Student Loans / Podcast

YFP 090: Key Tips For Refinancing Your Student Loans in 2019

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Key Tips For Refinancing Your Student Loans in 2019

On this episode of the Your Financial Pharmacist Podcast, Tim Ulbrich is joined by Tim Church, YFP refinance expert and student loan ninja. In addition to a quick recap of the process of refinancing your student loans, the benefits of refinancing, how to calculate your savings and what to look for in a refinance offer, Tim and Tim give you an update on a new refinance offer available that may save you big.

Summary

On this episode, Tim Ulbrich asks Tim Church about how to refinance student loans, the benefits of refinancing, how to calculate savings on refinancing your student loans and what to look for when analyzing which refinance company to choose.

Refinancing may not be the best option for everyone with student loan debt. First, you have to decide if you are going to pursue student loan forgiveness or not. If you are going to pursue PSLF or if there is a chance you could, then do not refinance as it will make you ineligible for forgiveness. Additionally, mathematically, refinancing may not make sense for some people, especially if they are needing an income driven repayment plan due to having unstable income or upcoming changes in income.

The main reason to refinance is to get a lower interest rate. On average, graduate or unsubsidized student loans have an interest rate of 6-8%. If you refinance with a lower rate, you have the potential to save thousands. When you refinance, it is possible to get out of debt faster as you may be able to pay more money toward your principal balance regardless of how long your term is.

Other benefits of refinancing student loans are that you can potentially remove a cosigner from a loan, lock in a fixed rate, and potentially receive a cash bonus. Refinance companies make money from the interest you pay on your loans. Your Financial Pharmacist has worked with several reputable loan companies to offer cash bonuses when refinancing with their companies.

Tim Church discusses the newest refinance company partner, First Republic. They are only in select cities, however, can offer (at the time of recording) 1.95% fixed interest rate for a 5 year term and up to 3.95% fixed interest rate for a 15 year term. There are several other requirements that need to be met to be able to refinance with First Republic, however, doing so could save you lots of money over the course of your loan.

If you have any questions regarding student loan refinancing, email the YFP team at [email protected] .

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to Episode 090 of the Your Financial Pharmacist podcast. Excited to be back on the mic alongside Tim Church. Tim, how you doing? It’s been awhile.

Tim Church: Yeah. Hey, Tim. I’m glad to be back on and just cool to be closer to that 100 mark.

Tim Ulbrich: So awesome. I was reflecting on that today, Episode 090, we’re 10 away. We’ve got some exciting things planned for Episode 100. And just so you know, Tim Church, while I am freezing here in almost sub-zero temperatures up in Columbus, Ohio, I happened to pull up my weather app today. And I still have Palm Beach Gardens on my phone from last time I visited, and it said it was about 80 degrees when you walked out of work today. So how’s that feel while we’re suffering in 0-degree temperatures?

Tim Church: It feels great. But I’m not looking forward to coming to Columbus in April.

Tim Ulbrich: Hey, hopefully by then, we’ll have turned a corner. So we’ll see what happens. Well, excited to have you on. I certainly, as I alluded to in the intro, you are our student loan expert. And when it comes to refi, you’ve had so much experience in this area, so I want to pick your brain a little bit. We’ll revisit some of what we talked about in episodes 029 and 030 around refinance. So certainly go back and listen to those episodes as well. But things have changed, there’s new offers that are out there. And so we want to make sure we’re revisiting this topic, probably one of the most common questions that we get is around this topic of refinance. Tim, before we jump in though, I want to say side hustle series, the work you’ve been doing with that, I have really been enjoying the episodes that you’ve been recording. So great work with that, looking forward to more of those coming in the future. Alright, here we go. Student loans, always a hot topic. As I mentioned, one of the most common questions we’re getting. Refinance. Should I do it? How should I do it? What companies should be used? So Tim, before we jump into some of these specific questions, let’s discuss specifically who should not be considering a refinance. So walk us through that component of who should not be refinancing.

Tim Church: Definitely. Well, I’ll be the first one to say that I made this huge mistake back a number of years ago. But I think the way that companies are marketing themselves and getting people to want to refinance that you have to really take a step back, and it’s not the best option for everybody. I mean, mathematically, it doesn’t make sense, even if you’re somebody that really wants to get rid of your loans as fast as possible, it may not actually be the best way or the best approach how to do it. So I think the biggest group, where refinancing is completely off the table is that if you’re pursuing the Public Service Loan Forgiveness program or you think you could be or that’s still in the running because if you’ve got typical student loans that pharmacists are facing, you know, $160,000 or more, then mathematically, PSLF is always going to win out just because of some of the strategies you can do to optimize it where you can simultaneously save in your 401k and other retirement vehicles while lowering those student loan payments and then not having to worry about a tax bill. So I think that’s really the biggest group where you’re just going to shut down from refinancing because once you do that, you’re going to make yourself ineligible. I think there’s some other groups too where you have to really look at this before you pull the trigger. And that’s really individuals who need an income-driven repayment plan. And there’s a number of different reasons why that may be. Now, one is obviously for PSLF, but it could be if you’re having an unstable income or you anticipate you’re going to have a change in your income and you really need to make sure that you’re able to cover at least that monthly bill. And you may not be ready to make whatever that payment is when you refinance, whatever that term may be. So I think those are some of the key ones that you really want to look out for.

Tim Ulbrich: Yeah, and I think, Tim, just to elaborate a little bit on your PSLF comments, which I think are spot-on and certainly just to reemphasize that, if you’re even remotely considering Public Service Loan Forgiveness, the way we always teach the loan repayment option is you first have to decide forgiveness or no forgiveness. And if it’s a no forgiveness play, then you evaluate a refinance, among other options. And we talked about PSLF in Episode 018. We also came back and talked about it on Episode 078 after some of the news that recently came out that was really getting to the point that 90+% of people applying for loan forgiveness were not receiving the benefit, and we hopefully broke down some of the confusion around that. Tim, I want to ask, though, we talked about in Episode 062, we talked about non-PSLF, so the other loan forgiveness. So that’s also something that people need to be looking out for, right? Any forgiveness clause they may be pursuing in the federal repayment option, they should not be going through a refinance, right?

Tim Church: Right, because you have to keep your loans in the federal system in order to qualify for any of these programs. So once you make that move, you would make yourself ineligible. And there are people where using the forgiveness that’s not through PSLF, where it’s 20-25 years, depending on the repayment plan that you choose and then having to pay the tax bill on the amount forgiven actually can be a better strategy than refinancing. I know it may seem overwhelming to say, “Hey, I’m going to hold onto my loans for 20-25 years,” but even with having to plan for that tax bill, you could be in a better position, depending on how high your debt-to-income ratio is. So you really have to look at the math behind what your situation is and what the difference would be if you refinance and how much would your monthly payments be and what kind of buffer do you have to even put towards other financial goals? So we talk about sometimes the debt-to-income ratio of 2-to-1, but also some of the things that you’re feeling holding onto loans that long, there’s some other emotional aspects I think behind it as well. But it’s also important that you do the math and see what comes out to be a better option.

Tim Ulbrich: Yeah, just a great example of that, Tim: This past week I was at Ferris State University doing some work with their students, and we were walking through PSLF and non-PSLF forgiveness. And you know, I think we tend to focus on so many of the mathematical components, but when I talked to them about non-PSLF forgiveness, 20-25 years, the tax bill, I got this look on their faces like, “Who in the world would ever consider that?” But I think to your point is that it’s a combination of these variables. And if you’ve got a very high debt-to-income ratio, and you’re working for a non-qualified employer, you’re working for a for-profit employer, then you know, depending on how you feel about it, it’s at least probably an option to evaluate. So again, just to be clear here, anybody who’s considering loan forgiveness through the federal loan repayment options, whether that’s PSLF or non-PSLF, certainly refinance would make you ineligible because you’re pulling yourself out of the federal system into the private system. The other question I get here, Tim, is — and you alluded to this a little bit about income-driven repayment plans and anybody who needs that, but what if I’m anticipating changes in income or I’m unsure about cash flow I’ll have month-to-month? I mean, is this something similar to the federal loan repayment options where I can make extra payments? So I could start with a longer term, say 20 years, and then eventually come down if I have more? Or do you recommend if somebody’s in that period of I’m not exactly sure the stability of my income, I should just stay in the federal system and then wait to do a refi?

Tim Church: Yeah, I mean, I think the conservative play is better in this situation that you want to have stable income and know what’s coming in because you’re not going to get that flexibility with most refinance companies like you get with the federal government. I mean, the option to do income-driven repayment plans and at the very worst, to temporarily stop making payments, whether it’s a qualified deferment or forbearance, you know, that’s something that you have to consider that you’re giving up. Now, some of the companies, they have variable options. I think at least one has an income-driven repayment plan option, and some allow you to make interest-only payments, but I think that you have to be pretty confident in your financial position before you make this switch.

Tim Ulbrich: Yeah, we’ve definitely seen a transition, I would say over the last five years where these plans very much are starting to look and be as competitive as the federal options, just hopefully with a lower rate, which I’ll talk about here in a minute. So I think we’re going to see more of that shift toward offering income-driven repayment plans, especially knowing how popular those are among borrowers when they go into active repayment. So before we transition and talk about the main benefits of refinancing, obviously, there are benefits because you have done this — how many times now have you gone through the refi process?

Tim Church: Um, let me see. I’ve refinanced my loans three times. And I think my wife has also done three times. So like a total of like six times.

Tim Ulbrich: OK. So let’s come back to that because I think that when I mention to people, you can refi more than once, I think there’s some concern about the impact on credit scores and just not being aware that you can do that. So let’s come back to that. But let’s first start with the main benefits of refinancing. So why would somebody pursue this? So they’ve decided, OK, I’m not going to pursue loan forgiveness, so now I’m going to evaluate either staying in the federal loan repayment system, choosing one of those options, or going to a refinance. What would be the benefits of doing a refi?

Tim Church: So I come back to your situation, Tim, because you’re somebody that was not pursuing any of the forgiveness programs.

Tim Ulbrich: Please don’t remind me, Tim.

Tim Church: And stayed in the federal system. And you —

Tim Ulbrich: At 6.8%, yes.

Tim Church: Right, so you had a lot of financial stability. And if you’re somebody in that position, most of the time, you’re going to be able to get a lower interest rate. And obviously, that is the main benefit and the main reason why you should even consider refinancing. So the average interest rates in the federal system are typically from 6-8% for a graduate loans or unsubsidized loans, and so by getting that overall interest rate reduced, you’re going to save a lot of money over the course of the loan. Now, it depends on your balance you start with, the change in the percentage and then obviously how fast you pay it off. But if you consider a pharmacist who has a balance of $160,000, and you plan to pay that off over 10 years, well if you take a rate from a 7% overall to a 4%, you’re going to save about $28,000 over those 10 years. So really, it can have a huge impact on the total amount that you’re going to pay over the life of the loan.

Tim Ulbrich: So what do you say — and I know obviously the news has been over the last year, we’ve seen the fed increase interest rates, which obviously these private loans are going to be tracking with what the fed is doing with their interest rates. So are you seeing these are still a competitive option with those federal loans being 6-8%? Were they more competitive 12 months ago, and they’re less competitive but still competitive? What are you seeing in terms of rates and what people are getting to? Obviously, knowing it’s variable based on debt-to-income ratio, credit score, etc.

Tim Church: Yeah, I mean, I haven’t noticed a huge difference.

Tim Ulbrich: OK.

Tim Church: In 2018, when we did multiple refis, we were able to get the first couple times down to in the 4’s. I know Nate, the Real Estate RPH, he I think was able to get down to like a 3.5% fixed rate with one of the companies. And this was in 2018. So I still think there’s definitely a lot of competition and a lot of room. And obviously, we’ll talk about one of the special partners that we have because they offer kind of a unique situation. So Tim, so we talked about obviously the lowering your rate I think is the biggest reason. That’s the No. 1 reason why you’re going to refinance. You’re going to pay less money in interest over time. So one of the things that’s kind of a cool way to look at it is technically, you will get out of debt faster if you make the same monthly payment that you’re making with a higher rate and switch to a lower rate because more of that payment is going toward the principal. So that’s another kind of a cool way to look at it. So regardless of what term you end up choosing, if you just make the same payment, you know, more of that is going to the principle, and you’re going to get done with it a lot faster.

Tim Ulbrich: So what are you seeing in terms of terms? You know, that’s usually one of the questions that I get of, you know, what is the range here? Is it 5-20 with everything in between? Are these all the same between companies? And then I would assume, in theory, the more aggressive you’re willing to be with payments, making larger payments, the better the interest rate you’re going to get. What are these companies offering?

Tim Church: Yeah, I would say in general, that’s true. So you’re totally right. Most companies, it’s anywhere from 5-20 years. A lot of companies offer a 7-year, a 10-year and a 15. And then a couple companies offer kind of rates a little bit in between there. But yeah, in general, the shorter the term, the more competitive the interest rate that’s being offered. And then also, the other variable that goes into it is whether it’s a fixed rate or whether it’s a variable rate. And that’s the other thing. A lot of times, they’ll put out teaser rates or rates from. Even on our website — which is typically their variable rate that they’re advertising. And sometimes, that’s just a teaser rate just to get you interested. But you always have to look at what the maximum or what the cap is because that can obviously change with the federal reserve and with LIBOR rates, so there’s a lot of different situations where you can end up in a worse situation than what your rate was before you refinanced.

