notes, I think is going to pay off. And doing the income or the employment recertification form often I do it every six months now just to update my public service loan forgiveness payments. I think that's going to be helpful when I move to fellowship. And then to attending hoods, just just being on top of it as much as you can. I mean, there's I think about the dollar amount that I earn as a resident dollar amount I earn as a moonlighter, but really the value of investing the time and energy to figure out how this stuff works and keep good notes also has its own dollar amount. And it's a lot. And also finding a community of people that have the same questions and being open about it so you can bounce ideas off each other. If you're married, being very open about these discussions and game plans so you're on the same page. So your spouse knows why, even though you're, you know, making six figures, that you're not spending six figures because you have all this stuff to worry about. So I think I think those are some big tips that I wish I had done more younger. And then I try to pass on to, you know, medical students and residents as I get the chance. That is great advice, Mark. And of course, if you want to learn more about the breadwinner loophole, we also did episode six. I believe you can see that with studentloanplanner.com forward slash six. And it'll take you to that episode if you want to learn more about that loophole. If you happen to live in one of those nine community property states and you wanted to listen to another episode that talk about that. So definitely Mark's going to check on that, think about whether or not that could apply to him. You never know what things you don't know until you know. Yeah, my CPA is definitely going to get some messages here soon. And you have to run some numbers. That's the goal. I mean, I know a few hundred bucks in residency is tough, but in probably nine out of ten times pays for itself ten to one hundred times over with our consult. And that's why I left bond trading, because it's a heck of a lot harder to get that kind of return in bond trading. The last thing I'll say as far as recommendations is if you don't have the time or energy or enthusiasm for this stuff is, you know, reach out to somebody that does and give them money as long as their reputation backs it up. The value of figuring this stuff out early and having somebody figure this stuff out for you and you making the right plays is huge. I've definitely pointed people in your direction, and it looks like, you know, even just this conversation is going to turn out to be very valuable. So I appreciate it. And that's the end of today's show. If you know that you need a student loan plan, get one set up today at studentloanplanner.com forward slash book. If you know that you need to refinance your loans, check out studentloanplanner.com forward slash refi R E F I and get a cash back bonus so you can start saving money in your interest today. And finally, if you like the show, leave us a review in the favorite place that you listen to podcasts or share it with someone who owes more than you.