Podcast

YFP 156: Should You Refinance Your Student Loans Right Now?

Posted on by yfpadmin

Should You Refinance Your Student Loans Right Now?

Tim Church, YFP student loan guru, joins Tim Ulbrich to talk about all things student loan refinancing. Tim discusses what refinancing is, how it differs from consolidation, the benefits, the potential drawbacks, what to look for when choosing a company, and whether or not borrowers should refinance while the CARES Act is in place.

Summary

Tim Church and Tim Ulbrich dive deep into all things student loan refinancing in this episode. Tim Church explains that refinancing student loans is similar to refinancing a home mortgage and that the general goal of refinancing is to lower the interest rate so that you’re paying less on the loan over time. Refinancing can also change the type of interest you have on a loan and the terms of the loan.

Tim explains that there are several benefits of refinancing student loans including reducing the interest rate, removing a cosigner, getting out of a variable interest rate on a loan, accelerating or catalyzing your payoff, and also the potential to get paid by a company to refinance. Since refinancing federal loans pulls them out of the federal loan system and into the private sector, there are several drawbacks to refinancing including that your student loans may not be discharged upon death or disability and that you may not be able to receive help through forbearance if you are experiencing a financial hardship.

However, with COVID-19 and the CARES Act in place, Tim says that federal loan borrowers in general should not refinance their student loans. This is because the CARES Act has allowed for a pause on making federal student loan payments without interest accruing, late fees or a reporting of a delinquent status until September 30, 2020. During this time, pharmacists with qualifying federal student loans can take the money they would normally use on their student loans and apply it to other financial priorities, like paying down credit card debt or bulking up an emergency fund. If someone is facing financial hardship, then The CARES Act is beneficial for them as they don’t need to worry about making any payments at this time. Additionally, if a pharmacist is pursuing a forgiveness program, these $0 payments are counted as a qualifying payment.

Tim also discusses the protections the federal loan system offers its borrowers, when refinancing might make sense, and why and how he refinanced his loans multiple times.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tim Church, welcome back to the show.

Tim Church: Thanks, Tim. Always a pleasure to be on here, whether I’m doing the interview or the interviewee.

Tim Ulbrich: Absolutely. Well, I appreciate you coming on. And so here we are, and Episode 149, we heard all about the journey you and Andria took to pay off $400,000 of debt in five years. So what’s new? The debt-free life is what? Give us the update.

Tim Church: Well, in general, it’s feeling pretty darn good. I mean, just having that massive amount of disposable income now, it just feels like that weight is off our shoulders. So anything that comes up that we need to purchase, like it’s never like, oh, do we have enough to cover that? Do we have enough to hit our other goals? But I’ll tell you, what’s interesting is it feels like there’s so many things right now competing for that disposable income. So even though the student loans are gone, it’s like, OK, let’s go onto the next thing. So we’re really looking at replacing our vehicles, we want to save for a down payment on a home, we built up our emergency fund pretty well, but all of these things are kind of going right in a row.

Tim Ulbrich: Absolutely. And we were talking a little bit before the show, I was reflecting back on the journey that Jess and I took and now looking with our four boys at home and the expense that they are, especially as we get into our grocery budget lately, my gosh, with the four of them. It’s real, though. I mean, there’s just competing priorities. And I think it’s a good reminder the value of being debt-free if that’s a possibility as it relates to your student loans, you go into that next phase of life, which is exciting. So Episode 149, we talked about the journey that you and Andria took to pay of $400,000 of debt in five years. And then we followed that up in Episode 150 and we gave our listeners a sneak peek of our newest book, authored by you, “The Pharmacist’s Guide to Conquering Student Loans.” And here we are, still in the midst of the COVID-19 pandemic and considering the impact of that pandemic and the passage of the CARES Act, which we talked about a little bit in Episode 146, questions have been popping up about refinancing student loans, when it does or does not make sense given the current situation. So we wanted to bring back onto the show our student loan guru, our very own Tim Church, to dig deeper into this topic. So Tim, back on Episode 149, you mentioned that although not the most important thing that you did to knock out your debt, one that did help in a significant way was refinancing your loans. So remind us, what is refinancing? And how does it differ from consolidation?

Tim Church: When you refinance student loans, you’re really changing or restructuring those terms. And it could be one thing or it could be a combination of things. But in general, when you refinance, you’re changing the interest rate, but you could also be changing the type of interest, either going from a fixed rate to a variable rate or variable to a fixed or some kind of a hybrid rate. Or you could also be changing the terms. So maybe your loans are 20 years or could be 30 years, and maybe you’re changing it to a 5-year, a 7-year, a 10-year. So really, what you’re doing is just, like I said, you’re just changing or restructuring what those terms are. Now, one of the things is that you can’t refinance within the federal system. And I know that there’s big talks about being able to do that one day in the future. But for a long time, especially those with graduate loans or professional loans, they’ve had very high interest rates, including myself. Most of mine were in the realm of 6.8%, so really encroaching that 7% mark. And refinance really differs from consolidation because you’re actually — your goal is to try to get a better interest rate than what you currently have or what exists whereas consolidation in general is just taking multiple loans, which could have different interest rates, combining them into one loan, and then really you get the end result of one weighted interest rate. And then usually when people are referencing consolidation, they’re talking about a direct consolidation loan, which is through the federal loan system. And sometimes that’s done to make it easier if you’re going through one of the forgiveness programs or maybe you’re trying to convert loans that didn’t qualify that you want to qualify or just overall make it a little bit easier having one servicer, one payment per month. But in essence, you’re not really changing the structure of the loan because you’re still paying the weighted interest rate of multiple loans.

Tim Ulbrich: Yeah, good distinction, Tim. One of the most common questions that we get — and I think a lot of confusion — is this difference between refinancing and consolidation. And so just to reiterate, when you’re refinancing, the goal is to actually reduce your interest rate. When you’re consolidating your loans, bringing them together, combining them into one loan, it’s a weighted average interest rate across those loans. So you’re not effectively lowering the overall interest rate but rather getting a weighted average of the interest rate of those loans. So talk to us then about the benefits of refinancing student loans. Why would one consider this path?

Tim Church: Well, it’s just kind of like refinancing a home. Your overall goal for the most part is you’re trying to get a lower interest rate than what currently exists and what you’re paying because over the course of the loan, depending on how fast you pay it off and depending on your term, you’re generally going to save more money over time because each and every month, more of your payment is going towards the principal instead of interest. So if you are making a certain payment on a loan at say 7% interest and you refinance and continue to make that same payment at a lower interest such as 5%, you’re going to pay the loan off faster because, again, more of that payment is going toward the interest. Now, there are a couple other reasons why you might consider it, so if you have a cosigner on a loan and you’re trying to remove that and take full responsibility, that might be one reason to do that. Maybe you have a variable loan. So obviously not currently — we’re not in the realm where variable interest rates on student loans are going to be tremendously high. But in some situations, that’s one of the reasons why people would get out of a variable loan because they don’t want to pay such high interest and get more toward the monthly payments. One of the interesting things that I did that I think really made a big impact when I was paying off my loans is I thought it helped accelerate or catalyze my payoff. So we already talked about in past episodes that I made some mistakes along the way, should have went for forgiveness, but sort of once I was on that path of OK, let’s get the student loans out of my life, let’s go for it, when I refinanced to a 5-year term — at one point I think I was paying like $3,200 or $3,300 was my automatic payment drafted every month, I had to make that payment. And so what it did was I knew that I had to basically shift my budget around that payment because it was such a large payment. But it forced me to make it. And so I think everybody has experience at least some point in their life, maybe not every day, but present bias where we really care more about spending our money today versus saving it or putting it towards debt or something else. And so I knew that when that payment came up, I had to have money in my bank account in order for it to process through and not default on it. So for me, it was kind of a way that I was going to get after it, I was going to accelerate and make it happen. And then one of the other benefits that is out there certainly is actually getting paid by one of these companies to refinance. So it’s a very competitive market out there, there’s a lot of players. And they’re trying to get your business. And so the nice thing is unlike a home mortgage refi where you might have to pay closing costs or some kind of fee, there really is no cost to you other than the time it takes to fill out the paperwork in order to do it. But you might actually get paid some kind of welcome bonus or new customer bonus as a result of refinancing with a particular company.

Tim Ulbrich: Yeah, great summary, Tim. And your example of your own story and having larger forced payments I think is a great one for especially — I mean, in general — but especially our new grads that are hearing this where I see that as one of the areas where income-driven repayment plans can get people in trouble where they may start off as a smaller payment and naturally expenses and lifestyle creep and other things may rise your expenses around that versus one of the benefits of a fixed, larger payment such as in your situation is it forces you to really prioritize that debt repayment and then budget around that.

Tim Church: Yeah, and I think, Tim, that there’s a couple ways to look at that. I think one side of the camp is kind of what I talked about as like we are our own worst enemy. So we need some things in place in order to protect ourselves from ourselves. But then obviously you have the other side where people say, “Well, I don’t want to have to force myself to make that payment. I’ll just choose a plan where I have to make a lower payment, and then I’ll pay extra every month.” And sometimes that works, but not always.

Tim Ulbrich: Yeah, and I think too is you do a nice job talking about on this topic in general, you’ve also got to consider the opportunity cost as you’re thinking about other priorities with your financial plan. And I think you do a great job of this in the book, “The Pharmacist’s Guide to Conquering Student Loans,” where you talk about all of the different options that are out there and really take the reader through from beginning to end, understanding those options and then determining for their own personal situation what is perhaps the best option for them to move forward based on all of these different variables that we’ve been talking about thus far and have talked about previously on the show. So certainly as you outlined, there are some perks or some benefits with refinancing student loans. But with everything going on with COVID, potential income hits in the CARES Act, is this still something, is refinancing pharmacists should even be considering right now?

Tim Church: In general, I would say no.

Tim Ulbrich: Alright. So thanks for joining us on this week’s episode. We’ve got nothing else to talk about, Tim! I mean, what do you mean, “in general, no?”

Tim Church: We answer the question.

Tim Ulbrich: So why should most pharmacists not refinance their loans right now?

Tim Church: Well, let’s look at this through the lens of what kind of loans one has. And I understand you may have federal and private, but let’s consider the majority of your loans is in one of those buckets. So if you have federal loans, one of the reasons why I would say no at this point is really because of the CARES Act. And that really was something that was just huge benefit that the federal government rolled out as a way to help students deal with their loans during this time, knowing that a lot of people have been hit with either a reduced income or completely loss of income. But essentially what this did was it allowed those who have federal loans to pause all of their payments until Sept. 30 of this year, something that is really done automatically by the servicer. But any qualifying loan such as direct federal loans, direct subsidized, direct unsubsidized, direct consolidation loans and FFEL loans and Perkins loans owned by the Department of Education, all of those qualify under that. And not only did they allow you to stop making payments, but they’re really — there’s no interest that accrues during that time. I mean, which is a huge benefit for a lot of people that are struggling financially.

Tim Ulbrich: Yeah, and I think it’s really important, we talked about this a little bit before on the Financial Considerations for COVID-19 when we talked about the CARES Act, but through Sept. 30, 2020 — and the Department of Education, for clarification, does have the option to extend this for three months if they choose to do so. That has not been done yet. But they do have the option to extend this through the end of 2020. But on qualifying loans, so as you mentioned, Tim, direct federal loans as well as those FFEL loans and Perkins loans that are owned by the Department of Education, those essentially you have a $0 payment that’s due as well as 0% interest. So the only thing excluded from this would be FFEL and Perkins loans not owned by the Department of Education, health professions loans, and private loans. So no interest, $0 payments on qualifying loans, so also talk to us about the PSLF provisions or those that are pursuing even non-PSLF, whether or not those payments count towards forgiveness.

Tim Church: Right, so those who are on the track for PSLF or non-PSLF forgiveness after 20-25 years, as you probably know, you have to be in an income-driven repayment plan and make qualifying payments during that time. Now, normally, if you’re in forbearance, those loan payments do not count towards either the 120 or depending if you’re going for 20-25 years. But because this is an administrative forbearance, any of these $0 payments, they essentially count towards the number that you’re trying to qualify for. So even during this time, it’s kind of like you’re getting a free pass without having to make that income-driven repayment but still getting the credit. So it’s actually a great time where you can shift whatever you were paying towards forgiveness in one of the income-driven plans to some other financial goal or having fun if you still have the income.

Tim Ulbrich: So Tim, you mentioned and clearly articulated that for those that have qualifying federal loans, obviously in this time period, $0 payments, 0% interest, doesn’t make sense. I think it’s also worth noting here that, you know, when you look at the major benefits of refinances, as you mentioned earlier, you’re often going and shooting for a significant reduction in interest rate that hopefully is going to save thousands and thousands of dollars over the repayment. And sometimes in doing that, you’re willing to take on some things that private lenders, even though these have largely been very, very competitive with the federal offering, in doing that, trying to accomplish that goal of reducing your interest rate and saving that money, you’re willing to take on some things with a private lenders that are different than what the federal program offers. So remind us of what those protections are that not all private lenders offer that somebody will get in the federal system.

Tim Church: Sure. So I think one of the biggest ones is the option to immediately opt in for a income-driven repayment plan. So essentially, if you have federal loans at any time, you can say, “I want to go into an income-driven repayment plan,” and they’re going to base that off of your last year’s tax return or if your income has significantly decreased since that time that you filed, that they’re going to base your payments upon that, which is really I think is a huge deal because if you are somebody who has significant income change, that is a great benefit. It’s essentially a safety net in order — if anything happens to your income. And then I think some of the other big ones are forbearance, so even if you couldn’t make the income-driven repayment payments on a particular plan, you could basically push pause. But you would be responsible for income as it would — or I’m sorry — the interest would accrue during this time on anything that was unsubsidized. And then you may not get the benefit of having your loans discharged if you happen to pass or you became permanently disabled, which is another benefit. Now, some private lenders will have those options in place, which is good. So I think that’s something to really know when you are signing that over, especially if you’re going from federal to a private lender when you refinance is know about those because if it’s something that they don’t offer, if anyone is essentially on the hook for any of those loans or if they try to cede your estate, you definitely want to have those insurance policies to really protect you in case that would happen.

Tim Ulbrich: Yeah, great stuff, Tim, too. And I think it’s also worth mentioning here, as we talked about on Episode 153 with student loan attorney Adam Minsky that there are some forgiveness provisions that are on the horizon that are being proposed in the legislature. To be clear here, nothing has been passed. This is all hearsay at this point in time. And we talked about several of those that might come to be or may not come to be, everything ranging from potentially an extension of the $0 payment, 0% interest or perhaps some forgiveness that could be happened in there for federal loans, some of those proposed legislations do and do not include private loans. So I think there’s a whole host of things that may or may not be coming. Again, at this point, nothing has been passed. But as we’ve talked about on Episode 153, one of the benefits I think for staying put if you have qualifying federal loans in addition to everything we’ve talked about, is to see how this plays out for the foreseeable future as they look at perhaps the next coronavirus relief bill that may or may not come to be.

Tim Church: Yeah, and I saw on I think it was the Facebook group and on our page, there was some people that were pretty upset about these forgiveness programs and whether or not they would go through after they’ve either paid off most of their loans or paid it off completely. So I think the bottom line is that you can’t always time when these things are going to happen, but if you have an opportunity, it might be worth waiting a little bit to see if it does come through. But I think one of the biggest things when you look at whether when you’re making that decision to refinance, there’s one huge assumption that you’re making. And I think it’s so critical. It’s that you’re assuming that when you refinance, that your income isn’t going to change or it’s going to go up, that you’re not going to have any change in your income. And I think that is such a key thing because again, those protections to either push pause or go to an income-driven repayment, that’s not necessarily going to be there depending on the lender that you’re working with. So you may have a pretty secure job or you may be in a situation where you’re not quite sure or maybe you’ve had reduced hours. And so especially in those situations, I think you’ve got to be really careful because if all of a sudden your income takes a big hit, well then you could be in a very unfortunate situation.

Tim Ulbrich: So to that point, Tim, for those that are listening that have private loans and are thinking, what the heck? I’ve been left out of all this. I was trying to do my due diligence and make payments and perhaps they’re in a financial hardship, maybe not, what options do they have? I remember seeing some states that were moving things forward, trying to work with private lenders. But as I understand it, that’s not really the same as the provisions of the CARES Act in terms of what that offers borrowers. Talk to us a little bit more about that.

Tim Church: Yeah, so there’s a number of states that believe — at the time of this recording, there’s about nine or 10 states that have stepped in to work with private lenders, including some of the big players like SoFi, Lendkey, Earnest, Navient. But basically, these provisions kind of mimic the CARES Act in that they’re also allowing borrowers to temporarily suspend payments for 90 days. They’re also waiving late fees. But I think one of the biggest things is that the interest does not stop accruing if you’re not making your payments. So that’s really the one big key distinction. And I would say that obviously, even if they’re giving you the option to suspend payments that that’s not necessarily something you should do if your income hasn’t changed and you still are able to make the payments. The other thing that they mentioned is that they’re not going to report delinquent payments to the credit bureaus if you’re going to stop making your payments during that time. Although that is an issue, actually, with people with federal loans under the CARES Act as there have been some cases reported with that.

Tim Ulbrich: Yeah, and we talked about that on Episode 153. And from everything that I can tell, that has been resolved. So some people saw a short-term ding on their credit. And that has been I think corrected. But always a good reminder to be checking your credit and your credit score. And hopefully those issues have been resolved. So Tim, based on what we’ve talked about, to be clear, what we’ve said here is most pharmacists should not be refinancing during this time period where we have the provisions of the CARES Act. Assuming that the majority that are listening have qualifying federal loans. So is there any subset where in this time period, refinancing may make sense?

Tim Church: Yeah, I thought about this myself in terms of if I was in this position and I had already refinanced my loans, which I did a number of times, you know, is that something possible? So I think those who have already refinanced once or another time and they have private loans, I would say maybe. OK? So the stipulations that would go along with that is that obviously, whatever you’re going to refinance to, that those terms are manageable. Obviously, you’re looking for a better interest rate.

Tim Ulbrich: Right.
Tim Church: So you have to come out on top and it has to make sense from a mathematical standpoint. But also, you want to be able to make those payments and not have to stretch your budget so far. I think the other thing you have to really think about — and we’ve talked about this I think a couple times already — is that you’re not anticipating any change or loss in your income because again, especially if you refinance to a more aggressive term where your payment may actually increase, that’s even more reason that you really have to be pretty confident in that. Sometimes what’s kind of nice is that you might even be able to refinance to a term that’s longer than what you are with a better interest rate with the intention that you’re going to pay extra in order to come out ahead over time. So that’s obviously an option as well. I think the other thing is you have to look at your overall financial picture and look at what your goals are and what the priority is because especially if you’re someone who has credit card debt or other goals you’re trying to accomplish, maybe you’re not going to be as aggressive right now with your student loans, especially if you’re going to have to make a bigger payment. So I think that’s something you have to take into consideration as well.

Tim Ulbrich: Yeah, such a great reminder that student loans are a really important part but only one part of the financial plan, right? We talk about this with investing as well. Really, really important part of the financial plan, but it’s only one part of the financial plan so really taking a step back and I think speaks to the value of a financial planner and a coach that can help you really look at the big picture and determine how you’re going to prioritize and strategize. And I would point to — and credit to you, Tim, for the work that you’ve done in building out the resources. If our listeners are not already aware, head on over to YourFinancialPharmacist.com, lots of great information not only on refinancing but also calculators for refinancing and other tools that can help you determine what your savings could be if you choose that as a path forward. So at this time, I want to shift and do some rapid-fire refinance Q&A. So while we have you here, I want to tee off some of those common questions that I get, you know, from listeners or out speaking and talking to pharmacists related to refinancing. And a couple of them we’ve touched on, but I want to really directly answer them, so we’re going to go through these one-by-one. So first question I have for you is what factors do you consider when selecting a lender to refinance? So lots of options out there and, you know, how many should I be considering? Should I only be looking at one? And ultimately, how do I get to that decision of which one to work with?

Tim Church: You’re absolutely right. There’s so many options out there in the marketplace now. I think that the key thing is really to shop around and make sure you’re getting the best deal. It would be unfortunate that if you refinance but you could actually get a better deal with a different company. Obviously, that’s not the only thing to consider. But I would say that that’s one of the most important factors because obviously from a mathematical standpoint is you’re trying to get the best deal in order to save the most money over time. And that may also help you accelerate your payoff. So I think that’s huge. I think the other thing is if your loans — if the loans are going to be discharged on death or disability. And to me, I think that’s really important and a really good thing if the lender is offering that because again, if for some reason you became permanently disabled, could not make your payments, you don’t want your disability insurance check that you have coming going all towards your student loans or covering a big chunk of that. I mean, you need it to live. And that’s why even some of those policies, they have student loan riders built in there as differing payments that you would have on top of your monthly benefit. So I think that’s a really important thing. And the same thing with whether they’re forgiven on death because if you’re married, have a spouse or significant other or a cosigner, you really don’t want to have to leave that debt to somebody else. And obviously you can have life insurance in place, but it’s just another thing that I think is a good benefit when you’re looking at the lender. And I think just making sure they’re a reputable one. You can go to the Better Business Bureau, I think NerdWallet has a watch list of predatory lenders that are out there. But there’s some really big names, obviously, and you can check some of those out on our website.

Tim Ulbrich: Yeah, and I think too in addition to the Better Bureau of Business rating, I think obviously you want to consider the consumer experience. And I would say it’s a great place to lean on the YFP community, jump in the Your Financial Pharmacist Facebook group, ask them a question about your experiences with different lenders. You know, you want to make sure that they’re going to be responsive in addition to obviously the variables we mentioned of finding a product that has the best rates and ultimately the terms that you’re looking for. So Tim, you mentioned in that last response the importance of loans being discharged on death or permanent disability, which would match the benefit that one would have in the federal system. So I’m guessing some may be wondering, well, how do I know that? How do I find out if a private lender does offer that?

Tim Church: Well, we have the information on the lenders that we’ve partnered with. But obviously there’s a lot more out there. So I think trying to find their facts on their website is a good place to check, but sometimes they don’t even have that. I know that back when I was first analyzing different lenders and trying to refinance, I actually had to send emails out to the company for them to get that in writing through an email to say like, yes, this is true, this is something that we offer. So sometimes it’s always not the easiest thing to find on their website.

Tim Ulbrich: And you know, you mentioned in your story — going to the next question here — you mentioned in your story, refinancing more than once. And you know, I think that’s something that often gets overlooked. So tell us more about not only one, that being an option, but why people should consider doing that and how often they might consider re-evaluating.

Tim Church: Yeah, I think looking back — so I refinanced mine three times and my wife did three times as well. And the bottom line was that each time that we did that, we were able to get a better rate. And so it really just made sense to do that because it just became more competitive. I think I started out going from 6.8% down to maybe 4% or somewhere around there. And eventually got down in the low 3%s and then with First Republic got down to even 1.95%. So each time we were able to get some savings. And there really is no limit in terms of how often one can do that. I have heard some cases for people that do it like extremely often, like multiple times a month or every two months, that you could experience a temporary hit in your credit score. But overall, I mean, it can be very beneficial. I mean again, you’re just shifting to a different servicer for the most part. And as long as they have good service, you’re really just making the same payment, could be the same terms, but just a little bit of a better interest rate. And a lot of times, as mentioned before, they can incentivize you that when you switch to a different lender that they’re going to reward you with either some interest rate reduction but also possibly some kind of a welcome or cash bonus.

Tim Ulbrich: And to that point about multiple refinances having an impact on credit, tell us about your experiences. Did you see that have a short-term impact on your credit score?

Tim Church: I really didn’t. I think the soonest that I refinanced after doing it, I think I want to say 2-3 months was the earliest that I did once I made it happen. So I never did it more frequent than that, so I can’t speak to those who might be wanting to do it more frequently. But like I said, I’ve only heard of some case reports where people have noticed — and typically, they’re not huge dings in their credit score. They’re typically small. But I guess technically, it could be much larger I guess if it was something you were doing like every week. And for those that are listening, especially any of the recent graduates, the new graduates, one of the most common questions I get is, you know, how soon can I refinance? So considering the variables that a lender would be looking at, what have you typically seen in terms of what might be the good time period for one to consider applying for that first refinance?

Tim Church: Well, I think you really have to get your plan down pat first. I mean, that is the key because once you pull that trigger and refinance, I mean, you’re essentially disqualifying yourself for any forgiveness programs. And that’s one of the biggest mistakes that I made and that I shared in the book is that you have to know that because you have to know what you’re giving up by doing that. Now if you’re someone who you think you’re committed to the private sector and forgiveness is not going to be an option or your debt-to-income ratio isn’t significantly high, then yeah, then maybe it is something that you consider. Generally, lenders are not going to even allow you to refinance until you’ve proven income. And I think now, especially during the COVID time, they’re actually being stricter on who they’re going to lend money to and be able to refinance because it’s — I think I want to say one of the lenders, initially they only needed like your last paycheck or last two. And now they’re upping it to your last three paychecks to make sure that you’ve had consistent income. So a lot of times, you have to wait. I mean, I really wouldn’t even consider it during this time if you’re a new graduate and you have federal loans. You have the grace period anyway.

Tim Ulbrich: Right.

Tim Church: But then on top of that, you have the CARES Act in place. You’re not forced to make any payments. So I would really just take the time, explore all of your options, make sure you know exactly what kind of position you’re going to take and how that’s going to impact your student loan options. And then, you know, once the grace period passes or you get to that point, then you can kind of decide which route you’re going to go.

Tim Ulbrich: Yeah, such a great reminder. For those that are or are not new or recent graduates, just the reminder that you want to have clarity on your repayment plan, so really determining the strategy first. And then if you get to the answer that refinance is best for you for whatever reason, obviously not in the moment likely for those that have qualifying federal loans but in the future, OK, then you start to go down the path. But you want to be crystal clear that that is the right path for your personal repayment strategy. Tim, last question I get asked all the time is how to apply with one of these private refinance lenders and I see they’re giving me fixed and variable rates to consider. Talk to me about what factors one should consider that would help them determine whether or not they may take the fixed option or the variable. And of course, we’re not specific rates here, so we don’t know what those rates are. But just generally speaking how to evaluate fixed versus variable rates.

Tim Church: Yeah, I think this is a tough one because like a lot of other products out there, even like mortgages, the variable rates are going to be very sexy, very flashy. They’re typically going to be lower than what fixed rates are available. And that can be very enticing to want to go that route. The problem is that if something happens in the market and rates significantly change, your payment can change and the amount that you pay in interest can significantly change. And it’s hard to predict into the future exactly how that’s going to fluctuate. Now, right now you might make the argument that most likely, we’re not going to see rates climb in the short term foreseeable future. But again, is that actually going to happen? It’s hard to exactly say. And if you’re even considering a variable rate, you want to know what the top end rate is going to be. Usually, there’s terms with regards to how frequent those rates can change but then also a maximum that you could pay in that situation. So I know there’s a lot of people that they’re comfortable with that level of risk and with that rate changing and the fact that they could refinance again to get out of it if needed. And certainly that’s one way to look at it. Me, I was never in that camp where I was comfortable with that risk, even if it was a small percentage improvement, I’m going fixed so I know exactly what’s coming out of my monthly budget or at least what the minimum payment is, and I’m not going to have any surprises along the way. So that made me feel really comfortable knowing that, even if it was, like I said, a little bit of a higher interest rate.

Tim Ulbrich: I think this is a good reminder for our listeners to check out our refinance calculator and tool on the YourFinancialPharmacist.com website and do the math. I mean, run the math on best case, worst case scenario of the variable rate. And, you know, to your point, really ask yourself what risk tolerance do you have but also what margin do you have in your budget? So you know, if you see that math on variable rate worst case scenario and you say, “Oo, I don’t know if I have the margin month-by-month for that difference,” then that might answer your question. But you know, if the rate difference is that significant, the savings are potentially that significant and you do have some margin, well then that might help inform which direction you take as well. So Tim Church, great stuff. And as a reminder to our community, “The Pharmacist’s Guide to Conquering Student Loans,” our latest book authored by Tim Church, “How to confidently choose the best payoff strategy that saves you the most money,” pick up your copy today at PharmDLoans.com. It’s a great book whether you’re overwhelmed with student loans or confused about repayment plans that exist, unsure if the strategy that you have in place today is the best one or perhaps a new graduate trying to determine what strategy is the best one forward or those that are feeling anxious about how to handle loans during residency or during a financial hardship, this book is for you. I can attest to it. I’ve read it. I think it does a great job of talking through all of the repayment options and strategies and really presents a very complicated topic and presents it an easy-to-understand and more importantly, actionable way that’s all customized for the pharmacy professional and written by someone who has done it. No theory, no case studies, but actual execution. So again, you can pick up your copy today, PharmDLoans.com. Again, PharmDLoans.com. And as always, if you like what you heard on this week’s episode of the Your Financial Pharmacist podcast, please leave a rating and review on Apple podcasts or wherever you listen to your podcasts each and every week. Have a great rest of your day.

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YFP 155: Why You Need Professional Liability Insurance

Posted on by yfpadmin

Professional Liability Insurance for Pharmacists

Tim Baker talks through what professional liability insurance is, why it’s important, who needs it and what to look for when shopping for a policy.

Summary

On this episode sponsored by HPSO, Tim Baker discusses the ins and outs of professional liability insurance for pharmacy. Working as a pharmacist without professional liability insurance or malpractice insurance is a risk that could cost you your assets including your home or retirement and could also leave you bankrupt or with your wages being garnished.

He explains that insurance is essentially a risk transfer, meaning you’re moving the risk by contract from yourself to an insurance company. The company takes a premium from you and if an incident is filed, then the policy will pay you out. Tim says that facing a lawsuit for malpractice can be absolutely devastating to your financial plan and future independence, and the cost of the premium for professional liability insurance is so low that everyone should really look into being covered.

A liability insurance policy provides coverage in a number of areas, including $1 million for each claim, license protection, loss of wages, attorney fees, actions taken against you while volunteering or giving verbal advice, and claims from previous employers. If your employer offers liability insurance, Tim says that this is more of a perk and not a plan. The employer policy is there to protect the institution and not necessarily the employee. If you have an employer plan, you need to find out if the coverage is high enough to cover all of the employees and if it will protect your license or provide money for lost wages or board hearings.

Tim shares that when shopping or evaluating a policy, it’s best to work with an insurance provider who is plugged into your profession. He says that you have to also look at what is being covered, how easy it is to set up, the education provided and how good their customer service is. He recommends HPSO as they insure over 100,000 pharmacists, lead in terms of education and are sponsored by APhA. You can learn more about HPSO here.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: On the day of the incident, the patient was admitted to the hospital due to nausea and vomiting to rule out possible gallbladder disease. The admitting provider ordered Reglan 5 milligrams IV push four times per day. The Reglan did not relieve the patient’s nausea, so the nurse requested the provider change to another drug. The provider discontinued the Reglan and order Promethazine 25 milligrams IV push four times a day. After the medication order was received and reviewed by the pharmacy, it was delivered to the medical floor. The nurse administered the medication via IV push in less than one minute, and that was undiluted. The patient immediately experienced pain, complaining that his left wrist felt like it was on fire. The nurse flushed the IV site several times after administering the Promethazine and stated the pain would subside in a few minutes. About an hour later, the patient’s IV site was noticeably swollen and continued to hurt. The nurse made the decision to remove the IV and notify the admitting practitioner of the patient’s complaints. Initially, the patient’s practitioner treated the IV infiltration conservatively. However, over the next several hours, the patient developed progressive swelling, discoloration, and numbness. Once it was determined that the patient had developed compartmental syndrome, he was urgently taken to surgery for decompression of the compartments of the left hand and surgery of the left hand. After surgery, the patient developed sepsis and was transferred to a higher acuity care hospital, which had a hand surgeon who took over the patient’s care. After his physiological status improved, he underwent two additional surgeries. He was then discharged home with daily wound care and physical therapy to be performed by a home health provider. Currently, the patient has very limited motor control over his left wrist and arm due to contractures and nerve damage from the compartment syndrome. He experiences a constant aching in his extremities as well as severe burning, stabbing and electric shock-like pain, which is associate with complex regional pain syndrome. Because his injury occurred to his dominant hand, he was unable to return to work as an aircraft mechanic and was forced into disability. The nurse, pharmacist on duty, director of pharmacy, and hospital were all included in the lawsuit. Allegations against pharmacists on duty included failure to provide written and/or oral instructions on the causative effects of Promethazine when given IV as well as providing a causative medication Promethazine in undiluted form without any instructions as to how to appropriately dilute and administer the medication. Allegations made against the director of pharmacy included his failure to establish a pharmacy policy on Promethazine detailing how to administer the medication safely. The hospital declared bankruptcy prior to filing the lawsuit, leaving the two insurers as the main defendants. During deposition, the nurse testified that he was unaware how to administer Promethazine and dependent on the pharmacist and the pharmacy department to provide medication safety instructions and warning. Both insurers acknowledged during their depositions that they understood how caustic Promethazine can be if it extravagates into the tissues and how serious consequent injuries can be. Neither could explain why a pharmacy protocol had never been developed for Promethazine administration. The likelihood of prevailing at trial was estimated to be between 35-40%. A collective settlement was made on behalf of the pharmacist on duty and the director of pharmacy with indemnity payments and expenses in excess of $740,000. Wow. Tim Baker, when you hear that story, if that is your client, whether it be the pharmacist or the director of pharmacy, what are the implications for them personally and to their financial plan?