Tim Ulbrich: Well, let’s talk there for a minute about the co-signer issue. That’s often a question I get as well is that, hey, I currently have a loan, I’m in the federal system, I’ve got a co-signer. How does that work when I’m looking to refi my loans and bring them over to the private sector?

Tim Church: So a lot of times, that’s another reason to do the refinance is you can actually get rid of a co-signer. So depending on your credit score, your current income that you have, your debt-to-income ratio, you can actually just put yourself on the loan and remove whoever else was on there. Because I know that that is a concern for some people, especially when the originally took out loans that they have somebody else that potentially is responsible.

Tim Ulbrich: Awesome. So we have talked through several benefits. We obviously talked about the interest rate and the savings, being able to get out of debt faster, the money going to a principle, potentially removing a co-signer, being able to lock in a fixed rate, more aggressive payments, usually the better rate that you’re going to get. What about the cash bonuses? You know, you mentioned the variable rates being kind of a teaser to get people in. The other teaser I see out there is often the cash bonuses, which certainly we have negotiated the best rates for our listeners over at YourFinancialPharmacist.com/refinance. But are those cash bonuses what they seem? Are there any hooks? And then why not refinance multiple times if you’ve got opportunities?

Tim Church: Well, that’s what my wife and I did. We literally did that. And this is no joke, but honestly, we actually made $2,700 last year in 2018, just by refinancing multiple times.

Tim Ulbrich: Time to quit your YFP job, right? Just keep refinancing.

Tim Church: Honestly, I don’t think that’s always going to be the scenario and the situation, especially depending on what competitive rates that you’re able to get. But it was fortunate for us is that every time we checked every couple months is that another company was able to make an offer that was lower at which we currently had. So it obviously made sense. It wasn’t just for the cash bonus that the companies were offering. It was also to get that lower interest rate. But I think it’s kind of important to understand, you know, why they do this and why pharmacists or healthcare professionals are sort of targeted. But obviously, it’s no secret that refinance companies, they’re going to make money from you by the interest that you pay them each month. And pharmacists, they typically carry high debt loads in the six figures, we all know that. They’re actually going to make more money off of pharmacists and other healthcare professionals than other people with just typical undergraduate student loan debt. And so as an incentive for you to use a particular company, they typically will offer a cash bonus or sometimes called a welcome bonus. And as we talked about, you’re not limited to doing this one time. And because the interest rates can always change and sometimes you can get a better rate, then you can obviously do it multiple times. I’ve heard this term before is “serial refinancing” where you can do this. But I mean, it makes sense that they’re able to do that. But I think one of the cool things — and obviously, we’re fully transparent. We do make a commission if you refinance through our links, but a lot of the big players out there, they’ve got student loan review sites and things like that. But they’re either offering nothing if you use their sites or use their links or a very minimum amount of money. But that’s not really our style. And one of the things that we wanted to do even from the get-go is really offer a lot of value and push that number as high as basically we could to offer our audience some really high cash bonuses, which there’s not very many companies and businesses that are basically putting that out there and putting that much money for people to get.

Tim Ulbrich: I think we need to get you a “Refi King” T-shirt. Right? That would be awesome. It really is incredible. And I think that’s an important piece that people just need to understand, what you just said there about the cash bonuses, the transparency is important. Obviously, that’s taxable income, right? So you need to account accordingly when it comes to tax season and accounting for that money that you’re making on a refi. What about the credit impact? That’s a common question I get that, “Hey, if I go through with these refinance offers, is looking at rates going to impact my credit?” And if not, obviously then when you go through the process, I’m assuming it would, just like you’re buying a car or something else. Talk us through the impact on credit.

Tim Church: Yeah, so when you do a rate check, they often do a soft credit check. So you’re just trying to see what kind of rate you’re eligible for. You’re not going to have any ding or any hit on your credit score. But you may experience a very minimal change when you do refinance, when you use — basically, when you fill out the entire application process, they’re doing a hard credit pull. So it is possible you might see a small reduction in your credit score. Personally, my wife and I didn’t really see that big of a difference, to be honest.

Tim Ulbrich: Which is just all the more reason, you know, to be aware of it, check your credit, annualcreditreport.com. You can do that once a year from three different companies. It’s something you should just be doing anyways, but obviously, be aware of the impact that this may have in that process and weigh that benefit as you’re going along and the risk, if any, associated with doing that. So Tim, second most common question I get outside of, “Hey, should I refinance or not?” is “I’ve got all these options, I’ve got all these choices. You guys have some on your site, I’m getting these fliers in the mail, I’m getting emails, I’m getting things from my national association. What company should I choose? And then what are some things that I should look for in choosing a company?”

Tim Church: Yeah, I mean, you definitely have to make sure they’re reputable. Unfortunately, there are so many scams out there with companies claiming to have these special forgiveness programs or special refinancing programs, and oftentimes, there’s — one of the ways you can tell they’re not reputable or they’re kind of scammy is that they want to pay them a fee. So that’s really a big red flag is that if they’re asking for some kind of origination fee in order to do the refinance, I mean, that’s a huge red flag. I mean, we just talked about that they want to pay you money in order to refinance with them. So definitely want to watch out for that. But there’s two places that I really like if you’re really concerned or you want to check it out. The first one is the Better Business Bureau. So you can go there and check out and see what kind of ratings they have and also some of the customer complaints, if they have any. And then NerdWallet actually has another cool resource called the Watch List. And we have that link on our website. We’ll put it in the notes. But what they did was is they’re basically identifying and targeting any businesses with unethical practices or fraudulent practices or have like severe debt or liens against them. So I think that’s another cool place to look for to make sure that whoever you’re using is a very, you know, safe company to use.

Tim Ulbrich: So obviously, they need to be reputable. You know, no origination fee, I agree that ultimately, you’re giving them business, and they’re going to make money off of that. We talked about the cash bonuses, you can obviously compare those. What about the forgiveness on death and disability? We know that if somebody only has federal loans, their loans would be forgiven in the event of death or disability. But that’s a question mark in the private sector. I know we’ve seen this move where it seems like most of all, these companies are offering that but not everyone. So what is your advice as you’re talking with fellow pharmacists and peers about how to evaluate that benefit of loan forgiveness on death and disability?

Tim Church: I mean, it’s definitely something you have to consider. I don’t think it’s an absolute must, but if you are going to decide to go with a company that doesn’t offer that benefit because they’re rates are much better, that you want to make sure you have those policies in place. I mean, for everybody pretty much, disability insurance or some kind of coverage is going to be warranted. Life insurance, that could be debatable on terms of whether you absolutely need it. But yeah, I mean, I think it’s something to keep in mind because that is one of the protections that you may lose when you switch your loans out of the federal system to a private lender. Three of the companies that we have on our site, so Common Bond, Earnest and SoFi, they will actually forgive the balance on death or disability. So that is one of the perks of those companies that we partnered with.

Tim Ulbrich: Awesome. So let me just point our listeners to — I think that’s a great point that it’s not an absolute, but if you’re going to work with a company that does not offer that because they’ve got a better rate and you’re weighing the risk and benefit, make sure to figure out that you have the life and disability insurance coverage that you need. We talked about that in Episode 044, How to Determine Your Life Insurance Needs, and Episode 045, How to Determine Your Disability Insurance Needs. So Tim, we talked through the benefits in terms of what somebody should look for in a company: they’re reputable, no origination fees, the cash bonuses, the loan forgiveness on death and disability. Now, obviously add making sure there’s no prepayment penalty. So just like in the federal system, if you want to make extra payments, maybe you’re on a 15-year fixed repayment plan, and you want to expedite that if for whatever reason you don’t refinance down to a shorter term, you can of course make extra payments along the way.

Tim Church: Yeah, and I’ve seen many people where, you know, they’ll say something like, “You know what? I could refinance to a five-year. I could make that monthly payment.” Or “I could make that seven-year payment. But you know what? I want to give myself a little bit more flexibility, and I’m going to set it up as a seven.” Or “I’m going to set it up as a 10. But I’m going to throw extra money at it.” So most of the companies, most of the main companies out there, I haven’t seen this be an issue of making additional payments and paying it off faster than what the term that you signed up for.

Tim Ulbrich: Yeah, I think especially as these companies have become so competitive at getting your business, they’re obviously wanting to offer everything they can to be able to secure that business. So Tim, one of our newest partners that we wanted to talk about on this show and make sure people are aware for those that are able to access this company and the benefits is First Republic. And I have to be honest, when you came to me with what First Republic was and told me about the rates, and I heard you talking about rates below 2% and I’m thinking of most people at 6-8%, I was like, “I don’t think I’m buying it.” But certainly, it’s legit. You’ve gone down this path. We’ve had several others that have. So talk to us about this opportunity, who qualifies, and what are they offering that’s unique compared to the other companies that we’ve been working with?

Tim Church: Yeah, they’re definitely a very unique bank. And it’s funny because of how this bank is described out there. Like a lot of blogs and websites, they talk about it as a secret or a mythical bank. Like, you know, like it’s hidden in the valley, like only certain people have the map to find it.

Tim Ulbrich: To find it, yeah.

Tim Church: But one of the main reasons why it’s kind of had that reputation is that unlike some of the megabanks out there, they’re only in select states and cities. So the state that they have the most locations in is California. And we have a link to the post that I wrote. It has all the specific locations there. But they’re in Portland, Oregon; they’re in Greenwich, Connecticut; and then they’re in Palm Beach County. They happened to be in Palm Beach County, Florida, which is where I live. And that’s why I was able to refinance with them. And then they’re also in Boston and New York City and also Jackson Hole, Wyoming. But why that’s important is that —

Tim Ulbrich: Jackson’s so random. Jackson Hole, Wyoming, right?

Tim Church: I don’t know, I don’t know. It would be interesting to see how their team, how did they decide how to select like what cities they’re going to have. But why that’s so important is that one of the requirements to actually refinance with them is that you have to live within a 20-mile radius of a physical location. I don’t know exactly why they mandate that, but that is one of their requirements. And obviously, that’s going to disqualify a number of people out there that don’t live in one of those locations.

Tim Ulbrich: Yeah, and depending on somebody’s student loan balance, it may be worth picking up and moving. I’m half kidding. But you know, it could when we look at these rates. But I think too, what I’m assuming they’re trying to do, which other companies are interested in doing as well is, you know, the refi here may be the gateway to get in the door as a long-term customer, to purchase a home, to eventually get a HELOC, to do real estate, other things that you do at their banking. But nonetheless, I mean, their rate is like no other what we’ve seen. So talk us through what they’re offering.

Tim Church: Right. You can’t beat it.

Tim Ulbrich: Yeah.

Tim Church: Yeah. I mean, there’s no one else that I’ve ever seen that has these kind of rates. But they still have, even as of the time of this recording, they have a five-year term. And this is the other thing is these are all fixed rates. None of these are variable rate offers. They’re all fixed rates. But they’re offering 1.95% for a five-year term.

Tim Ulbrich: Crazy.

Tim Church: And then it’s up to a 3.95% up through a 15-year term. And one of the things is that, you know, unlike some lenders where they’ll take all of your financial information and then they use their magic algorithm and spit you out a specific rate, it’s kind of — it’s an all-or-nothing. Basically, you either qualify or you don’t.

Tim Ulbrich: OK, so you mentioned them offering rates that are fixed, less than 2%, 1.95% up to 15-year terms at 3.95%. I was actually just coming back and looking using our refinance calculator, which we have available over at YourFinancialPharmacist.com/refinance, where you can run your numbers to say, “Hey, if I were to keep my loans in the federal system versus if I were to refinance, what exactly would be the savings?” So you know, looking at my total indebtedness, roughly around 6.8%, which is hard to think about when you’re talking about rates at 1.95%. So for me, it would have been about $30,000 of savings through a refinance like this. And I think that’s what we’ve seen on average for somebody who’s looking at the average indebtedness and saving a couple percentage points on a refi. Obviously, a rate like this is going to bring that down even a little bit further. Now, I know, Tim, you had to jump through a couple hoops that were not necessarily insurmountable but that were different from other refi companies out there to be able to work with them. So talk us through those just so people that are listening who are going to be evaluating this option among others, what are the things that they can expect in terms of meeting the requirements to be able to refi with First Republic?

Tim Church: Yeah, that is one of the big differences is that it’s pretty challenging to actually qualify and meet all of their requirements, much more stringent than the other major players out there. But we already talked about the 20-mile radius of a physical location. But one of the things that you have to have and what they’re looking for is about 10-15% of the loan balance in liquid savings. And depending on how high your loan balance is, I mean, that can be a pretty substantial amount. And if I recall, that’s not in retirement accounts or anything but actually liquid cash in savings, checking, something that’s able to be accessed pretty easily. So I think that’s one of the requirements that’s pretty tough. And then the other one that I think is pretty tough as well is they’re looking for a debt-to-income ratio of 40% or less. You know, we talked about earlier that it’s sometimes the opposite for people where they have a 2-to-1 debt-to-income ratio. So you know, much higher than that ratio. So I think those are probably the toughest requirements to meet. And sometimes, it may be something where you don’t meet it initially, but eventually kind of once you build your savings up, pay down your debt a little bit, that eventually you’re going to kind of meet those cutoffs. And what they’ve told me, what some of the reps is that these are not all, you know, you have to meet these exactly to the exact T. They kind of look at the whole picture, but this is kind of their basic guidance for when they’re looking at who to approve. And then some of the other ones that you have to have — so you have to have a loan balance of $25,000-300,000. Probably no big deal for most pharmacists who are graduating today. And then a credit score of 750 or higher. And those are really the main things. But then to kind of take it a step further, and this was something that for my wife at first was a little bit — caused a little bit of anxiety.

Tim Ulbrich: You convinced her, though.

Tim Church: I did. I used my amazing persuasive skills to show her all these benefits. But you actually have to bank with them. So basically, wherever you’re banking currently, you have to switch everything over. And that is to keep your rates at the level of where they are, you have to make direct deposits into one of their checking accounts. And then technically, you also have to keep I believe it’s 10-15% of the loan balance in there to keep that rate or it goes up — it goes up by a very small percentage, it’s not anything substantial. But the biggest ones to keep the rates down are making direct deposits, keeping a checking account open, not basically closing all your accounts before the loan’s paid off. So there’s definitely a number of hoops to get it to happen, but I will say that I am impressed overall with their customer service. You know, one of the things they do is they assign you a relationship manager, which you know, I kind of joke with people, I’m like, yeah, it’s VIP access, like your 1-800 number, like you’re calling like somebody’s cell phone, you know, in case you have any issues. But one of the other cool things they do is because they recognize that they’re only in select cities, if you have to use any ATM, it doesn’t matter what other bank or what other company, they’ll actually reimburse for any ATM fees that you incur, which is a pretty cool feature that they have.

Tim Ulbrich: I like that. I mean, I feel like the idea of ATM charges seems ancient in 2019. So glad to see that they’re on board with that.

Tim Church: Right.

Tim Ulbrich: You know, it’s interesting, even though you described those hoops, Tim, to me, as I hear you say all of those, they all make sense to me, right? So for them to be able to offer a very competitive rate, you know, they want to probably have somebody that they’re going to retain long-term business and get Return on Investment elsewhere, which makes sense in terms of banking with them, direct deposit so you have a higher likelihood of future business, and then they want to make sure that you’re a qualified applicant who’s going to be likely to pay on your debt and not be somebody who ends up going into default on these. So having liquid cash, having a favorable debt-to-income ratio, having a positive credit score, I think that all makes sense. And I think the thing I would consider for our listeners to evaluate if First Republic is an option for them to consider is maybe there’s a refinance play that you can do right now and take advantage of some of the savings, a cash bonus, and this is something you’re working towards as the next refinance, maybe in a 3-6 month period as you’re getting these things saved up. And I think you certainly can have your emergency fund in with them, which would help the 10-15% loan balance. So just some strategy, but when it’s all said and done, you’ve been there. It’s actually happened, right? And you’ve gotten good customer service, as you mentioned. So you can learn more about that on our website, YourFinancialPharmacist.com/refinance. We’ve got them listed alongside other partners. And then you wrote an awesome blog post on this topic and specifically, more about that offering that we’ll make sure to link to in the show notes.

Tim Church: Yeah, one of the other things that’s really cool — and this is the feature where I said, I don’t understand this offering that you have. But if you — once you refinance with them, if you pay off the loan balance within four years, they’ll actually give you up to 2% of the interest paid, 2% of the total loan balance. They actually give that and credit it back to you. And that’s one of the things where I said, “Well, like I don’t understand because you guys aren’t making much money, you know, off of this.” But again, it’s kind of what you said is this is one of their moves to get some of the younger generations into their banks to provide them and offer them other services.

Tim Ulbrich: Yeah. I mean, when the Churches end up being in the multi-millionaire status, they’re going to have your business, right? So that’s a good play on them in the future. So those that are listening to this that, you know, heard, OK, who should consider this, who should not? I know that I’m not going to pursue forgiveness, so now I’m going to evaluate a refinance. We talked about the benefits, we talked about the features of what somebody should look for in a company. So the question is, what’s the next step? Where do I go if I’m listening and I want to learn more about this? I want to check rates, I want to see my potential savings. What would you recommend?

Tim Church: Yeah, so I think going to our website, to YourFinancialPharmacist.com/refinance. And I think the first step is is just get some rates and see what you’re even eligible for. And then kind of once you look at the rates you can get and go ahead and use our calculator and see what that savings would be like. You know, some of the sites, they have it kind of baked in, so they’ll let you know and tell you what your potential savings are, but I think that’s kind of important moving forward. And then, you know, obviously if all the rates are the same and all of the perks and things that you like about the companies, then definitely go where the money is. Go for the cash bonus.

Tim Ulbrich: Awesome. And as always, if you have any questions as you’re going through this process, shoot us an email at [email protected]. And a couple last reminders as we wrap up this week’s episode of the Your Financial Pharmacist podcast, we mentioned at the beginning that 2019 is the year of giveaways over at YFP. And so this month, we’re giving away five Costco gold memberships — I really wish I was in this drawing, to be honest, but I don’t think that would be fair — valued at $60 each. So enter the giveaway today at YourFinancialPharmacist.com/giveaway. Again, that’s YourFinancialPharmacist.com/giveaway. 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 review in iTunes, Spotify, Stitcher, or wherever you listen to your podcasts each and every week. So Tim, thank you so much for joining and to our listeners, have a great rest of your week.

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YFP 087: Student Loan Updates with Travis Hornsby

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Student Loan Updates with Travis Hornsby

On this episode of the Your Financial Pharmacist podcast, Tim Ulbrich interviews Travis Hornsby, Founder of Student Loan Planner and Chief Student Loan Planner. Travis shares student loan updates and talks about his journey starting the Student Loan Planner, the most common mistakes he sees pharmacists making with their student loans, the pros and cons of student loan refinancing, what legislative changes he anticipates will happen and the one step you can take today if you are feeling overwhelmed with where to go next with your student loans.

About Today’s Guest

Travis started Student Loan Planner in October 2016 after helping his wife and her friends figure out their six figure student loans. He used to be a bond trader, so he took his Excel heavy skill set and built models for how to save money paying back student debt. When he and his wife tackled her debt from med school, there were not a lot of resources out there for professionals like her. Most of the sites that did exist just wanted us to refinance so they could earn a commission.

Summary

Travis Hornsby, founder of Student Loan Planner, talks all things student loans with Tim Ulbrich. The Student Loan Planner has saved 1,500 clients a projected $80 million over the lifetime of their loans.

Before launching the Student Loan Planner, Travis worked as a bond trader for one of the world’s largest companies. However, he wasn’t excited about getting up for work in the morning. He sought early retirement, traveled the world, and met his now wife who had a lot of medical school debt. Travis used his experience with Excel to model paying off her student loans and did the same process later for a lot of their friends. This experience paired with his realization of how little or bad advice is given for paying off student loans led him to create his Student Loan Planner business.

Travis provides insight and updates for different loan repayment options and reminds those with pharmacy school student loan debt that they have a lot of options.

First, Travis discusses the Public Service Loan Forgiveness program (PSLF). He shares that a lot of people are getting the story wrong about the history and working of PSLF and thinks that in the future, borrowers taking this path will be grandfathered in to complete the program, even if the program has changed or doesn’t exist anymore.

Travis also discusses the return of investment of the pharmacy degree and that it’s important to take your focus off of debt and think about your broad financial goals, as this can aid in determining which repayment plan to chose. He also speaks about the refinancing market and how to know if that’s the option that will work best for your situation depending on your debt-to-income ratio. Travis talks about the benefits of the “refinancing ladder” and that you are able to refinance your loans multiple times.

He also gives advice to those that may be feeling overwhelmed by their debt. Travis shares that it’s important to determine what your goal is, whether it’s to get your student loan balance to zero or for your loans to be forgiven. This will help you determine which path to take and allow you to plan out how to repay your loans.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Travis, welcome to the Your Financial Pharmacist podcast!

Travis Hornby: Great to be here, thanks for having me, Tim.

Tim Ulbrich: Yeah, I’m excited to have you on and talk all things student loans and excited to be able to pick your brain as somebody I view to be a leading expert in this space and hear more about the work you’ve done at Student Loan Planner and also talk about this topic, this behemoth that is student loans, the impact on pharmacy graduates, what you’re seeing with your clients and the future of student loans. Specifically, we’ll talk a little bit about loan forgiveness, refinancing and other things that I know our listeners are in tune with or want to learn more about. And Travis, I have to say, I was reflecting as I was going back, preparing for this episode. I think it was just over two years ago I heard about your journey, we had a phone call, got a chance to talk a little bit about the vision of what we each were working on. And it’s been incredible to watch what you have been doing over at Student Loan Planner, so congratulations on the work that you’ve done.

Travis Hornby: Thanks, and you know, great work as well, educating pharmacists and making them more financially literate. It’s badly, badly needed. So really grateful for Your Financial Pharmacist being out there. We’ve got very similar positive missions to try to help people as a community, so it’s exciting to talk.

Tim Ulbrich: Absolutely. And before I ask you to talk a little bit more about your journey of starting Student Loan Planner, I want to make our audience familiar with the work that you’re doing if they’re already not, so StudentLoanPlanner.com, and you have saved over 1,500 clients a projected $80 million over the lifetime of their loans. And we’ll talk a little bit about how you have done that. And the website, again, StudentLoanPlanner.com, is an incredible resource: up-to-date information, you’ve got the blog, you’ve now got the podcast we’ll talk about here in a little bit, calculators, quizzes. Your calculators are phenomenal. Is that you building those? I mean, that’s amazing if you’ve been building those calculators.

Travis Hornby: Yeah, you know, I did build it. That’s my background, I was a bond trader for one of the world’s largest investment companies, and you know, the career path is keep your head down, make a lot of good trades, you’ll work your way up to being a portfolio manager, and that’s a wonderful career path. It’s a very numerative career path, but it just wasn’t for me. It wasn’t what got me up in the morning, really passionate and excited to go to work. And I’m a big believer that no matter whether that’s in your field that you initially chose or whatever it is, you should try to seek it out. And so for me, that kind of led me to trying to do early retirement. So I actually quit my job at 25 and traveled the world for a little bit and then ended up dating this woman who had a lot of student loan debt, my now wife. And she had a lot of debt from medical school, and so I was thinking, well, you know, I’ve got all these Excel skills fresh out of being a bond trader. I should use these to model it for her. And I did. And then she told me to tell all her friends about it because they were in the same boat. And then we had friends when we were up in Philadelphia that were in a bunch of different graduate programs, and I found that the math was applicable to their situations as well. And then I thought, wow, this is a lot more fun than making rich people richer. Not that that’s a terrible thing because a lot of big investors are mom-and-pop type people, and that’s a noble goal, but it just wasn’t something that made me super excited to help people that already had figured out their financial issues.

Tim Ulbrich: So Travis, what were you seeing at the time in terms of — you mentioned your situation with your wife and the journey that you guys had paying that off, and you’ve kind of brought your experiences together as a bond trader. You had this desire of kind of doing something you are passionate about. What did you see in your own journey as it related to paying off student loan debt and achieving that vision of becoming debt-free? And why were you then passionate about spreading that onto others?

Travis Hornby: Sure. So a lot of your pharmacists that are listening to this that work at not-for-profit or government employers will really feel the pain here, will really feel our pain. So my wife worked at a not-for-profit employer when she was in residency and in fellowship. So she had a bunch of credit towards loan forgiveness. And then at about year 7 or 8, you know, in terms of the numbers of years toward the 10 that she needed to get public service loan forgiveness, she submitted all the paperwork after I made her realize that hey, this is a thing, you should really apply for this, you should be eligible for this and then we should be able to just cap your payments out on the IBR plan for the last two or three years of it when you’re attending, and we should be able to get $100,000 wiped away. And so I submitted all the forms, and then Fed Loan came back to us and said, “You don’t have any credit on half of your loans. And on the other half of your loans, you only have three years of credit.”

Tim Ulbrich: Classic, right?

Travis Hornby: Yeah. I was just blown away by this. I said, how is this possible that you’ve made all these payments based on your income for seven years and you have almost no credit for a lot of your loans and barely any on the other half? So I thought that was just absurd, and so I ran the numbers again to see, well, pretend that she gets the full three years of credit on everything, what does that mean for the rest of the PSLF path? Should we count on this or not? And her debt was small enough, you know, thankfully, that we just decided that the projected savings, there might be like $20,000 or $30,000 left over at the end of the 10 years, so we’re just going to refinance it and pay it off really quickly. So that’s what we did. So we paid off her $124,000 of med school debt, which is, you know, very low compared to a lot of people that I talk to. And we’re very blessed that it wasn’t very high, but at the same time, it’s really crazy because it should be the injustice of this whole system going through this personally because her parents were first-generation Americans coming over here from Hong Kong and then Canada. And they really sacrificed and put tons of their savings into her med school to try to help her come out with less debt. And if she’d only had better guidance, she not only could have had her parents keep a lot of that money, but she could have paid even less of it back if she had had that information early on in the process. So I thought that was just so outrageous that one, the cost was already so high for medical school. But second, that she got such bad advice from that same medical school that caused her to be kind of taken advantage of by the loan services, just the fact that cost us five, even six, figures. I just thought that was terrible, and I didn’t want that to happen to anybody else.