Tim Baker: Yeah, I think it’s devastating. That type of catastrophic loss is — it’s almost impossible to come back from. So you know, from a personal perspective, obviously your heart goes out to the patient that was negatively affected for the rest of their life and obviously losing a lot of function in the hand and everything. But from the client perspective, you know, this is a — obviously it’s a shot in the arm, to say the least, with regard to the ability to grow wealth. You know, this is probably looking at wiping out assets like a home, retirement savings, you’re probably looking at bankruptcy yourself, garnishes of wages, even the likelihood of return to pharmacy in some form or fashion is probably gone. So what most of us are striving to, and it’s really our mission, is to help pharmacists achieve financial independence. That’s going to be different for a lot of people. Regardless, a loss like this is going to put a dent in that no matter how you define financial dependence. So this is one where, you know, when I first read through this case study — and I’m not a pharmacist — like it gave me anxiety because you’re just thinking like you could see where this was going. And it’s devastating. That’s the word that comes to midn the most.

Tim Ulbrich: Yeah, and I think, Tim, you know, as we continue to see the pharmacist’s role expand, which is a great thing for our profession and great thing I think for patients as we know the expertise they can bring to the medical team, I think we’re going to see more and more opportunities where the expansion of that role leads to pharmacists being brought into lawsuits, right?

Tim Baker: Yeah.

Tim Ulbrich: So we’re now obviously seeing a good evolution away from just the distribution function of the medication, which in and of itself can bring potential errors and lawsuits that we have I think been well versed in and know of. But when you start to get into the clinical realms and the variety of clinical roles that we’re seeing pharmacists play, that certainly is going to expand. And I think it’s helpful to hear stories. This is one example, so I know our hospital pharmacists listening are going to hear this and say, yeah, you know, they can see this. They can visualize, they can relate to it. And I know when I was in school and we were taught about professional liability insurance, like it’s just hard to wrap my arms around like what would this be? And what are the situations? And how really significant is this risk? And so I think it’s helpful to hear examples, and this is one. You know, there’s some other examples that we highlighted in “Seven Figure Pharmacist” that have involved a pharmacist, a prostate gland suppository (?) that’s given instead of Progesterone that resulted in premature delivery of an infant that had neurological complications, a man who obtained sensitive medical information about his wife without her consent, a young child who received propylthiouracil instead of mercaptopurine that resulted in recurrence of leukemia and eventually in death. So these are unfortunate but true stories of pharmacists’ errors. And these errors obviously can result in significant financial implications. And so I think it’s important, Tim, that we take a step back and just think about what is insurance? So here, we’re talking about professional liability, but health, home, auto, life, disability, we’ve talked about many of those on the show. What’s the basic definition and purpose of insurance and the role that it plays in the financial plan?

Tim Baker: Yeah, so this — what insurance really is is it’s risk transfer. So we’re essentially moving the risk of some — so a risk is basically a condition where there’s a possibility of at least two outcomes: one being undesirable. And typically, those undesirable outcomes, you know, they’re losses. So this could be a loss of income, this could be a loss in a lawsuit where you have a liability to pay. The loss is really that disappearance or reduction in value. So what we do is, you know, we transfer that risk by contract from ourselves, the individual, to an insurance company. And basically, the insurance company is taking the premium, so this is what we pay for the policies, and they’re using the rule of large numbers. So basically the group is paying for these policies, and then if one member of the group has a loss, then you know, that’s where the policy pays out. So you know, a lot of us when we think about insurance, we use different methods to manage that risk. So you know, the big one that we’re talking about here is transfer the risk, but you know, a lot of us, we retain that or we self-insure. The example that I give for self-insurance is we have Benji the dog. And Benji, we looked at pet insurance, but we knew that those premiums would go up, so we just have an Ally account where we would have put those premiums toward that policy, we self-insure that risk.

Tim Ulbrich: Right.

Tim Baker: You know, there’s ways to avoid it. So like if you’re not in hospital pharmacy, we’ll talk about maybe some of the careers in pharmacy where you don’t need it. But at the end of the day, you know, this is something that is so — it can be so devastating. And I think the tradeoff in terms of the cost of the premium for professional liability that we’re talking about today, it’s almost — I don’t want to say it’s a no-brainer, but it’s almost a no-brainer. And if you are unsure because of where pharmacy practice is evolving and headed, I would buy a policy because it’s very cheap. And the downside is so great. So — and I think one of the things that we want to talk about here is you know, and it’s evident in this case, is there’s an over — we have an over-reliance or we make assumptions about our employer that aren’t true. So I know I’ve worked with some big companies and big organizations, and you think that walking in there that everything is pristine, there’s a policy and a procedure for this and that and your employer is always out for your best interest. And unfortunately, it’s not the case. You know, there are lots of things that we do in life, and I think that you’re going to see this just as hospital systems become more stressed where things are kind of — you wing it in some cases. There are things that change, and that’s a harsh reality. But I think in this case, it’s like, well, we never had that policy and procedure. You’re assuming the next guy down the line, maybe the nurse that is administering knows what they’re doing, but we make assumptions here. And you know what my mom said about when you assume, it’s not necessarily something that’s going to turn out well. So yeah, I mean, we can definitely go through the professional liability and why it’s important and what it is. But at the end of the day, if we look at this broad strategic part of the financial plan that is the protection of the financial plan, this piece of insurance that’s with insurance in general is going to be so important because things just happen that we don’t expect. And you can’t self-insure everything. You have to have that rule of that group to basically help shoulder that for you. So that’s really the purpose of insurance.

Tim Ulbrich: Great definition overview. And you know, I was just thinking as you were talking, in the pharmacies that I’ve worked in and many that are listening can relate if you’re working in a traditional community retail setting, the number of prescriptions you touch per day and you extrapolate that out to a week or a year and the number of patients that you interact with per day or if you’re in a hospital setting up on a floor distributing in a hybrid role, it doesn’t matter. Just from a statistical standpoint, when you talk about the risk and the things that could happen along the way, obviously there is risk that can be had there and making sure that you’re protected and the rest of your financial plan. But let’s be honest, even when we talk about a policy that is relatively inexpensive relative to the coverage it provides, nobody wants to pay for insurance. And I think for many, myself included, the thought of paying for something that may or may not bear fruit in terms of providing a benefit can be frustrating. And unfortunately, because of these feelings, I think many people forego implementing proper insurance coverage. So Tim, generally speaking, how do you work with clients to find this balance of ensuring the right insurance protection and that that is in place while they are trying to prioritize other goals such as paying down student loans, investing, or saving for a home?

Tim Baker: Yeah, I think there’s this misnomer that working with a financial adviser — and I think maybe it’s not a misnomer because I think, you know, we’ve earned it in some regard — there’s this misnomer that it’s all about growth of assets, invest, invest, invest. You know? And for a lot of pharmacists, you know, when they think about insurance, they’re left with a bad taste in their mouth because probably during pharmacy school, just like many physicians and other healthcare providers, you know, there’s this push by financial professionals like me to sell you a crappy whole life policy or something like that. So you’re already kind of from Jump Street a little bit wary of it. And to your point, Tim, a lot of people can view it as a sunk cost. So this is the idea that money that you’re spending towards these premiums cannot be recovered. And I think you’re really — it’s missing the point. And one of the analogies — or one of the examples I give is we talk about whole life, these are policies that are typically more expensive. And a lot of whole life advocates will say, “Well, term insurance, they only pay out 4% of the time.” But the point is that they did their job. Most of the — if you have insurance and you have a 30-year policy and you live beyond that policy, like you were protected during those 30 years. And it did exactly what it needed to do. And the same is true for professional liability. It’s like you don’t want to have a claim, even if you’re covered. You don’t want to have a claim. But you want to have that — the insurance is that safety net so you’re not in the poorhouse, your assets are protected, you’re not filing for bankruptcy. So what we say, you know, and kind of it’s just our messaging, every time we meet a client, like our mantra, our thing is how can we help you, the client, grow and protect your income, grow and protect your net worth, while keeping your goals in mind? And the protection is so much baked into the insurance piece, the estate plan, those types of things. But we want to make sure that we’re doing both of those things, not just growing the assets because we want to make sure that we are accounting for those dark moments. And I think we as humans, we sometimes suffer from the optimism bias, which is a cognitive bias that causes someone to believe that they themselves, Tim Baker, oh, I’m not going to experience a loss. I’ll never have anything; that’s going to be someone else, you know, a faceless person in the crowd. It’s never going to be me until it’s me. I often hear on repeat, “Hey, my employer has me covered. I’m not worried about it.” And that could be not just from professional liability but it could also be from life and disability insurance. So at the end of the day, what we say is insurance provided by your employer, it’s not a plan. It’s a perk. So we, if we’re doing this financial planning thing the right way, it’s just something that we have to bake into it. Now, when I say for things like life insurance, typically the things I say is for life insurance to make sense, it’s typically you have to have a spouse, a house and mouths to feed. Sometimes people that are single, they don’t have a house, they don’t have dependents, maybe it doesn’t make sense unless they have loans that are not going to be forgiven upon death. So the same thing with professional liability. We want to make sure that it makes sense for the scope of practice that they’re in and that they have things that could potentially be lost. But you know, for the most part, it is something that you want to take a hard look at if you’re a pharmacist. And I kind of hearken back, Tim, to the story that was done about kind of the — I know they interviewed a community pharmacist, and I’m blanking on who wrote the story, but the amount of scripts that that pharmacist filled in one day, it was like it’s crazy. So there’s potentially going to be mistakes, and those mistakes could have far-reaching effects. So you know, again, strategically it’s something that we definitely, we need to work through all those different parts of the insurance and make sure that we are properly covered in that regard.

Tim Ulbrich: So Tim, to that point, you know, just like health and life and disability, we’re trying to determine who needs it and how much do they need? So talk to us — and you alluded to this a little bit already — when it comes to professional liability insurance from your point, who needs to be evaluated and what considerations should they have as they’re doing that evaluation?

Tim Baker: Yeah, so you know, when we’re looking at professional liability, basically what this is, it’s coverage for a pharmacist that provides protection in the event a claim is made against the pharmacist involved in an actual or alleged or admission while carrying out his or her duties that are within the scope of practice for a pharmacist. And the hard part is that the scope of practice is a moving target. And it’s going to be defined by your respective state, so in your state licensing board. So again, it’s not necessarily a black-and-white issue for a pharmacist in whatever state USA. So to me, from our viewpoint is the idea is that if you are a practicing pharmacist and you’re interacting with patients, if you’re volunteering, if you’re giving advice, like I said, when we talk about side hustling a lot, there are a lot of pharmacists that they might moonlight and work in a hospital pharmacy. These are all instances that expose you to risk that you want to cover. And even policies — even claims that come up where hey, you worked at a hospital and now you don’t work there anymore and a lawsuit is filed, you’re not necessarily going to be covered under that employer plan, so having your own policy is kind of what we’re looking for. So to me, again, it’s going to depend on kind of what the day-to-day is of the pharmacist. Now, I can say — I kind of admit here most of the time, I would say probably 90% of the time, I say this is something that you really should consider if these are some of the blocks that you’re checking off. And part of that is because they are very inexpensive. But you know, these are going to be policies that for many of our listeners is going to be something that we want to have in play for sure.

Tim Ulbrich: And I’m glad you mentioned the piece about scope of practice because that is a moving target. You know, in Ohio, we’ve seen changes to scope of practice, significant changes, that have happened in the last 12 months. And I expect we’ll see that continue to happen as other states are. So in my conversations with some of these providers, I think we’re going to see these policies catch up to scope of practice, but many of them are not there yet. And so there’s a pretty standard policy that you’ll see. But obviously a pharmacist’s role in Setting A versus B versus C can be very, very different. So I think that’s an important consideration that people are thinking about. So anytime you’re purchasing a policy, again, whether it’s life, disability or home, auto, here professional liability, it’s good to know not only the purpose but what it’s going to do in the event that you need it. So if I’m purchasing a professional liability policy, what benefit would there be? What would it ultimately cover in the event that my employer, any coverage through my employer, may not be doing exactly what I need it to do?

Tim Baker: So typically, you know, the big thing here is it’s going to cover the — basically the professional liability itself. So you know, typically these policies will cover you for $1 million for each claim, $3 million in aggregate liability policies. So if you have a judgment against you, and in this case it was I think right around — what? — $750,000, you know, if you have this policy and it’s going to cover you — like your part of that is going to be covered by the professional liability. If you don’t, then that’s again when you are dipping into retirement, selling your house, that type of thing. License protection — so sometimes these issues don’t go to lawsuit, they’ll go to the licensing board. And you’re having to protect yourself with attorneys and things like that and investigation. So they’ll cover you a certain amount of money each year for those types of claims. It could be loss of wages. It could be for, again, hiring an attorney for your defense. It could be for, you know, just actions taken against you while providing pharmacy services while volunteering or giving Uncle Dave verbal advice or claims brought against you from a previous employer. So these are all things — and again, at the end of the day, the policies that your employer has are for your employer. They cover you by extension because you are an extension of your employer. So but at the end of the day, they are there to protect the institution, not you. And you know, there can be some certain instances where you think you’re covered and you’re not. So things to think about, you know, with regard to your employer’s policy is the coverage they have high enough for all your coworkers? So if that judgment that we talked about in the case study was $5 million, as an example, like would that be able to cover everyone? Does it cover your lost wages or licensing board hearings or things like that? Does it cover outside of work? Most of the time, it will not. They don’t want that liability. And what happens if you’re employed? So at the end of the day, it’s going to provide you with your own counsel, your own attorney. It’s going to pay all the reasonable costs incurred during the defense and investigation and cover for lost wages because this is something that’s going to take up time. You know, you’re going to be probably not practicing or not able to. So these are some of the things that you’re going to be looking or be covered when these policies are in place and definitely good to have your own.

Tim Ulbrich: So Tim, what about those that are listening to this show that are self-employed, work as an independent consultant, or work part-time for another employer in addition to their full-time job? How does this come into play?

Tim Baker: It’s definitely — yes. Like yes, yes and more yes. So I would say definitely look at the professional liability. So you know, this is going to cover you for professional pharmacy services outside of your employer setting, as long as it’s within the regular duties and activities of scope of practice. So again, that’s the moving target, and that’s the challenge to organizations like HPSO and some of the other ones that provide because it’s — or provide these types of policies — because it is ever-changing, and it’s changing by state. So but the best thing that you can do, what’s in your span of control is to buy the policy, purchase the policies that are there and just make sure that you are operating within the scope of practice of the state that you are practicing as a pharmacist. And for some people, I would venture to say a lot of people don’t know that. So maybe the second part of that is just to say, “OK, what is in bounds? What is out of bounds?”

Tim Ulbrich: Yes.

Tim Baker: And again, it’s something that you don’t — to reiterate the point — you don’t want to make the assumption, right? You don’t want to make the assumption that you’re covered or what you’re doing is because that’s how it’s always been done because things change and assumptions are made, and that’s typically where people run into a problem.

Tim Ulbrich: Tim, one area we haven’t talked much about, if at all, on this show before is where umbrella policies fit in and don’t fit in and really, what type of coverage they provide. And here, I’m thinking, as many may be wondering, if I have an umbrella policy or if I don’t and I were to get one, is that applicable at all here in terms of additional coverage if a professional liability issue would come up? So talk to us about not only that question but maybe some intro first into what are umbrella policies.

Tim Baker: Yeah, so an umbrella policy is an extra liability insurance coverage that typically goes beyond the limits of your property and casualty insurance. So property and casualty insurance being typically homeowners and an auto policy. So I’ve heard this before where, you know, someone will say “Well, I don’t necessarily need professional liability because I have an umbrella policy that covers me.” And I would say just separate lanes here. Just like life insurance is a separate lane from disability insurance, an umbrella policy, separate lane. It’s still liability, but we’re talking about kind of the personal liability side versus the professional liability side. So you know, typically, people that have umbrella policies have maxed out their homeowners and auto liability coverages. So typically, the maximum you can purchase for a personal liability policy under homeowners is like $500,000, you know, $250,000 per person, $500,000 per accident. And then you know, the same is true with the auto is kind of along those lines. So once you reach out to your auto provider and you max out those coverages, then they might say, “Hey, because of your profession or because of this or that, you have rental properties, do you want additional coverage?” which is very, very inexpensive just to go be above and beyond that. So there’s a little bit of a misnomer that if you have an umbrella policy, you’ll be covered from a professional liability. And they’re typically separate lanes with regard to the financial plan. So those, you know, those are policies that are going to really just sit on top of what you already have from auto and homeowners.

Tim Ulbrich: Last thing I want to talk about is just the actual purchasing, shopping, evaluating process. And we’ve talked before on the show and on the blog about when you shop for life and disability insurance — and we talked about this on episodes 044 and 045 of the show — how complex that process can be in terms of the range of options that are available, you have a whole host of different riders and often, you may not feel like you’re comparing apples to apples. And I think when people go into that shopping process, they can quickly get overwhelmed and maybe never get past that to be able to actually purchase what they need or end up with something that might be more than what they need. So what is really different here in terms of a pharmacist who’s looking to evaluate a professional liability insurance policy?

Tim Baker: Yeah, so you know, I hate to say that sometimes insurance can be a bit of a commodity, you know, and I think one of the reasons that we like HPSO in particular is I think they do lead in terms of education, which I kind of hold near and dear to my heart because I’m a big believer in the better educated the client will be, the better client you will be. So but I think also, you know, you want to work with a provider here, an insurance provider here that’s plugged into the profession. So — and I can say I’ve worked with different ones over the years and I feel like I’m really looking to point clients in the direction where they’re going to be responded to and good customer service and all that type of stuff. So I think the big thing is in terms of policies is what is actually being covered? And am I educated in terms of what my risks are and what my coverage is, you know, to mitigate those risks? And then how easy are they to get to set up? And then how confident am I in the ability to — the policies to ebb and flow and evolve over time? So HPSO is for health providers, it’s in the name. So we want to make sure that we’re working with a provider that kind of checks those blocks and makes sure that our listeners, our clients, are covered in the uneventful — or unhappy time that could be a judgment against you because of a professional liability error.

Tim Ulbrich: As we wrap up this week’s episode of the Your Financial Pharmacist podcast, I want to again thank our sponsor, HPSO. HPSO is the leading provider of professional liability coverage, insuring more than 100,000 pharmacists nationwide and sponsored by the American Pharmacists Association. As I mentioned before, when I was a practicing pharmacist, I carried my malpractice insurance through HPSO. And with individual policies for qualified persons starting at just under $150 per year, it’s a no-brainer compared to the cost of a claim and worth the extra peace of mind. Plus, discounts are available for qualified students and recent grads. So head on over to HPSO.com/YFP to learn more. Again, HPSO.com/YFP. And as always, if you liked what you heard on this week’s episode of the Your Financial Pharmacist podcast, please do us a favor and leave a rating and review in Apple podcasts or wherever you listen to your podcasts each and every week. Have a great rest of your day.

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YFP 154: Getting a Home Loan in a Pandemic

Posted on by yfpadmin

Getting a Home Loan in a Pandemic

Tony Umholtz, a Mortgage Manager for IBERIABANK/First Horizon, discusses the impact COVID-19 is having on the housing market, the current landscape for those purchasing or refinancing a home, and the role of the Professional Loan Program (aka the Doctor’s Loan).

About Today’s Guest

Tony graduated Cum Laude from the University of South Florida with a B.S. in Finance from the Muma College of Business. He then went on to complete his MBA. While at USF, Tony was part of the inaugural football team in 1997. He earned both Academic and AP All-American Honors during his collegiate career. After college, Tony had the opportunity to sign contracts with several NFL teams including the Tennessee Titans, New York Giants and the New England Patriots. Being active in the community is also important to Tony. He has served or serves as a board member for several charitable and non-profit organizations including board member for the Salvation Army, FCA Tampa Bay and the USF National Alumni Association. Having orchestrated over $1.1 billion in lending volume during his career, Tony has consistently been ranked as one of the top mortgage loan officers in the industry by the Scotsman’s Guide, Mortgage Executive magazine and Mortgage Originator magazine.

Summary

On this episode, Tony Umholtz, a Mortgage Manager for IBERIABANK/First Horizon, talks through the landscape of the housing market due to COVID-19, the professional loan product and answers questions from the YFP community.

Tony begins by saying that this period of time in the real estate market reminds him more of the recession after 9/11 versus the 2008 housing market crash. In this case, real estate is fairly stable during the pandemic and, in general, folks have more equity in their home, so if they lost their job due they are more likely able to sell and walk away easier than if they had no equity in it. He also shares that interest rates are down and it’s a great opportunity to refinance or buy a home if you’re in the position to do so.

Tony then discusses the professional mortgage loan (aka doctor’s loan or pharmacist home loan) that’s available through IBERIABANK/First Horizon. First time home buyers can get a 3% down payment with no mortgage insurance, no reserve requirement and and strong interest rates. If this isn’t your first home, you’re required to have a 5% down payment. There are requirements to get the professional mortgage loan, like having a 700 or more credit score and falling into a certain debt to income ratio. If you’re interested in exploring this option further, you can find more information here.

To wrap up the episode, Tony answers several questions from the YFP community.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. And before we jump into the meat of today’s interview, I would be remiss if I didn’t emphasize that the decision to buy a home and how much home should start well before digging into the financing options. This starts with No. 1, knowing your budget and No. 2, knowing all the costs involved with home ownership to figure out whether or not you are ready. And of course, this must be considered in the context of all of your other financial goals such as student loan repayment, building an emergency fund, and investing, to name a few. So if we fast forward and you’ve determined that the decision to buy a home fits within your budget and the rest of your financial goals, now we are ready to evaluate the financing options. And one of the options that exists is a doctor of pharmacist home loan, which is some unique features that can be attractive, and we talked about that on Episode 136 of the Your Financial Pharmacist podcast, and I’ll revisit that briefly today with Tony. Now, full disclosure, IBERIABANK/First Horizon is not the only lender offering a doctor type of loan. And these loans are generally defined for higher income professionals that are at lower risk to the bank and therefore, the lender requires a lower percent down, offers competitive rates and has no Private Mortgage Insurance. And we have explored several other options that are out there, but the rate-limiting step of bringing these forward to the YFP community has the limited availability of these loans in terms of the number of states that are serviced. Therefore, as we recommend with everything else, please shop around to find the best option for your personal situation. Also, full disclosure, we do have a sponsorship relationship with IBERIABANK/First Horizon, and as with our other relationships want to be fully transparent with you. We remain committed to bringing you solutions that we have vetted and we have the chance to bring value to your financial plan. And yes, while we do get paid for promoting several of these solutions, whether that be solutions for life and disability insurance or here with a lending solution for home buying, we are committed to maintaining this approach of vetting solutions and ensuring their value to the YFP community. Alright, without further delay, let’s bring Tony back onto the show. Tony, welcome back onto the Your Financial Pharmacist podcast.

Tony Umholtz: Tim, thanks for having me. Great to be here.

Tim Ulbrich: Excited to have you back. And in Episode 136, which seems like forever ago, that was pre-COVID life, we talked about a decent amount about the types of lending options available to a home buyer, including conventional loans, VA loans, FHA loans. And so we’re not going to spend more time on that here today, but I would encourage that didn’t catch that episode or that want a refresher in that area to go back to 136. And so we’re going to spend our time together really in three areas: First, we’re going to talk about the landscape and the housing market as it relates to COVID-19. We’ll then talk about the professional mortgage loan option that’s available to folks and to many pharmacists. And then we’ll wrap up by answering questions from you, the YFP community, and I’m going to tee those questions up for Tony. So let’s jump into the landscape of the housing market as it relates to COVID-19. Tony, generally speaking, how have you seen COVID-19 impact the housing market?

Tony Umholtz: Yeah, Tim, since our last call in January, it just seems like a lifetime ago. You know, just everything we’ve went through as a country, it’s been just unbelievable in such a short amount of time. The landscape has changed very, very quickly. There’s been a lot of different things that have impacted financial markets. Obviously the stock market liquidity and the high-yield debt market, all of these came under immense pressure. Mortgages were a part of that. You know, in March when most all asset classes were selling off, many mortgages got hit hard, so mortgages on the secondary market really lost a lot of value and a lot of the REETs and aggregators that weren’t backed by the government really had gone out of — shut down operations for the most part, especially on the jumbo loans, the larger loans that aren’t backed by Fannie Mae and Freddie Mac and Ginnie Mae. Those REETs aren’t lending right now or taking loans. So been a very big hit to the mortgage market.

Tim Ulbrich: And what do you see, Tony, you know, I lived through 2008, as many of our listeners did. I was doing residency at the time and can remember so much of the housing market being tied to 2008 and that recession. What’s different here as we think about COVID-19 and its impact on the housing market? What’s different in 2020 than what we experienced in 2008?

Tony Umholtz: Yeah, great question, Tim. I started my career back in coming out of the 9/11 recession and the dot-com recession in the early part of the 2000s. And this really — as far as real estate goes, this correction and downturn reminds me more of that one in that real estate has been pretty stable throughout this. ‘08-’09 was just so devastating because of the leverage in the market. There was a lot of things that — I didn’t do a lot of the non-prime loans myself, but there was easy approvals to things like that back then. I mean, the process of getting a loan was pretty easy. It was too easy, right? And that led to this steep correction. But the big indicator in ‘08 and ‘09, Tim, was the inventory on the market. There was so much speculative building, there was so much property and vacant housing and vacant unoccupied housing that that just — and then of course we had short sales and all these things that hit. So it was the perfect storm in the real estate world where this time around, we came into this with a very healthy financial system, and we came into this downturn with a very healthy housing market in most parts of the country. Obviously every housing market is different, but on average, the U.S. housing market was very, very strong. And we were actually under normal inventory levels in the majority of the markets of the country. So that’s really been one of the catalysts for what I’m seeing is a very, very strong real estate market.

Tim Ulbrich: And do you see — you know, I know we’re projecting here a little bit — but I think of things that are unique to COVID-19 like the enhanced unemployment benefits and some of the protections that lenders have in terms of forbearance and other factors. I wonder, are we going to see challenges that may come and it’s just delayed 4, 5, 6 months from now where we might see the unfortunate situation of people that are foreclosing on homes and those types of things? Or do you see it as really a big question that’s largely dependent on what happens with unemployment?

Tony Umholtz: You know, I think it’s all about unemployment. I really think that’s the key metric here. And there has been a lot of really sad situations out there. It’s a very tough thing to go through for many, many people. And when you take a step back and just look at everything, I don’t know for sure obviously, but just kind of looking at the numbers and the data that’s out there, we have homes on average are not overleveraged like they were in ‘08 and ‘09. So most people did not have a lot of equity in their home, so it was very easy to walk away from them. This time around, you know, you may have lost your job, but you may be sitting on substantial equity in the house. So I think it’s just going to be a different situation where if you had to sell, I think you could sell and you could get out of the home. I hope that we are through this sooner than later, but obviously the more time it goes on, that’s going to cause more pain.

Tim Ulbrich: And we’re going to stay away from talking about rates in the moment because we know these can change literally by the day and sometimes within the day. But generally speaking, what have we seen that’s been unique with rates? And I know the big news obviously, the Fed cut the interest rate to 0%. I think there’s an automatic assumption that we’re going to see mortgage rates kind of hit a floor, but we’ve seen some interesting trends here over the last few months. Talk us through what we’ve been seeing, generally speaking, on interest rates?

Tony Umholtz: Well, obviously when the Fed cuts rates, the short-term rates, it doesn’t correlate exact with mortgage bonds. Mortgage bonds are calculated off the long-term trading of long-term mortgage bonds, which are actual investment bonds traded on the secondary market. So that’s really what’s going to dictate what our pricing is on mortgage, not what the Fed does on the short end of the curve. But I mean, anytime we see something like this, there’s going to be a compression in rates. And rates have come down, and I think it’s created a great opportunity for people to refinance and lower their payments and consolidate debt. And we’ve had a lot of success with debt consolidation and of course buying a home. I think it’s created just a very, very good opportunity for buyers with rates low.

Tim Ulbrich: And there’s been some interesting — you know, I’ve been reading some articles in the Wall Street Journal and New York Times about kind of the situation we’re in that’s unique that the supply, for perhaps a variety of reasons, isn’t really out there. And it’s been maintaining the prices of homes for the most part. You know, as we perhaps start to open up the economy on some level and people are getting back out, do you think part of that supply issue is just hesitancy of people listing homes and having people come in their home? Do you think we’ll see that turn around in terms of more people putting their home up for sale?

Tony Umholtz: I think so. I think as more counties and states open up, I think you’ll see that people ease up, especially into the summertime more homes will be opened up for sale. I think that will provide a little bit more inventory. But there is a lot of buyers looking. It’s a good opportunity now. And if you’re renting, you’re looking at the numbers and saying, I can own for what I’m paying in rent. You know, the other thing — I think it’s more of the major cities, I think this isn’t for sure trend, but I think you’re going to see a little bit of a move more in the suburbs just in open spaces a little bit more than the crowded cities potentially. And I think that could benefit some suburbs, newer cities and maybe even some rural areas too just as people desire more open space. It could change the desire of what people are looking for too.

Tim Ulbrich: And for those that are listening that might be struggling to make a payment or perhaps find themselves in that situation in the future, what options do borrowers have to explore? And how does that differ even between the types of loans that are out there?

Tony Umholtz: Well, the — and I’m not an expert on the forbearance.

Tim Ulbrich: Yeah.

Tony Umholtz: But that has been a great tool I think for a lot of people that are in that position. I would stress, though, that this is only something you want to utilize if you’re in a position where you cannot make payments. If you can, it can have some adverse effects potentially. I wouldn’t do it if you can make payments. But that’s been a great tool I think to help a lot of people that are in a difficult spot. But you know, as far as the tools that are out there, the fortunate thing — you know, outside of the jumbo lending, which has been hit, those, some of the options I had in March, you know, I don’t have right now. And a lot of lenders don’t have any jumbos. I feel fortunate just to have the ability to write them. But the loan amounts that are backed by Fannie and Freddie on the conventional side, some of the programs that we have that are under a $500,000 type loans, those are very, very liquid. Those guidelines are very, very strong. And that’s been a blessing that that’s intact.

Tim Ulbrich: Great. So I think that’s a great overview of some of what we’re seeing in terms of the landscape of the market with COVID-19. And I want to transition to talking about the professional mortgage loan, kind of what is it? And more specifically, what is offered with IBERIABANK/First Horizon? And you know, I think this is an area that we’ve been seeing a lot of interest among the Facebook group. We’re getting a lot of questions about it, and I’m going to bring some of those questions forward to you at the end. But what we see certainly is that one of the biggest barriers to pharmacists being able to purchase a home, you know, is typically student loan debt. And for most conventional types of loans, this greatly impacts their debt-to-income ratio and certainly could affect someone’s ability to get a loan or greatly reduce the amount that they could get approved for and often we see has a significant impact on what they’re able to save in terms of down payment. So I think that’s a good segway into where the professional mortgage loan may come in. So tell us a little bit about that loan option, generally what it is and a little bit more about the program of what IBERIABANK/First Horizon offers.

Tony Umholtz: Sure. So the program essentially allows a first-time home buyer to finance 97% of the price of the home. So you — and there’s no mortgage insurance, which is a huge benefit. And if it’s a subsequent purchase, if you owned before, it’s just 5% down. So it’s 2% more down, but the real benefit driver is that there is no mortgage insurance. There’s also not a stated reserve requirement, which is good too because a lot of these programs have reserve requirements that can be difficult when you haven’t been able to save money. I know some of our physician loan products have reserve requirements as well. And this one does not. It also carries very, very, very strong interest rates. I don’t want to get into them because everybody is different for everyone based on credit, but it tends to have some of the better rates that I can offer, even though you’re putting 3% or 5% down. But the main driver is that no PMI, I think limited reserves, and there is a max loan amount of $510,400. So that’s the cap to loan amount. You can always purchase higher than that, but if it’s more than — let’s say you found a home for $550,000 and you put 5% down, you might have to put a little bit more down to get to that $510,400 max loan amount.

Tim Ulbrich: So one of the questions, Tony, we actually had this come up in a webinar this week that we were doing with Nate Hedrick on home buying, and we were talking a little bit about this option. And as we were talking about the things that you just said in terms of competitive rates, obviously a very low percentage down that’s required, no mortgage insurance, not having to have the same reserve requirements, those types of things, the question of well, why wouldn’t somebody do it? What are the downsides to an option like this? And the only thing that I could come up with within my mind is that if for whatever reason the rate weren’t competitive, you know, with something else that they were looking at, obviously that’s a consideration or that it might put somebody in a position to buy before they’re ready to buy in terms of the low down payment. But if they’re otherwise in a healthy financial position, they’ve got a good emergency fund, they’re in a good position to buy a home, I really don’t see a whole lot of downside here. What are your thoughts?

Tony Umholtz: Yeah, I mean, we do have a debt-to-income ratios that we have to abide by. So you know, there is controls put in place. We also have a minimum credit score. It’s 700. So those would be some other things we would look at. I didn’t want to get too technical, but I guess those would be just some of the metrics. But I mean, again, it’s a very tight population that we can offer this to. It’s not everybody. So it’s got to be in these stable, this stable job position and this occupation. But yes, I think as long as you qualify, it’s not a stretch, and you’re in a good position, I think it’s a good thing as long as it makes sense for you to buy a home in your personal plan.

Tim Ulbrich: Right. Yeah, and I think it’s always a good reminder of what could be the potential downsides of having a low equity position. So if somebody were to have to move quickly for whatever reason and obviously they couldn’t use the equity to cover other costs or purchase of a new home, those types of things, but again, if you’ve got reserves or you have other plans in place to be able to account for that, then I think it’s certainly a great, great option to be looking at. Tony, one of the questions we had come forward from the community is obviously thinking about what’s happening in the economy related to COVID-19 and perhaps the lenders becoming a little bit more astringent on who they’re lending to. And even though we’re talking about a minimum credit score here of 700, do you expect that an option like this might go away in the future or change in terms of max loan amounts because of changes that might come in lending?

Tony Umholtz: I certainly hope not. I think, you know, I think — anything can happen. Risk profiles, things can change depending on how bad this downturn gets. But you know, fortunately we got through this pretty far and there’s been no changes. So hopefully it’ll stay that way.

Tim Ulbrich: Awesome. And we’ll keep our community up-to-date and we’ll provide some more information. And as a reminder, you can go to YourFinancialPharmacist.com/home-loan, get some more information about this offering. And you can connect directly from there with Tony and his team over at IBERIABANK/First Horizon. Tony, speaking of your team and what you guys have done, I want to thank you guys for giving our community members the time and attention they deserve. And I’m currently working through a refinance. It’s been a great, great experience working with you and your team. And I went on over to our Facebook group and wanted to see what some of the chatter was around their experiences with IBERIABANK/First Horizon because I knew more questions were coming up about this option, and I knew that I had seen more discussion on it. And I pulled a few of the comments from that community of people that have just posted really within the last week. And there was a lot of great, great things that people had to say. So one of our community members said, “Iberia is where it’s at.” I love the brevity of that. Somebody else said, “I’m working with Iberia now for first-time — as a first-time home buyer. They’ve been fantastic to work with. Their online system is the best, easiest I’ve used so far.” I would agree with that, very intuitive system. Somebody else said, “Iberia is great to work with, user-friendly website.” Another community member said, “We used Iberia Bank to refinance our loan last fall. Easy process.” And then I also noticed there was some feedback on RedFin that was quick, easy, great rate, and a great loan officer. So thank you for the work that you guys have done and for how responsive you’ve been to our community that has reached out to engage with you guys.

Tony Umholtz: Oh, thank you, Tim. It’s been fun. We always enjoy helping people. That’s our job, but connecting and helping people is why we do what we do. So thank you for that.

Tim Ulbrich: So I want to transition now, as I mentioned at the beginning, I want to put Tony on the hot seat. And I asked you all, the YFP community, for your questions in advance, knowing that I’d have the chance to interview Tony today. So we have several questions that have come in, and we’re going to work through those one-by-one. So Tony, the first question we have from the YFP community relates to escrow. And the question is, in addition to costs associated with title and processing of the loan, how much money does one need at closing for property taxes and insurance? And if you could briefly define escrow for those that may be hearing that term for the first time.

Tony Umholtz: Sure. That’s a great question because this can be one of the most complex parts of real estate is escrow accounts and how they work. Well, escrow what essentially is is property taxes and homeowner’s insurance and flood insurance if you’re in a flood zone would be added in then too. So property taxes can vary based upon where you live in the country. Different municipalities collect taxes a different way. I know that many states, you pay it once per year.

Tim Ulbrich: Right.

Tony Umholtz: And others, it’s quarterly. Right? There’s different counties, different parts of the country do operate differently. So we need to be sensitive to that. But you know, overall, I’ll just also give one answer to a question that comes up about escrow accounts and what they are. Banks keep escrow accounts to help pay for taxes and your insurance let’s just say on an annual basis or quarterly basis. The insurance is generally due once per year, so the bank is actually collecting typically 1/12 of your tax, your insurance payment, each month to pay that annually. Generally, you do not have the option to waive escrow unless you have an 80% loan-to-value or bullet. So if you ever hit the — most people in the audience are not going to be in that position. But if you do, if you put 20% down or more on a conventional loan, you actually can waive it and pay it yourself. Now, there’s sometimes there’s a risk grade to the loan because there is a risk if you didn’t pay those things. So there could be a little effect to the interest rate. But that is an option, and I do see some people waive them when they do have a larger equity position. But the majority of Americans have an escrow account that have a mortgage. And the taxes and the insurance and how they’re collected I think is very important to understand. When you go to closing on a purchase, you’re typically going to owe one year of your insurance premium up front. So in a case of let’s say it’s a $1,200 insurance premium, well, you’re going to have to pay and bring that $1,200 to closing. The insurance company will want their funds. And then generally the lending institution — this is really universal for all lenders in the country — they’re going to collect a two-month cushion for the account. And then depending on what time of the month you close and so forth, let’s say you close in June and your first payment is due Aug. 1, they’re generally going to collect another month to cover that one month that you’re not making a payment. So it’ll look three months of insurance, 12 months of — three months of escrow for the insurance and then 12 months of your premium. So it looks like a lot of escrow, right? But that’s how it’s done. And the same thing for taxes. So in that example, property taxes would be a couple, probably three months of taxes collected: two months to establish the account and then the one month for the month you’re missing. But and then with refinances, it’s kind of a similar situation where — not to get too technical, Tim, but I think this is important. I think if you were to go refinance and you have your current servicer, loan servicer is collecting your insurance and your taxes, they typically will refund you the full amount within 30 days of your loan payoff. So the new lender is going to come in and they’re going to look like they’re collecting, especially if you close later in the year. Because most states and counties will want payment at the end of the year, right? So like November time frame. So if you close in the fall, in autumn, it’s going to look like your lender is collecting a lot of money from you that’s being rolled into your mortgage. You know, it could be 11 months of taxes. It could be whatever, 12 months of insurance.

Tim Ulbrich: Yes.

Tony Umholtz: It’s a big number being rolled in. But you have to realize that you have almost an equal amount being sent back to you. So that’s where that idea comes into place. Do I use that check to pay down my loan? So escrow is not something that costs you anything. You have to pay them as part of homeownership, but it can look like more is being collected than — it can look like your loan is being increased on a refinance to cover that.

Tim Ulbrich: That’s a great, great explanation, Tony. I know I found that confusing as a first-time home buyer back in 2009 but also, you know, especially I think for those that are moving from one property to another, especially if you’re moving from one area to another and timing is different, I think you very much can feel like you’re double paying. And I think that definition of escrow as really the holding place and there’s going to be a refund of existing as well as receive it paying forward and just keeping that in mind. And I think that’s an important consideration because if one is paying obviously at closing for future homeowners insurance and property taxes and then that refund check comes at a later time and you forget that and you go blow it on something else, well then obviously, you know, that can have the impact that you’re trying to avoid. So is there — while we’re on this topic, I’ve often heard as you alluded to, a small percentage of people that might pull out of escrow. And you know, you mentioned that might come with a little bit of a rate risk adjustment. What are the big benefits of that? I mean, I guess the thing that comes to mind when I think about that is, you know, the downside would be it’s now on my watch, I’ve got to make sure I’m making those payments on time for property taxes, homeowner’s insurance.

Tony Umholtz: That’s right.

Tim Ulbrich: But I guess the upside would be I feel like I’ve got a better pulse on what’s going on because it’s not rolled into my monthly payment. So you know, as my property taxes might inch up or I might be more apt to try to negotiate my homeowner’s policy. So talk us through why would that move be beneficial if it’s available to somebody?

Tony Umholtz: Yeah. You know, one of the things that I’ll mention just back to answer your question but also with refinancing, a lot of people will come to me, especially right now, and they’re telling me, “Hey, my payments went up a lot because there was a shortage in my escrow account.” Right?

Tim Ulbrich: Oh, right.

Tony Umholtz: And what really happened is the bank paid your taxes and insurance more than they had collected from you, and you’re basically getting an interest-free loan and you’re just paying that back. So that’s one of the — but your payment spiked. And what we do when we refinance, we true it up. We collect the appropriate amount. But that scenario if you’re able to waive your escrow, you can control, right? You can control. And I think the main thing is a majority of people with mortgages do escrow. But if you like controlling your money and you don’t mind making a lump sum, I think that’s an advantage, just having the ability to control it yourself. I’ll be transparent, I’ve waived mine for years. I’ve always done it, but I’m a finance major. You know, I’ve been a money person my whole life, so you know, if you’re good with money and think you understand it, I think it’s fine. One thing you did mention about insurance, I mean, you have the ability to check on your insurance, even if you have an escrow account. It’s very easy. The mortgage can be changed and the insurance company can still change. But I think the main advantage is you hold onto your money, you control it. And then right now, interest rates are low and you’re not getting much on deposit accounts. But if they’re higher, you can actually earn some interest on it while you wait to pay it.

Tim Ulbrich: Yep. Great stuff. Great explanation, Tony. Another question we have from the community is what options does IBERIABANK/First Horizon have for investment properties that are not owner-occupied? Anything creative on that end?

Tony Umholtz: Well, a couple things. First thing I’ll just mention on the investment properties — and this has come up a few times with the professional produce — with multi-family, if you’re buying a multi-family property, a duplex you can still put less than 20% down. You can’t do 3% or 5%. It’s generally 15% down. There is no MI. Rates are still very, very good even though it’s multi-family. But when you get to buying a three- or a four-unit, and a four-unit is the largest residential property that we can finance. Anything above that is considered commercial. That’s a completely different type of financing. But you know, you typically have to do 20% if you’re buying a three or a four. But we still do have quite a bit of investment property options that are conventional mortgages. There is one 85% that we have for investment. It does have PMI, and PMI can be tricky and a little expensive. So I usually recommend if you’re buying investment to put 20% or even 25% down if you can because then that’s where the best rates are for investment property. But there’s a lot of liquidity still for that type of thing. And the rates tend to be pretty good. We have — we’re still doing quite a few of those purchases people are making because rents are still high. It can be a good cash on cash investment.

Tim Ulbrich: Great stuff. And so for the house hackers out there, we’ve talked about that on previous episodes, it doesn’t mean it’s not a good option, doesn’t mean it’s not something you should pursue. But it just might mean a little bit more that you have to bring down to get that purchased.

Tony Umholtz: There is one thing I will say. There are — you know, for example, FHA, you can buy a multi-unit property with 3.5% down. Now FHA does have higher PMI, but the rates are very attractive. So that can still be a good solution for owner-occupied, you know, multi-family that you’re renting the other units out.

Tim Ulbrich: Awesome.

Tony Umholtz: So that is a good tool. There’s other tools outside of our professional product too.

Tim Ulbrich: Another question we have from the community, Krista asks, “What advice for those that are considering a refi that are hesitant because of a second mortgage such as a HELOC? Can borrowers with two mortgages consolidate and still get a competitive rate?”

Tony Umholtz: That’s a really good question. Very, very good. So a HELOC is if — so there’s two ways lenders look at this. So if you purchased a home originally with a first mortgage and a second so it was part of your acquisition of the home and we refinance and combine the two together, which I think is a great decision because you get rid of a floating rate second, right? If you combine into a fixed. But that’s considered what’s called a rate and term refinance, which is going to get you the best rates. If you were to buy the home and then take out a second mortgage let’s say a month later, if we pay that off, it’s considered a cash-out mortgage. And that comes with different guidelines and can be a little bit more expensive, depending on the loan-to-value. So it is possible, but that’s often — it just changes the type of loan if it’s a subsequent, if you subsequent purchase took out the line of credit.

Tim Ulbrich: OK.

Tony Umholtz: And that comes up a lot because if you’ve done it later after you purchased, it’s a cash-out and that can change the terms of the loan.

Tim Ulbrich: Great stuff. And the last question we have, which brings us full circle to some of our conversation about what’s going on with COVID-19, from Jessica, “Does national shortage of housing units create an environment where home prices will remain high despite the economic recession?”

Tony Umholtz: You know, every market — and we touched on this a little bit in the beginning of the call, is different. Every market has different demand and supply factors. So we don’t want to completely generalize. But on average, most of the country is in a supply issue. Right? There’s not enough supply of homes on the market. And I think commercial is a whole different story. This call isn’t about commercial, but obviously commercial market can be impacted much more deeply than residential. But being that we had such a low supply of homes and interest rates being low and the housing market is pretty strong, we’re very, very busy. I’m very surprised myself. But just in the things I read and the people I talk to, now I’m kind of on the ground level with this with realtors and buyers, there’s a ton of activity. So I would have to say that the residential market is very, very well supported, very well.

Tim Ulbrich: Great stuff, Tony. And thank you to those from the YFP community who submitted questions. We’ll have Tony back on the show in the future if you have a question that we didn’t get to today. And I want to thank Tony for his time, again, for his partnership and collaboration with us for serving you, the YFP community. And to learn more steps — about the steps in consideration to getting a home loan, make sure to check out the post on the YFP site titled, “Five Steps to Getting a Home Loan.” You can do that by visiting YourFinancialPharmacist.com/home-loan. Again, YourFinancialPharmacist.com/home-loan. And right from that page, you can get the contact information to reach out to Tony. And as always, if you liked what you heard on this week’s episode of the Your Financial Pharmacist podcast, please do us a favor and leave a rating or review in Apple podcasts or wherever you listen to your podcasts each and every week. That helps others find our show. So thank you for joining, and have a great rest of your week.

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YFP 153: COVID-19 & Student Loans: What’s Next?

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COVID-19 & Student Loans: What’s Next?

Adam Minsky, an attorney devoted to helping student loan borrowers and a Senior Contributor to Forbes, joins Tim Ulbrich on today’s episode. Adam talks about the student loan proposals that do and do not have momentum including The HEROES Act recently passed by the House, and what you should expect going forward as it relates to your own student loan repayment plan.

About Today’s Guest

Adam S. Minsky practices in Massachusetts and New York, and is one of the nation’s leading experts in student loan law. He remains one of the only attorneys in the country with a practice devoted entirely to helping student loan borrowers. Attorney Minsky provides counsel, legal assistance, and direct advocacy for borrowers on a variety of student loan-related matters, including repayment management, default resolution, and servicing troubleshooting. He has been interviewed by major national media outlets including The New York Times, NPR, The Boston Globe, The Washington Post, and The Wall Street Journal, and has been named a Massachusetts Super Lawyer “Rising Star” every year since 2015.

Attorney Minsky regularly speaks to students, graduates, and advocates about the latest developments in higher education financing, and he maintains a nationally recognized student loan blog, “Boston Student Loan Lawyer.” He has published three handbooks including The Student Loan Handbook for Law Students and Attorneys, published by the American Bar Association. Attorney Minsky is also a contributing author to the National Consumer Law Center’s manual, Student Loan Law, and he is a Senior Contributor to Forbes, where he writes about the latest developments in student loan law and policy.

Attorney Minsky received his undergraduate degree, with honors, in Philosophy and Political Science from Boston University, and his law degree from Northeastern University School of Law. He lives in Boston, Massachusetts.

Summary

There have been several government proposals to help support people that are facing financial challenges due to COVID-19. Adam Minsky, Massachusetts attorney devoted to helping student loan borrowers and a Senior Contributor to Forbes, shares a recap of the student loan provisions in the CARES Act, the provisions proposed in The HEROES Act, and what student loan borrowers might expect in the near future.

The CARES Act was recently passed in March which suspended all interest, payments, and collections on federal direct student loans until September 30, 2020. These $0 payments count for those that are on a path to forgiveness with their student loans, whether that be through PSLF or non-PSLF forgiveness. However, FFEL, Perkins and private student loans, among a few others, are not covered under this provision and borrowers have to continue making payments on those loans.

The House recently passed The HEROES Act, a $3 trillion stimulus package which includes several other provisions for student loans as well as other proposals for stimulus checks among several other components. Although this isn’t law and is unlikely to pass the Senate, it’s meant to be a starting place for conversation and bi-partisan compromise. Adam discusses the student loan provisions and amendments that have already been made to the proposal.

Adam also talks about what’s next for student loans, his viewpoints on the longevity of the PSLF program and how student loan borrowers can advocate for themselves.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. It’s a pleasure to welcome Adam Minsky, a senior contributor for Forbes and attorney who founded the first consumer rights law practice in Massachusetts and New York devoted entirely to assisting people who have student loans. In addition to helping borrowers navigate the complex web of student loan repayment programs, Adam represents borrowers who have disputes with their loan holders or servicers and those who are facing economic hardship, default or collections. Adam has also provided various training and seminars on this important topic, authored multiple handbooks on student loan law and advised elected officials and consumer advocacy organizations on student loan legislation. In addition to his contributions on Forbes, he has been featured in the New York Times, NPR, Washington Post, and has been named a Massachusetts Super Lawyer Rising Star every year since 2015. He completed his undergraduate degree in philosophy and political science from Boston University and got his law degree from Northeastern University School of Law. Adam, welcome to the Your Financial Pharmacist podcast.

Adam Minsky: Thanks for having me. I appreciate it.

Tim Ulbrich: Certainly appreciate your time and your expertise in this area. And as I mentioned in my email to you, today’s pharmacy graduates, many of whom are on the frontlines of COVID-19, have a median debt load of $170,000, are overwhelmed on how to manage this debt, so when I ran across your article on Forbes — which we’ll link to in the show notes — that there are now five plans to forgive student loans, how do they compare, I thought to myself, we need to have him on the show as our listeners would greatly appreciate his expertise and insights on this topic that impacts so many of our community members. So before, Adam, we talk about what might be, let’s talk about what we already know. So give us a quick recap of the student loan provisions that were in the CARES Act.

Adam Minsky: Sure. So the CAREST Act suspends all interest, all payments, and all collections activities on government-held federal student loans from March 13, 2020 to Sept. 30, 2020. So let’s break that down. That means first of all, only government-held federal loans are covered by that. So that includes federal direct loans and a small number of other types of federal loans that the Department of Education has at some point acquired or taken over. There are a large number of commercially-held older federal loans that we call guaranteed loans or FFEL, stands for Family Federal Education Loan Program loans. Those are federal loans that are guaranteed by the government but are not held by the government. Those are not covered. Federal Perkins loans issued by colleges and universities, those are not covered. Health professions loans are not covered. And private student loans are not covered. So there are a lot of borrowers who unfortunately aren’t getting full or complete relief from the CARES Act. But a lot of people are. And the interest suspension means that basically folks have a 0% interest rate and no payments are due on their loans. And what’s more is that — so typically when you have some sort of payment suspension through a forbearance or a deferment, those months don’t count towards anything. They don’t count towards loan repayment, they don’t count towards loan forgiveness. But the CARES Act has a specific exemption in place that says that if you were already on track for a program like a 20- or 25-year loan forgiveness under an income-driven plan or Public Service Loan Forgiveness that the months of suspension, the months when no payments are made, will still count towards those loan forgiveness programs. So that’s a unique benefit of the CARES Act as well.

Tim Ulbrich: Yeah, great summary about who is included, who is left out, and a mention of those payments counting toward for forgiveness, which I know will impact many of our listeners and certainly a benefit for those that are pursuing that route. You recently released an article, Adam, which we’ll link to in the show notes, with reports about how student loan servicers are dinging credit reports for the CARES Act forbearance, even though this shouldn’t in theory be happening. And people have been assured that it shouldn’t be happening. So tell us more about this.

Adam Minsky: Yeah, so it’s sort of an evolving story. You know, so I started hearing about this from some clients, some other consumer advocates started hearing about it, some news sources started doing some investigations. But it sounds like some loan servicers were improperly reporting the loan status, either in a nonpayment or in some cases possibly even a delinquent status. And according to the provisions of the CARES Act, there’s nothing that says it should be reported that way. And the Department of Ed has actually confirmed that the loan should be reported as normal, as paid as agreed. So some folks apparently have seen a credit ding or a reduction in their score. Now, at least one of the services, Great Lakes Higher Education, put out a statement saying that they’re working on accurately reporting all credit report information and the loan status in accordance with the law. I know at least one of my clients did see a restoration of his score back to what it was before. So it looks like if there are issues, it’s being addressed. But another consumer advocate theorized that because this had to be implemented so quickly, it’s possible that some loan servicers sort of on the back end, there may have been some issues in terms of how the loans were being reported to credit bureaus for certain borrowers. So it’s concerning, but I’m hoping that it’s temporary and it will be addressed and fixed soon.

Tim Ulbrich: And I think, Adam, as you outlined in your article, this was just a good reminder for me and a good reminder for our community of why checking your credit report and understanding your credit score is an important thing to be doing, regardless of a situation like this. But obviously, it’s timely with this. So for those that do find an inaccuracy on their credit report, what steps can they take?

Adam Minsky: Yeah, so like you said first of all, it’s just good practice to periodically check your credit. Under the Fair Credit Reporting Act, you are entitled to one free credit report annually from each of the three bureaus. So at a minimum, at least once per year, you should be checking your credit report. If you see anything suspicious or problematic or erroneous, you want to know about it and you don’t want to find out about it when you’re buying a house or you need access to credit.

Tim Ulbrich: Right.

Adam Minsky: So in terms of what you can do, obviously pull your credit. Annualcreditreport.com, which is sort of the go-to place to get that free credit score under the FCRA, due to COVID-19, they actually are now offering a free weekly online credit report through April 2021. That’s a new service. So that’s a way to kind of pull your credit report on a regular basis without having to pay for a service. Now, that won’t give you your score, so that’s important to keep in mind. It’s not going to give you a credit score. It’s going to tell you what’s being reported. If you do see something that’s inaccurate, so under FCRA, you can get inaccurate or erroneous information removed. So your first step would be to contact what we call the furnisher, the entity that’s reporting that inaccuracy. That could be the lender, that could be the servicer. Try to work with them to see if they can remove it. If they don’t remove it, then you can file a formal dispute with the Credit Bureau that is doing the reporting. That can be done online or in writing through mail to Equifax, Experian or Transunion. And if that’s not successful, and you’ve experienced some sort of harm as a result of that inaccurate or erroneous reporting, that might be a good time to get an attorney involved to see if you have any path forward legally under the FCRA.

Tim Ulbrich: Awesome. And you did a nice job in the article outlining those steps, so we’ll link to that article in the show notes for our listeners to be able to go and get more information.

Adam Minsky: Great.

Tim Ulbrich: So the CARES Act is temporary protection, which as I think you mentioned the dates of through September, and I think that is igniting debate and conversation about what could be longer term solutions. And we’ll talk about that here in a moment with the HEROES Act. And to be clear to our community, I think there’s so much moving so quickly that there’s often confusion of what is reality versus what is proposals? So what we’re going to be talking about as it relates to the HEROES Act over the next several minutes might become reality but certainly has a long path to get there. So this is the beginnings of the conversation. The HEROES Act has been passed by the U.S. House of Representatives. It’s a piece of legislation that’s essentially a $3 trillion stimulus bill that’s intended to help provide further financial relief beyond that to the CARES Act to both individuals, businesses, organizations, health systems and so forth. But again, to be clear, what we’re talking about here is not yet in place and still has a way to go to get there. So Adam, the Senate is on record for saying that this will be dead on arrival. The president has publicly mentioned that he would veto it. So why are we even talking about this? Why should borrowers care when the House puts forward a piece of legislation like this, especially as it relates to the student loan provision?

Adam Minsky: Yeah, well, I mean, so this is basically viewed I think by the House leadership as a starting point for negotiations. So it’s not necessarily as if the House passed this bill and the Senate is just going to ignore it and start fresh. You know, there has to be some sort of bipartisan agreement to some extent, at least. And I think the hope is that some of the provisions of the HEROES Act — and there are many provisions — the hope I think is that some of those might make it into a final Senate version of that new stimulus bill, one way or another. And so we don’t know what pieces will make it in, whether those pieces will be changed from what they are currently in the House-passed version. But I think it’s a starting point for negotiation, and I think that’s the key point.

Tim Ulbrich: So talk to us about those provisions that are in there. You mentioned there’s many, of course student loans aren’t the only part of this, but that’s what we want to talk about here. So what are those student loan provisions that are in at least for the time being the House version that’s been passed?

Adam Minsky: Yeah, so one of the big ones is an extension of the CARES Act. So the CARES Act currently suspends payments, interest and collections on government-held federal loans through Sept. 30, 2020. The Department of Ed does have the ability to extend that by an additional three months, I believe. So they could extend it to the end of the year. But it does expire relatively soon.

Tim Ulbrich: Right.

Adam Minsky: So the HEROES Act would extend all of those provisions by a year, to Sept. 2021. So it would basically give folks a year and a half of suspended payments and interest. It also would expand the CARES Act provisions to include some of those loans that were excluded from the original CARES Act. So I referenced those commercially held FFEL program loans and Perkins loans. Those would now be covered under the CARES Act suspension and not left out. Private loans would still not be covered, but all federal loans for the most part would be covered now if this did become law. The big sort of debate when it comes to the student loan provisions of the HEROES Act was with regard to student loan forgiveness. So House progressives had originally been pushing for $30,000 in across-the-board federal student loan forgiveness, which was pretty significant.

Tim Ulbrich: Yeah, I saw that.
Adam Minsky: The version of the HEROES Act that was initially released scaled that back but still had pretty significant provisions that provided for $10,000 per borrower in across-the-board federal student loan forgiveness and, interestingly, it also provided for $10,000 in across-the-board private student loan forgiveness as well. So you know, for folks who are carrying $100,000 or $200,000 in student loan debt, it may not seem like it’s that big of a deal, but this actually would result in approximately I think 16 million borrowers becoming completely debt-free.

Tim Ulbrich: Wow.

Adam Minsky: So it would have had pretty far-reaching effects. Now after they released that version, one of the main sponsors of the Act amended it to restrict those loan forgiveness provisions. My understanding is that after the initial version of the HEROES Act was released, the CDO came out with an estimate of the cost of this, and apparently the loan forgiveness provisions would cost upwards of $250 billion. And they’re trying to find ways of trimming that overall cost of the bill. So what they did is they limited who is eligible for those loan forgiveness provisions. And they limited eligibility to someone who they deem to be in economic distress, and this is very specifically defined as someone who is either delinquent or in default on the applicable student loan or they were in economic hardship deferment or forbearance or they were in an income-driven repayment plan with a calculated monthly payment of $0. And that has to be as of March 12, 2020, the day before the national emergency was declared. So it locks out a lot of people. It still has a lot of forgiveness in there, but it’s much more narrowly defined in the final version of the HEROES Act.

Tim Ulbrich: Great summary. And I think that applies, you know, when you said it’s been limited in a significant way, that certainly would be true for pharmacists if this were to move through. I mean, there certainly are some that would fall into that economic hardship definition, economic distress category that you mentioned or being delinquent or default. And I do think there’s certainly some probably trainees — I’m thinking about our pharmacy residents — that might be in an income-driven repayment plan that has a monthly payment of $0 a month. So I think there could be some situations, again, if this were to move through, that that would apply. However, as I understand it, the biggest piece that would apply to our community would be that extension of the CARES Act provisions through Sept. 2021 and the expansion to include, as you mentioned, the commercially held FFEL loans and Perkins loans. Adam, I also recall seeing something about a fix to PSLF. Tell us more about that in terms of what was there in the HEROES Act.

Adam Minsky: Yeah, so some brief background on Public Service Loan Forgiveness, I’m sure most listeners know how the program works. But the program requires 120 qualifying payments, which a qualifying is a payment made on a direct federal loan, which is a particular federal loan program, under an income-driven repayment plan while the borrower is employed as a full-time employee for either a 501c3 nonprofit organization or a public organization of some kind. You do that 120 times, which if made consecutively is about 10 years, and your remaining balance is forgiven at the end of that. A big problem with this is to go back to those commercially held FFEL program loans, those don’t qualify for Public Service Loan Forgiveness. There is a mechanism to correct for that, and that’s through a program called the Direct Consolidation Program where borrowers basically take out a new Department of Education loan, it pays off the old loans, and what they end up with is a new federal direct consolidation loan that does qualify for PSLF. The issue is that any payments made on the FFEL loans prior to consolidation don’t count towards the 120 payments required for PSLF. There have been a lot of — there’s been a lot of advocacy to fix sort of the seemingly unnecessary complexity of this program, and so the HEROES Act does include the fix for that where borrowers who are consolidating their FFEL loans through the Federal Direct Consolidation Program would be able to get those payments previously made on FFEL program loans to count towards the 120.

Tim Ulbrich: Yeah, and I know that’s been a big point of pain and contention and certainly has gained the attention of the media in terms of people that thought they were on track and had qualifying payments and find out they didn’t. So I’m sure that would be a welcome solution for many if that were to go through. It’s important to note too — and we’ll keep bringing updates related to this and as Adam mentioned, it’s going to be an evolution. I think this was a starting point for the future debate and negotiation, but there’s other provisions in the HEROES Act that are relevant to the individual, including cash payments to households, extension of unemployment benefits, the enhanced unemployment benefits and housing assistance for mortgage and rent payments, to name a few. So if you’re not already familiar with the language that’s in there, we’ll link to it in the show notes. But again, we expect this will be a moving target in the future, and we’ll bring up-to-date to the community. So Adam, what’s next here? Obviously it needs to go to the Senate, they’re going to have debate on this. What do we expect in terms of a timeline for review?

Adam Minsky: It’s a good question. I mean, the Senate isn’t even returning to Washington until June, so I mean, nothing is happening anytime soon.

Tim Ulbrich: Yeah.

Adam Minsky: And the Senate leadership has basically said they may not even be interested in passing a new stimulus bill, at least in the short term. Now, you know, they’re saying that publicly while at the same time there are reports that they’re kind of working in the background on a potential bill. But few details have really been released. I don’t anticipate any fast movement on this at all unless we see, you know, further cratering of the economy, which is possible. I mean, we’re in such a weird, uncertain time right now where half the country is still in various states of being shut down, but things are also opening back up. I don’t know what’s going to happen. I don’t think anyone does. I think all we know is that this version of the HEROES Act is not going to become law. And I think that whatever becomes law, if anything, we’re quite a ways away from knowing what those details are going to be.

Tim Ulbrich: Yeah, and so again, just to reiterate what you said and I mentioned earlier, especially for those that maybe tuned in halfway through or have us on double speed, what we’ve been talking about has been passed by the House, still needs to be debated, reviewed by the Senate, signed by the president. As we mentioned, what has been proposed likely is not going to be what moves forward but certainly could be a starting point for the discussions of a future bill. So looking into your crystal ball as an expert in this space, what do you see as an outcome that you think has real potential to get passed by the House, get approved by the Senate and ultimately get signed by the president?

Adam Minsky: I do think it is possible that we could see an extension of the CARES Act. I mean, frankly, at a minimum, I think that because the Department of Education already has the authority to extend the CARES Act by three months, you know, just from a political perspective, I mean, payments are going to come due again in October, just a few weeks before the election. I just don’t see that happening. Who knows? But you know, hitting millions of borrowers with a bill a few weeks before the election, I could definitely see a reason to extend that CARES Act out a bit, which could mean that we might not see a further extension of the CARES Act in the next stimulus bill, right? I mean, Congress has a habit of kind of walking to the cliff before they decide to do something. And so if this is already going to be extended possibly to the end of the year, we may not even see an extension of the CARES Act in the next stimulus bill. We might have to wait until the next next one. Who knows?

Tim Ulbrich: Right.

Adam Minsky: But I do think extension of those benefits is something that is more palatable on a bipartisan basis and less controversial if there is an economic basis for arguing that folks really aren’t in a position to be affording these payments. So pausing everything I think could be palatable to enough people to pass. I think something like student loan forgiveness, most Republicans have basically said that’s a nonstarter. It’s gaining traction with Democrats, but currently we have divided government, so I just don’t see that necessarily passing now. But again, we have an election coming up. Who knows what the makeup of Congress will be after that? And frankly, who the president will be. So you know, we don’t know for sure what will happen. But I think in the current state of things, I think that student loan forgiveness in any form is going to be tough. That being said, I think that student loan forgiveness as a concept, whether it’s $10,000 on a limited basis or $10,000 on a broad basis or something bigger than that, it has rapidly gained traction among lawmakers I think in the past year. And so that is something that I think for the first time, even though it’s a long shot right now, I think it is more realistic in some fashion than it has ever been before.

Tim Ulbrich: So while we’re talking loan forgiveness and while I have you on the line, I want to get your input on PSLF and the future of that program. You know, when we talk with pharmacists, in my estimation 20-25% of pharmacy grads qualify for PSLF, most of them because they’re working in a qualifying employer like a not-for-profit hospital. You know, the No. 1 question I get — and I can tell there’s instant hesitancy — is I just don’t trust this program’s going to be around in the future, I’m worried that this program’s not going to be around and how that might impact me, especially as they see that unknown and the potential for their loan balance to grow through that 10-year period. So talk to us about what you see as the future of PSLF.

Adam Minsky: Yeah, it’s a good question, and it’s a question that I get all the time I think from people who are in the program and are worried about it. Let me start by talking about the past, which is that in the past couple of years, there have been proposals to repeal the program. One was initiated by the White House through a budget proposal. The other was initiated by Congress prior to the 2018 midterms through a piece of legislation called the PROSPER Act, which would have repealed the program. Now, some key points here: No. 1, in both of those proposals, current borrowers would have been grandfathered in. The repeal only would have applied to new borrowers taking out new loans after those bills would have passed. There’s no absolute requirement that current borrowers be grandfathered in. Congress passed a statute that provided for the existence of PSLF, they can pass a statute repealing the program. There’s nothing that says they can’t do that. But if they didn’t grandfather people in, I think that there would be first of all, potentially viable legal challenges for pulling out the rug from people. And I think there would be political blowback from fairly powerful constituents who work in various sectors that have some political power. So I think that there is good reasons to grandfather people in if a repeal were to be passed. The other key takeaway is that these repeal proposals did not pass, they did not come close to passing, and that was during one-party control of Congress and the White House. It didn’t even garner sufficient support to even come to the floor of either the House or the Senate for a vote. So that tells me that that type of repeal at least at that point did not have enough support to really threaten the existence of the program. And certainly now with divided government, any repeal of PSLF would never pass the House of Representatives, in my opinion. Now, let’s talk about the present. I have had several clients who have gotten their loans forgiven under the program. So I can tell folks I have firsthand experience. The program does work, people do get their loans forgiven, I’ve seen their balances go to $0, it is legitimate. So despite all of the well-deserved scrutiny and bad press that the program has gotten, it also does work for people. And I think that that’s an important takeaway. Now, looking ahead, you know, again, I wish I could make predictions. We are in weird times right now. But you know, anything is possible in theory. But looking at what has happened so far, certainly I don’t think that the program is in any immediate danger. The efforts to repeal it that we’ve seen would have grandfathered people in if they passed, and they didn’t pass. So who knows what the future would hold? It is possible it could be repealed.