Tim Ulbrich: I love that you took your personal pain and obviously, you know, nobody wants to go through that, but taking that personal pain and turning it into good and teaching others. And I think as I follow your blog, I weekly kind of follow, I think you’re an incredible teacher of taking what is a unbelievably complicated subject — probably one we both agree is unnecessarily complicated — and really breaking it down in a way that people can understand and really take a step back to say, what is the best student loan repayment option for my personal situation? And I know coming out of school, similar type of a journey, as I look back, I could have went Public Service Loan Forgiveness, I could have refinanced, didn’t know what either of those were, didn’t have the education, didn’t have the tools. I couldn’t tell you what was subsidized, unsubsidized. I couldn’t tell you IBR and PAYE and REPAYE. I didn’t have any idea any of that knowledge. And I think that’s a consistent theme we see with lots of pharmacists, I’m sure you see with your clients, and being able to break that down and as you work with people one-on-one to say, hey, based on your situation, this is really what we think is the best path forward I think is incredible. So that’s been fun to watch your journey and see that grow along the way. So let’s talk while we’re in the moment of loan forgiveness, let’s talk about that for a minute because I think there’s so much swirling right now about Public Service Loan Forgiveness. We’ve talked about it on this podcast on multiple occasions. In Episode 018, we talked about maximizing the benefits of PSLF. Episode 078, we just recently talked about whether or not pursuing loan forgiveness is a waste. And so much news swirling around about, you know, at 99.x% of applicants being rejected and you know, is this something as a new pharmacist graduate that might actually be viable for me or not? So give us the lowdown on what’s going on with loan forgiveness. Is there any new news out there? What should recent graduates be considering as they potentially pursue this path?

Travis Hornby: Yeah, that’s a great question. So the listeners that are planning on loan forgiveness or afraid that they might not get it, they first need to realize historically what happened with this proram. So this program was around since 2007 on the books but functionally, it really didn’t exist until like 2009. And in earnest, it didn’t exist until 2010. And the reason is because you had FFEL loans before 2010 that were basically loans issued under an old loan program. So before 2010, when the government took over all student loan lending and created everyone had to use the direct loan program past that point. Prior to that point, you had this FFEL loans, which are basically bank loans that are backed by the government. And those loans, because you can think of the banks being the ones that actually hold the debt, obviously they wouldn’t want those loans forgiven, right? And so the government essentially gave them basically allowed the banks to not have to deal with the PSLF thing for those loans. And so when 2010 rolled around, then everybody started getting direct loans by default without having to do anything special. And everybody had access to things called Income-Based Repayment that people could sign up for without having to be a PhD-level expert in Department of Education bureaucracy. So a lot of people look at these statistics, and they get really depressed. But the problem with that is that you have to look at what happened 10 years ago to understand why so few people are getting approved today. And that’s a very hard thing to do and explain in a quick 800-word article on CNBC or something like that. So that’s the problem is a lot of people are getting the story wrong because yeah, like it was almost impossible to have loans that qualified in 2008 and 2009. That’s why you’re only seeing people that basically went to like one-year Master’s degrees that documented everything perfectly, they got super, super lucky being the ones that are getting approved right now. And so for that reason, I don’t personally believe that we’re going to see any large-scale forgiveness for PharmDs until about 2023. I think that’s when we’re going to see the first cohort that had been on an income-driven program for, you know, 10 years consistently and actually has a full slate of PharmD debt that they’re going to get forgiven. So a lot of the people out there that are pharmacists, you know, don’t expect any shocking news until then.

Tim Ulbrich: And you actually recently talked with — or I can’t remember, you might have blogged about it — a real, live person who actually had loan forgiveness, right? I mean, they do actually exist.

Travis Hornby: They do. Yeah, it was great. She sent me an email — that’s one of the best parts of having a student loan blog and just being super focused on that alone is, you know, I got this long email from this person who was like, this is my story. Feel free to use it. And I was like, absolutely. I’ll take you up on that. So I wrote a blog post about it, and she only had $19,000 from a very short, abbreviated degree program in like 2008 that just happened to be from one of the right schools. Because they had direct loans prior to 2010, but it was very limited. And so this person just happened to have the right kind of debt, she had signed up for the wrong kind of program, but she followed the TEPSLF rules, the Temporary Expanded PSLF rules, precisely. And she ended up getting loan forgiveness, and it was amazing. She even got refunds for all of the payments that she made that she shouldn’t actually have to make based off of her payment count. So that’s really amazing. Like anybody that’s worried about not getting PSLF needs to probably read that article because it shows you that not only are they going to cover it and give it to you, they’re also going to give a literal refund for all of that money that you pay that you shouldn’t have had to pay. So that’s the most amazing program that you can really think of in terms of if you can actually get it.

Tim Ulbrich: So one of the questions I probably get most often, Travis, is what is the future of this? And what certainty, if any, what’s the political climate? And obviously, none of us have a crystal ball, but as you’re in this each and every day in the weeds, I mean, do you foresee major legislative changes coming in the future? And if so, should there be any security that people feel in terms of being grandfathered in in terms of when those rules may be changed?

Travis Hornby: Yeah, so the thing that people need to realize is the way that the U.S. government works is the grandfather people in, and they make changes on a long-term basis. So a perfect example for this is social security. Social security, whenever they need to fix the program, they don’t cut benefits for people that are currently retired because they don’t want to make people super angry at them in the short term. So politicians is the “them” that I’m talking about. So what they do is instead, they just gradually raise the retirement age over time. So if you talk to people that are looking at social security, their retirement age goes up by like I think it’s 2 months every year or so for the next x amount of years until it hits 67. So something similar like that’s going to happen, I think, with PSLF. I think that it’s very, very expensive, this program. People have no idea how expensive it’s going to be from the taxpayers’ perspective. So I do expect it to get phased out eventually. I think that you’re going to a future Congress realize that it’s way, way more expensive than they thought probably in the early 2020s, and then I think that they’re going to probably curtail it or eliminate it, but they’re going to eliminate it for future borrowers, and they’re going to eliminate it for people who start graduate school after a certain point. So it’s going to be real interesting to see what grad programs do. I would imagine they’ll probably try to enroll a lot of people early. You know, so they can get access to this. But yeah, I do think it’s going to end at some point in the next, say, 5-10 years. But I think it’s going to end for people who have never taken out yet. So I think that the PSLF promises that are being made now will be continued to be paid out well into the early 2030s.

Tim Ulbrich: Awesome. I’m going to switch gears for a minute here and talk about the ROI of the pharmacy degree. You’ve blogged on this topic, and we’ve talked about it here. We’re in a landscape that is shifting. We’re hopeful, I think, as those that love the profession we’re going to see this shift back, but obviously supply-and-demand, and actually just yesterday, I got an email from somebody in the YFP community talking about they’re a fourth-year graduate, getting ready to go out into the market, they’re worried about the market being saturated, salaries are decreasing, and they’re basically looking at between salary reductions and a reduction in the number of hours, planning on a base salary somewhere around $85,000. And the question being, what can I, what should I be doing to plan financially for that? And I think historically, the message that I felt and many others have felt that don’t worry about the student loans, you’re going to have a great income. Well, that story is changing. So as you’re working with clients, Travis, specifically your pharmacy clients, are you seeing this trend? Are you seeing the shift? And what are some of the things that you’re trying to help them think about in terms of intentionality of student loan repayment? Maybe being strategic about finding an employer that qualifies for loan forgiveness, refinancing, how does this shifting ROI of the degree in the job market impact their plan to pay back student loans?

Travis Hornby: Sure. So the average pharmacist client that we’ve had has had about $214,000 of student loan debt. So that’s obviously a multiple of what the first-year starting salary is. If you were going to talk about the average income being $85,000, then in terms of the average that we’ve seen, that would a debt-to-income ratio of about 2.5, 2.5 times income. So generally, what we tell people is if you have a debt-to-income ratio that’s above 1.5-to-1, and this is at a family level, then that means that you probably need to go for loan forgiveness, you know, in some fashion. Basically, what you need to realize is that if you try to refinance this thing, it’s kind of like walking in front of a train. If you’re making $85,000 a year, you have $200,000 in debt, you’ll have to pay $2,000 a month for 10 years. So that’s about a third of your take-home pay going to debt. That’s really not that sustainable.

Tim Ulbrich: For 10 years.

Travis Hornby: For 10 years. That’s really not a sustainable or a smart decision. And that’s not anything, that’s not a mean statement, that’s just reality of math. And you could pay the debt back, but if you do, then you’re not going to be accomplishing things like saving for retirement, saving for your kids’ college, you know, buying a house, like doing all these other financial goals that are really important. So one thing that I like to tell somebody is take your focus off of the debt from a really zoned-in level and start thinking more about, you know, what are your broad financial goals? And how does that fit into your debt repayment? So for example, if somebody has $120,000 in pharmacy school debt and they are one of those lucky folks who does get a full-time job at a CVS in maybe a rural location making $120,000-130,000 a year, yeah, sure. Refinancing can make a lot of sense. And paying it back in five years and doing a refi ladder where you start with a 10-year, refi to a 5-year later, you know, and getting rid of it as fast as you can, that’s a great decision. But when you’ve got an $85k type of income, I’m assuming that this person’s not working at a community hospital or an eligible not-for-profit. So that’s one of the biggest misconceptions that I’ve run into with pharmacists is they’re not aware of the other loan forgiveness. So the IDR loan forgiveness. And that’s going to be more and more important for pharmacists. You know, one thing that I think is fascinating is $85,000 is still an amazing salary. That’s still really good compared to your typical person that’s going to go work for a corporation and make $50,000-60,000 a year. And if you’re working 32 hours a week for that income, that’s exceptional. And the reality is I think we’re going to continue to see, you know, this decline in salaries because of the acceptance rate of pharmacy schools is so high overall. And so I think for a person who’s in pharmacy school now, you think about this from a positive perspective is the worst case scenario, your debt is a tax. It’s a percentage of your income. And so if you lose 10% of your income to student loans, and that’s your cost — I know you have to put a couple hundred dollars away for a tax bomb one day — then that $85,000 income can actually be pretty attractive. And to take it a step further, you know, how many people out there can go earn a $50,000-60,000 a year job or salary, rather, working 20-25 hours a week? Not a lot of people.

Tim Ulbrich: Yeah, I think that’s great insight. And we’ve talked before on the show, and I want to emphasize it again because I don’t think we talk enough about what we call non-PSLF forgiveness, or the other PSLF forgiveness. And I think you’re spot-on with this debt-to-income ratio, if that continues to trend in the direction we’re seeing it trend, that option is going to become all the more important as when you evaluate. And I also would add to that, Travis, and we’ll talk here fo a minute about refi, but as interest rates are climbing, obviously, that changes the math a little bit on the refi. And I like the example that you used of pharmacists coming out, maybe they have a lower debt load than the average, so maybe $110,000-120,000. Maybe they’re making $120,000-130,000, they’ve got one of those full-time jobs that’s paying a decent salary, well then obviously, paying them off or refinancing looks very different than somebody maybe who has $250,000 of debt and they’ve got an $85,000 income. And to Tim Baker’s credit, one of the things he talks a lot about, and I appreciate his external view into the pharmacy world is that we typically don’t think about career advice in the sense of seeking something like a qualifying employer for loan forgiveness, right? We often are thinking about it specifically on the type of pharmacy practice that you’re interested in, salaries have been relatively equal since I graduated in 2008. You aren’t seeing huge discrepancies from one area to another. But we are starting to see that trend happen. And I think now, a very important consideration is if you’re somebody that has an extremely debt-to-income ratio, then really that choice of employer and potentially being able to pursue Public Service Loan Forgiveness is going to be a viable option. So Travis, as a follow-up to that, what are the trends you’re seeing in the refi market? It feels to me that six or 12 months ago, even maybe a year or two years ago, the math on that was very lucrative because of where interest rates are. And I feel like that’s tapered off a little bit as interest rates have come up. What have you seen in terms of the clients that you’re working with?

Travis Hornby: Yeah, I mean, a few months ago, that was definitely the case. It’s gotten a little bit better because the 10-year Treasury yield has declined a little bit again with a little bit of uncertainty in the economy and the government shutdown, China’s economy being a little bit slower growth than expected, so I think that the refi opportunity will exist for at least probably the next few years. I’m not sure if it’s going to go completely away. I don’t think it will because, you know, a reminder for folks that when you borrow in school, it is tied to what the government’s borrowing cost is. So you know, eventually, if interest rates keep rising, you will also feel it in your student loans that you’re taking out while you’re in school. You know? So last year, Grad Plus was 7%. This year, it’s 7.6%.

Tim Ulbrich: Ugh.

Travis Hornby: Yeah, so even though you might not be able to refi to like a 4% or 4.5%, you know, if you can still refi to like 5-5.5%, and you’re having to borrow at 7.5% or 8% or 8.5%, like that’s still savings, you know? But yeah, the refi market, I think the one thing that I’d like people to know more of — and we have a similar philosophy too on how we hook people up with the refi deals because you guys obviously have a lot of great bonuses on your site — and the thing to do is to refinance multiple times. So I did a survey of our readers, had almost 1,000 responses, and only half of them knew that you could even refinance more than one time.

Tim Ulbrich: Yeah, we see that a lot too.