Tim Ulbrich: Sure.

Adam Minsky: But there’s no immediate danger of that. And I think that’s the best I can do in terms of trying to help people feel a little bit assured about the existence of the program.

Tim Ulbrich: Yeah, and connecting, Adam, something you said earlier about student loan — a concept like student loan forgiveness more broadly being acceptable. You know, it’s gaining traction, probably still a long way away from becoming reality, but it’s definitely more of a conversation now than it was two or three years ago. And I see this being connected, this idea of a change to PSLF and I don’t think that would be politically popular by any means, and you mentioned that. And so I think as this topic of student loan gains more national attention and I think it is here in the CARES Act, here in the HEROES Act, obviously we know it’s a $1.5 trillion problem and it’s impacting many, many people. I think there is a very significant political beast there constituents should have an important voice in terms of how these student loans are impacting them. Which takes me to my final question as I know you have been involved in student loan advocacy and people have looked at you as an expert. And I know many of our listeners with advocacy from the standpoint of advocating for their profession or advocating for their role as a pharmacist. But I don’t know if they have thought about really advocating for their position as a constituent as it relates to their student loans and as it relates to things like the HEROES Act that are being considered. So what advice would you have for our listeners that want to engage in the discussion on this topic in terms of how they can successfully advocate and have their voice heard?

Adam Minsky: Well, I mean, I think the best thing that people can do is to talk about it. Talk about it with your family, talk about it with your friends, talk about it on social media, and talk about it to your elected officials. I think that one of the big issues in our country is that people have debt and people have shame and guilt associated with that debt. And I think what that means is a lot of people carry this debt and then don’t talk about it. And I think that, you know, there’s 44 million Americans who have student loan debt in this country. There is $1.6 trillion in outstanding student loan debt. There’s a lot of student loan borrowers, there’s a lot of student debt. The system is really not working, or not working well at least. And I think that the only way that that’s going to change is if we talk about it and we get enough support, broadly speaking and also with our elected officials so that there can be meaningful change. And so that means sharing your story. If you just have a lot of student debt and you’re struggling to pay it back or you’re dealing with nightmare servicer issues or you’re getting five different answers from five different people or they’re not counting your qualifying payments, talk about it. Share this with the people around you. And tell your congressperson, tell your Senate office because they need to hear about it as well. Personal stories really do go a long way to kind of putting a human face — you know, I think a lot of times, elected officials are just looking at the numbers. And the numbers are important, but I think that the human stories really have to be highlighted as well.

Tim Ulbrich: Yeah, great point. I think it’s — you look at a number like $1.6 trillion — I was off by .1 — $1.6 trillion and as a legislator or even as a person, you look at that and it can have somewhat of a numbing effect. It’s just so big. So when you hear an individual story about how somebody’s been impacted or how it’s impacting their personal situation, their family situation and trying to make those payments or difficulties with working with a loan servicer, I think it resonates in a totally different way. So great advice there. Adam, where can our listeners go to learn more about you and the work that you’re doing on this important topic?

Adam Minsky: Yeah, so feel free to check out my website, easiest place to go would be BostonStudentLoanLawyer.com. You can also follow me on Forbes. You can go to Forbes.com/sites/AdamMinsky, that’s Adam Minsky. You can sign up for email updates. I publish pretty routinely on Forbes, once or twice a week, sometimes more often than that. I try to stay on top of all these developments. You can also follow me on Twitter or connect with me on LinkedIn or find my Facebook page. But I try to stay on top of everything and to post analyses of what’s going on because like you mentioned, this is changing rapidly, especially these days. And I think that it can be confusing to know what’s what, what’s law, what’s not law, what changes have been made to certain proposals. So I do my best to kind of stay on top of all that, so folks should feel free to follow.

Tim Ulbrich: Great stuff, Adam. Thank you so much for taking the time to come on the show to share your expertise and to contribute on this important topic to our community. Thank you very much.

Adam Minsky: Thanks for having me. I appreciate it.

Tim Ulbrich: As we wrap up today’s show, I want to remind you again of our latest resource, authored by Tim Church, “The Pharmacist’s Guide to Conquering Student Loans.” We will be doing a full release of that book soon, and you can sign up for the list to be notified when we go live by visiting PharmDLoans.com. Again, that’s PharmDLoans.com. As always, if you liked what you heard on this week’s episode of the Your Financial Pharmacist podcast, please leave us a rating and review on Apple podcasts or wherever you listen to your podcasts each and every week. Have a great rest of your day.

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YFP 152: Living the Van Life During Residency

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Living the Van Life During Residency

Rena Crawford, a PGY2 resident living in San Diego, California, joins Tim Ulbrich on the show. Rena took matters into her own hands after realizing how high the cost of living is in San Diego, especially on a resident’s salary, and came up with a creative solution: to buy and renovate an old van for $7,000 and live in it. Rena dives into the details of living in a van, her dreams of attaining financial freedom, and the lessons she’s learned along the way.

About Today’s Guest

Dr. Rena Crawford was born and raised in North Carolina where she received her undergraduate degree in Clinical Research from UNC Wilmington. She then moved to Charleston where she earned her PharmD from South Carolina College of Pharmacy at the Medical University of South Carolina campus in 2018. Her student work experience includes interning at Ralph H Johnson VA Medical Center and volunteering at Joint Base Charleston pharmacy. Her fourth year student rotations were completed in Jacksonville, Florida. After graduating from pharmacy school, she traveled the country for several weeks in her converted van before moving to Tucson for her first year of pharmacy residency at Southern Arizona VA Healthcare System. She now resides in San Diego, California where she lives comfortably in her van and enjoys traveling, visiting national parks, and spending time on the water. She is currently finishing her second year of pharmacy residency, specializing in ambulatory care.

Summary

Rena Crawford, a pharmacy graduate from UNC Wilmington and now PGY2 resident living in San Diego, California, has chosen a different approach to saving money on her expenses than most. When Rena realized that rent prices in San Diego are often over $2,000 a month per person, she knew that she was going to have to find a creative solution to her living situation so that she could make some progress on her six figures of student loan debt.

Inspired by her brother traveling the country in a van, Rena decided to purchase a 1994 Dodge Ram van and renovate it so that she could live in it during residency. Her dad helped with the renovation and built custom fit furniture for her new 60 square foot home. The van also boasts nice flooring, 200 watt solar panels, a full size dresser that doubles as a cooktop, a mini fridge, and a full size bed.

On this podcast episode, Rena dives into all the details about living in the van, her financial goals, how van life is helping get a head start on them even while making a resident’s salary and the lessons she’s learned this last year.

Mentioned on the Show

YFP Planning

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. I’m excited to have joining me Rena Crawford, a PGY2 resident living in San Diego who has developed a creative solution to the problem that many new grads entering residency are facing: high debt loads, a reduced income, and another year or two that goes by without making progress on their financial plan. Rena, welcome to the Your Financial Pharmacist podcast.

Rena Crawford: Hi, Tim, thank you so much for having me.

Tim Ulbrich: Such an awesome, unique story. I appreciate you reaching out. Excited to have you on the show to tell our listeners more about your journey as you’ve gone through residency, have a unique living situation, and I think more than anything, just really having an intentional mindset towards your financial plan, which I love and we’re going to dig into that a little bit deeper. So before we jump into your current living situation and your lifestyle, let’s back up. Tell us a little bit more about where you went to school, where you grew up, and then ultimately why you decided to make the move out to San Diego.

Rena Crawford: Right. So am I on the southwest coast now, but I actually grew up in North Carolina, on the East Coast. I went to pharmacy school at the Medical University of South Carolina in Charleston. And I moved out west for the first time prior to my first year of pharmacy residency. And I’ve actually only been in San Diego since I matched for PGY2 and started in July.

Tim Ulbrich: Awesome. And tell us about your student loan debt position at graduation. How much did you have? And how did you feel about that debt when you graduated?

Rena Crawford: Right. So when I graduated, I was at $160,000. As a student, I don’t think that really set in, what that really meant, until I got to residency and first started making a salary or any kind of paycheck at all. That was really the first time it hit me what that meant.

Tim Ulbrich: Yeah, a resident salary will do that to you, right? You see that big student loan debt number, obviously you’re excited about residency training, and all of a sudden you go into active repayment and you’re like wait a minute, how much do I have to pay on a resident’s salary? Is this realistic? And to that point, you had shared with me that for your situation, it was going to take about a $600 payment, which would be about 20% of a resident’s take-home pay, just to pay the interest alone. So I’m guessing that was a surprise. Is that fair to say? That it would take that much payment just to cover the interest?

Rena Crawford: Right, exactly. So I knew I wasn’t going to go further into debt for residency, and to pay off just the interest means making zero progress. And so by the time residency came, I’d had four years of student debt accruing, I had a low salary, and just to keep everything in check was going to take a large percentage of my take-home pay.

Tim Ulbrich: I appreciate that mentality. I always say stop the bleeding, stop the bleeding. And you did more than that. You made progress, and we’ll talk about that. But I think residency can be a time period where you’ve gone through all the hard work, you get your PharmD, obviously get to that point, you’re excited, next phase is coming, big student loan debt position often that grads are faced with. And if you go into residency, low income position for a year or two, obviously it’s easy I think to throw up your hands and say, “You know what? I’ll worry about it after the fact.” And you certainly did not do that, and we’ll talk more about that. So we have heard stories of pharmacists on this show, we’ve featured some on the blog, who have really reduced their spending in really extreme ways, whether that be eating out and really inexpensive foods for a long period of time, eating bulk foods all the time, reducing your utility payment by not using air conditioning. We’ve talked about house hacking and other creative strategies. But I’ve never heard — I’m guessing our listeners have never heard — of anyone doing what you’re doing to reduce their expenses so that they can tackle their debt. And that is, of course, living in a van for a year. And we’re going to talk about exactly what that looks like to be able to do that. So talk to us about the rent situation in San Diego, in southern California. What does that look like? And how did that help drive your decision to go a different route and ultimately live in a van for a year?

Rena Crawford: Yeah, San Diego rent prices are known for being especially high. I have friends both inside pharmacy residency as well as outside of the pharmacy world completely that are paying $2,000 and more a month in rent. That could just be their share. They may have to have one or two roommates that pay just as much.

Tim Ulbrich: Wow.

Rena Crawford: Of course that can range a little bit. I know people who are paying a little bit less than that. But compared to what I’d seen growing up on the East Coast, it was the most expensive I’d ever seen. And it seemed hard to picture being able to pay down loans in any meaningful way and have a normal life if rent was going to cost two-thirds or so of my monthly paycheck. So knowing that I found a lot of satisfaction out of minimalism and having that freedom to spend money on other kinds of things like being healthy, having a good diet, I knew that the rent was something I would be willing to sacrifice and I could be pleased living in a van.

Tim Ulbrich: Yeah, and I think one of the things we’ve talked about on the show before is we know pharmacist’s income don’t increase proportionally with cost of living, and I would say that is certainly true for residents as well. You know, there’s a range for a resident’s salary, you may see that fluctuate, but some, and it may be a little bit higher on the West Coast than it is here say in the Midwest, but typically it doesn’t go up proportionately with what we see in cost of living. So as you mentioned, that would have been a huge portion of your take-home pay when you look at rent figures that are that high. One of the things you said, Rena, which I thought was interesting — I want to dig a little bit deeper — is that you said knowing that you get satisfaction from minimalism. Tell me more about what you mean by that and how you identify that.

Rena Crawford: Yeah, so before I started living in the van, the only person I’d ever known to do anything like that was actually my younger brother. When he graduated college, he bought a cheap Chevy van and left and traveled the country for a few months. After that, that piqued my interest. I became more interested in that kind of idea. So I myself after pharmacy school graduation before PGY1 year started, I took the van and traveled. I hadn’t ever left the East Coast at that point. So I went across into the southwest, up the coast of California. So when I matched there for PGY2 residency, I’d already been there in the van. I could picture the beautiful weather, the pretty beaches and how easy it would be to pull off living in the van again. And traveling in it, I’d realized that it was something I genuinely enjoyed and got a lot of satisfaction out of.

Tim Ulbrich: Awesome. Awesome. So being able to have some of that previous experience and knowing that it could be a possibility obviously was valuable in being able to do that for a whole year. So let’s talk about the van. Tell us a little bit about how much you bought the van for and, you know, what did it look like when you got it and how much did you have to do in terms of renovation to make it livable for a year?

Rena Crawford: So I have a 1994 Dodge Ram van. The van itself was about $4,000, and it cost a few hundred extra for registration, maintenance up front and everything. I’d say to get the van into my possession was probably about $5,000.

Tim Ulbrich: OK.

Rena Crawford: When I first bought it, it looked like it was frozen in time back from 1994. Velvet lining, it was bucket seats in the back with the old stuff in the center and the bench that went down into a bed. So I had to start from scratch in terms of renovating. My dad helped a lot. He’d built a lot of the furniture custom-fit for my van. And then I had a friend out here locally in San Diego who did some electrical work, put in nice flooring. So it’s actually, it’s pretty nice inside. I have a couple 200-watt solar panels that keep a couple deep-cycle batteries charged to hook my laptop and phone into. So all said and done, the renovation was probably another $1,500.

Tim Ulbrich: OK. So roughly $7,000 all in, you mentioned the purchase, obviously the taxes, all those other fees that come with buying a car, and then some of the renovation inside. Which if we go back to your rent numbers that you shared and if we use $2,000 as a number, we’re looking at a little over three months before you would break even and obviously you then have something that you can leave with or even if it was a lesser rent value, certainly within a time period of one year, you would have broken even. So cool to think about the numbers. And for those that are saying, “I’d love to see the van. What does it look like? How did this work? And I want to see what it looks like on the inside,” we’re going to share some pictures on the show notes. So make sure you head on over to the website, YourFinancialPharmacist.com, pull up this episode, and you’ll be able to see some more of that as well. So walk us through the van, Rena. If I were to enter into your van, give us the visual of what would I expect as I walked into the van.

Rena Crawford: Yeah, so I generally walk in from the backside door. When you first open the door, you realize it’s actually pretty spacious. I have a full-sized dresser that doubles as a cooktop immediately straight across when you walk in. Then I have a mini refrigerator sitting on a bench seat that opens up into storage. I have a full-sized bed in the very back. It’s shorter than a full-sized bed, it’s actually as wide as a full-sized bed. It has extra storage under the bed as well as along the top near the ceiling. And like I said, it’s surprisingly spacious. The van itself is considered to be an extra-long version. So it’s a little longer than a typical van. But it’s tall enough for me to stand in. I have room to move around easily, getting dressed, making dinner. And even if I wanted to have a couple friends over to sit on the floor and hang out, that’s something I’ve done before.

Tim Ulbrich: That’s cool. So in terms of size, if I remember right, less than 100 square feet, right?

Rena Crawford: Oh yeah. It’s like 60-something square feet.

Tim Ulbrich: Yeah. OK. It’s just amazing, you know. I think about my own home and other homes that I’ve lived in and certainly family and how easy it is when you think of 2,000 or 3,000 square feet, it’s like oh my gosh, I need four bedrooms, 3,000 square feet. But I think all of that you put into perspective when you have an experience like this. And it really helps you determine, you know, what are the things that really matter most? And perhaps it’s not the space that really impacts those things. And we’ll talk a little bit about that at the end of the episode. So some common questions that I’m thinking of that I’m guessing our listeners may be thinking about as well is where do you park the van? And how do you shower? Where do you able to work out and enjoy some of those amenities? And what about cooking versus eating out meals? Talk us through some of those logistics that you might think about that you have to think about differently versus if you have a home or you have an apartment.

Rena Crawford: Right. So I would say parking was the biggest learning curve. You kind of over time develop an eye for places that you know you could park overnight and not draw attention to yourself but also seem relatively safe. And I say relatively because one thing about San Diego is there actually is a community of people who live in vans. And more often than not it’s actually because they have a very dire financial situation and have no other choice. So parking spots are — some of them are in high competition, especially ones that have WiFi. Those are more limited. But like I said, over time, you kind of get an eye for it. I generally look for places that are kind of off a main drag but are next to a neighborhood. And those tend to work out the best. There’s places along the beach, and there’s places near the hospital. So actually, once you get into a groove, it hasn’t really been an issue. In terms of showering, I definitely rely on fitness centers, I use the locker room at the hospital. Finding those places was a bit of a transition, having to locate which showers had good water pressure, which ones I could count on having hot water, things you wouldn’t necessarily think about. And then in terms of food, I can cook in the van. I have a stovetop and I can boil water and I have the ability to saute and cook in a pan. But my refrigerator is pretty small. Any meals that require a lot of ingredients or leftovers, those things are inconvenient. So I end up picking things up a lot such as the hot bar at Whole Foods or takeout food, something healthier like poke or something like that. And I’m comfortable doing that because one, I’d have to eat anyway. And two, I can’t sustain a resident’s lifestyle on ramen noodles.

Tim Ulbrich: Right, right. Well, and we’re not talking about — I think it’s a good point. We’re not talking about crappy fast food all the time. I mean, obviously you’re talking about healthy options that you can find at Whole Foods and others. And I would also add, you know, that it sounds like because you’re able to keep your cost of living down that that frees up some income to be able to eat out or even as we’ll talk about here in a moment, be able to pay off some more of your student loans. So do you feel like you have some of the margin and the permission to be able to do that and have that convenience of not having to cook in the van where you don’t have a lot of space and room for refrigerating leftovers because you’ve been able to decrease the rent position?

Rena Crawford: Exactly. I feel like that’s one way that the van life has really paid off is being able to be selective about what I eat and being able to comfortably afford things that I believe are healthy.

Tim Ulbrich: So one of the things, Rena, I was thinking about this from the lens of a parent perspective, you know, if this were my child, I’d be like, ‘Oh, I love the passion for staying committed to achieving your financial goals and not spending money where you don’t necessarily have to,’ but I’m worried about some of the things we’ve talked about: your safety and your wellbeing and all those things. So is there a community of people that are kind of looking out for one another? You mentioned that those that are often living in a van situation might be in a dire situation to do so. But are there others that — I’m thinking of like the FIRE movement folks or others that are in a similar situation to you that are often trying to help each other out, pointing people in the right direction about this parking spot or this food option or this WiFi? Or do you feel like you’re kind of going at this alone?

Rena Crawford: When I first got here actually, there were some people who walked up to me and started conversation. I woke up in the morning once with a note written and put under my windshield wiper just saying, “Hey, I don’t think you’ll be able to park here for very long. We get cleared out from time to time.” So at the beginning, I did feel kind of that sense of comradery, but now as I’ve identified my own locations to sleep and kind of my own groove, I feel like I kind of run into them less. But yeah, there is a community, and they definitely do look out for each other. It’s actually one of the nice sides about it.

Tim Ulbrich: That’s cool. And tell us about, you know, the progress you’ve been able to make on your student loan debt because you’ve been able to free up some of your income that would otherwise be going towards rent.
Rena Crawford: Well, I try to shoot for about a $1,600 a month payment each month. That can vary a little bit depending on if something comes up in terms of needing van maintenance done. But as a whole, you know, in the last two years making resident’s salary, I’ve still been able to take my principal from $160,000 down to $130,000.

Tim Ulbrich: Wow. That’s awesome. So again, as we talked about earlier, often residents, I feel like the goal can be status quo. But here we’re talking about making progress. And it looks like you’ve done that in a significant way. So you mentioned earlier that you’re from the East Coast. So right now you’re on the West Coast for residency. So million-dollar question, depending on where you end up for a job and where you go next, what do you plan on doing with the van?

Rena Crawford: I think by the time the year is over, I’ll probably be ready to move out of the van. I mean, I’ve been really content living in it and it’s been very satisfying because it’s accomplished what I wanted it to accomplish, which is help me pay down my student loans. But by the time this year is over, I think I’ll be ready to get out of the van or at least not have it as my home base. I want to keep the van forever and use it for weekend travels. It does feel like an asset, and it has a lot of good memories with it. But yeah, I don’t think I’ll continue to live in it after this year.

Tim Ulbrich: Is there one or two things that you miss most about more of a “traditional” living situation like a rent or a home?

Rena Crawford: Yeah. I mean, I miss the convenience of showering. And the way it is now, it requires several extra steps. And then just being able to cook. You don’t realize until you can’t cook anymore how pleasurable it actually is to make your own meal from scratch. I miss doing that.

Tim Ulbrich: Well, I can envision as you take this next step following your residency where you end up in let’s say a 1,000-square foot apartment and you’re like, what do I with this? I have more than 10 times the space I had for the last year. But obviously I think that’s a good challenge to be thinking through. So talk to us a little bit about support of family and friends. You know, I could see this going one of two ways. And I know your brother went a path of traveling in a van, so maybe this is a little bit different with the family, but I could see family and friends being like, ‘Wow, I just admire the passion,’ and perhaps it even motivates and inspires them in their own journey and their own financial plan or their own quest of finding what they actually need in terms of minimalism. Or I could see people being like, ‘What in the world are you doing?’ Like what has that been like in terms of support from family, friends and even colleagues?

Rena Crawford: Yeah. Yeah, when I started residency, I didn’t want to publicize it. But I knew it would be discovered. It’s hard for it to never come up in conversation at all. And I was worried at first, you know, that it would look unprofessional or that it would reflect poorly on me in a job setting. But actually, you know, once word got out there, it spread pretty quickly, and everyone only had positive things to say. You know, I actually have gotten that before, like, ‘Oh, that was a good idea. I wish I would have thought of it. Maybe I would have done it too.’ So far, nobody actually has moved into a van after talking to me, but maybe it’ll happen sometime because people have genuinely positive reactions and seem to really understand the idea behind it.

Tim Ulbrich: Absolutely. And I sense people listening to this, it may be that they move into a van, but more likely, it’s probably the principles that they take and apply to their own situation in terms of trying to really evaluate what they do or do not need and what other goals could they accomplish if they’re able to free up some of the expenses that come with what is usually the largest expense in someone’s budget, their living situation. So I want to read a passage, Rena, from the article that you had sent over to me and then talk a little bit about this concept of happiness related to money. So you said, “Forgoing a real home in favor of living in a van may sound extreme. But there’s something wonderful about knowing that almost all of my needs can fit into 70 square feet. Living in a van has done more for me than just save me money and allow me to pay down my debt. It allows some freedom for cheap weekend traveling and I can live in any part of the city I want, depending on my mood that day. Plus, I’ve learned just how little I need to be happy.” So talk to us about that concept of happiness and how this experience, as you reflect back on this experience, what it’s made you realize in terms of what it does or does not take to be happy.

Rena Crawford: I think a lot of my happiness right now comes from accomplishing my goal of getting further towards freedom. And you know, if that’s your priority, putting the money there first and then living on what’s leftover, that forces you to re-evaluate what really makes you happy. And I mean, I still have my laptop, I still can watch Netflix before I go to bed or a nice movie or something if I want to, I can pick up meals when I feel like I need to. But I don’t need a bunch of things. And I feel like as people, you know, make more money, the things kind of start to fill up the empty space because you have that discretionary money, you’re more likely to purchase things you don’t need. And living in a van that doesn’t allow that, you know, I don’t have a place to put anything, so I don’t buy any extra stuff. And I haven’t suffered for that at all. In fact, I feel pretty free. And a lot of my money goes into experiences like spending money on gas to spend a weekend at Yosemite or something. I feel more pleasure from that than I do just having belongings.

Tim Ulbrich: Which are the memories you’ll remember. I mean, I think the experience in and of itself is one that you’ll remember. But being able to fund those experiences I think is so cool. And I’m a huge believer that short-term experiences — when it comes to your financial plan, short-term experiences, even if they’re short-lived, have positive long-term benefits. So here I see a situation where yes, of course you’re not going to live in a van forever. But through this experience and through what you’ve learned about what makes you happy and where you can derive that value you do or do not need, even though your expenses will naturally go up, your income is going to go up, I think it really will have a long, long-term impact on how you spend your money. And I think that’s one of the coolest things about an experience like this. So Rena, if we fast forward five years from now, so what would that be? 2025. May 2025, I sense you’re someone who’s got big goals, dreams and aspirations. You know, you’ve obviously been able to tie into this concept of minimalism, you’ve had some real intentional efforts during your residency to be able to pay down your debt. So when we look at your financial plan in five years, five years from today, what would you say success looks like?

Rena Crawford: So in five years, I definitely want to be debt-free as well as have a solid nest egg of savings to maybe put a down payment on a house, maybe put a down payment on a sailboat and travel the country or travel the world. I haven’t figured that out yet. But I know for sure I will be out of debt and have some nest egg to figure out what that next step looks like for me. Some kind of investment or new alternate way of living.

Tim Ulbrich: Yeah, and I can tell for your situation, obviously having no debt and taking away that $1,600 a month payment or perhaps more as you go into the future to get that paid down plus having minimal expenses overall, even if that goes up, is going to give you lots of options to do the things that matter most to you. So Rena, thank you so much for sharing your story, for reaching out, for taking the time to come onto the podcast. And I’m confident your story is going to help inspire others to think about their own financial situation. So thank you so much.

Rena Crawford: Thank you. Thanks for having me.

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YFP 151: How Personal Finance Perceptions Affect Student Pharmacists’ Career Choices

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How Personal Finance Perceptions Affect Student Pharmacists’ Career Choices

Dr. Nick Hagemeier joins Tim Ulbrich to talk about an article he and his colleagues published in the American Journal of Pharmaceutical Education titled Student Pharmacists’ Personal Finance Perceptions, Projected Indebtedness Upon Graduation, and Career Decision Making. They discuss the history of student loan debt in pharmacy education, Nick’s experience teaching personal finance to pharmacy students and why today’s graduates, more than ever, should be equipped with the knowledge and tools necessary to manage the pressures associated with large student loan debts.

About Today’s Guests

Nicholas “Nick” Hagemeier, PharmD, PhD, is Vice Chair and Associate Professor of Pharmacy Practice and Director of Student Professional Development at the East Tennessee State University Gatton College of Pharmacy. Dr. Hagemeier also serves as Director of ETSU’s Pharmacy Practice Research Fellowship. He earned his PharmD, MS, and PhD degrees from Purdue University. He was awarded NIH funding to conduct research on the role of pharmacists in preventing opioid-related morbidity and mortality and was appointed to the US Health and Human Services Pain Management Best Practices Interagency Task Force in 2018. He has published 44 peer-reviewed manuscripts and has presented his opioid and wellbeing research nationally. He is a graduate of the American Association of Colleges of Pharmacy Academic Leadership Fellows Program. He is currently serving as a Presidential Fellow at ETSU. Dr. Hagemeier has a passion for using communication to improve patient care, applying social/behavioral research in practice, and helping students thrive personally and professionally. In the College of Pharmacy, he champions wellbeing-promoting initiatives such as Phitness Phriday and the mentoring program. Dr. Hagemeier resides in Johnson City, Tennessee with his wife Molly and four children, Will (14), Clara, (12), Fritz (10), and Katie Ann (6). His hobbies include exercising with his F3 buddies, running, and playing the banjo.

Summary

Dr. Nick Hagemeier is an Associate Professor at the Gatton College of Pharmacy, East Tennessee State University. Nick shares that he made a lot of financial mistakes after graduation, but after taking a Dave Ramsey course at his church, his eyes opened and he paid off a lot of debt quickly, sold his new car and proceeded to go back to graduate school to get his PhD.

He and another colleague started a personal finance course in their college of pharmacy driven by a passion to equip pharmacy students with the knowledge they need to make smart decisions about their finances and student loans, even while still in school. Nick wanted to get data about if and how personal finance perceptions or the amount of student loans carried affected the careers or training that pharmacists took. Some colleagues at other colleges of pharmacy were also passionate about this topic and joined forces to conduct a study across three schools. They surveyed students at the beginning of their personal finance class and had 700 usable responses. Their hypothesis was that the amount of student loan indebtedness would impact postgraduate training. Through the survey they discovered that the actual student loan debt amount wasn’t predictive of pursuing postgraduate training, however the perception of debt pressure and stress associated with the debt was predictive. Nick was surprised by their findings and shares that this is modifiable and they are able to equip students with skills to manage their stress and debt.

You can read the full study here.

Mentioned on the Show

Refinance Your Mortgage with Credible
AJPE: Student Pharmacists’ Personal Finance Perceptions, Projected Indebtedness Upon Graduation, and Career Decision-making by Nicholas E. Hagemeier, PharmD, PhD, Chad K. Gentry, PharmD, Debbie C. Byrd, PharmD, MBA, L. Brian Cross, PharmD, Daniel Rose, PharmD, Nasar Ansari, PharmD, Pooja Subedi, MPH, and Tandy Branham, PharmD
YFP 082: Debt Free Theme Hour with the Teacher and Pupil w/ Joe Baker and Blake Johnson
Bureau of Labor Statistics Occupational Outlook on Pharmacists
YFP 124: The Behavioral Investor w/ Daniel Crosby

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. I’m excited to welcome Dr. Nick Hagemeier, associate professor at the Gatton College of Pharmacy, East Tennessee State University, to talk about his findings from research he and colleagues published in the American Journal of Pharmaceutical Education assessing student pharmacists’ personal finance perceptions, projected indebtedness upon graduation, and career decision-making. Dr Hagemeier, welcome to the Your Financial Pharmacist podcast.

Nick Hagemeier: Hey, Tim, thanks for having me. It’s a pleasure to be here.

Tim Ulbrich: Appreciate you taking the time to do this. I know it’s crazy times with schedules and wrapping up the academic year and COVID-19 and all that that brings, so thank you so much for taking time.
Nick Hagemeier: Absolutely.

Tim Ulbrich: So Dr. Hagemeier, when I read your research article that you and your colleagues published in AJHP, which we’ll link to in the show notes and I would encourage our listeners to check out for themselves, I knew that our community, the YFP community, would really take interest in what you found through this study So before we jump into the study and your findings, tell us about your work that you’re doing at ETSU right now and your career path leading up to your current position.

Nick Hagemeier: Oh, wow. Well you know, the work we do is ETSU, we have a personal finance elective that we have probably around 20 students will take that every fall semester.

Tim Ulbrich: OK.

Nick Hagemeier: And that’s been, you know, it’s been a huge blessing to me and Brian Cross, we’ve co-coordinated that class I think since 2013 now. And it’s probably — you know, we’ll tell the students in that class it’s our most fun class to teach because we know the impact that the knowledge that we’re sharing with them had on our lives and we know that it can be a game-changer for them. And you know, we’ll have students that buy in and actually will change their lives. And that’s something that keeps you coming back for more.

Tim Ulbrich: You know, and it reminds me, Nick, I’m guessing you get several of these emails from graduates. Perhaps in the moment it sticks, maybe it doesn’t, it’s a later point in time. It reminds me of Joe Baker we’ve had on the show teaches personal finance at UAMS in Harding. He’ll regularly hear from students about wow, the impact that this had on me later on or when they get to a later decision point about student loan debt or home buying or life planning or whatever, you know, it’s often planting seeds. That’s what I find, and I don’t know if that’s the same for you, but it’s often planting seeds. And some of those come to be in the moment in terms of the fruit, and sometimes it’s a little bit later on.

Nick Hagemeier: I absolutely agree. Yeah. We tell our students in that class that you know, probably the best time to do the course evaluation is about five years from now. But you’re right though that some of that seed will be planted right then, and it will be a game-changer for them while they’re in pharmacy school. That’s obviously our preference. But getting those thank you emails or just learning about the impact that it had years down the road, that’s awesome.

Tim Ulbrich: So tell us a little bit more, Nick, about your career path into your current position: where you did your training and I know you have some advanced degrees and training as well.

Nick Hagemeier: Yeah, I did my pharmacy degree at Purdue University. And then started trying to figure out what I wanted to do next. And I really didn’t have a good feel for that until my P4 year, and a mentor suggested that rather than residency training, which is what I thought I was going to pursue that I might want to consider a PhD. So I didn’t really know a whole lot about it at the time, to be honest. But I trusted his judgment and when you know who that person is, it was Nick Popevich. And he’s well known, a dear man, and I really think he had my best interests in mind. And he was right. And so that’s what I did. And I worked in the community pharmacy setting part-time during my Master’s degree and then stopped after my Master’s degree and worked full-time in the independent community pharmacy setting. I worked at a couple different pharmacies because my primary one didn’t have enough hours to support me. So I worked 30 at one and 11 hours at another. And did that for a few years and then transitioned into chain. And that was really — I don’t even know how to put it into words, you know. It really brought back my career aspirations and made me reflect on what do I really want to do? And I felt like I was stuck. I didn’t know anything about money. I had been — the example I give my students that just shows you how dumb I was about money is I had a note on my wife’s engagement ring. We were engaged in — we got married in 2002, engaged in 2001 I believe, 2002. And I had not paid anything on this note until 2009.

Tim Ulbrich: Oh, wow.

Nick Hagemeier: I just kept paying the interest. I mean, how silly is that? So I got — the church we were attending offered the Dave Ramsey course, and I’m like, well, I don’t know anything now. This really can’t hurt. And we took that course, and it was absolutely eye-opening for me. It really did change my life. And that’s what we tell the students, and Brian Cross has the same story. And we’re very transparent with the students about our ignorance, things that we did wrong as we were going through pharmacy school and then early in life. Eventually, I figured out how to get out of debt. I paid off a ton of debt over a very quick period of time, sold a car I had just bought — my only new car I’d ever owned, I sold that and got out of a ton of debt and figured out a way to make it work to go back to school so that I could do what I love doing. And that’s what I did. I went back to Purdue, got a PhD in 2009, graduated in 2011. And here I am at ETSU.

Tim Ulbrich: And I love, Nick, that you took your personal experience and you know, I always joke with my students the school of hard knocks is the best way to teach this topic.

Nick Hagemeier: That is for sure.

Tim Ulbrich: And I think it makes you real. And I can tell the students appreciate that, I’m sure the same is for you and just that vulnerability and sharing that this is a topic, it’s so behavioral, and we are all constantly learning. We’re all constantly making mistakes, hopefully less over time. We hopefully do better over time. But it’s human behavior, you know, when it comes to personal finance and making mistakes. And I’m so glad to hear that you share those stories with your students. You know, I’ve tried to do the same, even though it’s hard to sometimes admit like oh my gosh, did I really do that? Did I really pay a note on an engagement ring for that period of time?

Nick Hagemeier: Yep.

Tim Ulbrich: Did I really make that mistake? But I think it makes it real for the students, and I think it also allows them to see that hey, mistakes are going to happen and you continually learn, you pick yourself up and you move forward. And I also love that you have really been able to not only teach and give back to the students but also transition to moving some of this into the research space and being able to ask some really important questions that are having an impact on our student pharmacists, on our graduates and our profession as a whole. So let’s talk about this study, again, published in AJPE, “Student Pharmacists’ Personal Finance Perceptions, Projected Indebtedness Upon Graduation and Career Decision-Making.” Tell us a little bit about the purpose of this study. What led you to wanting to conduct a study about student pharmacists and the link between their indebtedness and their career decision-making process?

Nick Hagemeier: Well, I was fortunate to have some colleagues at other institutions that at that time that were just as passionate about this as I was. And I’m a data guy. I love anecdotes, I love good stories, but at the end of the day, I want to know are there data that support my assumptions or assertions that we’re going to make? So I had a little bit of a captive audience, and I had students that were willing to participate in this research, so I just wanted to try to figure out, you know, OK, I know I think personal finance influences decision-making, career decision-making, whether people are going to grad school or fellowships or residencies, you name it. And I just wanted to have some data to do that. And Chad Gentry had been at ETSU and he had been at Lipscomb, and Debbie Byrd was then at the University of Tennessee and now serves as our dean. But they were both doing work like this, and I reached out to them to see if they would be willing to participate in — actually some of this happened at an AACP meeting, just we were talking about this. And they both expressed interest that hey, they’d like to survey their students too. So I developed a survey instrument and kind of put it through the ringer here at ETSU, tweaked it a little bit early on, and then invited Chad and Debbie to participate as well. And so it was really cool that we got data from three different institutions. I think that’s a strength of the study as opposed to just having students at ETSU.

Tim Ulbrich: I do as well, and we’ll talk more about the potential for extrapolating some of that data to other colleges and students across the country. So tell us a little bit — you started to talk about three institutions, but tell us a little bit more about how you conducted the student, who specifically was evaluated, how they were evaluated, and the types of questions that you asked in the survey.

Nick Hagemeier: Sure. So we — I think an important point is that we surveyed the students right out of the gate, so right when we had them in a personal finance class. And it differed across institutions as to whether that was required or not. We surveyed them before we gave them any knowledge.

Tim Ulbrich: OK.

Nick Hagemeier: So we were trying to look at baseline, like how are you feeling? Like what are your perceptions about this? What are your self-efficacy beliefs or your confidence in your skill set related to personal finance? Wanted to know about their perceptions of debt and the pressure that goes along with that or can go along with that. So we developed this paper-based or web-based survey, depending on the institution, and the students took this at the beginning of the class and then we got the data back and we analyzed it here at ETSU. So we had P2s and P3s.

Tim Ulbrich: OK.

Nick Hagemeier: That were participating in this research; that varied across the institutions as well.

Tim Ulbrich: And tell us a little bit more, you mentioned one of the strengths, which I agree with, would be across multiple institutions. So thinking about the generalized ability of this data, tell us a little bit more about those three institutions and why that is a strength as we consider how this might apply to other colleges and other students across the country.

Nick Hagemeier: Yeah, so we could really separate out the data, you know, but I think that there is strength in the end there that you get from three different institutions. But you’ve UT, which is a public university. You’ve got Lipscomb, which is a private university. Then you’ve got ETSU, which is kind of the mutt, right? We’re a private college within a public university, which I don’t know if most people are aware of that or not.

Tim Ulbrich: I did not know that, no.

Nick Hagemeier: Yeah, so there were no state dollars to support ETSU opening a College of Pharmacy.

Tim Ulbrich: OK.

Nick Hagemeier: Back in the day, and the only college of pharmacy was in Memphis at UT. But it was a private model within a public university, so it’s a completely tuition-driven college. So I mean, you’ve got three different types of colleges, all three of those exist around the U.S. And we looked at common themes across all three of those.

Tim Ulbrich: OK. And from what I can remember, over 700 usable responses, really strong response rate, around 90%. So talk us through with that data in mind of the main findings of the study. And then we’ll talk about what those perhaps could mean and the implications of those.

Nick Hagemeier: Sure. So one of the things, and one of our hypotheses was that the amount of indebtedness, so the actual dollar amount, would impact post-grad training, pursuance direct entry into practice versus pursuing another path. And so that was one thing we were going to look at. And then something else that was interesting were just perceptions, right? Because you can have this dollar amount, but if you don’t pay any attention to it, maybe it doesn’t matter.

Tim Ulbrich: Yep.

Nick Hagemeier: Maybe it doesn’t matter. And so we were interested in really both of those. And I was really interested in self-efficacy beliefs too because confidence, you know, confidence is really important. There’s all kinds of literature that shows that’s the case. Now, whether students are accurately reporting their confidence, if their confidence actually matches their ability, that’s another question. But those were some of the things that we were looking at. So I think the main finding here was that the actual student loan debt amount wasn’t predictive of pursuing post-grad training. But the perception of debt pressure and stress associated with that debt was predictive. So I think you know, that to me was — we didn’t anticipate finding that, but that was just a really interesting finding. And it’s really cool because that’s modifiable.

Tim Ulbrich: Right.

Nick Hagemeier: Right? We can equip students with some of the skills and knowledge that, just help them manage that stress, manage that debt, minimize that debt and therefore, position them to pursue the careers that they want to pursue.

Tim Ulbrich: Yeah, and I think that’s a really important point as we just summarized that as I understand it, Nick, to reiterate what you said, the actual indebtedness amount that they reported or projected indebtedness upon graduation didn’t have an impact on their career decision options they were considering for the future, but rather, the debt influence and pressure and their perception of that, which was a combination of how they responded to a series of questions around things like I’m concerned about my anticipated debt load, I feel pressure to get out of debt, my debt load factors in my career plans after I graduate, my debt load influences my decisions. So I think that perception, I’m so glad you assessed that because I think that’s been my experience in working with students as well as my personal experience, you know, sometimes the dollar amount, especially when we think about it from the student perspective, the actual dollar amount may not necessarily have hit them yet. But it may be weighing on their mind, and for students at different levels. You know, I’ll talk with some students sometimes that have $75,000-80,000 of projected debt and they’re very much thinking about the stress. And I’ll speak with others that maybe $250,000 or $300,000 of projected debt, and you know, it still feels like at that point Monopoly money and something that’s not top of mind.

Nick Hagemeier: Yeah.

Tim Ulbrich: One of the things I found really interesting — and I wanted to pick your brain on this — is when I was looking at the findings presented in the results section, Table 2, which was the pharmacy student personal finance constructs and perceptions, I was caught off guard — and these, as I understand it, were a series of questions they responded on a Likert Scale with a higher number essentially indicating a more favorable response and agreement. And as I looked at those, I was caught off guard by how high these responses were. So for example, questions like “I’m confident in my ability to manage my personal finances,” the mean was a 3.81. Again, 1-5 scale. “I’m confident in my ability to get out of debt,” 4.05. So to me, when I saw that, I feel like there’s perhaps some overconfidence here. I mean, can you speak to that and what you’ve seen either in other literature — I know from my experience looking at some of the vet med literature, which I know has published more in this area of personal finance, there’s a lot of data supporting the idea that perhaps overconfident in school and underestimating what impact that’s going to have in the future. So was there anything there that you took away to say maybe there is some overconfidence here in the response?

Nick Hagemeier: Well, I completely agree with you. You know, again, this is just anecdotal, but based on some of my experiences and conversations that I’ve had with students that I know responded a 4 or 5 on this, and you know, I’ll talk to them about, “OK, so you’re confident in your ability to develop a personal budget.” “Yes, I am.” “OK, what about like sticking to it?” “Oh, I don’t ever stick to it. But I can develop one.” So part of it’s in the items that I asked. But again, I think that this is something where a lot of students probably covered it in high school, they’re familiar with it. So there’s comfort in saying that I’m confident in things with which I’m familiar.

Tim Ulbrich: Sure. Yep.

Nick Hagemeier: But again, you mentioned in the beginning, it’s behavior-based. And man, some of these behaviors are so hard. And I do feel like this is a situation where they’re probably overconfident. I don’t think their behaviors, their knowledge or their skill set matches those high numbers that you see in the manuscript.

Tim Ulbrich: Yeah, and one of the things I noticed too as I was looking at the data, again anecdotally talking from my experience working with students, is the item they rated the lowest on relative to the others was the statement, “I’m confident in my ability to choose appropriate investment option.” And I will say consistently when I talk with students about what’s the topic you feel least confident about and you want more information? It often is investing. And similarly, you know, I feel like that sometimes they feel perhaps overinundated with like student loan debt information but when I sit down and talk about repayment options and really dig into the weeds, I sense that there’s a feeling that they may not need that information. But once you dig in, they really have some of those Aha! moments of like oh my gosh, I had no idea of the implications of if I choose this one repayment option versus this and why this decision is so important. So I say this because I think it’s important — and we’ll talk more about this as we talk about next steps in personal finance education — I think it’s important we look at the responses and how students feel but also take a step back and layer on top of that what do we think they really need? And does their reported confidence in perhaps being ready to address and tackle the student loan debt, is that reality? Or do we still need to spend more time? Because I think it’s a topic that at the surface may not seem so overwhelming but can certainly be complicated when we think about the nuances of repayment and the implications it has with the rest of their financial plan.

Nick Hagemeier: Yeah, I agree. And we try to link them together. We try to talk about with our students, this ability to develop a budget, it may not seem that related to your ability to choose appropriate investment options.

Tim Ulbrich: Yeah.

Nick Hagemeier: But wow, if you can figure out the budgeting part and maximize the amount that you can put towards your student loan debt and towards your investments and etc., etc., and then that really gets their attention. So it’s the linking them has been impactful.

Tim Ulbrich: Absolutely.

Nick Hagemeier: From a teaching perspective. But yeah, I completely agree with you. It is important to pay attention to those numbers. And you know, in our class, we lovingly call them out if we feel like you’re overconfident. Well, that’s awesome, but your behaviors aren’t matching what your confidence levels. Yeah. They’re not matching.

Tim Ulbrich: Sure. Talk to us a little bit more about what you found in terms of their — the connection between this debt influence and pressure perceptions and their actual areas of training after graduation, whether that be the decision to pursue post-graduate training or not or even going into, say, a hospital practice versus chain community or supermarket mass-merchandiser type of practice.

Nick Hagemeier: Yeah, so we did a couple different models here. And this Table 3 in the manuscript, you see the unadjusted odds ratio, so that’s just looking at each one of these variables independently. And debt pressure perceptions are mentioned in there was a significant predictor there. It’s the only one that is. And we dumped them all into this soup together and looked at an adjusted odds ratio. And it still held there that debt pressure perceptions were the only significant predictor. Again, student loan debt, anticipated student loan debt at graduation wasn’t. When we looked at it from a — I mean, there’s significant overlap here, I will tell you that because you know, when we’re looking at community chain versus independent versus supermarket mass-merchandiser versus hospital. So most of your people that are going to pursue residency are going to be in that hospital bucket, right? So there’s some overlap here. But the debt pressure perceptions, they significantly predicted going into chain community as compared to going into hospital. OK? Which is just another way to say what we saw with pursuing post-graduate training or directly entering practice. We thought there might be differences across some of the higher paying, historically higher paying jobs that they’re in practice as compared to some that may not be. And we saw a little bit of that, but I mean the biggest difference was by far the hospital versus community chain.

Tim Ulbrich: So I know we’re conjecturing here a little bit, but taking this data and then thinking about what’s been evolving or changing in the last few years, and this is I think difficult because we look at the Bureau of Labor Statistics data as one way to track some of the workforce trends and obviously the salary trends of a pharmacist. I think it often leaves us wondering, well, for new practitioners, I know here at least in the Columbus, Ohio, area, we’re definitely seeing a trend where what might have been when I graduated in 2008 the community position as being more of the lucrative financial move, that is changing because of several companies making decisions to go back down to 32 hours, some more recently even cutting pay and some as recent with the COVID-19 situation and then obviously also just thinking about the relative flat nature of those salaries over time. So do you see this changing, this perception of students and what they viewed as perhaps the debt influence and perception impacting a decision that if I’ve got more debt, I might be thinking about more of the community space because of the financial benefit to that position? Do you think that’s a ship we’ll see going forward?

Nick Hagemeier: Yeah, that’s a great question. And you know, succinctly, I don’t really know.

Tim Ulbrich: Yeah.

Nick Hagemeier: I think that there’s a lot more transparency and some of the other issues that have surfaced — and they were there when I was in chain as well — but some issues with patient safety and workload and things like that that I think are more in the media now, they’re more on the minds of our students. And I don’t think it’s as simple as dollars. I don’t have any data to support that, I just think that just based on some conversations with students, I think that this is really something that’s top of mind. And they’re realizing it’s a complex decision. And you’re right, Tim, all those things that you mentioned about salaries are flat at best and you know, there’s a lot of unknowns right now. So short answer is I don’t know.

Tim Ulbrich: Yeah.

Nick Hagemeier: But I think that still, it to me, it just takes me back to this is all the more reason to help students figure out how to manage money in pharmacy school.

Tim Ulbrich: Amen.

Nick Hagemeier: So that they have the skill set to make decisions that are in the best interest of themselves and their loved ones and the people that they’re caring for. And you know, that’s something I’m really passionate about, and I just, I think that this is just driving home the point that this is really important now. Not when you get out, this is really important now. And we have a ton of success stories, and we’ll tell — we share with our students the success stories of previous students about — we’ve had students that were spending $1,200 a month eating out.

Tim Ulbrich: Right.

Nick Hagemeier: Like wow.

Tim Ulbrich: Yep.

Nick Hagemeier: I’ve got a family of six, and our budget is $300. So you know, just kind of helping them see that and put some numbers with some of their behaviors. And then adjust it and then figure out hey, I’m not miserable. You know, I was actually able to save close to $10,000 over the course of an academic year. I mean, we’ve had just outrageously successful students that make game-changing decisions. And they don’t even recognize how big of changes those are yet. They won’t recognize that until they get out and can make those loan payments so much easier.

Tim Ulbrich: Absolutely.

Nick Hagemeier: And see some of the fruits of their labor.

Tim Ulbrich: I agree, and it reminds me as you were talking, Nick, of I had Dr. Daniel Crosby on the show talking about his book, “The Behavioral Investor.” And he studies behavioral economics. Essentially, that’s his job is to look at all that and look at the research. And he talks a lot about the correlations between happiness and money and talks about that threshold where somewhere around the $70,000 mark where you’ve got enough to cover your basic living expenses and have a little bit of margin and breathing room. But after that, you start to see an inverse relationship happen. And I think that’s been my personal experience as well as so many students I’ve worked with is when they start to identify that point of OK, living on a budget and being able to do so so that I can achieve my goals and have some healthy level of restriction, again, not in a negative sense but in more intentional allocation of funds, like I think there’s actually an ironic happiness that comes from that, especially as you then start to be able to free up funds and do things that the literature does support provides happiness like giving and experiences and other things like that as well. So I love the passion for I think igniting this desire in students to learn. And let’s talk about that more because in the article, you mention that this study could serve as an intervention point for colleges so they can support student pharmacists and the debt pressure they face. Talk to us a little bit more about what you think that looks like in an ideal state in terms of how we best support our students. Is it a personal finance elective that’s kind of a one-and-done? Is it something more longitudinal where we hit them at multiple points in time? Is it required? Is it optional? What are your thoughts around this?

Nick Hagemeier: Well, I think that it could be a mixed bag. I mean, one thing that I think for sure is this is not a one dose and done. I think that this warrants discussion throughout the curriculum. And you know, it could certainly be an elective, and we have the elective here. But I have framed it in terms of wellbeing. I really like how Gallup defines wellbeing across the five domains with career or purpose, community, social, financial, physical. And I’m really defining that financial wellbeing for students the way that Gallup defines it, not in terms of the amount of money you make, but it’s more about security and living within your means. And that gets their attention. And we assess wellbeing frequently. So this is top of mind, this is something that our mentors will discuss with the mentees. So this is something that I kind of get the pleasure of championing this wellbeing initiative at ETSU and the mentoring program. So I’ve kind of got a built-in mechanism to facilitate conversations with students and do so on a regular basis. Now, that doesn’t mean that necessarily all of our faculty are equipped to have those conversations. But again, they know they’ve got resources in the elective and in Brian Cross and myself to get them help if they need it. So I don’t know that there’s a necessarily like a magic way or a best way. I don’t think we have the evidence to support that. But I do think that, you know, I would prefer it be if possible to get it in front of all the students and for people that have access to students to think of creative ways to frame it. You know, wellbeing, I think students were less familiar with that than they are money. And so framing it in that way I think has worked to our benefit — and I don’t know if they know it or not yet, but theirs as well.

Tim Ulbrich: Yeah.

Nick Hagemeier: That’s been our approach, and I think that that’s worked pretty well.

Tim Ulbrich: I agree with you wholeheartedly. And I think we don’t yet have the evidence to say this is the best approach. I mean anecdotally and my gut says I feel like it’s something that’s more longitudinal in nature and that really meets the students where they are. So as I think about the financial needs of an incoming P1, you know, to me, really understanding like the anatomy of a student loan is really important because I think — again, I don’t have the literature to back this up — but I think if you really understand the anatomy of a loan and interest and the types of loans, that likely might help shift your behavior while you’re in school and obviously have long-term impacts afterwards. Whereas we think about like P4, OK, they’re getting ready to enter obviously into that new practitioner phase, get ready to go into active repayment, a lot of the decisions resulting in the debt load they have at the moment have been made. But they’re now entering a different phase of how do I actually manage this debt? And then obviously other decisions, investing and life planning and all those other things. So I think something more longitudinal in nature. The other thing we talk a lot about, Nick, at Ohio State is how do we customize this? You know, I think and I sense that this resonates with the learner, which I think is true in learning in general — but how do we customize this, especially when we’re talking about a topic that is so inherently personal, right? So if we know the literatures shows about 15% of students graduate without student loan debt, so if we do have education materials, well, for those students, you know, how do we engage them in other topics that are most meaningful? Or we know that students come in with a very different baseline understanding of this topic, perhaps that they had in their home life or previous coursework that they’ve taken, so how do we provide some base education for all students but then almost allow like a choose-your-own adventure based on the goals that they have as well as the existing knowledge and experiences they’ve had?

Nick Hagemeier: Yeah, that’s — I mean, those are great thoughts. And I think that you know, something that I’ve — again, I don’t necessarily know that I have the evidence. I think I do, but the knowledge versus skill. Completely knowledge-based experience or whatever that might be, I just don’t think it’s going to be that impactful.

Tim Ulbrich: Yeah.

Nick Hagemeier: You know, just like me sitting in a CE program that’s completely knowledge-based, to what extent am I actually going to take that and use it? It’s tough because it involves behavior change. So for the most — you know, our first stop is the budget and that basic behavior. And from there, because we’ve seen students that don’t have any student loan debt. But they don’t know how to do a budget.

Tim Ulbrich: Yep.

Nick Hagemeier: There’s just some very basic things. But if we can meet students where they are, that would be fantastic. That’s probably easier said than done.

Tim Ulbrich: Yeah.

Nick Hagemeier: But it’s worth trying to do.

Tim Ulbrich: And we’ve had a little bit of success, I think the online space has allowed us to do a little bit more of that, of the customization of learning that we may not be able to do as much in the classroom. But I think it’s just a good reminder for hopefully we have some colleges and faculty listening about collaborating and here, we’re sharing ideas but others doing the same. Nick, the last question I have for you is in the background of the article, you talk about how an educational investment is composed of both a monetary investment, so tuition, and an opportunity cost, time spent in school. So if we look at the sharp increase in student loan debt in pharmacy education, so 2010 the median indebtedness of a graduate for those that had debt was $100,000. 2019, that was $170,000. So just a nine-year period, $70,000 increase. What advice would you have for high school students, undergrad students that are evaluating this educational investment? They’ve determined that pharmacy is the career path for them, they want to be a pharmacist. But they also see what’s ahead of them in terms of this educational investment. What suggestions would you have for them?

Nick Hagemeier: Wow. That’s a really good question. Actually, I just before recording this, Tim, had a talk with some students from academic APPE. And one of the questions that they asked me was what advice would you give to high school students that are interested in pursuing pharmacy, given the current landscape? Which isn’t a whole lot different than the question you just asked. And my response was that they need to look at what it is about the profession that just really lights a fire in them. And then try to figure out — like do some research and try to figure out, you know, can I expect that that’s going to be present in this profession when I graduate? It’s changing so fast. And you know, I think that the more exposure that we can get students to different careers in pharmacy and informing them — you know, and AACP has done a good job of this here in recent years, of just trying to show what can a pharmacist actually do? Because there’s so many misperceptions there. But I think that thinking beyond what they see currently in the profession to what it could be. And then seeing if they’ve got the passion to drive it to what it could be, that’s hard work. That’s my — I think that’s my best way of answering that question. It’s so hard. There’s so many different biases that I have there and different life experiences that influence that. You know, would I do this again? Yup. But I would do it in a lot more informed manner. I kind of took the scenic route and made a lot of dumb decisions along the way. You know, looking back, I could have done this a lot better.

Tim Ulbrich: Yeah, I agree with you. And I think as you define that, you know, in the article in terms of the educational investment, I think that — I didn’t think about it that way. And I agree with you. I could have made the same decision, I think I would have just made a little bit more of a straight path, which is easy to say, right, in hindsight?

Nick Hagemeier: Right.

Tim Ulbrich: But I think when you think about your investment and I would say tuition as well as cost of living — because we see so much of the actual indebtedness is cost of living that’s taken out on unsubsidized loans that are accruing interest — and then the opportunity cost, I mean obviously that time spent, that variable you may or may not be able to impact in a significant way. But the cost of getting there and how you get there and how you minimize the indebtedness, which obviously impacts what it looks like on the back end, I think is certainly a variable that the student, prospective student, can change but also that we on the side of the education part can also help our students be able to navigate that in a little bit better way.

Nick Hagemeier: Yeah, I absolutely agree. And you know, just reflecting on my response to that question, if I would have taken the more direct route, I wouldn’t have struggled in all these areas of wellbeing, you know? And then I’m thinking, well, shoot, then maybe I wouldn’t even be able to have that much of an impact on students now and helping them succeed financially.

Tim Ulbrich: Yeah.

Nick Hagemeier: So then now I’m like, well, maybe I don’t regret what I did.

Tim Ulbrich: Yes.

Nick Hagemeier: You know, I made some dumb decisions so that you don’t have to and helping students appreciate that and helping them figure out as a high school student that your career starts — when you’re in college, consider that a career. And helping them think about money and you mentioned too that the opportunity cost, the amount of dollars that have to be borrowed or that can be borrowed aren’t necessarily the amount of dollars that you need to borrow and helping them understand that on the back side. I’ll tell you, one thing that we’ve done that’s been really impactful and it’s kind of funny, but I don’t know, Tim, do you all have Cookout up there?

Tim Ulbrich: No.

Nick Hagemeier: The restaurant? OK. It’s a little fast food restaurant that’s really close to the chain, and it’s really close to the college pharmacy. A lot of students go there. And so we’ve kind of — you mentioned like the anatomy of a student loan and the interest. We’ve taken that and applied it to eating at Cookout. So Cookout is known for their $4.99, you can get all you want for $4.99 there. And then trying to take that out over OK, so you’re using that $4.99, that’s borrowed money. Right? So if it’s not, let’s pretend that it is. And then I’m going to choose an interest rate that’s pertinent now for student loans and we’re going to look at that over a 10-year. How much is your Cookout actually costing you when you’re paying it back in 10 years? OK, what about if you do it on a 25-year loan? And holy smokes, they just like are like, “I don’t think I even want to go to Cookout anymore.”

Tim Ulbrich: Right? Right.
Nick Hagemeier: Just helping them realize some of those everyday decisions that they’re making and what that looks like in terms of loan anatomy and futuring. That can be really impactful and at least evokes an emotional response in them, which I think is something that’s necessary to really have impact here.

Tim Ulbrich: I agree, I love how you teach that because it makes it real, right? That’s something they deal with every day. Maybe not every day, but you know, every week or however often they go. And I think making this topic that can seem so big, so overwhelming, especially when you’re talking about big numbers of what you’re going to pay back over 10 or 25 years, but saying OK, the decisions you’re making today, what does that look like? What impact does that have? And really trying to make it as tangible as possible. And I love, Nick, what you said, you know, one of the things that people ask me all the time is, would you have done things differently? Absolutely, I would have done a lot of things differently. Do I regret the path that I’ve taken? And my answer is no, for the exact reason that you mentioned, that learning through those decisions and then being able to teach and influence others, like I think it’s worth it. Would I have done it differently? Yes. Do I regret it? No. So I appreciate so much, Nick, your passion for this topic. I appreciate you taking time to come on the show to discuss your journey and the article that you published in AJPE, “Student Pharmacists Personal Finance Perceptions, Projected Indebtedness upon Graduation, and Career Decision-Making.” So thank you so much, Nick.

Nick Hagemeier: Absolutely. Thanks, Tim. I really appreciate being here.

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YFP 150: New Book: The Pharmacist’s Guide to Conquering Student Loans

Posted on by yfpadmin

New Book: The Pharmacist’s Guide to Conquering Student Loans

Tim Church talks about the release of his most recent book, The Pharmacist’s Guide to Conquering Student Loans: How to Confidently Choose the Best Payoff Strategy That Saves You the Most Money.

This book is available for a special preorder until May 7 which includes exclusive bonuses like free shipping, discounted pricing and a free Conquer Loans t-shirt (with certain packages).

About Today’s Guests

Tim is the Director of Getting Things Done at Your Financial Pharmacist and a clinical pharmacy specialist at the West Palm Beach VA Medical Center.

He is also the author of The Pharmacist’s Guide to Conquering Student Loans: How to Confidently Choose the Best Payoff Strategy That Saves You the Most Money , Seven Figure Pharmacist: How to Maximize Your Wealth, Eliminate Debt, and Create Wealth and When Eating Right Isn’t Enough: The Top 5 Medications to Control Your Type 2 Diabetes.

Summary

On this episode, Tim Church dives into his newest book The Pharmacist’s Guide to Conquering Student Loans: How to Confidently Choose the Best Payoff Strategy That Saves You the Most Money. He shares that although he was happy when he and his wife hit submit on their last student loan payment, feelings other than happiness began to set in. They paid off $400,000 of student loans in 5 years, however he didn’t know enough about his options for repayment and ended up paying $100,000 more by not choosing PSLF.

The Pharmacist’s Guide to Conquering Student Loans: How to Confidently Choose the Best Payoff Strategy That Saves You the Most Money is a comprehensive guide for pharmacists and pharmacy students. Tim’s goal of writing the book is that a pharmacist can pick it up, analyze their options and choose a strategy and plan that will best align with their financial and life goals.

This book is available for a special preorder until May 7 at midnight (ET). Included with the preorder are bonuses that won’t be available after May 7 like a free Conquer Loans t-shirt (with certain packages), free shipping and discounted pricing.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. I welcome back our very own Tim Church to talk about his most recent book, “The Pharmacist’s Guide to Conquering Student Loans: How to confidently choose the best payoff strategy that saves you the most money.” Tim Church, welcome back on the show.

Tim Church: Thanks, Tim. Always on a pleasure to be on this side of the mic.

Tim Ulbrich: So excited to have you on. It’s been a long time in the making. You’ve been working hard on this book and excited to talk about the work that you have done. And I know it’s going to be a piece that’s going to help so many in their own repayment strategy. And we recently had you and Andria on the show to talk about your journey paying off $400,000 of debt in five years. And so if you’re listening to this episode and you haven’t checked out yet that episode, hit pause, go back and listen to that show, their story. I think it’s going to be an inspiration to you and will be a nice lead-in to what we’re going to talk about this week as it relates to Tim’s book, “The Pharmacist’s Guide to Conquering Student Loans: How to confidently choose the best payoff strategy that saves you the most money.” So Tim, I want to start by reading a passage from the beginning of the book, and I think you articulate so well the reality that so many pharmacy students and graduates and new practitioners are facing. So let me read a passage here from the book. “I’ll never forget the day my wife and I finally paid off our student loan debt. In fact, we still have a screenshot of the $0 loan balance. We are overjoyed, to say the least. We felt accomplished. We felt relieved. Finally, we did it. Andria and I had conquered the $400,000 of student loan debt that plagued us right from the start of our marriage. $400,000 gone. No more saying no to everything, no more anxiety about doing things we wanted to do while still funding our financial goals. No more payments. And my wife was ready to finally get a cat. The deep sacrifices we made to limit our spending finally paid off, and we were so ready to move on with our lives. But once that highly anticipated moment had come and gone, feelings other than happiness and relief set in, ones that I didn’t necessarily expect or want. I was angry and frustrated, and I had some major regrets.” Tim, what do you mean? Major regrets? Talk to us about that.

Tim Church: Yeah. When you say it out loud, it sounds like maybe I have like a mental health issue. But the reality is when I look back at the situation, you know, obviously we like to look at the numbers and things like that. And the reality is I was very fortunate to be in a position where I work for the government. And I had the option of going for the Public Service Loan Forgiveness program. That was definitely on the table, no questions about whether I qualified or not. But the problem was I didn’t really know that much about it at the time and all of the financial advice that I had been getting was kind of like steer clear from that. You don’t know, there’s a lot of unknowns with it. But when I actually sat down and did the math and found out that really, it was $100,000 decision that I made — meaning that I could have came out with a much better position because of how much I would have to pay for the loans versus the way that I did it. So once that hit my mind, it was kind of like, oh my gosh. Like you could have been in a much better position than you are today. So although it was awesome to get that feeling that the loans are gone and out of my life, it could have looked a lot different. And I think that’s really where those feelings started to come into play.

Tim Ulbrich: Tim, I don’t know if you remember — I was just reflecting back as you were talking. Do you remember we were in Baltimore several years ago, we were working on some student loan content, and you and I broke out the calculator and realized what we could have saved through PSLF. And you know, when we both did that, we’re like oh my gosh. This was a six-figure decision in terms of what this cost us. You know, I think that really lit a fire for both of us and really making sure people understand the repayment options that are available to them. And ideally, those that are transitioning out from student to new practitioner, getting ready to go through that grace period and that active repayment, that is the time to really understand your options and make sure that you’ve got the best payoff strategy in place for your situation. And that’s what really this book is all about. So Tim, why write this book? I mean, there’s lots of information out there, lots of opinions out there on student loans. Why invest the time, the energy — we know it’s no small feat — why do it? Why write this book?

Tim Church: Well, I think looking back, when we wrote “Seven Figure Pharmacist” three years ago, student loans were definitely a part of that, but there was just so much more to say. So many more details and things that’s important for people to know. And I think just through the YFP community, through the Facebook page and our channels that we just continue to get questions come through about student loans. It’s probably one of the hottest topic that we see come through the community. We talk a lot about it on the podcast. But it just keeps coming up. And I thought, what if we could take all of our information that we’ve done through blog posts, podcasts, what if we could take that all together and make it into a consolidated resource that although has a lot of complicated and complex information but make it in a way that’s easy to digest and ultimately helps somebody pick this up, read it, and say, “OK. I know what my options are. I’ve got a plan in place. And I’m confident about that plan.” And that ultimately was the goal of creating this.

Tim Ulbrich: Well, I can tell you you accomplished that. As I read through it, a couple thoughts came to mind. One, you have taken an incredibly complex, difficult topic and not only have communicated it and taught it in an easy-to-understand way but ultimately help the reader navigate and get to that point of, OK, I have all this information, how do I apply that to my personal situation and choose the option that’s best for me? And I think you did an incredible job in doing that. And that certainly is no easy feat. So kudos to getting that done. Chapter One is “Get Organized.” And one of the things you say is “Before jumping in to student loan payoff strategies and developing an overall game plan, it’s important to know exactly how much you owe and who you owe.” So Tim, why is this so important? And how can people get started when it comes to this concept of getting organized with your student loans?