Travis Hornby: Yeah. So for example, like you can refinance for — say you’re one of those people making $130k and you have $120k in student loan debt, well, you don’t want to do a five-year because that payment’s going to be over $2,000 a month, and what if you lose your job? What if you want to move? What if you want to work part-time or something like that happens? So that’s a very common feeling. And so rather than jump right into a five-year, what you can do is you can do a 10- or a 15-year where the payment’s around $1,000-1,300 a month, something like that, and you can pay extra. So you can pay maybe $2,000-3,000 a month to really knock the debt down. And then once you knock the debt down a bunch, then you can refinance it again and maybe cut your 4.5% or 5% rate down to maybe a 3.5% or 4% rate with about the same monthly payment by refinancing to a shorter term. So that’s called a refi ladder, and a lot of people don’t understand that. And that’s something that could save people money. I will say this, though, the refi thing, I don’t want people to get super focused on the refi thing because that will save you several thousand dollars, it really can in terms of interest costs. And if you pay down your debt faster than you would otherwise, it could save you tens of thousands. But loan forgiveness can save you hundreds of thousands in certain situations. So that’s why, you know, you’ve got to be real careful also about not making extra payments. One problem that I see people make or one mistake that I see people make — I’ll give you an example. I had a buddy who was a community pharmacist at a hospital system, and he was paying on the standard 10-year plan. So he was paying on $200k of debt about $2,000 a month, you know, instead, he could have been on the Revised Pay As You Earn plan, and he could have been paying about like $690 a month. So you know, saving almost a little over $1,300 a month, and he was eligible for Public Service Loan Forgiveness.

Tim Ulbrich: And maxing out a retirement account and all of that jazz, right?

Travis Hornby: Yeah. And then he could reduce his student loan payment even more. So and that’s the PSLF example. You know, the flip side to that is a pharmacist who wants to have a family, work 20 hours a week, wants to have more time for hobbies or whatever that reason would be. And then that person can pay, you know, say $400 a month working part-time. And then you just have to make sure you’re prepared for that tax bomb when it hits in 20-25 years.

Tim Ulbrich: So I hope the students that are listening, hopefully one of the take-home messages you’re getting as you’re hearing Travis drop lots of wisdom here is knowledge around this topic is obviously going to be able to influence a decision that could save tens if not hundreds of thousands of dollars. So using this time, you know, before you graduate, before you go through the grace period, to really identify for your personal situation, taking a step back, looking at all of your financial goals, looking at the type of job you’re going to pursue, residency, no residency, all these variable, debt-to-income ratio, and coming up with the best student loan repayment option is huge. Refi ladder, Travis, I like that. I know the concept, we talk about it. We talk about that idea, but I think you should brand that. So I haven’t heard that term used before.

Travis Hornby: Yeah, I should trademark it, right?

Tim Ulbrich: Absolutely.

Travis Hornby: I got a lot of zingers here, you know? I mean, yeah. There’s all kinds of weird things that I’ve learned doing this that you wouldn’t think about unless you’ve really had a lot of cases. So I’ve done over 1,000 plans personally. I think that’s more than anybody else in the country. I’m not positive, but I think that is. And you know, advised more than 330 million myself.

Tim Ulbrich: That’s incredible.

Travis Hornby: Yeah, so that’s pretty bad because that tells you how much debt it out there, you know?

Tim Ulbrich: Well, you’ve got $1.what? $1.4 trillion more to go? Something like that?

Travis Hornby: Yeah, exactly. So I mean, so one example is something called the breadwinner loophole, that’s another one of my weird terms I’ve come up with. So for example, a pharmacist in California might be making $90,000 a year, maybe she has a stay-at-home spouse, and that spouse makes nothing. And she’s eligible for Pay As You Earn. Well, in community property states, you can file separately for taxes and equally distribute income. So you can equally distribute income based on community property rules in these certain states. There’s like nine of them. And then you can basically have instead of an income of say $90,000, her income would be $45,000. And because you equalize the incomes, you also eliminated most of the tax penalty from filing separately as a married couple. So that’s an example of just some random thing that, you know, we realized probably a year into doing this that people could do since the payments are based on your adjusted gross income. And you know, we’ve not received any guidance on this yet, but it certainly seems like this is a legitimate way to approach repayment in these nine specific community property states. So that’s another one of these random things that you wouldn’t really think about unless you do this all day, every day. So that’s one thing that I like about our focus is we really do focus just on people that have $50,000-$1 million of student loan debt. Really, our primary client is in the $200-500k range. But you know, it lends itself for having a deep specialty level of expertise on something that’s very complicated. You don’t have to worry about getting the broad financial plan together, the insurance or things like that. That’s somebody else’s job.

Tim Ulbrich: Tim Baker, that’s your job. Yeah.

Travis Hornby: Exactly, yeah.

Tim Ulbrich: What are, Travis, some of the most common mistakes that you’re seeing pharmacy graduates make as it comes to their student loans? I mean, I’m sure there’s a ton of them. After you do enough of these, you start to see some I’m guessing repetitive things that are happening over and over again that our listeners can be aware of.

Travis Hornby: Well, for your pre-pharmacy listeners, there’s a whole bunch of schools that have opened up to basically take your money. And that’s why they exist. I mean, that’s just my personal opinion. But you know, you have like high-quality schools, you know? Like UNC or like Ohio State, that’s where you’re at, right, Tim?

Tim Ulbrich: Go Bucks. Yes.

Travis Hornby: Yeah, so maybe University of Florida. I mean there’s pharmacy schools that have been around for a long time that are high quality that even if you have a crash in the profession are not going to be going anywhere. But there’s a whole bunch of new schools that I won’t mention any by name because you know, I don’t love getting served lawsuits, but you know, basically there’s schools that were initiated that are private schools that were founded in the past, you know, 5-10 years I would say are automatically suspect. It doesn’t necessarily mean it’s a bad school, but you want to be very careful. And from a student’s perspective, if you’re going to go to these places, you just have to realize that things could potentially not end well if you go to one of these programs that has a high acceptance rate. So I would actually ask the school to give you their acceptance rate data. I would ask them to tell you what their average salaries are for graduates in writing. And I would actually do some due diligence and actually ask them in a very assertive manner for these statistics that you deserve to have prior to making this decision. Now, if you already have the debt, then I think that your perspective has to be a positive one. There are, like I said — you don’t even have to actually be a pharmacist, which is kind of crazy. These income-driven repayment plans apply whether or not you’re unemployed or making a bazillion dollars as a CEO. So it doesn’t matter that you become a pharmacist, even if you graduate pharmacy school. So from a mental health perspective, don’t feel trapped, even if you have $200,000, $300,000, $400,000 of pharmacy school debt. Do not feel trapped. You have so many more options than you think you do. And if you want to go make 50% more than the median household income in America, you can do that, even in a big city and live a pretty decent life. You’ll have to live on a budget, you’ll have to be a little careful with your expenses. It’s not as good as it used to be, but you’ll certainly make a good living. And so I would just say in terms of student loan mistakes, I mean, it’s a little broad, but I guess I just want people to know that the biggest mistakes you can have is not having a plan and sticking your head in the sand.

Tim Ulbrich: Amen. And if I could echo that, that’s the one thing we’ve seen, Travis, is the wandering through graduation into new practitioner life of not having an intentional plan. We’ve already highlighted and we don’t need to beat it further that that can cost you hundreds of thousands of dollars. And that example you gave of I think you said it was a community pharmacist friend of yours that went through a 10-year standard repayment, paid the maximum payment for 10 years, that was my situation. You know? And I think that as I look back on that journey, a little bit of knowledge would have saved me a ton of money along the way. And I want to also add, you know, your advice for the pre-pharmacy student I think is incredible because the reality is not all schools are created equal. And a lot of this data you can go out and look up in terms of what’s the board pass rate? What’s job placement like? What is the application acceptance rate into the College of Pharmacy? What’s the residency placement rate? And obviously, you know, there’s ranking that are out there, but they don’t represent many of the factors that are going to be most important to you as a graduate of a pharmacy school. So great stuff there. Travis, my last question for you is that my guess — just knowing our audience — is that we have lots of our community listening that’s feeling stuck with their student loans, feeling paralyzed, maybe feeling overwhelmed, don’t know where to start. What’s one piece of advice that you’d give to them that they can begin to get over that hump of feeling stuck or overwhelmed?

Travis Hornby: One piece of advice would be look at what your payment is. If you think that your payment is too high, take a look at Pay As You Earn or Revised Pay As You Earn and try to figure out whether or not your end goal is to go for full repayment and get to $0 in terms of the debt you owe, or if it’s to go for forgiveness. That would be the first big decision somebody has to make. So if you could at least figure out whether or not you need to go for forgiveness or repayment, that will help a lot because a lot of people, you can tell that in their actions, they don’t really know. They’ll throw an extra $200 at their highest interest rate loan when they have it, they’ll make a $5,000 one-time, lump sum payment to the smallest loan to get rid of it so they feel better psychologically, and that’s very, very indicative of just having no plan and no strategic direction at all with your loan repayment. So I would say that’s one piece of advice. One thing that I’d say is I forgot to say this when you asked student loan repayment mistakes. There’s a lot of residents out there who probably listen to your podcast.

Tim Ulbrich: Yeah.

Travis Hornby: The residents need to be on one of these income-driven programs while they’re still in residency.

Tim Ulbrich: And not deferring.

Travis Hornby: Yeah. A lot of people don’t realize that, but if your goal is to eventually pay your debt back, Revised Pay As You Earn can get you thousands of dollars in interest subsidies from the first month that you start paying on it. So if you’d like to have $5,000-10,000 less in debt by the end of your PGY1, PGY2 years, then get onto the Revised Pay As You Earn if your plan is to eventually pay the thing off. If your plan is not to eventually pay it off, you’re kind of unsure, then you might look at Pay As You Earn as well to try to build up credit for forgiveness. But that’s one mistake that I see people make all the time that I think people will continue to make because, you know, the residency programs are not as organized with as much detailed information for loan management as I think a lot of the human medicine physician type residency programs are because they’re a lot older and more resources are behind them. So that’s one thing that I’d say for your residents listening, but yeah. The big kind of direction, you know, you have to figure out if you’re going for full repayment or forgiveness. And that’s the big fork in the road, and that determines a whole bunch of the recommendations that we like to give. So like one thing we do is we figure that out for people or which path we think they should go down.

Tim Ulbrich: Yeah, great advice for residents. And I probably see — the most common situation I see is deferment during residency, which for those that are thinking loan forgiveness, obviously deferment does not equal a qualifying payment, number one. But two, as look at the income-based repayment plans, then you know obviously depending on how that’s calculated, you know, there’s this automatic assumption that I can’t afford any payment. Well, do the math. Sit down and figure that out. And obviously, you’re going to begin to make that progress toward whether you’re going to pay them off and refinance them or whether you’re going to eventually pursue loan forgiveness. So Travis, obviously StudentLoanPlanner.com, our listeners can learn more about the work that you’re doing and the service you provide. Also, it’s my understanding you recently launched a podcast, the Student Loan Planner podcast. I’m assuming that’s available on iTunes, anywhere that you can find podcasts: Stitcher, Google Play, Spotify, etc. Beyond StudentLoanPlanner.com and the podcast, what’s the best place that our listeners can go to learn more about you and the work that you’re doing?

Travis Hornby: I would reach out to us, [email protected], and myself or somebody from our team will reach out and tell you what we think you’re dealing with and whether or not we think that you’d be a good fit for our services or not. And then if you want to just read more about pharmacists in particular, if you go to our blog, StudentLoanPlanner.com/blog, on the right hand side if you’re on a desktop, you’ll see our categories that we’ve written articles on, so there’ll be a pharmacist category that you can click and read everything we’ve ever written about pharmacy school and pharmacists. And it’s quite a lot at this point, so take a look at that if you’re looking for some free resources.
Tim Ulbrich: Great stuff. Travis, on behalf of the YFP community and the YFP team, thank you so much for taking the time to come on today’s show and looking forward to more collaborations in the future and having you back on to provide some more education to our audience.

Travis Hornby: Thanks for having me on, Tim.

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YFP 082: Debt Free Theme Hour with the Teacher & Pupil

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Debt Free Theme Hour with the Teacher & Pupil

On episode 82 of the Your Financial Pharmacist Podcast, Tim Ulbrich, co-founder of YFP, welcomes Joe Baker and Blake Johnson to the show for debt free theme hour. They talk about Blake’s journey paying off $150,000 in student loans in three and a half years and how the class he took at the University of Arkansas, taught by Joe Baker, helped prepare him to be on his way to achieving financial freedom.

About Today’s Guests

Joe Baker, MBA, has been a sales representative with Pharmacists Mutual Companies for almost 28 years and an Adjunct Assistant Professor at the University of Arkansas for Medical Sciences College of Pharmacy for 20 years where he teaches a personal finance elective for P3 students. Originally from Emerson, Arkansas, Joe graduated from Southern Arkansas University with a Bachelor of Business Administration (BBA) degree, and earned his Masters of Business Administration (MBA) from the University of Central Arkansas. Joe is also a Chartered Financial Consultant (ChFC) and he obtained his Series 7 securities license in 1986. Joe has been a guest speaker at the NCPA national meeting five times, and has spoken to various pharmacy schools across the country on wealth accumulation, particularly as it relates to young pharmacists.

Blake Johnson is a 2013 graduate of the University of Arkansas for Medical Sciences. Upon graduation, he married his wife Kristyn and he began working in a small town independent pharmacy. He worked there for 2 years and is now working in Conway, Arkansas at a local independent pharmacy. Upon graduation, Blake decided that paying off student loans would be a top priority, while still being able to travel and save for his retirement. After three and a half years, he was able to pay off his and his wife’s student loans. Since then, Blake has been able to increase his savings and start purchasing rental property. In his spare time, he enjoys traveling as much as he can and teaching others about finances.