Tim Church: Yeah, I mean, you really have to know what you’re facing before you can even talk about what your options are because those options are largely dependent on the types of loans that you have, also your employer as well. But really getting down into the specific types of loans one has, how much those loans are, the interest rates, all of those things are really important as you break this down. Most pharmacists that are graduating are going to have federal loans. So loans that are funded through the Department of Education and then through one of their servicers. So that information is available through the NSLDS. So there’s a number of different ways that people can get that information on their federal loans. But the easiest way is to go to StudentAid.gov and log in and put in your information and then whether you’re looking at their loan simulator or just your account itself, you can get a really nice quick snapshot of all of your loans that you have that are outstanding, your servicers, your interest rates, that kind of thing. And then some people beyond federal loans, they’re going to have private loans as well, and that’s — I mentioned in the last podcast episode that I had some private loans through undergrad that I still had to consider when I was paying back everything. Although they had a similar servicer, they were not — they were private loans, some of them were. So they have a little bit different in terms of the strategy that you’re going to consider for those. And then I think other people, sometimes they forget do they have loans to family members? And I think it’s really important to keep that in mind too because all those things are going to play into when you develop that strategy and come up with all of those options.

Tim Ulbrich: Tim, as I read Chapter Two, “The Key Payoff Strategies,” you know, the first thought that came to mind was, my gosh, I wish I would have had this as I was in school or navigating residency, you know, going through that period of ultimately should I defer? Should I not? I’m in the grace period, I need to choose. And I ended up going the standard, default 10-year repayment. I’m grateful we got through them quicker than that, but it really cost us a lot of money as we already talked about. I could have went PSLF, I could have refinanced. So unfortunately, this is so difficult to navigate. You do a great job in Chapter Two talking about the key payoff strategies. My question here for you is there a common mistake or two that you see pharmacists making when it comes to their student loans and the repayment strategy and decision that they make?

Tim Church: I think the biggest one, Tim, is when I ask somebody, I say, “Well, what is your student loan strategy?” And they’ll come back to me and they’ll say, “Well, I’m in the standard 10-year payment,” or, “I’m on an extended repayment plan,” or, “I’m on Revised Pay As You Earn repayment plan.” And I say, “Well, that’s not what I asked. I said, I asked what your strategy was.” And this big misconception as to repayment plans being strategies I think is the biggest mistake that I see people make. And whether it’s through the federal system or a private lender, your repayment plan is just dictating what the minimum payments are for a specific term. It’s not necessarily an overarching strategy on how you’re going to best tackle your student loans. Now, when you pick one of those strategies, you may utilize one of those repayment plans as the way that you’re navigating that strategy. But that’s not the strategy itself. You have to really look at what is the math behind the overall strategy? And when we talk about some of the big ones, you know, there’s forgiveness, there’s non-forgiveness, and that’s basically kind of opened the door to anything else that’s out there that isn’t a forgiveness option. And then within that, there’s obviously many options, whether you pay it off through the federal government or whether you refinance and pay it through a private lender. And then within those options, you have the different repayment plans. But even though you’re committed to a repayment plan doesn’t mean you have to make those payments. You could make extra on those payments. So there’s really — you have to look very broadly about what those options and strategies are. And then you have to really get tactical about how you’re going to execute those.

Tim Ulbrich: Great stuff. And let’s talk about one of those options in a little bit more detail: PSLF, which you talk about in Chapter Three, “Public Service Loan Forgiveness.” And we know that many pharmacists like you may be eligible but haven’t chosen this path for a variety of reasons. Perhaps they’re not aware, they’re scared of the unknown, they don’t want these loans hanging around for 10 years. And as you say in the book, “It’s honestly hard to find anything positive in the media about the program, especially when 99% of borrowers who apply for PSLF are denied.” So my question to you is why are we even talking about it? You know, when you look at a headline like that, where does PSLF come to play? And is this an option that perhaps more people should be considering?

Tim Church: Yeah, I mean, it’s hard to argue with the math behind PSLF. If you have standard student loan payments that you’re coming out with, you know, the average pharmacist is going to borrow around $170,000. For a private school, it’s going to be much more, when you look at the amount forgiven and the amount that you have to pay over that time, you just can’t argue with the math. I mean, there’s simply — unless you’re getting a tuition reimbursement plan where they’re basically just giving you free money, even if you were to refinance and pay the loans off faster with lower interest rates, you’re still never going to be able to compete from a math perspective with what you’re going to get if your loans are forgiven after 10 years, mainly because that amount forgiven is going to be tax-free. So it’s not going to be counted as income, any amount forgiven. But then also, within PSLF, you have options to even lower your student loan payments as you’re building your net worth and as you’re putting money in retirement accounts since your payments are going to be based upon your Adjusted Gross Income. So you just really can’t argue with the math. The only time that it really doesn’t make sense if you came out with a very small debt load where nothing would even be forgiven if you were making payments.

Tim Ulbrich: Yeah, and for those that are wondering about PSLF, you know, should I be pursuing it? Should I consider it? Or in it and making sure they want to cross their t’s and dot their i’s, I would highly encourage you to get a copy of the book. I think it’s one of those things that has gotten a lot of negative press. And to be fair, I don’t think they’ve done a great job promoting the program. There hasn’t been consistent information and advice, especially from some of the student loan servicing companies. But I think as we’re starting to see this program evolve and obviously we’re now — let’s see, it started in 2007, first group 2017 have forgiveness, we saw a lot of negative press come out then. I think we’re going to start to see more and more people that are applying for and receiving forgiveness and hopefully some of it we’ll be able to feature on the show here soon as well. So make sure you get your information, make sure you know what you’re trying to do from a strategy standpoint but also that you’re following all the PSLF rules as that, of course, is critically important. Tim, in Chapter Five — and we’re just scratching the surface of some of the things that you talk about in much, much more detail in the book — Chapter Five, “Non-forgiveness and Refinancing.” So you know, essentially if somebody does not choose the forgiveness route, whether that be PSLF or non-PSLF — and we’re not going to talk about non-PSLF here, but you talked about it more in the book — if they don’t choose forgiveness, we’re really looking at a good old strategy of just paying them off. So what options then exist here in the federal and the private sector if somebody is not choosing the forgiveness route?

Tim Church: Yeah, I think this is a tough one to consider because you have so many different options in terms of repayment plans and whether or not you keep your loans with the federal government or whether you refinance with a private lender. But then not only that, you have to determine your strategy in terms of what does your timeline look like? So you could accomplish the same timeline whether that’s through federal or private. But you have to really then take this in context with all of your financial goals since largely, it’s going to depend on when you pay this off is your payments that you make towards it. So obviously the bigger your payments that you make, the faster you’re going to pay off your debt. However, the more that you pay towards your student loans, there’s obviously an opportunity cost to other financial goals such as retirement, saving money for a house, going on more vacations from a lifestyle perspective. So I think this one is really tough because yes, you may choose a repayment plan. But what is actually your strategy within that repayment plan or within whether you’re paying them off federally or through a private lender? So this is really where you see all of those blog posts, all of those discussions, should I invest while I pay off my student loans? Should I buy a house while I pay off my student loans? And really, you know, there isn’t one correct answer that you’re going to find out there. So part of this is somewhat subjective. But within that chapter, I put some key points in there to really consider as you’re doing this because I think it can help figure out how far fast forward — how much do you want to fast forward that timeline? How fast do you want to pay them off? And you know, if you’ve listened to the podcast episode that my wife and I did, you know, for us, we were kind of in this situation once forgiveness, we decided against it at some point, which I didn’t really understand, but basically for us, you know, we decided we were going to get our matches through our retirement 401k equivalents and then also do an HSA. So we kind of decided to do both. You know, other people you’ve had on the podcast, they’ve basically every single extra dollar they had went towards their student loans. So obviously there’s some subjectiveness to figuring that out, but I think there’s also some considerations you have to put in there. You know, obviously if you’re somebody who is just out of school and maybe is more of a traditional age and has a lot of time to prepare for retirement and other life events, then you’re a little bit more aggressive. But that might — you may not have — time may not be a luxury that you have if you’re more of a nontraditional student that’s graduating. So there’s a lot of different I think considerations that help decide and guide you where you want to fall on that timeline.

Tim Ulbrich: Yeah, and I love what you said there, Tim, is that there is no one right repayment strategy. I mean probably one of the most common questions we get, you know, whether it’s submitted through the Facebook group or an email or when we’re speaking or through the podcast, whatever, is hey, what’s the best repayment option or strategy? And you know, our answer is uh, depends, right? It depends. And what I love about what you’ve done with the book is you go through all of the options. But again, you present it in a way that if someone can layer their personal information on top of those options as well as how they feel and other life factors and other goals that you’re trying to achieve, when you get to the end of the book, the goal is that you’ve identified that one repayment option or strategy that is best for your personal situation and you can feel confident in executing that plan going forward. And speaking, Tim, of how to manage debt repayment with competing financial goals, I think you do an awesome job of this in Chapter Seven, talking exactly about that. How do you manage competing financial goals with student loans? You know, and here we’re thinking about — as you mentioned — obviously home buying or retirement. So talk to us a little bit about if you were sitting down with somebody who was reading this book, what would you not necessarily advise them, but what would you encourage them to think about as they’re trying to make this decision of should I go all in? Should I go in Tim and Andria Church-style of $6,667 per month on average to pay off $400,000 over five years? And I know you guys did a little bit of balancing of other things. Or should I spread this out among other things that I’m trying to achieve? How would you talk somebody through this debate of how do I compete multiple financial goals while I’m also thinking about debt repayment?

Tim Church: I mean, I think the first thing I would ask is how emotionally weighing are the loans? I mean, for a lot of people — and there’s studies out there that show this, that student loan debt can cause you to have insomnia, it can cause depression and other emotional situations for people. So I think that actually has to be part of that equation because if you’re somebody that really is being affected and even though you have the knowledge and equip yourself, despite knowing that, it’s not going to change some of those negative thoughts and feelings you have, then obviously that is something that has to go in when you’re figuring that out in the context of all your other financial goals. I think some of the other things are do you have really high interest debt that you’re comanaging with student loans? So if you’ve got credit card debt, you know, in the 20%, 15%, I mean, you have to really look at other high-interest debt and maybe knocking that out first before you go really aggressively. And you know, the other thing I think about is an emergency fund. I mean, along the way when Andria and I were being super aggressive with our student loans, I mean, we had some things come up that we never expected. So we had big car repair payments that we had to make. You know, one time I think Andria’s car was like $3,000. She has a Volkswagen Rabbit and there was some like very specific part that you had to get from the dealer or something like that, and it was just crazy. So it was like a huge hit. So we’ve had that, we had some medical issues come up along the way. So I think before you’re going to go super aggressive, I think you have to make sure you have a cushion there in case anything else comes up because even if you’re planning to pay your student loans off on a specific timeline, I mean, there’s really other life events that can come up that can kind of knock you off whatever your anticipated payoff date is going to be.

Tim Ulbrich: Yeah, that’s great. We’ve talked a little bit about that earlier on the show, I want to say back in the 20s. It might have been 026, Baby Stepping into a Financial Plan, thinking about things like consumer debt and emergency funds and how those fit in as really building that foundation in which you lay upon student loan repayment strategies, investing and home buying, other goals that you’re trying to achieve. One of the things too, Tim — and I want to just mention for a moment knowing the times we’re in right now obviously with the COVID-19 pandemic, in Chapter Nine, you talk about how to handle student loans during job loss or hardship. And I think this really comes at a good time. And we’re going to be supplementing the book as well with some additional information related to the CARES Act and student loans specific to this moment in time that we’re in. But I think this is an area that we don’t talk a whole lot about. You know, we talk about those that are doing well, making big, big, big student loan payments, but we don’t talk about those that might be in a situation that job loss, hardship, and how do you handle that? So what words of encouragement would you have for folks that are — find themselves in the moment in a financial hardship or in a job loss situation about what options they have related to their student loans?

Tim Church: Yeah, it’s a great question, Tim. And unfortunately, a lot of people have been in that situation. And some people have defaulted on their loans, and it can get as bad as having your wages garnished. I mean, there’s really a lot of power that the federal government has in terms of taking money from you if you’re delinquent. But the reality is that things are going to come up and some people, even pharmacists, are going to face these situations. Now, I think the good news is that if you have federal student loans that there are a lot of options within there to kind of temporarily manage the situation. So hopefully whatever the situation may be, it’s just a temporary one and you need to kind of put pause on your student loan plan and strategy and just kind of make it until you can either find another job, get your income back up, or whatever that issue may be that you’re dealing with. So I think the easiest one — well, let me take a step back. I think it also depends on kind of what your strategy is because that may also dictate some of the things that you’re doing. So fortunately that if you’re in a forgiveness plan, you’re going to make income-driven repayments. So those may also — those may already be somewhat manageable, so maybe nothing really changes for you in the meantime if you’re able to at least make those payments. So I think that’s always a great option on what to do because if you can still make those payments, especially if you’re in forgiveness, they still may actually count, depending on what your situation is. But you know, last resort, if you can’t make a payment, even on an income-driven, they do have forbearance where basically you can put pause on making any payments on your student loans. Interest will accrue during that time. However, this is — I’m talking about this aside from what’s currently happening with COVID where this is an unprecedented situation where it’s more of an administrative forbearance where interest doesn’t accrue and you don’t have to make student loan payments during this time. So it’s a little bit different. So I think you have definitely quite a few options if your loans are held by the Department of Education. Now if you have private loans, the equation changes quite a bit because you’re really dependent upon whatever that private lender, what they have established. Now they may be willing to work with you, so it may be some kind of a forbearance option and maybe a change in the term or the repayment plan that you’re currently on, and some of the refinancing companies, they do offer income-driven repayment options or somewhat of a forbearance. So there are some that have options, but it’s really up to them in determining what they can do for you at a particular time. So really depends on that situation. But yeah, I mean, the good news is that a lot of these situations are temporary. But there are options that exist. And that’s kind of what we talk about in the chapter is like really trying to think through how can you have the most minimal impact on what your overall strategy is because like I said, you may have to just put pause on it for the time being.

Tim Ulbrich: Yeah, I think you do a great job of that in Chapter Nine, How to Handle Student Loans During Job Loss or Hardship, and I think again, a good consideration — hopefully certainly we don’t want people to be in that situation, but if they are, to understand the options that are available. So there you have it, the latest from Tim Church, “The Pharmacist’s Guide to Conquering Student Loans: How to confidently choose the best payoff strategy that saves you the most money.” And so if you’re somebody listening that you feel overwhelmed with your student loans or perhaps confused by the repayment plans that exist, many of which we talked about here today, if you’re unsure if the strategy you have in place is the best one, or maybe you’re feeling anxious about how to handle student loans during residency or during a financial hardship, this book is for you. It takes a very complicated topic, presents it an easy-to-understand and actionable way, all customized for the pharmacy professional, and written by somebody who’s done it. No theory, no case studies, but actual execution. So again, you can head on over to PharmDLoans.com and for the next week, you can pre-order your copy where you can get free shipping, reduced pricing, and access to exclusive bonuses. So Tim, I’m going to end with this quote from the very end of the book, which I think is a great summation of our conversation. You say, “Whether you’re facing $50,000 or $400,000 in student loan debt, the bottom line is you have options. Having clarity about your plan can take an immense weight off your shoulders, allowing you to focus on other financial goals and live your life. I know firsthand how difficult and overwhelming it can be looking at six figures of debt right in the face and trying to figure out what to do. Be intentional. Develop a plan. Execute. And adapt as necessary. And then enjoy the security and financial freedom of paying off those loans.” So Tim, congratulations on your work in this book. And thank you so much for taking time to come on the show to talk about it.

Tim Church: Thanks, Tim.

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YFP 149: Crushing $400k of Debt in 5 Years

Posted on by yfpadmin

Crushing $400k of Debt in 5 Years

Tim and Andria Church join Tim Ulbrich to talk about their journey paying off $400,000 of debt in 5 years. They share their motivation behind such an aggressive repayment strategy, how they did it and their plans now that they are debt free.

About Today’s Guests

Tim Church is the Director of Getting Things Done at Your Financial Pharmacist and a clinical pharmacy specialist at the West Palm Beach VA Medical Center.

He is also the author of Seven Figure Pharmacist: How to Maximize Your Wealth, Eliminate Debt, and Create Wealth and When Eating Right Isn’t Enough: The Top 5 Medications to Control Your Type 2 Diabetes.

Andria Church is a pharmacist and Assistant Professor of Pharmacy Practice at Palm Beach Atlantic University. She specializes in neuropsychiatric pharmacy. She is a native Floridian and an alum of the University of Florida and Palm Beach Atlantic University. Andria is also the one in the relationship that made sure fun money was set aside in the budget.

Summary

Tim Church, YFP’s Director of Getting Things Done, and his wife Andria join Tim Ulbrich on this week’s episode. Tim and Andria are both pharmacists and had a combined debt load of $400,000 in student loans. On this episode, they share their journey of why paying off the loans was important to them, how they paid it all off in 5 years, the hardships along the way and what their plans are now that loans are gone.

Tim and Andria expressed being on the same page financially was crucial for the success of their marriage. They had a lot of conversations about their finances before they were engaged. While Tim expresses that he may have not had the best approach to talking about how to tackle their debt, they found a balance that worked for them.

Their why behind paying off $400,000 so quickly came back to other financial goals they had with wanting to give generously, save for a house, have a family in the future, plan for retirement and be able to provide for their children and future generations of their family. When they had a difficult time with the sacrifices they were making to take down their debt, they would come back to their why to keep them motivated.

In order to achieve such an audacious goal, Tim explains that they had to pull every lever they could. To start, they minimized their expenses and didn’t make any big purchases. Andria and Tim lived in a one-bedroom apartment for the first 3 years of their marriage, didn’t have car loans and didn’t acquire any new debt. Then, they looked at how they could earn additional income. Tim took on overtime opportunities at the VA when it was available, worked special projects and had a moonlighting position for a year. All of this additional income was thrown at their loans. They also took advantage of whatever windfall money came their way, like bonus checks, and put it right toward their debt. Finally, Andria and Tim refinanced their loans multiple times over the course of 5 years locking in a lower interest rate each time. Of course, they also had to make sacrifices along the way. Andria explains that they didn’t take lavish trips, eat out a lot, or buy new clothes and accessories. While this was trying at times, Andria said that they had to check themselves to make sure they weren’t playing the comparison game with others in their field and had to remind each other that they were doing what was best for their future together.

Now that the debt is paid off, Tim and Andria feel like a giant weight has been lifted. They are focusing on padding their emergency fund, saving for a house and are hopeful they can give to those in need.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. It’s an honor to have joining me Tim and Andria Church to talk about their debt-free story and their journey of payin goff $400,000 of debt in five years. I’ve been waiting for this day to come for some time. Such an awesome story of persistence, of working together and how a clear why can help be the necessary motivation when you have such a big, long-term goal such as paying off $400,000 of debt. So Tim and Andria, welcome to the Your Financial Pharmacist podcast.

Tim Church: Hey, Tim. Thanks for having us.

Andria Church: Hi. Yeah, we’re excited.

Tim Ulbrich: So glad. And Tim, I don’t even know if welcoming — it’s your own podcast. I don’t even know if that’s like the right term. But excited to have you on.

Tim Church: Well, it’s nice to be on the other end sometimes.

Tim Ulbrich: That’s right. So Tim Church, take us back to the beginning. You graduated from NEOMed College of Pharmacy, you start residency training. What type of debtload were you looking at then? And had it hit you yet how significant this would be in terms of the repayment journey?
Tim Church: It just kind of felt normal at that point. I mean, everybody else was in a similar position. And I think right when I hit residency and the grace period had ended, I had accumulated debt from undergrad, three years of undergrad, and then also at NEOMed for the PharmD degree. And after all the interest had capitalized, it was pretty close to about $200,000. So like I said, it didn’t really sink in right in the beginning. I was kind of like, OK, everybody else has this debt. This is what everybody faces starting out, you know, no big deal. It will get paid off eventually.

Tim Ulbrich: And so Andria, when you meet Tim as I understand it if I remember this story right, you are still finishing up pharmacy school.

Andria Church: Yes.

Tim Ulbrich: Two years of residency still ahead of you. Were you thinking about the weight of the loans at this point in time?

Andria Church: No. I was a third-year pharmacy — well, no. I was in between my second and third year of pharmacy school when I met Tim and he had just finished residency. And so no, I wasn’t thinking about it because kind of like Tim said, everybody had — well, not everybody — but the majority of people had student loans. It was just something that you “had to do” to go to graduate doctoral school. And I remember in undergrad getting this advice. We had some professional financial person come and give a talk at a student organization geared towards students going into the healthcare field. And he had said something that just always stuck with me, which is probably why I didn’t worry about it. He said, “You need to continue to live like a student for the first couple of years after you graduate because you’ll get this massive paycheck and want to live the bigger lifestyle. But you’re going to have these student loans.” So in the back of my mind, it was always the thought, yeah, I’m going to continue to live below my means. So I didn’t feel the weight of it yet, but that’s also probably because I was still a student and I’m like, I just need to focus on graduating, I need to focus on getting a residency. So I wasn’t really thinking about the full weight of what it was going to feel like when I actually had to start paying it off.

Tim Ulbrich: And I know Tim’s good looking, but my gosh. You signed up for this. You said, I’ve got a lot of debt, he’s got a lot of debt, we’re in this together. But I want our listeners to hear, like how did you guys handle this conversation before you got married? And why was that so important to ultimately get to a point where you really treated the debt as ours versus it’s just my debt?

Tim Church: Yeah, it’s a great question, Tim. And I’ll be honest and say, before we got married and when things started clicking for me in terms of wanting to get into a better position and thinking about how I was going to pay off my loans and just making better decisions overall, I thought about this question very hard. And I knew it was going to be very important that if we were going to get married that we — even before we got married, we had to be on the same page with how we were going to look at finances and how we were going to make decisions together to reach those goals together. But the problem was is that in the beginning, I didn’t say it very nicely like that. I wasn’t thinking about oh, let’s look at our goals and dreams together. It was more like, hey, this is what’s going to happen. And are you on board? So I’ll admit that I had the worst approach that you can have with finances and being in a relationship in terms of how to figure out how to be on the same page and know that that’s going to work together because as you mentioned, like it’s a really important part of a relationship. And a lot of marriages and things like that suffer because people cannot come to agreements.

Andria Church: And we were doing — we had that conversation before we were even engaged. We knew that we were on the path, we wanted to get married. And so we started doing a prep for marriage at our church, and there was a financial component. And then we wanted to also take a finance class. And so that very eloquently delivered line from Tim happened before we were even engaged. And it was — it was a large argument that at the time was very frustrating that now we can laugh at because we ended up being on the same page. But yeah, it was just kind of at the time, he got more on board with it first before I did. I, again, I don’t think I had full understanding and I’m thinking, oh yeah, I’ll have to make sacrifices. But I’ll still be able to have some fun and buy things that I want whereas Tim’s like completely gung ho and is ready to just give up everything.

Tim Ulbrich: So Andria, to that point, in all seriousness, we talk — and I give Tim a hard time — but we talk on the show about he’s the all-in kind of person, right? I mean, Tim Church operates at one level, and that’s full speed, you know, whether that’s the awesome work he does with YFP, paying off student loans. And I want to talk about this for a moment because I think, you know, both sides of this, it’s really important to understand how to effectively work with the other person. And what advice would you have, Andria, for those that are listening that are trying to work with this, on this financial piece, whether it’s student loans or another part, and they’re doing it with somebody esle that is all-in, kind of one speed? What advice would you have to make that work from your perspective?

Andria Church: Well I think just reminding the person that it’s about striking a balance. Like it took me some time to realize that we were — we wanted the same goals and we both agreed that being on the same page about our finances was critically important for the success of our future marriage. But I think it’s coming to a middle ground, somewhere in between there, realizing that I needed to get a little bit more on board with his point of view but that he also needed to do the same with mine, that if we were just so gung ho all the way in that direction that we were not going to have any enjoyment or celebrate things throughout the course of those first couple years of our marriage that were worthy of being celebrated, you know, that maybe didn’t — we weren’t going to have a big blowout celebration and go on a big trip, but maybe splurge a little bit on a fancy or something like that versus if we would go all the way to my side, we would not have paid off the loans in five years. So we needed to both reach a middle ground. And it took awhile, a lot of conversations, a lot of really meaningful and long discussions. And over time, honestly just through practicing and just having open communication with each other, we reached that middle ground. I’m way better and more in line with the finances than I was when we were having those initial discussions. And Tim will also be one to admit that he’s glad that I forced us to have some fun and take a moment to pause and really celebrate those small victories that we were having, whether it was getting the student loans off, celebrating our anniversary, or just those things that were really important during those first five years of marriage that we can’t go back and redo. So it was just, honestly just having open communication with each other and expressing frustrations and how we feel about the situation to really ultimately work together and be successful.

Tim Ulbrich: Yeah, and I’m so glad, Andria, you know, the word that I took away from there was really balance. And I love how you framed that in the first five years of marriage. I mean, obviously there’s strength in being in the position you are now going forward. But making sure — I mean, that’s no short period of time. It’s not like you guys were paying this off for three months. I mean, five years. And it’s a lot of money. And we’ll talk about more of the numbers and the x’s and o’s. But I think striking a balance. So Tim, as you reflect on this journey with that word balance in mind, you know, when you look back, what are some of the things that helped you get to that point of finding that balanc? And perhaps what would you go back and tell yourself to maybe be more balanced even early on?

Tim Church: Yeah, I think one of the things that we did was after we paid off about $10,000 in student loan debt, we tried to have little celebrations, like Andria said, going out to dinner, maybe even doing like stay at a hotel down in Fort Lauderdale, not too far away, or something like that. And I think the other thing that really helped is one thing that we tried to still do during this time is go and visit family and friends but do it in a very frugal way I’ll say and just be very tactical about how we did that. So I think that was really important, like reflecting back. If I could say what is the one thing that I would not have changed was that and probably should have even considered doing more of that because those are the things that really, we’re never going to regret because we can’t get the time back.

Tim Ulbrich: Love it. Love it. So let’s transition, Andria, to the why for the two of you. We talk about this on the show all the time, the importance of having a why and motivation behind your financial plan. And here, we’re talking about paying off a massive amount of debt and, again, no small feat, five years, lots of difficult conversations. So so important to have a why and a purpose. For you and Tim, what is the why? What’s the motivation behind so aggressively paying off this debtload and getting to the point of being debt-free?

Andria Church: I think the why was just that we had other financial goals and desires that we have for our life together. We wanted to be able to give generously and abundantly to all of those around us and even people that we didn’t know. And in order to do that, we knew that the debt needed to be gone. And it also just was this constant weight that we felt on our shoulders that it was there and felt like we couldn’t really fully enjoy things or take certain luxuries because we would look at it and say, “OK, is this a need to or a want to?” You know, a have to or a want to. And we had to make some of those tough calls that if it wasn’t a have to and it wasn’t a true need, you know, putting that money then towards the debt in the long run, that was going to help us get to those goals quicker. Aside from being able to give abundantly to others, being able to get a house and plan for our future family and retirement, I mean, really long-term vision goals and just also being able to want to provide for our future children when they go off to school and even thinking about grandkids and like just the future generations of the family that we would be creating together. So all of those things was really the long-term vision, even though sometimes on the day-to-day grind, it was hard. You might lose sight of those and think, why are we doing this? Maybe we should just spend a little bit more money. Is it really going to make a big deal in the long run? And I think what really kept us on track was that big why and the fact that we both were on the same page about it and felt the same way and wanted to achieve that goal together.

Tim Church: Even though we had disagreements along the way.

Andria Church: Yes. Not to paint a rose-colored vision of it because yes, there were disagreements.

Tim Ulbrich: And I hear there’s a cat in the future? Is that true? Now that we’re debt-free, is that happening?

Andria Church: Yes, that was the long-term promise that I was going to be allowed to get a cat once we were debt-free, even though despite my best efforts to convince Tim that we needed a cat much earlier on in our marriage. Yeah, that is a goal that is happening.

Tim Ulbrich: That’s awesome. Tim, let’s talk x’s and o’s for a minute when it comes to repayment. You know, you’re the student loan expert, and we’re going to talk a little bit in a moment about the book that you have coming out. And we talk all the time on the show about there are so many options in the federal system. You’ve got forgiveness, non-forgiveness, income-driven repayment, standard 10-year repayment. Then you’ve got the whole host of options in the refinance market. And how overwhelming this can be. So when we talk about $400,000 of deb tin five years, what was the repayment strategy? And as you look back, was that the best one?

Tim Church: Yeah. In the very beginning, I didn’t really know what all my options were. And unfortunately, we didn’t — I didn’t have a strong background with my family, friends or people that were very knowledgeable about this area nor did I have a very strong capstone or discussion, really, on student loans and what those options were. So you know, for the longest time in my mind, it was just kind of get rid of them as fast as possible, you know, however you can make it happen. When I look back at this point — and I talk about this in the book obviously with my story — that not considering forgiveness given my situation was a big mistake. I mean, it really costs — there’s a huge opportunity cost to not doing that. It’s great that the debt is paid off and it’s no longer here, but I probably could have been in a better financial position after 10 years than after being in — after the five years that we were married. So there were definitely some things that I reflect on and would say I wish I could have went a little bit of a different way. However, being intentional about trying to get rid of the student loans as soon as possible, you know, we basically utilized, pulled every lever, used every tactic that we could. So obviously the biggest thing is how do you cut back on expenses? How do you minimize those? So one of the key things I think that really helped for us is really looking at those big purchases. So we lived in a one-bedroom apartment for the first three years of our marriage. And you know, we live in south Florida, so it’s definitely not cheap to live here. It’s not as expensive as some other areas, but it’s certainly not cheap. But we made that big sacrifice and definitely got a lot of questions about why we were doing that based on our income. But I think that was actually really huge because we were able to save on those costs. We never — once my car was paid off really early on in the first year of marriage, I think it was right around there, we didn’t really have any car loans, so we had no debt coming from there. So I think we were very fortunate that beyond — really, we just had the student loans that we were working with and didn’t acquire any new debt with credit cards or other things like that. So starting out, those were kind of some of the big tactics. And then I would say the other one along the way was just looking at ways that I could earn additional income. So I did work overtime when it was available through the VA. I took on different special projects that came up. And then I eventually did a moonlighting position for about a year and a half. And that really helped accelerate things because I was just chunking all of that additional money towards the loans, so just making as big of payments as possible. And then I would say — so if you look at those as being kind of the top big strategies, then there’s a couple other things that I think really were in our favor during this time. So what do I mean by that? Well, one of the things is really taking advantage of windfalls. So you don’t know exactly when you’re going to get bonus checks. You don’t know when you’re going to get unexpected money like cashing out a life insurance that you might not necessarily need or stock options you didn’t know that you had that are not in retirement that you don’t really want anymore or for the time being it’s more important to pay off the loans. So all of these things that we never expected were going to be given to us, we really took those and just threw it right at the debt. We never even thought about it as well, how could we spend that money? It was just like, let’s put a massive dent in this student loan — in these student loans. So I think that was key. And then finally, one of the things is obviously refinancing for us. We did that multiple times throughout the five years. And when you look at it, the amount of interest that you pay can be pretty massive. I mean, looking back for awhile, federal student loan interest rates were anywhere in the 6-8% range. And that can really tack onto those payments that you’re making every month. So it makes it hard to really attack the principle. So we were very fortunate that throughout that five years, we continued to find better rates each time that we refinanced. So even though it wasn’t I would say as huge of a lever as some of the other things that we did, it was still really important and really helped us accelerate.

Tim Ulbrich: Yeah, one of the things, Tim, I love that you said in that was having clarity on where windfalls would come. And you gave some great examples of that. And to me, that goes back to being crystal clear on your goals and having a prioritized list of goals so when that windfall comes, you know exactly what you’re trying to achieve with that and then it feels like you’re hitting the accelerator on that goal, which I think just further provides momentum, obviously. One of the things I want to pull from the book, Tim — and we’re going to talk about this on an upcoming episode in much more detail — so for those that don’t yet know, we’re getting ready to release “The Pharmacist’s Guide to Conquering PharmD Student Loans: How to confidently choose the best payoff strategy that saves you the most money” written by Tim Church. And in there, you say — and this comes from the introduction — you say, “but once that highly anticipated moment had come and gone,” referring to hitting submit on that last payment, “feelings other than happiness and relief set in, ones that I didn’t necessarily expect or want. I was angry and frustrated. I had some major regrets.” What I love about that as I read through the book is I feel like you’ve evaluated and understand all of the options that are on the table. And obviously here you are on the back end, you’ve got an awesome success story and certainly a bright future ahead. But I think by navigating this, by understanding the ins and outs of all of these repayment options, you’ve been able to package that in a way that is very easy to understand for a topic that is not so easy to understand. And so we’ll talk more about the book in an upcoming episode, but I think you’ve got some great wisdom in there. I’m excited to share that with the YFP community. So Andria, $400,000 of debt in five years. So I want to break this down for a minute. That’s $80,000 per year on average, $6,667 per month on average, $1,538 per week on average, and $219 per day on average. I had to triple check my math when I did that because I saw those numbers and I’m like, oh my gosh. $219 per day on average over five years. That’s really incredible when you think about how accelerated that is and obviously how much of that was ultimately going to principle to be able to minimize the interest that was accruing. So question here is when you’re doing that, even on two pharmacists’ income, it doesn’t matter. That is big sacrifice. We’re talking about $6,667 per month, which essentially for many pharmacists is about the equivalent of a full pharmacist’s salary net income going towards student loan debt. So talk to me about the sacrifices that you had to make to be able to pay off that much debt and obviously free up cash flow each and every month to get there.

Andria Church: Well as Tim mentioned a little bit ago, both of our cars had been paid off. So we did not go out and get new cars. We’ve had — my car is, she’s going to be 11 this year. And Tim’s is a little bit younger but also getting up there in age. So we still have the same cars that we’ve had all this time. So didn’t buy new cars, didn’t go and buy a condo or a house, didn’t go on big lavish trips, even though it’s a goal of ours to travel throughout the United States and internationally. As Tim said, we would take trips to visit family and friends, those critical moments that we didn’t want to look back and miss out on. But taking a dream trip or a trip for extended periods of time, that didn’t happen. For me, buying clothes or accessories or other things that I wanted, that didn’t happen either. And same for Tim, although Tim is less into stuff. I will admit that I am a stuff person. I like things, even though I like experiences too. And you know, also just simple things like cutting back on going out to dinner. We realized so quickly how expensive food is. Not just groceries, but just eating out. And also for me too, I love going out to get coffee. So also having to scale back on that and realizing I can’t be going to buy coffee every day outside of the house. And so something as simple as that, which is just a couple of bucks, right? But that adds up. And Tim would always say something to me that sometimes would resonate and kind of snap me back into reality, you know, death by a thousand cuts. Like I would say, “Oh, it’s only $5. What’s the big deal?” But $5 over multiple periods of time, you know, that could really add up. And so it — it was thinking about the why, it helped stay motivated, helped us stay motivated and helped keep me on track. But there were definitely days where I had the fear of missing out, the FOMO that I would look at our friends or other people who were pharmacists that were friends or other healthcare professionals, people making equal salaries or more to what we were making and just feeling like are we ever going to get there? How old are we going to be when we finally — what I felt like was really start our life? Like are we just going to be in this one bedroom, one bathroom apartment forever? We couldn’t have people stay with us. It was always a challenge and having grown adults sleeping on an air mattress just at a certain point just seemed ridiculous. So it was hard. I’m not going to pretend like even though we were on the same page that making these sacrifices wasn’t a challenge. And we had to constantly remind ourselves to not play the comparison game. And certainly in the day and age of social media, it doesn’t help. And you really have to put yourself in check and just say, “OK, but this is what Tim and I are doing. This is what we’ve decided together that we want to do for our marriage, that we want to do for our future. And in the long run, isn’t that what’s more important than the outfit that I really feel like I need but that I don’t really need?” You know? Is that more important than throwing money towards the student loans. So those were just definitely some challenges that we had to really look at and face and talk about. And we shared that with each other, frustrations like ah, I wish we could go do this or buy this or have this. And OK, yeah, but babe, remember we want to stay on track. And ironically, there were moments where I was the tougher one, reminding Tim and saying, “OK, babe, we can’t be spending that money on that. We need to put it towards the loans.” So yeah, it was tough.

Tim Ulbrich: Such wisdom there, and I hope our listeners are encouraged by that and hear the reality of obviously the excitement and the joy but also the challenges along the way. Now, being in south Florida before and having been able to experience the famous Pub Sub from Publix, I honestly — I don’t think I could control myself to cut that out of my budget. So kudos to you guys if you were able to do that. But for those that haven’t been to south Florida, haven’t been to Publix, it may be worth the trip just to go there and get the Pub Sub from Publix. So Tim Church, let me ask you about kind of handling the debt in the context of other goals. So obviously I’ve got a little bit of an insider view in your story and I know that you were ultimately able to refinance to a really, really low interest rate with First Republic and that offer. And so I think some people may struggle with should I — if I have a really low interest rate, should I be going all in on the debt? Or when I get to a fixed interest like that that’s so low, should I be prioritizing other goals like saving for the future? So talk to us about how you found that balance and ultimately came to that decision.

Tim Church: Yeah, I think early on when we first started paying off the debt, it was kind of like, forget retirement, forget everything else, we’re going all-in. And you know, once we kind of realized how long we were going to be in this, we really didn’t want to go five years without putting any money towards retirement. So one of the things that I think was great along the way is we were still saving for retirement. So we both have matches at work, so we made sure that we contributed enough to get our matches. And then we also did a fully funded Health Savings Account every year that we were able to and that I had it because, you know, really looking at that as another retirement account but also some of the tax benefits. So that worked for us. And I know everyone has a lot of different opinions about how aggressive to kind of be on that timeline. You know, you have a lot of people that will prolong the time to pay off their debt because of the other things. And you know, we wanted to kind of find a balance that worked for us. So we were still doing something but also really after that being as aggressive as we could. You mentioned in that final year, so we didn’t even know about First Republic, and they’re a bank that’s in very specific locations, so New York, south Florida, California and some other areas. But they offer ridiculously low interest rates. So we actually — it was on Andria’s loan, but we were obviously as you talked about were paying it off together, that her loan for a five-year fixed interest rate was down to 1.95%. But what’s crazy is not only that, they will pay you back up to 2% of the interest that you pay if you pay it back within four years, which is like unheard of. So that was actually a struggle. We actually had quite a few discussions about that, like look, we could start saving, getting a down payment on a house, going let’s let these ride for four years, pay it back over four years because the interest rate is so low. I mean, that really was a tough decision. I mean, to go, still go all-in and pay that off. And I think what we ultimately came to the same conclusion is, yes, there are certainly benefits there. But that emotional weight and that anxiety that the loans were still having on us, getting rid of that outweighed any potential mathematical advantage behind it. And obviously sometimes it’s tough for somebody from the outside to look at that, but that was really kind of where we were.

Andria Church: And we just felt like we could see the end of the finish line. And so like what Tim was saying is just knowing OK, yeah, we could hold onto it. But we’re so close. And we’re just like, let’s just get this out of our lives, that that meant more to us than yes, possibly being able to prolong the loan payoff and save for a house, for example. We just, we had put it in our mind that this was something that we were going to do, that we wanted to definitely have it paid off before we had any kids, which of course we’re like, OK, we might not have control over that, but that was like a goal we really wanted. And so it’s like, let’s just meet this goal. We want to get this over with.

Tim Ulbrich: And I think, Tim, you do a nice job of this in the book, you know, talking about obviously the x’s and o’s and strategies but layering on top of that the emotional part, the things we talk about: How do you feel about the debt? And what’s the momentum and the velocity of that momentum worth? And it’s hard to put a dollar amount to that, but it has to be evaluated as one is considering the repayment strategy. So Andria, we have the class of 2020 that is coming out as we publish this episode. And I think they’re coming out in very unique times obviously with what’s going on with COVID-19, some uncertainty around the job market and obviously just the challenges and the times that we’re in, high debt loads, all the variables we know that they’re facing. And certainly we know they’re going to do great things with the opportunities they have as well. What advice would you have — looking back several years when you walked across that stage, what advice would you have for those students that are coming out in the class of 2020 as they get ready to make this transition into new practitioner life?

Andria Church: I would say to definitely consider all of their repayment options, kind of like Tim alluded to that he feels — has regret over not making certain decisions. And I was in the same boat. You know, we both were like, let’s just get it paid off, which there’s nothing wrong with that but just really researching and kind of digging down to figure out what are their options depending on what career that they are stepping into. Is it the private sector? Are they going to be working for the government, etc.? And then two, just also being willing to make some sacrifices that you’re going to step into a job that has a huge salary and it’s going to look very glamorous. And when you get that paycheck because it’s going to be more money than likely you’ve ever made, and the pull, the lifestyle tug is going to be there, the FOMO, you know, maybe peers that didn’t have loans that are living it up a little bit bigger because they’re financially able to. That tug and that temptation is going to be there. But that — just to think about what are your long-term financial goals? Do you want to have this debt hanging around for decades? Or are you willing to make some sacrifices? You know, yes, celebrate this huge victory that you just did, that you earned your PharmD, that you’re getting your first big adult job or maybe it’s your second one if it’s a second career. Celebrate that. There’s nothing wrong with that. Treat yourself a little bit. But be willing to make some sacrifices and not compare yourself. As long as you are on the right track and you feel like you are being a good steward of your money, then that’s what really matters. And if you’re in a relationship with someone that you and the other person are also on the same page with your finances. So to me, it doesn’t matter if you’re — it’s just you or it’s you and another person, that you’re making the best and smartest decisions for your financial future.

Tim Ulbrich: Awesome. I love that. Tim Church, so we go back to the numbers here. $6,667 per month on average over a five-year period to pay off $400,000 of debt. You hit submit on the last payment, you no longer have to send in on average $6,667 per month. So what’s the game plan going forward? What goals are ahead as you guys look at kind of this life after being debt-free?

Tim Church: Yeah, I mean, like I said, I had some bittersweet thoughts after it kind of happened. But I mean, it definitely just feels like an immense weight is off of us. And it’s just nice that that payment’s not automatically drafted out of the bank account. And so I mean, one of the things is obviously we let loose a little bit. You know, Andria wanted to have a little bit of a shopping spree, so we made that happen. You know, we’ve done some things that we wanted to do that weren’t as intense. So that was really nice. And then really padding the emergency fund was our next big goal that we wanted to do. And then really right after, as we kind of finalized and get that buttoned up is really the next thing is going for a house is one of our big goals.

Tim Ulbrich: Time to be on the offense, right? It’s exciting times.

Tim Church: Yeah. And I think the other thing — and Andria mentioned this a little before — is just the ability to be more generous. I mean, I think that everyone is coming from a different position. But I think that when you have a sound financial plan and you’re in a position to give and help others, you know, that’s something that we truly believe in. And sometimes that may be something that’s planned for and that is continuous, but there’s also going to be opportunities that you may not even know that are going to come up, whether that’s family members, friends or complete strangers you don’t know. And that’s something that we’re looking forward to, to be able to do that.

Tim Ulbrich: I love that. And thank you both so much for taking time to share your story. I know it’s been an inspiration to me and it will be to many in the community, whether those that have achieved that journey or are in the midst of it or students that are listening and thinking about what’s ahead. So proud of you guys for the journey that you’ve had and excited for what lies ahead for your family and those that are going to be positively impacted by your generosity. So thank you so much for taking time to share your story.

Tim Church: Thanks, Tim.

Andria Church: Thank you.

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YFP 148: How One Couple Got Started in Real Estate Investing

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How One Couple Got Started in Real Estate Investing

Jenny and Myke White join Tim Ulbrich to share their journey into real estate investing. They talk about why they feel like real estate investing is a good fit for them, how they got themselves financially ready to purchase their first property, the good and the bad of owning an investment property and future goals they have for building their portfolio.

About Today’s Guests

Jenny and Myke are both originally from Colorado Springs, CO; they’ve been together for the past 10 years and married for the last 6. Jenny attended Creighton University through the distance program and was awarded her PharmD in 2017. During her time as a student, she interned at Multicare Auburn Medical Center. After graduating, she completed a PGY1 residency at Providence St. Peter Hospital in Olympia, WA and then went on to take a position as a night pharmacist at Multicare Covington Medical Center. Currently, Jenny is working as an assistant professor at William Carey’s School of Pharmacy in Biloxi, MS. She divides her time at Keesler Medical Center, her clinical practice site where she practices as an ambulatory care pharmacist. Myke has been serving in the United States Air Force for the past 12 years. Five and a half years were spent at Luke AFB, AZ, where he worked as a Project Manager. He was the IT contact for both new facility construction projects and renovations, ensuring that customer and contractor support was above reproach, and milestones were met. Five and a half more years were spent at Joint Base Lewis-McChord, WA, where he worked Client Systems, which is usually referred to as the “Geek Squad of the Air Force”. He is currently a Technical Training Instructor at Keesler AFB, where he trains both recent Basic Military Training graduates and re-trainees before they begin their career as Client Systems Technicians.

With Jenny being a new graduate, the thought of paying down school loans was always in the back of her mind. Her night shift schedule really allowed her to start researching ways to create more income besides just working additional hours. During this time, she stumbled across Rich Dad, Poor Dad, which completely changed her mindset on building wealth and developed her new focus of creating passive income through real estate. After sharing her vision with Myke, he also became fascinated in beginning this journey to change their life trajectory in a major way. Shortly after finding this new passion for real estate, they received military orders to Mississippi. This initially came as a huge shock to them, but it truly was a blessing in disguise. Selling their house in Washington’s hot and expensive housing market gave them an opportunity to benefit in Mississippi’s much more affordable housing market. Jenny and Myke hit the ground running to find an investment property in August 2019 and were able to close on their first duplex that December.

They have 3 dogs, enjoy fitness, and love to travel.

Summary

Jenny and Myke recently moved to Mississippi from Washington state. They had planned to stay in Washington for a couple of more years, however, Myke, who joined the Air Force in 2007, received orders to move.

Jenny, a pharmacist, brings the student loans to the table in their relationship and felt responsible to find a way to bring more money in to pay them off. After pharmacy school, Jenny worked a 7 on/7 off schedule which allowed her to work per diem at two other hospitals. She wanted to figure out how to increase their cash flow and create passive income instead of having to work more hours. After readying Rich Dad, Poor Dad she realized that she could become a pharmacist real estate investor.

The couple works with Tim Baker, one of YFP’s CERTIFIED FINANCIAL PLANNERS™, and he suggested that she take the PSLF route in paying off her loans after hearing their financial goals. Jenny and Myke started focusing on saving money for a down payment on a real estate investment property with the extra money they had each month. They were also able to use the capital gains from selling their house in Washington to help with purchase their first property.

Myke shares that they dove into real estate investing because they can positively help other people while bringing in cash each month. They also want to be good landlords and take care of others. They closed on their first duplex in December 2019 and currently have one side rented. In this episode, they share what they’ve learned in the real estate investment process so far and what their future plans are.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. I’m excited to have on the show this week Jenny and Myke White to talk about their journey with real estate investing. Now, we have heard loud and clear from the YFP community that you want to hear more stories from those in the beginning stages of real estate investing. And this episode is intended to do just that, to share their journey into real estate investing, how they got themselves financially ready to go, what types of investing they’re doing, how it is going, lessons learned, and where they’re going from here. So Jenny and Myke, welcome to the Your Financial Pharmacist podcast.

Jenny White: Yeah, thanks for having us, Tim.

Myke White: Tim, it’s a pleasure.

Tim Ulbrich: Well let’s start with some introductions. Jenny, you first. And then Myke. Talk to us a little bit about your background, your careers and the work that you’re doing right now.

Jenny White: OK, so my name’s Jenny White, and I’m the pharmacist in this marriage. And so we actually met Tim Ulbrich through the other Tim, who’s been our financial advisor for the past year. I was starting my pharmacy career in Washington state, where I worked as an intern. I was actually part of Creighton’s distance program. And so once I graduated, I did my PGY1 residency at Providence St. Peter and then went on to work for about a year with multicare as an overnight pharmacist, so working in the ED and primarily MedSurg. And then we kind of had a change of plans, so we were in Washington for about six years during my whole time being a pharmacy student and then my pharmacy career. And then Myke, who will introduce himself here shortly, is in the Air Force, and we got orders to Mississippi, which changed things dramatically for us. ANd so now I’m actually an assistant professor at William Carey University. And so I split my time being a faculty member for the pharmacy school and then working at Keesler Air Force Base as an ambulatory care pharmacist.

Tim Ulbrich: Awesome. Thank you. Myke, go ahead.

Myke White: So my name is Myke White, I like Jenny said am in the Air Force. I joined in 2007. I started out in Arizona as a IT project manager. So I handled a lot of the high-dollar initiatives throughout the installation, whether it was new constructions or renovations, anything that needed communications, meaning network capability, computer servers. We were all up in it. So I was there for almost six years, made our way to Washington where I was a client systems technician, so I mainly focused on computer and end user devices. And I liked it. We were there for almost six years, and honestly, our plan was to stay for probably a couple more years, get Jenny established and maybe even try to get overseas if we could. And then actually came back from holiday exodus in 2018, and I realized that we got orders. And of course when you look at your orders, it just says that you’re notified or you were selected for orders. It doesn’t exactly tell you where you’re going. So I was excited because on my preference list, I had nothing but overseas. So I’m like yes, we’re going to get that opportunity to get overseas. And I checked, and I saw that we’re going to Keesler. And of course, I had to break the news to Jenny. And she was obviously not happy. But at the end of the day, we had to deal with what we were given. So now we’re here. And it’s actually not as bad as I ever would have thought. You know, it’s opened up quite a bit of opportunities for us. And hopefully they continue as long as we’re here.

Tim Ulbrich: I think the Mississippi folk listening will be glad to hear you say it’s not as bad as you had thought. And what a change, I mean, Pacific Northwest to Mississippi. We talked about before we hit record, you know, home being Colorado. So lots of transition for sure. But I’m excited, I know one of the goals that you all have going forward is sort of the flexibility and the freedom with travel and doing things that you love, especially as time in the military eventually wraps up and having more options, which is I think where real investing in the financial plan fits in so well. So Myke, I want to start with really a broad question about your financial plan as a couple and how real estate investing fits in. And the reason I want to start here is that I see many pharmacists, especially new practitioners, really struggling to get started with real estate investing. One, they want to do it but they don’t know how to get started because, you know, of course they’re balancing six figures of student loan debt, perhaps the need to build up reserves for a rainy day fund, getting rid of credit card debt, trying to prioritize other goals such as investing, home buying, wedding, starting a family, the list goes on and on, right? So tell us a little bit about for the two of you — and obviously in your work with Tim Baker as well I’m sure this has been part of the discussion — how has real estate investing been able to come up and bubble up as a priority among all the other things that you’re trying to work on?

Myke White: So starting from the beginning, honestly, I had not necessarily an interest but I just didn’t know better when it came to real estate just because you know, you have that typical mindset of people where there’s a lot of moving parts, there’s a lot of money involved, there’s a lot of things that people don’t know so they kind of just put it off, that’s not for me type thing. And of course once Jenny was introduced to YFP and in the midst of all of that, Bigger Pockets and I mean, her entrepreneurial spirit anyway, she kind of found out about everything. And then she kind of sold it to me. So of course I was a little bit apprehensive at first. I was like, eh, I don’t think so. But then after I started reading a few things, looking at a few different articles and of course read “Rich Dad, Poor Dad,” I think that’s when my whole mindset shifted. And I was like, OK, maybe we can do something different, we can stop this 9-5 mindset and think outside the box and figure out ways that our money can work for us and benefit us in the long run. So I think once we started that, we kind of started to zero in on our different priorities and how real estate can feed that. And also leaving Washington, we of course sold our house. And we ended up making quite a bit of capital, extra capital, in order for us to start to kick things off once we got to Mississippi. So we’re able to pay down quite a bit of our debt, we’re able to establish our nest egg or our real estate venture. So I think once we got to that point and once we got settled in Mississippi, we’re kind of able to set our priorities and get that going. But as far as right now, our plan is again to — so I retire in about eight years. So for us to kind of get established now, get smart on everything, establish our connects and different things and get that going. We of course got our first property. Obviously our goal is to get at least 1-2 properties at minimum a year until we get to the point where the cash flow is supplementing at least one of our salaries so we don’t have to worry about working.

Tim Ulbrich: So Jenny, you must have done an awesome job selling him well. I mean, hearing Myke go from “I’m unsure of this” to “We’re going to be getting at least 1-2 properties a year,” that gets me fired up. And isn’t it amazing — I mean, “Rich Dad, Poor Dad” had that same effect on me. And I recommend, I feel like it should be required reading throughout multiple times. It’s not one of those things you read once either. I feel like you pick up something new each time. But it’s a mindset book. It just makes you think differently about money, especially if something like real estate investing, small business, wasn’t a part of how you grew up. Jenny, talk to us for a moment about student loans because I’m guessing many people are listening saying, “My gosh. Like I would love to get started with real estate investing.” But you know, we know the average indebtedness is about $170,000 across the country for today’s graduates. So for you all, talk to us about the student loan position and then your repayment strategy and how that has played into allowing you to be able to prioritize real estate investing while you’re also facing student loan debt.

Jenny White: Yeah. So for us, student loan debt is definitely something that I think triggered this looking out for other options. So obviously when I went to school, pharmacy was my passion. Like I absolutely love it. I love what I do, I love hospital, I love ambulatory care, I love all realms of it. But once I was working as an overnight pharmacist, I’m like, yes, I finally made it. I’ve got that consistent salary, I’m making money. And we were paying down some of the debt that we had accumulated. And mind you, so Myke, he doesn’t bring this debt to the table. Like this is strictly mine. I know there’s a lot of people that are two pharmacists or other debt. Like this is all mine. So in my mind, I was almost thinking like, I have to get rid of this. So I kept looking at other things. I looked at side hustles and I was trying to figure out how we could do — how we could continue to pay it off because my first goal was I wanted to try to pay off all of the student debt because I was like, let’s just get this out of our way. Like I don’t want to deal with this anymore. But then after I’d talked to Tim and I was like, OK, I did sign up for PSLF because I was like, this is kind of my backup, if like in a couple years I realize like I’m not getting this paid down quickly enough then I could always fall back on PSLF and draw back on the payments and try to decrease them. The other thing that I noticed too was that like when I was working, I had the 7-on, 7-off working night shift, which was amazing. But it also gave me the opportunity to work per diem. And so I was working per diem at two hospitals. And then I was like looking at my paycheck, and I was just like holy cow, like so much of my money is getting taken away for taxes. And so I was like, there has to be something else, which is when I found “Rich Dad, Poor Dad,” which I recommend that book to every single person. It’s $5 on Amazon. There is like no reason, especially now in the quarantine, that you can’t read it because that completely shifted it where I was like, this is right, they’re taking all of my hard-earned money for taxes and using it for whatever they use taxes for. But like how can I hold onto more of my money? And then that’s where it really shifted to thinking about cash flow, passive income, and then we kind of shifted focus on like instead of paying down all the debt, let’s focus on saving up as much as we can to get down payments for houses.

Tim Ulbrich: I love it. And I think that strategy of PSLF here is really an important part because as our listeners know well, now if you’re pursuing PSLF, which right now doesn’t get sweeter than it is, right? We’ve got a bonus time period here of $0 PSLF-qualifying payments because of the CARES Act. But the PSLF strategy, you know, if that’s what you’re in is minimize payments, maximize forgiveness. And here, that allows additional cash flow to be freed up to be able to focus on things like real estate investing. And I think it’s a good reminder of the interconnectedness of all the parts of a financial plan and how someone like a coach can really help you balance those out and think about them where it’s often easy just to get siloed in the one part of the financial plan. So Jenny, talk to us a little bit about the month-to-month rhythm for you guys. I know if you’re working with Tim Baker, it likely means he’s talked about a budget and the spending plan and obviously I would assume that’s a key part here based on the goals that you have. What does this look like month-to-month and week-to-week for you and Myke in terms of how you’re able to account for income and expenses and ensure you’re able to fund and prioritize the goals that you guys have?

Jenny White: Yeah, so for us, Tim Baker has been a huge resource to us, and we’ve definitely learned a lot from him and kind of managing our finances as well as Tom, who is the budget guy for Tim. And so we’ve been working with him. So we really had to kind of focus in our spending. And we actually run a budget now, which is something that we didn’t really do before and we kind of just would pay our bills but we really wouldn’t look at our spending. And now when we do that, we’re like, holy cow, we spent this much money going out to eat, we spent this much money on groceries. And so it really opened our eyes, and so we try to make sure that we’re cognizant of that. So that was kind of a big thing. But even for kind of getting in the ball rolling for the real estate thing, a lot of it was just learning. And Myke and I are still doing that. We have tons of books from Bigger Pockets that we’re reading, we listen to podcasts, and we also — the thing with Bigger Pockets is that they have so many great resources. So one thing that a lot of people don’t realize too is they think like, I can’t get started in real estate because I don’t know everything. But start learning now so that you can get the ball rolling so that when you’re ready, then you’re good to go. So like we started in January of 2019. This is when I really started. And then you know, early in the year, then Myke really got involved. And so we were listening to all the podcasts, reading all the books. But they have a calculator on Bigger Pockets that you can use to like really dial in like your properties. But you have to practice it to be able to like see what a good deal is versus what isn’t a good deal. And so from the time that we started doing that, we were practicing probably from like March ‘til May-June timeframe before we got there so that when we actually got to Mississippi, we were ready to roll because we could actually pull in those numbers, we knew what we were looking for, we knew what made sense, and we weren’t trying to scramble and wonder if this was a good deal.

Tim Ulbrich: I love that. And I love your passion for learning because I think what happens here, what my wife and I have found is when you’re listening to podcasts, when you’re reading books, when you’re analyzing deals, running calculators, you can’t stop thinking about it, right? And then you kind of start talking about it more. And then you find yourself driving down the street and you’re like, ooh, I wonder if that would be a good property? Does that beat the 1% Rule?

Jenny White: Yep.

Tim Ulbrich: And it’s top of mind. And then it gets cemented as a priority, and I think it starts to build that confidence so that as Bigger Pockets talks about all the time, great resource, that first deal is the hardest deal. You’ve got to get over the hump.

Jenny White: Yeah.

Tim Ulbrich: And you’re never going to feel fully confident, fully ready. You’re going to make mistakes. We’ll talk about some of those along the way. And that’s OK. But you’ve got to get started. In that, of course, making sure you’re doing so in a way that fits in with the rest of your financial goals. So Myke, before we talk about the first property, why real estate investing? You know, I know our listeners are probably thinking about, OK, I could be maxing out 401k’s and 403b’s and HSAs and Roth IRAs, I could invest in a brokerage account. What is it specifically about real estate investing that intrigues you maybe equally or even more so than other areas and options for investing?

Myke White: For real estate, for us, obviously the bonus is money, is that cash flow. But it’s also helping people. And a lot of people don’t necessarily always think about that. They think, OK, this guy is huge into real estate. He’s in it all for the money. But a lot of money don’t realize that you’re helping people’s situation. And I feel like we’re seeing that firsthand with the property that we currently have. There is a tenant in there that, I mean, doesn’t necessarily have the best situation. But I feel like, you know, us being her landlords, we’re kind of seeing our focus shift from OK, it’s not about the money, it’s about making sure that they’re good. So if they’re good, that means that you’re good. So that’s kind of how we see it. Obviously like the money’s nice. That leads to other things. But at the end of the day, you’re helping those people. So I think that’s something that you don’t necessarily see in a lot of other forms of investment.

Jenny White: And I think too is sometimes landlords kind of can get a bad rap, and that’s not something that we’re striving for. You know, we actually want to provide a property. And we’ve had a lot of things that have already popped up that the property manager prior to us taking over this property didn’t take care of, but we’re taking care of it because it’s the right thing to do. And overall, she’s a great tenant. And we want to keep her long-term. And so by Myke saying like, you know, being good landlords and helping them out and even with like COVID-19 right now, making adjustments to payments, doing what we can. I think that’s going to help us keep her long-term, which is what we want because that helps with cash flow too. Turnover can get you quite a bit if you’re not careful.

Tim Ulbrich: I’m so glad you said that. You know, I’ve learned firsthand with the property my wife and I recently purchased, the cost of vacancy or turnover that leads to vacancy or obviously repairs that need to be done then because of damages or other things. But in tandem, it’s not just the numbers. Obviously you’re in a position to help, and I love that heart and passion to do that, especially during a difficult time like this. So Jenny, walk us through the first property. A duplex, tell us about it, where it is, what it looked like, kind of general numbers, and why the duplex is where you decided to start versus a single family home or even doing something like a house hack. What was the strategy and thinking there?

Jenny White: Yeah, so when we got to Mississippi, one, we were coming from Washington state where single family homes are easily not like even great, but they’re between $200,000-300,000 for like bare minimum. We came to Mississippi and we’re looking at like $60,000-100,000. We’re like, holy cow. So then when we started looking at properties, duplexes were popping up, which like in Washington are probably close to $500,000 where here, you can get them for under $200,000. And we were just like, we can’t believe this. So we started looking at both because to us, it was important just to make sure that the numbers made sense. And so we looked at both, and we probably looked at a good 10-15 properties, ran numbers on close to 50-60. And actually, our first deal fell through. So we had put down — or we had gone under contract for an initial duplex, which had two tenants in it. And we were planning on keeping them. Then some issues happened with the electrical boxes being in inappropriate places, so they were going to be expensive fixes for us. And then once we continued down the process, our appraisal came back down low, which would have been great for us, but the seller wasn’t willing to go down. And so we ended up losing out on that duplex because we couldn’t come to an agreement on terms and all that. And so at that point, that was like September timeframe and Myke and I were pretty bummed out because we were literally a couple days away from closing before it fell through. And so it had been over a month of working, getting inspections done. So we were really bummed. So we started going back to the drawing board and were looking at more properties when I actually went with our realtor — and we had a great realtor who was very investor-friendly. So she went with us, you know, even in the evenings, anytime she was like available to go with us. And so Myke actually didn’t even see the property until we actually had purchased it because I went with the realtor and it was listed for $125,000 for a duplex there was two tenants in. On the unit side A, it has some repairs that are needed but nothing bad. Unit B was a Section 8 tenant that had been there for about eight years, had really demolished the place. Like I mean, you walked in there and you could see like the smoke. It was just like everywhere. Everything was caked in dirt, it was pretty run down. And so we knew — I knew that it was going to need a lot of fixing up. So I told Myke, I was like, well let’s keep looking. We’ll keep an eye on that. It’s listed too high. We kept looking and I just kind of got like a gut feeling, and I was like, let’s just take a chance. And like our realtor had let us know that their realtor had kind of mentioned that the person who was selling was an older guy. He was just trying to get rid of the property. So then I went to look at the purchase information, I saw that he had purchased it back in 2009, paid $60,000 for it. So I was like, he’s got his money in and he’s made tons of money already. So I was like, let’s just try lowballing. I was like, let’s just take a chance, we’ll see what happens. They had said they were already evicting Unit B and they were going to get rid of her. So I was like, OK, if we can make that part of the contract, then that would be great. So it was listed for $125,000, and I said, “Let’s offer $60,000.” And so most people would think that I was crazy, which it was a little bit. My realtor even — our realtor even said, “Either they’re going to ignore you. Or they might come back with an offer.” She’s like, “That’s pretty low.” She’s like, “I don’t know what’s going to happen.” I said, “That’s fine.” I was like $60,000, we’ll pay closing costs, let’s see what happens. So it took — what? — about like a day and they came back and they said, “We’ll sell it for $85,000.” Yeah. So it was huge for us. Their realtor was actually really smart because at the same time, she said, “We’ll take $85,000, but we’re dropping the price to $92,000 on the MLS.” So that day, they got multiple offers from it dropping that much. But we had said, “We’re like, we’ll take it for $85,000. We’ll go.”

Tim Ulbrich: I love that. And you know, speaking of the cost difference from Pacific Northwest to Mississippi, there you go. If anybody’s hearing that, they’re probably like, “What number? Say that again. How much for a duplex?” But you know, when you talk about the 1% Rule as just a general example, when you’re talking about two units for $85,000, the math is pretty quick. I don’t really have the details, but I know just with those numbers it’s probably a good deal based on that. So you know, area matters. And I think this is important for our listeners to hear because some people might be in an area where they say, “The numbers don’t work. I live in Seattle. I live in Columbus. I live in wherever.” And so being open to out-of-state, out-of-area investing I think is really important. Actually, Bigger Pockets has a book out specifically on long distance real estate investing, which is a great read. It’s something I’ve done. And as I understand it, you all are thinking about bringing in other people that are out-of-area but see your market as an opportunity, correct?

Jenny White: Yeah. That’s something that we want to do.

Myke White: Yeah, so even when we were in Washington, obviously we wanted to try to get the ball rolling. But there would have been no way. It would have been out of our price range. So of course it’s comfortable. It’s convenient to stay in your own personal market. But sometimes you might need to consider venturing into other areas just to see what the environment is there. If you know people that invest in that particular market, you know, ask them how the climate’s been for maybe the past few months or couple years, even, and kind of go at it that way because yeah. Like I said, coming here has opened up a lot of doors and opportunities and as much as we really wanted to get into real estate, it wouldn’t have happened — it wouldn’t have happened at least as quick if we weren’t here.

Jenny White: And so we have people who are from Washington and Colorado who are interested. And I mean, getting into a partnership is kind of nerve-wracking as is. But that’s why we’ve talked to people that we knew we were interested, people that we trust, and we’re in the process of kind of like working out what those contracts would look like because basically, Myke and I are tapped on capital because we put our down payment down, we made the repairs to the other side, so it might take us a little while to pull our capital back out through the BRRRR method or just save up enough money to make that happen. And so we’ve talked to a couple people and said, you know, “You bring the funding for the down payment. We own the place 50-50 and there’s different ways to work it out with your financing. But then we can property — we’ll be the property managers for it.” And that also is a big thing that people don’t want to do, they don’t want to deal with the headache of being a landlord. And so we’re like, OK, if it’s in our area, we keep our duplexes within a certain radius for us to be able to get to, we manage that portion of it and then you get your payment every month, you get your cash flow, we both are building equity, we have this and we can figure out what we do with it down the line. But it’s an opportunity for people to get involved in real estate. And again, some people don’t want to learn the process either. So that’s another thing is we’re invested in learning in this process and managing it and being hands-on. So we’ll gladly work with people if they want to give us the money to do it.

Myke White: Yeah, so prime example, I mean, my dad came down here to visit about a month ago. And he had of course known that we were doing our thing with our duplex. And so of course, what better way to kind of tell him what we’re dealing with than actually show him the duplex, show him or at least explain to him the process so we could get there, the money involved. And really, we gave him like the short and simple version to kind of be like, oh, that sounds pretty interesting. That sounds like something I would maybe want to get involved with. So obviously, you know, you hear a lot of times when it comes to these type of things, don’t involve family, you don’t want to mess up the dynamic. And I was very reluctant, even though Jenny asked me quite a few times, “Just ask your family. Ask your mom and dad if they want to throw some capital at us.” And I’m like, no because if the crap hits the fan and something happens, I don’t want to be looked at or affect our relationship. But the way that we kind of conveyed it to my dad, he was excited about it, he told my mom. He was like, “Look, we want to make this happen. So if there’s any properties that you see come across your desk, let us know. And we’ll see if we want to provide a little bit of capital. So that’s like the best case scenario, honestly. And I know that whatever we give them, they know that we already did our due diligence and running the numbers and making sure it works for us before pulling the trigger.