Summary

This episode of the Your Financial Pharmacist podcasts highlights an inspiring debt free story. Joe Baker is an Adjunct Assistant Professor at the University of Arkansas for Medical Sciences College of Pharmacy and teaches a personal finance elective for P3 students for the last twenty years. Blake Johnson is a pharmacist and former student of Joe’s who has paid off $150,000 of student loan debt in three and a half years.

In this episode, Blake shares his story of not only becoming debt free but also of building wealth through investing. Blake was inspired by Joe’s class and the principles he shared. His wife, Kristyn, grew up with the teachings of Larry Burkett. These two teachings combined helped to create a strong financial foundation for Blake and Kristyn. In regards to prioritization to get to this point, Blake first budgeted to see what they needed to live on. Budgeting is his biggest piece of advice to students while in school and upon graduation. He and Krysten lived like they were still in school after graduation which allowed them to develop a lifestyle of living below their means. After Kristyn graduated, they used her paycheck to pay off student loans and watched their debt melt away. Now, they continue to max out their 401k contributions, increase their savings, and are about to close on their six real estate rental property.

Joe Baker says that creating a lifestyle like this is crucial to getting out of debt and building wealth. He suggests living off of $50,000 as your income each year even if you are making much more. This way, you are sure to stay below your means and have extra money to pay off debt and start contributing to retirement funds or other investments. He has created a list of “Baker’s Dirty Dozen” that he teaches in his college course that are discussed in the show.

Joe Baker’s Dirty Dozen Tips on Getting Rich

Invest in appreciable items, such as education and house. Minimize depreciable items, such as car, clothes, etc. Student loan money should be spent on bare necessities.
Utilize the time value of money. Time is on your side when you are young.
Max out on your 401(k), 403(b), Roth 401(k) and Roth IRA. Stocks, Bonds & Cash. 100% – your age = % in stocks. Stock Index Funds or Target Date Fund (2055 Fund). At the minimum, contribute enough for employer match – free money!
Save money consistently and systematically throughout your life (dollar cost averaging). Don’t take money out of your retirement account. Penalties and taxes will apply.
Make sure your future spouse has the same financial goals as you. Pre-marital counseling that includes financial goals and spending habits. If already married, try to get on the same financial page. Dave Ramsey offers a Financial Peace Workshop.
Stay away from credit cards. “If I cannot pay balance off each month, I cannot afford it!” Debt is NOT your friend. ALL debt is bad. Proverbs 22:7
A vehicle is NOT who you are – it’s transportation only! Beware of the illusion of wealth. This is one of the biggest obstacles in wealth accumulation.
Keep an eye on the small choices you make in life. Buying Starbucks Coffee. Drink water at restaurants!
Avoid lotteries, multi-level marketing (pyramid schemes) and time shares.
Choose a 15 or 20 year mortgage over a 30 year. Pay 20% down (avoids Private Mortgage Interest). Make additional payments toward the principal.
Protect your assets! Adequate personal liability coverage. Life & disability coverage protection. Have your own individual pharmacist liability policy.
Read Seven Figure Pharmacist by Tim Ulbrich, Pharm.D & Tim Church, Pharm.D. Sign up for Your Financial Pharmacist blog. Kiplinger’s & Investopedia, like on Facebook.
Make a difference in your family, community & place of worship. This will make you wealthy in your heart, body and soul. Amen!

Mentioned on the Show

YNAB. Giveaway
Larry Burkett
Dave Ramsey
YFP 057: The Power of Automating Your Financial Plan
7 Figure Pharmacist by Tim Ulbrich, PharmD and Tim Church, PharmD
Investopedia: Are You In the Top 1% of The World?
Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money – That the Poor and Middle Class Do Not! by Robert T. Kiyosaki
Bigger Pockets
YFP 068: Pros/Cons of the Dave Ramsey 7 Baby Steps
Contact Joe Baker
The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich by David Bach

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this episode of the Your Financial Pharmacist podcast. I hope your new year is off to a great start. And boy, do we have a special episode for you today, a two-for-one special. We get to interview new practitioner Blake Johnson alongside his personal finance mentor and teacher at the University of Arkansas, Joe Baker. Blake really has an incredible story to share of him and his wife Kristen paying off $150,000 of student loans in a short period of time and building a strong financial foundation, which as you know, we talk about often on this show. And Joe Baker, nearing the end of his career, has a passion for teaching personal finance and has influenced hundreds, if not thousands, of new practitioners to pave a successful financial future. He has the famous Baker’s Dirty Dozen Tips for Getting Rich, which we’ll talk about briefly on the show today. So Joe and Blake, welcome to the show, excited to have you.

Joe Baker: Thank you.

Blake Johnson: Yeah, thanks, Tim.

Tim Ulbrich: So I’m going to start with brief introductions so our audience can get to begin to know each of you before we unpack the story. So Blake, why don’t you start? Give us a quick background on when you graduated, what you and your wife Kristen were facing financially as a new graduate, and the current area of practice that you do in pharmacy.

Blake Johnson: OK. So I practice pharmacy in Conway, Arkansas. It’s about 30 miles north of Little Rock. And I’ve been out of school for almost six years in May. My wife’s a nurse practitioner, she graduated I guess about three years ago. And upon graduating, we had my student loans, they were about $120,000. And then my wife was in school at the time. It took her about two years to graduate after I did, and hers was about another $30,000-40,000, so all together, we had accumulated close to $150,000-160,000 in student loans once you added interest. And we’re proud to work for a community pharmacy in Conway now and been there for about three years. And prior to that, I had worked in Clinton, Arkansas, which is about an hour outside of Little Rock. So been in community pharmacy for since the time I gradated, and I really do enjoy it.

Tim Ulbrich: So we’re going to unpack that more here in a little bit in terms of what allowed you and your wife Kristen to be successful in that journey and how you did it, how you’ve worked together. But first, Joe, give us a brief introduction of yourself, the history of your work in the pharmacy world, and how you became so passionate about teaching this topic of personal finance, which resulted in I think you being the first, I believe, of starting this coursework in pharmacy curriculum. So give us some background.

Joe Baker: Well thank you, Tim. It really goes back to the late ‘70s, when I graduated from Southern Arkansas University with a business administration degree. And going from different jobs, including real estate, which unfortunately, at the time of the late ‘70s and early ‘80s was 17% interest on mortgages. It was a tough time. But I did find my niche teaching high school marketing. And I really loved the education because of the immediate feedback. And I would probably still be there today if it had not been for a friend of mine who ran for Congress and asked me to help him, to get involved in his campaign. I did so. Unfortunately — or fortunately — as life has it, we lost in runoff by 2 points, so then, after that, I had to get a real job and found my way into insurance and was fortunate enough to get on board with Pharmacists Mutual Insurance, which was 27 years ago. And during that time, I always wanted to get back into education in some way. And I thought the best way or the one that I was looking for was to teach college on some level. So I decided after 20 years to get my Master’s degree, got an MBA. And during this time, I was about to wrap up, I happened to be at the College of Pharmacy at UAMS, University of Arkansas Medical School, and I was visiting with the dean and the assistant dean. And this was in the late ‘90s, 1999, and I said, “You know, what about teaching some type of business course for the pharmacy students?” And they were very open. They said, “Yes. Our pharmacy students are making around $45,000 a year and going out and getting broke making this type of big money.” So you can see how the money has changed.

Tim Ulbrich: Times have changed.

Joe Baker: And even today at $120,000, we have pharmacists and other professionals going out and getting broke. So the fall of 1999 was when we started the personal finance class, a 2-hour elective at UAMS College of Pharmacy in Little Rock, Arkansas, and it has really blossomed. And it has just helped me fulfill my education desire. And with the financial literacy, I just think it all worked out greatly.

Tim Ulbrich: Yeah, and I appreciate — I was actually stalking you on LinkedIn, Joe, I know we’ve been getting to know each other. I didn’t know the background of the congressional campaigns, and I knew the rest of the story. So appreciate your support of what we’ve been doing at YFP. And for those that have been following our journey at YFP, Joe has been at this long before we have. So speaking on this topic, he mentioned the personal finance course since 1999, we’ve got some exciting collaborations coming forward. You’re going to be hearing more from Joe and hopefully seeing about their speaking and on the blog, so we’re excited to be collaborating and working with you. And I certainly appreciate the path you’ve paved that has even made it a little bit easier for us at YFP as we’ve been on this journey. So what I want to do, actually, what stimulated this interview is Blake had sent an email over to Joe, so his former professor, on this topic. And I’m going to take a minute to read this email because I think, Blake, as I went back and looked at this as I was preparing for the show, I feel like it really helps outline your story but also helps outline what I think to be the importance of personal finance education and helping especially young pharmacists get started. So here’s that email, and then we’ll begin to unpack a little bit further. So Blake says, “Joe, things are going great for me. I’ve been out five years now. I am so glad I took your class. It has been a truly amazing journey. I came out of school and my wife, who’s a new practitioner and I had $150,000 in student loans. We paid those off in 3.5 years. During that time, I maxed out my 401k and was able to put 20% down on my house!! I’m about halfway to my ‘millionaire net worth journey’ that you talked about in class. The best thing that we ever did was partner up with a friend on some real estate. We have five rental homes right now. It has been very good for us. Anyways, I thought I would share that with you because I really do trace it back to your class. On top of that, I’m now able to teach this principles in a class at our church in Conway.” So Joe, as you saw that email, what was your feeling as you kind of reflected on the success that Blake has had and the impact that your class had on that.

Joe Baker: Well Tim, I was just ecstatic because, you know, to get that type of feedback from one of your former students is just — makes you feel really, really good that you’re really accomplishing what you have set out to do. I know there are many success stories out there, but to see it in print and to someone that I’ve known for several years, I just can’t put it in words how it made me feel.

Tim Ulbrich: Yeah, that’s great. I think as I read it, I got fired up. I can only imagine as you guys have that relationship and teaching that course. So Blake, as I read that and I read that email, five years out of school, no debt, of course, except the home, which you mentioned putting 20% down on. I’m guessing you have that even further paid down, you maxed out your 401k while doing that, which is no small feat. And you have five rental properties in that time period. And so to me, as I read that, this is really the definition of what we talk about on this show and on the blog about a good foundation. No debt, equity in the home, a fast start to retirement savings, and I’m assuming obviously an emergency fund in there as well. So my question, Blake, is what were the secrets for you and your wife Kristen that allowed you to have such significant progress in a short amount of time. If you had to distill that down to a few things, what do you think allowed you guys to have progress in such a quick amount of time?

Blake Johnson: I think two things. No. 1, Joe’s class. At that time, right when I was taking that, my wife and I had just started dating, and so I attribute it to Joe’s class and teaching that. But No. 2, also to my wife. Her parents taught her the old school Larry Burkett, Dave Ramsey-type stuff. So when we got married, we were able to within about six months, add to what she had saved up to be able to put 20% down on a real nice home just because of that and Joe’s principles, we were able to kind of kick it out of the gate with this good of money principles. I had read Dave Ramsey while we were engaged. And between Joe’s class and what Dave Ramsey teaches, we kind of took that, kind of agreed on what we would live on, and just kind of went from there.

Tim Ulbrich: And what I love about your story, Blake, as I mentioned, we talk so much on the podcast or when we’re speaking on the blog about the importance of this foundation and really investing the first number of years out of school to build this foundation where you’ve got a solid position to work from because as I’ve seen with so many practitioners that are 10, 15, 20 years out, it’s really hard to unwind some of the things and to play catch-up. And so Joe, I’m curious from your perspective, you know, what I’ve seen and I’m guessing you’ve seen — you’ve been at this longer than I have — is that it seems like some new practitioners like Blake and his wife Kristen get a quick start and really have some momentum at a very early point in their career whereas others, you know, maybe it takes 10 or 15 years or even longer to turn things around and kind of come to that “Aha!” moment where my salary is good, but it doesn’t necessarily mean a good salary is a secure financial foundation. What do you think differentiates the two of those? Is it mindset? Is it knowledge? Is it behavior? Is it a combination of it? What do you think?

Joe Baker: Well, I do think it’s a combination. But what I have stressed to the students is when you get out, making six figures, don’t live like you’re making six figures. Don’t buy a huge house, automobiles, which is the biggest obstacle for wealth accumulation. If you can just live like you’ve lived, hopefully like you’ve lived through your college years and put back the money, you can do great things. It all begins as soon as you come out of the blocks. Just like a race, you’ve got to live below your means starting out because then, it’s much more difficult to get where you want to be financially if you live like a person making six figures. So behavior and what you do.

Tim Ulbrich: Yeah, and I think just to build on that, Joe, what I’ve seen — and I’m guessing what Blake and Kristen did almost treating it as if you make some lower percentage of your salary. If you can really convince yourself that I make $100,000 a year, but really I make $50,000 or $60,000 and budget off of that, and then use the remainder for paying down debt, building equity on the home, getting involved in investments, real estate, all of a sudden, it’s a lot easier to pivot to those opportunities. But then also when life throws you something unexpected, you’ve got margin, right? And I think that that peace of mind when you have margin — so as I look at Blake and Kristen’s story, no debt, equity in the home, fast start to retirement savings, they’ve got rental property, they’re building equity. If life throws them something that they’re not expecting, they’ve got options to handle that. Whereas if you’re living up to your entire income or beyond, obviously that can be taken away from you. So Blake, as you and Kristen were going at this, one of the things I see a lot of young pharmacist struggle with is trying to balance multiple priorities. And so I see here, you obviously were paying down debt, which is a lot in five years by itself. But then also, you were able to build up equity and max out retirement savings and get involved in real estate. So my question is, did you prioritize and focus on one or two of these at a time? Or were you really balancing all of these priorities at once?