Tim Ulbrich: I love the creativity there because you know — and I think as you all are discovering, like I think it certainly can be tricky with family and friends. But with really good agreements in place and good conversations and just very honest conversations about hey, there’s risk and we need to all understand what worst case scenario is. And I’ve done some investing with somebody else where I think they’ve done a really, really good job of that to say, “Hey, I care enough about you that I want you to fully understand the risk and be transparent because this relationship is first. So as long as we’re all on the same page about the risks as well as the opportunities, then we can clearly communicate that and document it.” I think that that’s reasonable. So I love the creativity because what I hear you saying is that the rate-limiting step for you guys growing your portfolio at 1-2 units a year — and I’m guessing if we talked a year from now that number might be 2-4, 3-5, whatever — is that you know, obviously you’ve got to have the capital. And I think it’s important to you all that you aren’t being overleveraged and that you can have equity in these homes. So it just takes time to build up a down payment. I mean, even when you were talking about an $85,000 property, if you’re putting a significant chunk down to get good financing and to make sure you’re not overleveraged, it just takes time to save to do that. But if you guys can put in sweat equity and bring other people in that maybe have the capital interest and don’t want to put in the sweat equity, you can essentially have the equity in the property without necessarily needing as much of the capital. And I love that creativity for you guys moving forward. So that makes a whole lot of sense. So Myke, tell me a little bit about the other side of this. You know, I think sometimes we talk about real estate investing and we talk about it like it’s roses, rainbows and cupcakes. But there’s another side of it as well, right? And that’s the — we all have stories of this didn’t go as planned or I thought this was going to happen or oh my gosh, I didn’t realize this. Talk to us a little bit about with this property what those moments were for you guys.

Myke White: Yes. Of course, like Jenny said, in regards to our duplex, I did not see the property until we had already got it. And so it was already 10 times better than it looked when she went there for the initial walkthrough because all the furniture was gone, of course the tenants were gone, the carpet was actually ripped up already.

Jenny White: Thank goodness because it was gross.

Myke White: There was a lot of that smoke smell. So I just walked in and — of course we had seen a bunch of other properties along the way that were not that great. And so I was like, OK, I feel like I’ve seen it all at this point. But I was sorely mistaken. So I walked in, yeah, it was really bad. And I was like, we’ve got a lot of work ahead. And luckily, we do have, you know, that support system and we do have our realtor that knows quite a few people that can do the handiwork. But we also have friends that can assist when needed. So we’re like, OK, maybe we can knock this out and do it on our own. But yeah, it was — once we got into it, we realized how much work it was. So we first started out by trying to get rid of that smoke smell because it was everywhere. And we knew a lot of it was absorbed into the walls. So we had done a little bit of research and we had found a solution that we got from Home Depot to literally just scrub the walls.

Jenny White: And we had white towels that were coming back black and brown and like we’ve been trying to document our journey too so we have like the videos on my Instagram and I post them to my Facebook just so people can see like what we’ve been doing.

Myke White: Yeah, so we were able to get some small stuff done. But literally, it was that first day — matter of fact, it was probably that first hour of that first day that we realized, OK, we might need to get some — we might need backup. So we called it a day and we looked into different contractors that could do at least a little bit of work for us. And so we had decided on one. They were able to get in pretty quickly and they replaced the flooring, they painted the walls and did a few annoying things. So right now as it sits, the duplex is almost OK. But I feel like anything else that needs to be done, we can do. But that’s just kind of the expectation. You’re never typically going to find a property that’s ready to go. And you know, it’s expected that you’re going to have to put a little bit of work in. You’re not always going to have the luxury of having that support system or having that realtor that just happens to know the handyman or the AC guy or the electrician. So sometimes it’s what needs to happen in order for you to make some progression.

Jenny White: But we learned too along the way that a lot of things, when we decided we were first going to do it, we’re like this is great because our tenant, the one that stayed, her rent covers our entire mortgage. So we’re like, OK, we can take a little bit of time with this, which is why we wanted to do it. Then we realized we both work full-time jobs, getting this done on the weekends and like evenings, it was taking up too much time. So realistically, with us delaying the nice rent money that we’re losing by not having a tenant in there, so we were like, we need to just get this fixed up, which I mean, we’ve had delays and life happens and things happen, so it’s still going. But that was again, when we purchased our original — when we made the decision to purchase this property, knowing that her rent covered our mortgage, it’s not anything that we’re losing money on, which is very good in our scenario. But we were like, we’re going to have this done by February. It didn’t get done by February. Then in February, like great, we’re going to get this done, then we had a delay on our appliances. We were still having trouble with the smoke smell, so we had to have the AC guy come in to do more repairs. And so now, it’s about ready and now COVID-19’s going on. And so we’ll see how long it takes us to get into — get a renter into that property.

Tim Ulbrich: Sure.

Jenny White: But that’s again, when you buy, buy smart and don’t overleverage yourself because, you know, we’re still in an OK position right now. So we’re just kind of biding our time.

Tim Ulbrich: And I think that’s a good reminder that what’s coming to me as you were talking of especially on the first property, buy smart, don’t overleverage. You know, when I heard you say one half of the total rent of the duplex covered your payment, that gives you margin right out of the gates, right? So if timing goes on, if an expense comes up you’re not aware of or doing this for the first time, we didn’t realize this or this, you’ve already got options and you have a little bit of wiggle room. So and I love — just kind of bringing this all full circle — I love as we think about the future of investing for you guys and why you’re doing this, connecting this all the way back to having some flexibility and options, diversifying your income, generating additional revenue streams so you guys can pursue travel and other passions and hobbies that you guys have. I also hear kind of a desire and a heart for giving and doing other things that you have options to do. So what a cool story, and I’m so grateful that you both took the time to come on the show to share this. And I think it’s going to help many people that are thinking about hey, I’d love to do this but I just don’t know where to get started. So I appreciate both of you taking the time to come onto the podcast this week.
Jenny White: Yeah, thanks for having us.

Myke White: Thanks for the opportunity.

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YFP 147: How One Pharmacist is Turning Tragedy Into Triumph

Posted on by yfpadmin

How One Pharmacist is Turning Tragedy Into Triumph

Phillip Beach, Director of Pharmacy at Arkansas Continued Care, talks about his career journey, his path toward financial independence, and the start of the Harper Faith Foundation, a 501(c)3 non-profit that was founded in memory of his daughter Harper Faith Beach who was born with hypoplastic left heart syndrome (HLHS).

Summary

In this episode, Phillip shares about his career path, the why behind his and his wife’s FIRE journey, and the start of the Harper Faith Foundation in memory of his daughter.

Phillip graduated in 2017 from Harding University College of Pharmacy and began working at NEA Baptist the following week with a 7 on/7 off night shift for about two years. Through networking on LinkedIn, Phillip was able to take a PRN position which led to his current full-time Director of Pharmacy position at Arkansas Continued Care.

Unfortunately, on September 11, 2018, his life forever changed. His daughter, Harper Faith, passed away due to hypoplastic left heart syndrome (HLHS), a congenital heart disease she had been battling with for four months. Phillip shares how he and his wife grieved, how his outlook on life has altered and what their focus is on financially because of their tragic loss.

Philip and his wife wanted to help other heart families and formed the Harper Faith Foundation. The foundation supports others by promoting research, giving inpatient gift bags full of toiletries and other necessities to make long-term hospital stays a bit easier, and offers a yearly college scholarship to a high school senior with a congenital heart defect.

Phillip shares that he and his wife are moving to a FIRE approach with their finances and life because they want to have more time and freedom to do what they want.

More About Harper Faith Foundation

About Harper Faith Foundation: In January of 2019, Phillip and his wife, Tori, founded the 501c3 nonprofit organization “Harper Faith Foundation” in memory of their daughter, Harper Faith Beach, who was born with hypoplastic left heart syndrome (HLHS). Their mission is to spread awareness for congenital heart defects and to help out families who are battling HLHS. They are dedicated to turning tragedy into triumph.

HFF helps heart families by doing the following:

1) Yearly college scholarship to a congenital heart disease survivor

2) Donating funds (Ronald Mcdonald house, CVICU @Arkansas Childrens Hospital, directly to those in need)

3) Giving gift bags to those currently staying in the CVICU (gift bags include the following: children’s books, newborn socks, newborn side snap onesies, pacifier, newborn stuffed animal, toiletries for both mom and dad – shampoo, conditioner, bodywash, face wipes, toothbrush and toothpaste, lotion. The bags also contain a water bottle, kleenex, individual Tide laundry packs, notebook, pen, and a binder to help organize medical documents and information.

4) Supporting research at Mayo Clinic – participation in 2 clinical studies (studying DNA, cord blood stem cell injection into the heart during surgery).

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. It’s an honor to have joining me Phillip Beach, a recent graduate of Harding University College of Pharmacy and Director of Pharmacy at Arkansas Continued Care. On today’s episode, we’re going to talk about really an unimaginable journey that Phillip and his wife had had over the past couple years with the loss of their daughter Harper Faith at a very, very young age to a congenital heart condition. And we’re going to talk, yeah, we’ll talk a little bit about Phillip’s career journey, a little bit about their financial journey, but we’re going to talk most about that journey of loss, that journey of grief. What were the strategies that allowed them to come together to get through that difficult time? And we’re also going to talk about what they are doing going forward with the starting of the Harper Faith Foundation, a 501(c) not-for-profit organization that’s designed to help families and research that is related to the condition that took their daughter at such a young age. So Phillip, thank you so much for taking time to join me on this week’s episode. And welcome to the show.

Phillip Beach: Thanks, Tim. I’m very excited to be here and share our story. So thank you for having me on.

Tim Ulbrich: So let’s start our conversation with your journey into pharmacy school and the current work that you’re doing.

Phillip Beach: So I got started in pharmacy 2017. I graduated and I took a 7-on, 7-off night shift position at NEA Baptist in northeast Arkansas. And so I did night shift for a little under two years, and that was a great time. Got to work with a good friend of mine and it was a huge learning experience. So I learned a ton, got my feet wet in that role and really learned what hospital setting was all about as a pharmacist straight out of school. Currently, I am Director of Pharmacy at Arkansas Continued Care Hospital. We’re considered a long-term acute care. We’re a 44-bed facility, and I am the full-time pharmacist. We have one full-time technician with me as well. Census is typically 20-25, somewhere in that area. So we stay busy. We just implemented Omnicells about a year ago, so we’ve been getting that process down and really enjoying that over doing cart fill, which is a nice change. And as you can imagine, it is a smaller place, so I get to wear a bunch of different hats and it keeps me constantly learning. And there’s just so much to do and so much to learn. It’s been great. And the community is small, so I’m getting to know the nurses and the leadership and the physicians, everyone, way more than I did at a larger hospital.

Tim Ulbrich: So as we’re recording, we’re in the middle of the COVID-19 pandemic, so thank you to you and your team that are on the frontlines of this and going to work each and every day. And it sounds like as we talked about before we hit record, you all haven’t been as impacted yet, at least, right, by the pandemic?

Phillip Beach: Yes, sir. So we’re — the models currently look like around towards the end of this month, around the 26 is what we’re expecting. So we’re preparing for that, doing a lot of education on PPE donning and doffing, obviously trying to get any supplies we can get and also doing emergency preparedness with the other hospitals in this region, kind of combined forces and see how many ventilators we have and what we can do when it does come.

Tim Ulbrich: So Phillip, when I think about a leadership role at a smaller institution like you’re at — and as you mentioned, you wear lots of different hats — I think about, you know, when you’re in that size of an organization, obviously a time like this, you’re thinking about emergency preparedness types of things. But even just in not a time like this, normal operations, you’re probably wearing a financial hat, a human resource hat, operations hat. And how does one prepare themself for that? Or maybe a better question is how do you get an opportunity like that, you know, right out of school, graduating in 2017, without advanced residency training or additional academic degrees?

Phillip Beach: Well, I’ve had a lot of great mentors. So his name was Byron at my previous job, he was a really good boss. So I got to learn and watch him while I was on night shift for almost two years. And then my current boss, Charlie, has been fantastic in helping mentor me into this role and leading me on the path as a director. And then like I said, the leadership team at our hospital as well, getting to be involved and watching them and learning from people that have been here longer than me and know what they’re doing and really learning leadership styles. It’s been very helpful to watch them. But the amount of hats that you wear, really, it just comes with time doing it. So the longer that you’re in it, the more you learn. And you know, literally I am learning stuff every day and there’s just so much to improve upon constantly so that I feel like my work will never end, which is a good thing. It keeps me having new goals constantly. There’s always something I can work on, antibiotic stewardship or policies and procedures or nailing down our therapeutic interchanges, there’s just so much I can do on a daily basis that I enjoy.

Tim Ulbrich: Yeah, and as you know, once you land a position like that, as time goes on in your career, the lack of having a residency training or additional degree is going to matter less and less. And I want our students listening to hear, you know, what I heard is really two years of a willingness to learn, night shift, I’m not sure many people are willing to do night shift for two years. I definitely hear a willingness and a desire to learn, hard work, seeking mentorship, so I think all of those things are incredibly important. So thank you for sharing.

Phillip Beach: Yeah, I’d also want to — I forgot to mention networking was huge. I actually found this position by networking on LinkedIn. And I reached out to the current Director of Pharmacy who had posted like a PRN shift work, and I was just looking for additional income. So at the time when I was 7-on, 7-off, you know, I had those seven days free. I was like, hey, I want a couple days extra work. So I reached out to her on LinkedIn, and that’s how the whole ball got rolling. And so I worked PRN filling in for her for a little over a year, about 14 months, and you know, when she left the job, it opened up to me and she recommended me for the position. So it’s crazy that networking and LinkedIn, how far that can go in today’s age. So I can’t emphasize that enough too for new grads.

Tim Ulbrich: Yeah, absolutely. And ironically, it’s a reminder to me that this interview came to be because of LinkedIn. So we had connected a while back when you were in pharmacy school, you helped us do some editing for the book “Seven Figure Pharmacist.” I think you might have been a P2, P3. And then I had seen you post a few months ago on LinkedIn some updates and work that you’re doing with the Harper Faith Foundation, and I was like, “Ah, that’s right! Phillip helped us with the book.” I think I had heard from you a couple other times via email and other things. So I think it’s just a good reminder of the power of networking and staying in touch with folks over a period of time. So Phillip, you graduate from pharmacy school in 2017, obviously your career is taking off at a very young age. And on September 11, 2018, life changes really forever. Tell us more.

Phillip Beach: So Harper was born May 21, 2018. She was born with half a heart, Hypoplastic Left Heart Syndrome. It’s just a big word for missing half your heart, basically. So the ventral valve, the left ventricle and the left atria did not form in the womb. So that whole left side of her heart was just not functioning, basically. So for these HLHS babies, they have a three-stage palliative surgery option that hopefully can basically extend the life and give you a quality of life and hopefully, it gets you to where you’re older and more stable to do a transplant is ultimately the goal. So there is not a cure. So that’s the path that we went down. So Harper was born the 21. She had open heart surgery on Day 4, 4 days old. She did really well. She conquered that surgery and stayed on intubated and on the vent for about a month. So we couldn’t hold her for that whole first month. And it was extremely just difficult, as anyone could imagine. And we stayed in the hospital altogether about two months straight. And here I am, working 7-on, 7-off night shifts. So I did use my PTO and a week here, week there. And my wife is staying there 24/7. She was the one there all the time while I was here at work. So it was very difficult, and during those two months, she got better, you know. Everything was going good. We were able to be discharged. So we got to bring her home for a month. And everything was great. Daily weights, there was a very close monitoring program that we actually had on the iPad from Arkansas Children’s Hospital. We’d take videos daily, monitor their weight. We’re literally writing down how many mils that she’s drinking every two or three hours throughout the day. So tracking it down to the milliliter, literally, and journaling that. So while the experience to monitor to make sure that they’re being fed right and that their fluid electrolyte balance in perfect, and it’s such a critical thing in these heart babies where something as small as that fluid and electrolyte difference can make a huge impact. So that month goes on while we have her home and it’s time for heart cath, just to check her heart function. So we go to the hospital and do this heart cath, and after that procedure, her heart developed a tricuspid regurgitation, so some blood flow was leaking out of that valve. And it never recovered. And it got to be severe tricuspid regurg. So she was basically in heart failure at that point and we had to start her on continuous IV drips for her heart function. And so this was about three months of age, and we were basically stuck inpatient there at that point thinking about the transplant list. So we’re meeting with the transplant team and organizing, getting all that set up, getting blood types, getting her registered. And Harper coded multiple times. And come to find, she had undiagnosed sepsis as well as heart failure. And she passed away on 9/11/2018. So at this point, it’s really just devastating for my wife and I. It totally just changes your life. And everything that you know as a parent, your routine, your role, everything just changes instantly. So as long as — as well as your identity. So everything as a parent, you know, is gone instantly. And it’s just major shock. So going through that grief and that entire process, working 7-on, 7-off, that was very difficult spending those seven nights away from my wife ultimately. So that’s what led me to this daytime Director of Pharmacy position was to be able to spend more time with my family and with my wife. So during that grieving process, that was a key, getting to spend more time together as both of us were going through that process.

Tim Ulbrich: Yeah, and Phillip, I’m sure our listeners are thinking the same. My heart breaks for you and your wife. And just the situation as a father, I can’t even imagine what you guys went through. And I have to believe that we have one, two, 10, 100, maybe more people that are listening that are going through some type of grief or loss right now. You know, maybe it’s a similar situation, maybe it’s a job loss, maybe it’s a loss of a parent, a loss of a spouse, a loss of a child or something else. What words of encouragement would you have to share for somebody listening that is going through a moment of grief or loss right now?

Phillip Beach: Well, that’s my hope coming on here to talk to you today is that I can somehow spread a message of positivity to at least one person and impact their life and help them through whatever struggle they’re going through, to just make that choice every day to stay positive and know that these trials and things you go through will make you a better person in the end. And you never know who you can impact by choosing that positivity every day. And I’m not saying that I always win that battle. But every day, I try to make that conscious effort to be positive. And I think that is the key. And I know we talked about Adam Martin before, but he actually had a video on this I think yesterday that I saw between two different pharmacists, one choosing not being positive and the other being positive and being a great leader in their pharmacy. And I think that’s so key is making that choice daily, wanting to impact others and being a leader in that positivity to spread it to others. No one wants to be around a negative person. So I hope I can be that same light to someone that’s going through a tough situation.

Tim Ulbrich: And what gives you and your wife hope? What gave you hope through that time period of obviously losing Harper? But I sense this is something daily that you’re working through. Like what gives you guys hope going forward?

Phillip Beach: You know, really, we started Harper Faith Foundation, and that was one of the things that we could transform this tragedy into something triumphant. That was — that’s our goal to spread some hope to someone else that needs it. So we made the Harper Faith Foundation a nonprofit organization in January 2019. My wife started it up, did all the research, figured out how to do it, contacted LegalZoom, got that set up, it’s all official. And the outpouring that we’ve had from our community and our friends and our church and our support group, our family, to give back to us so that we can give out to others has been amazing. So that has been a source of hope for us. And being able to spread it to other people, that gives us joy. So ultimately, there’s nothing like giving back to other people. You don’t get that sense of joy from anything else.

Tim Ulbrich: And Phillip, one of the other things as I think through others that may be going through a situation of loss or grief would be that this topic of finance in and of itself is stressful, let alone when you’re going through a difficult situation. So talk us through for a moment about how you keep the financial plan afloat during a time of grief. Or maybe a better question is how do you give yourself permission or peace to just let it go temporarily, you know, in the midst of everything that you’re dealing with?

Phillip Beach: It’s definitely a balancing act. And I think it’s so key to live below your means in a lot of areas of your life but also realize that life is very fleeting and when you have something that you enjoy as a family to go and enjoy that and not worry about it. And realize that you have money to spend and go out and enjoy, go on vacation with your family, spend that time together, do what you can while you’re on your own because you don’t always have that time later down the road. And that’s another part of my life that I want to touch on. My dad unexpectedly passed in 2016 when I was right about to start my rotations. I was literally about three or four days from going to my first acute care rotations in Texas, he unexpectedly had a heart attack at 56. He was in great shape, he was ex-military. And that has also stuck with me and just convinced me that, you know, the balancing act and using your time while you have it because you can save for your 401k all day and all that, but it’s not a for sure thing that you’re going to live to 65 to get to enjoy it. So I definitely encourage people to be wise with their money but at the same time enjoy it and love your family and go and do the things that you like to do together.

Tim Ulbrich: Yes, such a good reminder, Phillip, of the balance of today versus the future, right? There’s responsibility in taking care of your future self but not fully at the expense of today and the needs that are around you but also as you mentioned just the experiences and the opportunities that you have of things to do. So I think that balance is so critical. So I think you answered this a little bit, you know, in that context of that balance of today and the future, but tell us a little bit more about as a guy who I sense is a financial nerd, right, you know, you’re kind of saving, balancing debt, and the questions you ask, how does money have a different meaning for you after you go through such a obviously situation of grief and loss such as that you did?

Phillip Beach: I think now, we’re more focused on giving back. And when we have extra funds, we don’t necessarily set aside a certain percentage or anything but you know, just kind of sporadically my wife will be like, “Hey, why don’t we help this family out?” Or, “Hey, why don’t we go up to Arkansas Children’s this weekend and bring them lunch?” Those are the kind of things that we like to do just on a whim. And that’s what we’re more focused on these days is giving back, doing what we can, as little as bringing someone that Chick-Fil-A at lunch in the hospital. It might not seem like much, but to them, that’s like — it’s a really big thing when these families are stuck inpatient for 3, 6, 12 months at a time. Some of these families are on the transplant list, like I said, and they literally don’t get to leave. They eat cafeteria food day-in and day-out. They’re there with their sick child and something just like bringing a meal is very uplifting. So that’s what our focus is on now is just giving when we can.

Tim Ulbrich: Especially a Chick-Fil-A meal, right? That makes anyone happy.

Phillip Beach: I know, right?

Tim Ulbrich: You know, I think what resonates with me when you said that is yes, it’s the meal. But it’s the gesture. It’s letting people know they’re not alone, that there’s a community that’s thinking about them, that’s praying for them, that’s encouraging them. And I think the meal is maybe the vehicle in which you’re able to do that. But obviously there’s a broader intention there. So let’s shift and talk about the Harper Faith Foundation, a 501c not-for-profit organization. You mentioned your wife set it up, which is awesome and we’ll talk a little bit more about that as well. But let’s just break it down. What is the mission and the work of the Harper Faith Foundation?

Phillip Beach: So our mission is to help other heart families and kind of like you said, building that community. There is — other heart families, you just have this bond with no one else has kind of gone through this situation like these people have. So you understand each other. And that’s kind of what we are making and building with Harper Faith Foundation. We aim to help out other heart families. So that is our goal is to provide some hope to them during these tough times.

Tim Ulbrich: And specifically as I understand it, you guys are doing work in a variety of different ways, including supporting families — you talked a little bit about this — supporting families, but I think there’s some other components as well with research. So talk us through the specific areas of the work of the Harper Faith Foundation.

Phillip Beach: Yeah, so we help other families through a variety of ways. One of the things we like the most is promoting research. So we were actually involved with two studies with Mayo Clinic. They took stem cells from the umbilical cord blood when Harper was born and they froze them and they were planning to use those in the Stage 2 surgery and they were injecting them directly into the heart to try to make that side of the heart stronger, the right ventricle, so that it could kind of take over some of that workload that the left isn’t doing. That’s one of our joys is to help with the research process and try to find not necessarily a cure because there isn’t a cure right now but just make advancements in this field because the prognosis is just very poor right now. And like I said, it’s a three-stage palliative operation. And that’s really all they can offer right now besides transplant. So we love to be involved in that. Sadly, we didn’t get to that Stage 2 operation to get to use those stem cells. But still, they were happy to be able to participate with Mayo Clinic in that. We also participated in another Mayo Clinic study with DNA. So my wife and I both took mouth swabs, and they’re trying to find a genetic link to see what is going on here. They haven’t exactly determined the link yet. But you know, there’s got to be something there more than meets the eye. So we’re happy to be involved in that too. Another way that we help is just by giving gift bags to the families that are inpatients at the CDICU. These gift bags include a lot of items like children’s books, newborn socks, newborn onesies, pacifier, stuffed animals, toiletries for mom and dad while they’re staying there inpatient in the hospital. There’s a water bottle, Kleenex, individual Tide packets so you can do your laundry there at the hospital. And we also put a binder in there to keep all your child’s medical information. And that’s one of our favorite parts is including this binder because you’re bombarded every day with so much medical information. And a lot of the times, you just freeze because it’s two steps backward, one step forward constantly. And when it’s with your kid and they’re telling you these diagnosis and stuff, it’s so important to have this medical information with you on paper, in a binder, somewhere where you can access it quickly just because a lot of times, it doesn’t sink in when the doctor is telling you these heavy diagnosis. So that’s one of the things we love most about these gift bags, giving those to the families. And then we also — we do a yearly college scholarship for a high school senior that’s going into their freshman year specifically to someone that has a congenital heart defect. So we’re very happy to be able to do that. And we started that this past year. And we would like to be able to increase it every year. Not only increase the value of the scholarship but as time goes on, we would like it be two scholarships, three scholarships, four scholarships, and just keep it growing. We’re just happy to be able to pay it back, and we’re so thankful that our friends and family has helped support us to be able to give back to others as well.

Tim Ulbrich: And I love what you said earlier, Phillip, you know, taking tragedy and turning it into triumph and really being able to make a difference. I think you have been tangibly — you and your wife, obviously — tangibly have been doing that. So thank you for sharing. For our listeners that are hearing that and saying, “I want to learn more about the Harper Faith Foundation,” or perhaps even give to the foundation, where can they go?

Phillip Beach: They can go to our Facebook page, Harper Faith Foundation. That’s probably the best place to get in touch with us. We have an Amazon link if you’d like to donate. And it has all of the items that we include in these gift bags to the families. So literally things like pacifier, the animals, the socks for the newborn, everything that goes in there you can get and reach out to us, connect with us, see what you can do to get involved and learn more.

Tim Ulbrich: So Harper Faith Foundation Facebook group. And we’ll link to that in the show notes for those that want to go onto the website when we publish this episode. You know, the other thing I’m thinking about here, Phil, is I sense many of the YFP community members have a desire to start a nonprofit for a variety of reasons and may look at that and say, “Well, that’s a really daunting, overwhelming task to start a 501c3.” So you mentioned your wife working with LegalZoom are really taking the lead on that process. Talk to us a little bit more — while I know you didn’t do it directly — about the intensity of doing that and hopefully an encouragement to others that, you know, it’s not something that can’t be overcome, can’t be done.

Phillip Beach: Yeah, definitely. So she — like I said, she did the whole process herself. She did all of the research and figured out LegalZoom was the route that we wanted to take. There’s a bunch of questions that you have to answer, of course, to get involved. And they basically assign you a legal team, they set it all up, and it’s a fairly straightforward process once you get it going. I would compare it to TurboTax and filing your taxes. They kind of pinpoint you questions to answer and lead you down the path, and it’s pretty simple as far as that goes.

Tim Ulbrich: Awesome. Awesome. So shifting to your financial plan for a couple moments here as we wrap up, before we had the interview, you had mentioned that you and your wife are interested or moving on the path towards Financial Independence Retire Early, the FIRE movement. We have previous episodes that we’ll link to in the show notes where we’ve talked about this. So tell me more about the motivation. Why is FIRE an area that you and your wife are interested in and pursuing?

Phillip Beach: So I like FIRE for a variety of reasons. But I guess the main thing is having more time and freedom to do what you want and spend that time with your family. Obviously it’s a long-term goal for us. My wife is still in school right now, so that is our focus right now is getting her through school and letting her accomplish her dreams, becoming a nurse and going to nurse practitioner, getting her doctorate. That’s our focus right now. But the opportunity to spend more time with your family, that’s really what we’re striving for.

Tim Ulbrich: Love the clarity of the why there. And typically, you know, student loans are the biggest barrier to people being able to achieve financial independence because you need to obviously be saving aggressively, and student loan payments, you and I both know, can be really big at times. So for your student loan situation, as I understand it, you were on a Public Service Loan Forgiveness Track working for a not-for-profit hospital but then switching to a for-profit hospital that that path changed a little bit. So talk to us about your current student loan repayment strategy.

Phillip Beach: Right, so I was on the PSLF with the nonprofit and I changed to this DOP role, and now it’s a for-profit hospital. But so still on the same loan forgiveness path, but now it’s including the tax bomb, basically, and a little bit longer of a plan. And that’s our plan for right now. And you know, with this whole pandemic and things changing daily, who knows what’s going to happen in the future? But right now, that’s what we’re doing.

Tim Ulbrich: Well right now, you’re in a pretty sweet spot. You know, we were talking before the show that obviously with the passage of the CARES Act, for somebody such as yourself that’s pursuing non-PSLF or even those that are pursuing PSLF, essentially you’re going to get six months worth of credits but have a $0 payment, 0% interest, essentially for six months, end of September. TBD after that. So at least for the foreseeable future, it’s a good place, good place to be in. Couple questions I have for you about the non-PSLF track. First one would be we often don’t talk with folks about how they’re thinking about or saving for the tax bomb. So for a moment, let me just explain for those listening that may not be familiar in that if somebody’s pursuing non-Public Service Loan Forgiveness inside the federal system, instead of 10 years with PSLF and that being tax-free forgiveness, with non-PSLF, as you mentioned, it’s longer and it’s not tax-free forgiveness. So for example, if you have $100,000 at the point of applying for forgiveness after 20 or 25 years, depending on your plan, that essentially gets treated like income that year, and you have to be preparing for the “tax bomb” that will be coming, which could be sizable, depending on one’s student loan amount and the amount that’s forgiven. So the question often comes then, you know, how do you plan for it? Do you worry about it now? Do you worry about it later? Where do you put those monies? So how are, Phillip, thinking through the preparation of the tax bomb?

Phillip Beach: So I guess there’s a lot of strategy I’ve read about online, and I’m thankful for so much content and resources from the YFP community and there’s some other physician bloggers for finances. And I guess right now, it’s a little bit of both, worrying about it now and in the future. And hopefully during this whole time period, you can set aside funds to a separate account and that is basically your tax bomb fund is how I’m thinking about it. And so when that time comes, you’re ready for that. Or hopefully it’s even a larger amount than that, and if the whole forgiveness thing washes out and you’re not — and that’s not a possibility, you have enough in that side fund to just completely pay it off. So that is kind of my long-term goal there.

Tim Ulbrich: Awesome. And while you’re in this situation that’s somewhat unique of six qualifying payments and you have to make a payment and if I remember correctly, you said your monthly payment was just shy of about $1,000 per month. So talk us through like what’s your strategy during this unique COVID-19 situation where you don’t have to make a payment? How are you thinking about utilizing those resources that would otherwise go towards student loans?

Phillip Beach: Well, you know, it’s such a fluid thing. But I’m waiting to get more information. So again, I’m thankful for your guys’ website putting out almost daily information bits on that. But we will probably hammer off some of the remaining debt that we have just a little bit left on my wife’s car. You know, that’s very tempting to go ahead and take care of. That’s probably our biggest interest rate right now. So that might be what it goes to. If I don’t have to make student loan payments for the next six months, that’s probably what will happen.

Tim Ulbrich: Yeah, it’s a time where you can be a little bit more opportunistic, right? Especially if you’ve got other parts of the plan tidied up in terms of emergency fund, credit card debt. I think it’s an opportunity to be opportunistic with those funds that would have otherwise gone towards student loans. So long-term, Phillip, there’s an interest, passion perhaps, to open up your own gym. So tell us more about that.

Phillip Beach: I’ve always been interested in maybe having my own small business one day. And I’ve been always been interested in nutrition and exercise. So that just seems like a no-brainer to me. And actually, my brother and I have always had this dream I feel like of just opening up our own gym and making that a reality one day. And the whole thought of doing something that you really love every day. And not only that, but it’s a place to help people. I can’t help but think of how much chronic illness we deal with here in America, and it’s just — it’s the cure for it basically is how I see it. Moving more, exercising more, can — it’s just the cure.

Tim Ulbrich: Yeah, and it reminds me of the episode we had with TJ Allen, who is a owner of a couple different gyms as well as an independent pharmacy owner, previously on the show. Just another example of kind of a passion for fitness, entrepreneurial type of mindset, and certainly strategic when it comes to his financial plan. So Phillip, thank you so much. I mean, this has been a great interview, certainly has inspired and I’m confident will do the same for our audience. I appreciate your willingness to come on, record this very early, 6 a.m. your time here this morning when we hit record and certainly willing for your — appreciate your willingness to share the journey that you’ve had with Harper Faith, obviously you and your wife, and more about the Harper Faith Foundation. So thank you so much.

Phillip Beach: Well thank you for having me on. And again, I hope this message can bring some positivity to at least one person and inspire them to keep going and get through those trials in their life. So again, thank you for having me on and thank you to all of our frontline healthcare workers too, the nursing staff, retail pharmacists, everyone out there that’s out there on the frontlines dealing with this pandemic. So just want to give a shoutout to you guys too.

Tim Ulbrich: Thank you, Phillip.

Phillip Beach: Thank you, Tim.

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