Blake Johnson: So we sat down when we got married and kind of made some decisions. No. 1, we kind of went against what Dave Ramsey teaches in paying off all debt before you start doing the 401k. Because we noticed at 25 years old when I graduated, I could at that time put close to $18,000 a year into my 401k. And it didn’t really reduce my paycheck by that much. So that was our No. 1 priority. The second priority was we wanted to put a minimum amount on our loans until my wife got out of school. So those two things were set. I mean, we did our whole budget based on those two amounts taken out. And outside of that too, we also love to travel. So we wanted to be able to travel some too. So what we did was just do a budget every month. We would say, “Hey, we want x amount of money to travel on a year. We’re going to put this minimum amount on the loans. And we’re also going to put towards the 401k.” So until my wife graduated, we did that. And as soon as she graduated, we had this lifestyle that was set, and we never increased it at all. We just basically took her paycheck as a nurse practitioner for about a year, and that literally took the hammer down on the loans. We were used to a lifestyle, we didn’t change it, and just kind of hammered it down until it was all paid off. We looked up, we had money in our 401k, we had equity in the house, and now we’ve been able to build more and more off the top of that. Our lifestyle — honestly, our lifestyle and budget hadn’t changed since the day I graduated.

Tim Ulbrich: Yeah, and as you know, once you get to the point where you are, now it’s game on with really starting to see the benefits of those investments grow and compound and take over time. And I wanted to take you a little bit deeper there because I think sometimes, when we have guests on the show and we share a success story like yours, and it’s like five years, you paid off debt, you’ve got retirement, you’ve got some equity in your home. And it’s like, poof! It’s magic. But I heard in there, you know, you talked about budgeting. And I’m guessing that was a fundamental piece for you and Kristen in doing this. So tell us exactly what that looked like for you. What’s the budgeting method that you use? Did one of you take the lead on that? How did you come to consensus and agreement on it? What did that process look like for you and Kristen?

Blake Johnson: It was a rocky start to start out with because I’m all about Excel sheets. I can remember out of the gun, coming out of the — as Dave Ramsey says, coming out of the den with this huge spreadsheet. And it was overwhelming. I mean, it was ridiculous. I think I had like $300 for groceries per month and like $100 for going out to eat. And I mean, that’s evolved into a lot more. But I mean, it is tamed down kind of over 4-5 months, figuring out what we lived on, what we felt comfortable with, and other than that, we’ve used it from then on out. It took time to get a grip on things. The No. 1 thing too is set goals. So I mean, if you want to go on a vacation a year from now, why don’t you start now saving a small amount each month. That way, in a year, you’ve got the money set back instead of having to scrounge for it. So I just think it’s, you know, it’s a push and pull type thing. You sit down, work with your spouse and just kind of figure out what works best for you.

Tim Ulbrich: Yeah, and I like that. We talked about to your last point there, I think it was in Episode 057, we talked about the power of automation and sinking funds, getting your concept there. If you have a vacation in 12 months or whatever is planned, really being thoughtful about what those goals are and funding those. So Joe, my question here for you is, you know, when you hear Blake’s story, it appears from the outside looking in that he and Kristen were working together on this, although as he mentioned, you know, may have had a rocky start. But they obviously got there. And I know you’ve talked about this before, you and I have as well, is the importance of two people working together on their financial plan. So my question for you is what advice do you have for new graduates that are facing a financial uphill battle? Lots of student loans, maybe they have aspirations on a home, but they don’t have a down payment. So they’re really trying to figure this out. And what advice would you have for them in trying to get on the same page and work together?

Joe Baker: Well, a number of things. First, the keyword is lifestyle that Blake used. Starting after graduation, I know it can be overwhelming if you’re looking at $150,000-200,000 in student loans, just sit down and develop a plan. And if you are in a situation, relationship, married, fiancee or whatever, make sure you’re on the same financial page because that is very, very important. Blake was very fortunate. I know his wife, Kristen, and they were on the same page financially. And that is — I cannot stress how important that is to make sure you’re on the same financial page. Because it would be really tough if you were not so. But I do tell them that if you can start off with a lower lifestyle and I also even point out to plug your “Seven Figure Pharmacist” book, there’s a section in there — and I’m paraphrasing — about living on $50,000, which is the median income of the United States right now?

Tim Ulbrich: Yeah. Household.

Joe Baker: Yes. And $50,000, that’s — at least in Arkansas — that is a lot more than most make. So if you could live with that lifestyle of making $50,000 a year and start paying off your student loans like Blake and contributing to a 401k or 403b, Roth IRA, you’ll be just way ahead in the years to come. So that’s what I try to get across, not only to the students but also whenever I speak to pharmacy students is your lifestyle.

Tim Ulbrich: I think that’s a great point there, and I think there’s wisdom in reframing the perspective of your salary, right? Because I think that I know what I felt coming out of school in 2008 is there tends to be that pressure of peer comparisons. If I’m in residency and I’m making a whopping $31,000, and I look up and my friend’s making $120,000 with a sign-on bonus, which I understand don’t exist these days, that feels like it’s unmanageable, right? But if I reframe the perspective to me as a single person or even me and my wife as a combined income, and then you put that in the perspective of a median household income in the United States or we recently shared an article on the Facebook group this week about the top 1% in the world when you look at it in terms of the world economy, I think that helps reset the perspective of really what are you working with and what are the opportunities that are ahead. So Blake, one question I have for you is that as you think back, even though you’ve done a lot of things well, I’m guessing you look back to your former P1 self and say, “I wish I would have…” or “I wish I would have known this or done this differently.” What advice would you have for the students that are listening of some things that you may have done differently in your journey?

Blake Johnson: I think the No. 1 thing to look back on is budget while you’re in school. I mean, one thing that Joe talked about in the class is the power of compounding interest. It works for you, and it can work against you. If you come out with $120,000, you’ve got 6-7% interest working against you. Or you could have more money to put in the market and have that work for you. So I think during school, the less amount that you can take out, maybe by working more or just watching your expenses, I think that’s one of the big things because interest rates really do work against you and do take a good amount out of pocket.

Tim Ulbrich: Absolutely. And the follow-up question I have for you is we actually just wrapped up a book discussion with YFP, we’re doing a book discussion on “Rich Dad, Poor Dad,” by Robert Kiyosaki, which for those listeners who haven’t read that book, I would highly recommend it. It’s a great book that really just helps shape your mindset around money. But what really stood out to me in that book, second time through, is this focus on real estate investing, which obviously you are tuned into. You mentioned five properties. So tell us a little bit about why you are interested in real estate is my first question. And my follow-up is for those of the listeners that are thinking, maybe I want to get started in real estate investing, where would you recommend they even begin to learn more?

Blake Johnson: It all started, I guess about two years ago, right when we were wrapping up paying our debt off. I was looking at different ways for us to invest. And I love the stock market, we were maxing out our 401k, and I started a Vanguard fund, I started that and putting money in that. But I wanted something that could be “passive income” down the road. With the Roth IRA, you can’t access it until you’re 59.5, and other investments, it’s hard to get to. So I wanted something that could work for me and earlier in my lifetime that I could use as investment. So I started doing research, and me and my wife were talking about it for a long time. And I’ve always just enjoyed real estate. So it takes me a long time to decide on something. So after about two years of really looking into it, a friend of mine who moved back in town, we got back together, and he already had rental property here in Conway. And after about three or four months listening to him, I just kind of asked, “Hey, would you like to partner on something?” And we ended up partnering on something, and it ended up being nice because his interest and my interest as far as partnership meshed real well together, so we purchased two homes together out of the chute. That was back in April, and here we are in November. We actually just closed on our sixth home as of last month. So it’s been a fun journey and going back to where you can find info for that, there’s a great website called BiggerPockets. It’s basically a Facebook for real estate investors. And it is packed full of information. And I highly recommend it because real estate’s something you need to do a lot of reading on because you can get yourself in big trouble if you don’t get in there with good equity in homes to make the right decisions.

Tim Ulbrich: I second your recommendation of BiggerPockets, I’m actually binge listening right now to their podcast, so it’s fantastic. And I feel like every day, it just provides some new insight into I had no idea about this aspect of real estate or this aspect, especially if you grew up in a home where real estate investing wasn’t a part of growing up. So great stuff. Congratulations on the closing of the sixth property, that’s awesome. And I think the reason I wanted to bring that up is I know many of our listeners are interested in identifying potential revenue streams that don’t necessarily have to wait until withdrawal of retirement funds at the age of 59.5. So I think real estate is something we’re going to be talking a little bit more about. So Joe, I want to briefly just mention what I think are your famous Baker’s Dirty Dozen Tips on Getting Rich that I’ve seen referenced from coursework and people on LinkedIn where you’ve done talks and social media posts and engagement. I think they’ve become quite well known and famous. And we’ll link to them in the show notes, but I’m just going to briefly read through a few of them and then reference our listeners to the show notes and ask you a couple follow-up questions. So in this list, you have things like invest in appreciable items such as education and a house, minimize depreciable items such as car, clothes, etc. Student loan money should be spent on bare necessities. You mentioned utilizing the time value of money, that time is on your side when you’re young. You mentioned save money consistently and systematically throughout your life, such as dollar cost averaging. Don’t take money out of your retirement account; penalties and taxes will apply. You mentioned choosing a 15- or a 20-year mortgage over a 30-year, paying 20% down, avoiding PMI and making additional payments. So as you think through that list, do any of these stick out to you more than others in terms of their level of significance when you think of your own journey and mentoring numerous pharmacy students on their own financial path?

Joe Baker: Well in class, I’m pretty much an open book. And not to go into any personal details of my financial path — I did not achieve true financial wealth until all debt was paid off. Because I believe — I disagree with a lot of financial planners that say there’s good debt and bad debt. Eh. I think all debt is bad. There’s some that’s less bad than others if you forgive my grammar, so being that, I say, “Listen. I didn’t make a six-figure income until I was 47 years old. And completely debt-free at age 50 and then it was just amazing how much money was accumulated.” And fortunately, Blake is, he’s 20-25 years ahead of where I was at his age. It’s just amazing. I don’t think it was mentioned, but Blake, I’m going to tell on you. You’re 30 years old. So quite amazing. When I was 30 years old, I wasn’t even married. And had a little credit card debt, but found a lady that was a math teacher, taught me a little bit about the time value of money and saw that I had potential and married me. So I was very fortunate in that. But I really stress to my students and even when I speak too is you’ve got to get rid of the debt. The debt is the biggest albatross, and then I’ll speak also on buying automobiles. That seems to be a big hindrance in wealth accumulation. But the debt is the biggie in my book.

Tim Ulbrich: Yeah, and I’m thinking back to Episode 068 where Tim Baker and I talked about what we thought are kind of the pros and cons of Dave Ramsey’s baby steps, and I think one of the things we’ve realized, whether it’s our own financial plan or talking with hundreds and thousands of pharmacists is that for everyone, obviously different situations are going to allow for unique circumstances, but I think the piece that is often consistently missing in financial advice — although to Tim Baker’s credit, I think he does an outstanding job of this — is the behavioral mindset components. And it’s very hard to put a value to that. And for some people, it’s more important than others. But I share a similar belief, Joe, and when my wife and I hit that point of becoming debt-free with student loans, there was a mindset shift that happened that I cannot even put a value on what that’s done for how we’ve thought in terms of opportunistic ways of our financial plan. Now, could we have gotten there while doing it while we were in debt? Maybe. But I think it’s hard to articulate exactly the impact that that had, and it certainly has been significant for us. So Joe, talk us through your course a little bit. How do you approach that course? And the reason why I want to do address this is I think that while we have a handful of pharmacy schools out there that teach personal finance, we have probably 90+% that do not, and I know we have many faculty that may be listening to this or students that may go back to the school and say, “Hey, we want to do something like what Joe is doing.” So what does that course look like? And what are the fundamentals that you’re trying to teach and address in that course? And even the level of students that take that course.

Joe Baker: Well first of all, if anyone is interested, I would be happy to share any information that I have for you to take back to your dean of the college of pharmacy, even my syllabus, etc. And the way you sell it to your college of pharmacy is to say, “Listen. We’ve got people going out, and if they become financially independent, accumulate wealth, it will benefit the college of pharmacy in the future because the students will be more — the former students will be more inclined to give because they have, quite frankly, deeper pockets.” So that’s how to sell it. But the course that I teach, it’s at the beginning, we talk about all the different styles of stocks, bonds, mutual funds, ETFs. Then I graduate a little bit into the — not a little bit, a lot — into the retirement plans and some of those all the while, showing them examples. And then we gravitate into some other areas. It’s a two-hour elective, which is 30 classroom hours. So it’s hard to get really in-depth for too many subjects. So I want to give them a little overview, get them a little excited, showing them how if they start investing early versus investing late, then we go into some areas like buying and selling a house. I have a mortgage speaker that comes in and speaks along that. I also have an income tax person that comes in. She is not only a CPA but an attorney, so we cover the basis in the income tax area. I personally cover the personal property taxes, which we have in Arkansas. Of course, the insurance areas and then towards the end of the course, I have the student loan speakers come in from the state and explain how, what to do with their loans, some ways of paying them off, etc. So basically, it’s we have 15 class periods, two hours per week, can’t get it all in, but at least it sets a foundation. I tell them, “If I can just motivate you to do the things that you need to do at the beginning, everything else will take care of itself.” But it’s a lot of fun. It is. It is a blast. I get immediate feedback and quite frankly, I tell you, “You’re not doing this for a grade because if you miss one class, it could be $1 million. So you want to make sure you come in for all the classes, participate,” and I will say, up until your book was introduced — and I will brag on your book again — I finally had a book that I said, “Wow. I have a true textbook for my class.” Because before your book, I had “The Automatic Millionaire,” but it —

Tim Ulbrich: Yeah, David Bach, yeah.

Joe Baker: But it obviously wasn’t directed towards the pharmacy students. So thank you for that. But I was just so excited when I saw your book. And that’s the textbook, if you will, that we use in class.

Tim Ulbrich: And I love to hear your outline of the curriculum, but also obviously to hear Blake’s story and the success it’s had, and I think a key piece there you mentioned is motivation. It’s really planting seeds, right? You’re not going to cover everything about the financial plan in 30 hours. But you’re beginning to train behavior, beginning to establish mindset, and Blake’s story is one example. I’m sure there are hundreds of others that have had success because of that course. So I would also like to throw out there — and Joe, I know you and I have talked about this — we have a vision at YFP to see every college of pharmacy in the country be educating their students on personal finance. I personally believe — I obviously have a bias — but I personally believe this is a fundamental part of professional development of pharmacy students and new graduates, which to your point, has benefits to a college beyond their graduation, but I feel is an obligation that we have as a part of the professional development because what I’ve seen personally in my own life, in research I’ve done, in working with other pharmacists is personal finance and the stability of one’s personal finance impacts other areas of their life, including their career and the impact that they’re having in their day-to-day work. If we can help provide stability and a foundation through education, I think we’re going to have a better workforce that’s out there. So other colleges that are listening, this is the call to action. We would love to see you pick up an elective course. Anyone from ACP is out there listening — I’m not sure they are — we’d love to see this long-term as a portion of the accreditation standards in the future. So Blake, I want to end on this question. So you and your wife Kristen have done an unbelievable job in setting a strong financial foundation. We’ve talked about you guys becoming debt free, having equity in your home, maxing out retirement accounts, getting into rental properties, and you’re an incredibly young age. What is next for you guys? What are the goals that you have going forward?

Blake: You know, the biggest thing that I love about being debt free and being able to accumulate wealth is the fact that it frees you up to give. I feel like as a community leader, as a pharmacist, you know, we’re called to be leaders in the community. And through that, whether it’s to church or just to any type of organization, it frees you up to give more. So that’s kind of our goal. As years go by, we want to be able to give more and give more away. And we really do enjoy it. It brings a lot of joy to us when we can help others and do that type of thing. So outside of that, we’d like to get some more rental property and just continue to save. I’d like to leave a good inheritance to my kids and grandkids in the future.

Tim Ulbrich: That’s awesome. And I love your vision that you and your wife have on giving, which takes us to No. 13 in the Baker’s Dirty Dozen Tips on Getting Rich, which is make a difference in your family, community and place of worship. This will make you wealthy in your heart, body and soul. And I can see he has helped cast that vision to you all as well as obviously the impact that your family has had. So hopefully we look forward to having you back on the show when we get to that net worth of $1 million. And let me say to both Blake and Joe, on behalf of the YFP community and the YFP team, thank you so much for coming on today’s show and for your support of the work that we’re doing over at Your Financial Pharmacist. We greatly appreciate it. So thank you.

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YFP 078: Is Pursuing Public Service Loan Forgiveness Program a Waste?

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Is Pursuing the Public Service Loan Forgiveness Program a Waste?

On episode 78 of the Your Financial Pharmacist podcast, Tim Ulbrich, co-founder, and Tim Baker, YFP Team Member and CFP, give an update on the Public Service Loan Forgiveness Program (PSLF) and discuss whether or not this program is still a viable option for pharmacists considering the recent data published showing 99% of applicants for PSLF were denied.

Summary

Tim and Tim discuss an update on the Public Service Loan Forgiveness (PSLF) Program as a response to recent data published showing that 99% of applicants for PSLF were denied. This fall, an article went viral from several news outlets sharing data from the Department of Education. Of course, this impacted many people, but it’s important to dive into the details behind the program.

Tim Baker shares the importance of following the program guidelines to be sure you match all of the steps to qualify for PSLF. The guidelines include working for the right employer, having the correct loans, enrolling in the right repayment plan, yearly check-ins for employment certification and making the correct number of payments. One-third of applicants were denied forgiveness due to having missing pieces on their application or not following the guidelines accurately. Tim Baker urges that you cannot rely on third-party customer service representatives to give you accurate information and that you should work with a financial advisor to ensure you’re on the right path. He also mentions that if you are enrolled in the PSLF program, you have to go all in.

Although it may be a small amount compared to the loans that borrowers were hoping to have forgiven, Congress has authorized 350 million dollars for situations where people weren’t enrolled in the correct repayment plan, etc. Tim Baker believes that this is a tip in the right direction and that it demonstrates the potential longevity of the PSLF program.

Mentioned on the Show

CommonBond
YFP Resource: Crush Your Loans
YFP Blog: Ultimate Guide to Student Loans
YFP Facebook Group
NPR Article
YFP 018: Maximizing the Benefits of Public Service Loan Forgiveness (PSLF)
YFP Blog

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to Episode 078 of the Your Financial Pharmacist podcast. Excited to be here alongside Tim Baker as we tackle an update on Public Service Loan Forgiveness, PSLF program, talk about some recent news that was published about 99% of applicants getting denied and really get to the point as to whether or not, for those of you that are pursuing it or considering it, as to whether or not this is still a viable option moving forward. Tim Baker, how you doing?

Tim Baker: Good, Tim, how about you?

Tim Ulbrich: Doing well, excited to get into this. I feel like it’s been long overdue. We read this article. I’m sure you’ve gotten lots of questions, we’ve gotten lots of feedback in the YFP Facebook group. And I think it’s one of those topics that this hit the news, the headline, I’ll read here in a minute, and I think it was a little bit of sensational news that really, as you start to dig into the details, I think we can provide some level of reassurance that people need to stay the course. And we’ll talk about what that entails as it deals with PSLF. Alright, so let’s cut to the chase. This fall, article went viral from several news outlets, coming out with data published from the U.S. Department of Education that a very small percent, 1%, to be exact, a very small percentage of those that were applying for loan forgiveness through the popular and often talked about Public Service Loan Forgiveness program were actually successful in getting that balance forgiven. So here’s one headline from NPR. It says, “Data Shows 99 Percent of Applicants for Student Loan Forgiveness Program Were Denied.” Now, I think this is a big reason, Tim, for a few different reasons. First, as I mentioned, these articles, when they went out, I think people went bonkers. And you know, I think I’m confident in saying that many people were probably impacted if they didn’t read behind the details and do their homework and how they feel about the future of this program, what to do about their own loans. Second, as we’ve talked about before on this show, pharmacists have a boatload of student loan debt, many are pursuing this program and our estimates, looking at those that qualify, is that about 2,500 graduates each year may be eligible for PSLF. And third, we’ve advocated before on this show that if you’re going to go in on PSLF, we recommend an all-in strategy in situations where it makes sense. So I think people that read this, maybe have heard us talk about this on the show before are like, “Oh no, maybe these guys got it wrong.” So are you getting lots of questions from clients? Lots of concern out there?

Tim Baker: You know, I really haven’t, Tim. I had one resident that I’m working with — she mentioned the article and just was kind of backtracking and saying, “Hey, are we sure about this?” And you know, I just reiterated that nothing’s 100% sure. Like we definitely have our thoughts and beliefs in the program, but it could — I mean, there is risk with the forgiveness programs. But I think ultimately, the phones were pretty quiet. And it’s kind of the same thing like with investments. Usually, when the market, like it has recently, takes a downturn, people are calling their advisor and saying, “What’s going on?” My clients really haven’t done that. And I think it’s about the education piece around not only investing and sensible investing but also like the PSLF program and kind of what we’ve talked about it. So it hasn’t really been as big of an issue as I even expected. So I think part of it is just because of what we’ve been saying and some of the indicators that we’ve talked about that I’m sure we’ll outline here today about the program and where it is and I think where it’s going to go.

Tim Ulbrich: Yeah, I’m with you. I think we’ve been preaching details on this in terms of making sure you’re in a qualifying repayment plan, the right kind of loans, doing what you need to do, so I’m hopeful that has paid off. So let’s walk through five kind of main points of our outline for today’s show. We’ll talk about a quick review of the PSLF program, the requirements. We’ll talk about what this data does and doesn’t tell us. We’ll talk about what we think those pursuing PSLF should do with this information. We’ll talk about some other recent news surrounding PSLF that I think gives us some insights into the future of the program. And finally, we’ll wrap up with some resources that we have available to help you out with next steps for those that are wondering, is PSLF right for me? Or those that are even actively pursuing it. So Tim Baker, we talked about in Episode 018, we talked extensively about PSLF. So we don’t need to spend the episode doing that. But walk us just through again quickly the requirements related to PSLF.

Tim Baker: Yeah, so typically, the cadence for the PSLF program basically goes like this. You have to work for the right type of employer, and that’s typically a 501c3 nonprofit. You have to be in the right kind of loans, so private loans need not apply. You basically need to be in the federal direct loans. And there’s some confusion about that. So you know, if you’re not sure, and you’re seeking PSLF, probably consolidation. And we’ll talk about that in a second. You’ve got to be in the right type of repayment plan. So that’s typically one of the four income-driven plans. So we’re talking IBR, ICR, Pay As You Earn and Revised Pay As You Earn. You’ve got to make the right amount of payments, so this is typically 120 payments across 10 years. It doesn’t have to be consecutive, though. You’ve got to prove it, so that’s where we basically every year, we’re going to dust off the employment certification and say, “Hey, FedLoan Servicing,” who’s the servicer that basically monitors this program, ministers this program, “Remember these payments that I’ve made over the last 12 months or so? We good? They count? OK, good.” So we basically have to prove that every year. And then at the end of our 120 payments, we apply and we receive tax-free forgiveness, which is important because in the other forgiveness program that’s the non-PSLF program, you essentially have to pay taxes on the amount that’s forgiven, almost like it’s income. So that’s really the way in which, you know, you walk through the PSLF program.

Tim Ulbrich: And I think that’s important that we spend just a couple minutes talking about that because as we look at the article that came out from NPR, other news outlets, data from the U.S. Department of Education, all of those that I see in terms of those that were denied is because of something that went wrong there, besides people who had just filled out the paperwork wrong. But you know, they either weren’t in the right kind of loans, so they didn’t consolidate their loans into a direct loan. They weren’t in the right type of repayment plan.

Tim Baker: Yeah.

Tim Ulbrich: Or they weren’t ensuring that they were working for a qualified employer. And they ultimately were putting themselves in the position. Unfortunately, I think why this gets so much negative press is that the way these plans are typically working is that somebody’s loan balance is probably going to grow over the course of this time period. So I think some people, especially early on, if they didn’t have the right information, are rightfully ticked off because, hey, what the heck? I thought I was going to be forgiven. Now I owe more. And we’ll talk about at the end what the government is trying to do to appease some of this concern that’s out there. So No. 1, you’ve got to make sure you’re in the right requirements. And as Tim mentioned, those are the things around the right type of employer, right kind of loan, right repayment plan, making the right amount of a payment. It’s 120 payments. And then ultimately, you prove it, and you apply for tax-free forgiveness.

Tim Baker: Which can be super confusing, Tim, because even when the program was rolled out, there wasn’t a whole lot of information on that. So you know, a lot of the news, it kind of goes back on the borrower, which the borrower, I think there’s some — you know, we have to figure that out. But I think the way the program was rolled out was just really, really inefficient. And I think we think that the acceptance rates for the forgiveness will get better over time, just basically more iteration, more information, that type of thing. But yeah, it’s not the easiest thing to navigate, which kind of gives us some job security because obviously, this is kind of what we do a lot of these. But you know, it’s just something to really — because when you’re looking at this much debt, super important to make sure that the t’s are crossed, the i’s are dotted.

Tim Ulbrich: So let’s talk about that a little further because I think that goes into the next point here about what this data does and doesn’t tell us. While I love NPR, I think they got this wrong when they said, that “PSLF is out-of-reach for most people who apply for it.” And what they were looking at is that as they looked at the data, nearly 29,000 applications were out there, but of those 29,000, just 289 were approved. So that’s where they got the 99% denial rate. But to your point, Tim Baker, we have to remember that October of 2017 was the first point in time when people were eligible to apply for forgiveness because they would have gotten to that 10-year mark. This program began in October 2007, so tell us what the first few years, maybe some of the information, details, access to forms, how good the services were doing or not — although I think they’re still doing a pretty crappy job.

Tim Baker: Yeah.

Tim Ulbrich: But what was different then versus people who maybe have come out in the last three or four or five years?

Tim Baker: Yeah, well I think first of all, the income-driven plans that are out there weren’t even in existence. I think it was IBR was the first one that came out — maybe it was ICR — but IBR and ICR were the first ones. And now we have REPAYE and PAYE. They weren’t even there. I think the other thing to consider is that the employment certification, which is a major step in this process, that wasn’t even developed until years into the program. So you know, FedLoan Servicing, they’re really the ones that, like I said, are administering this program. And the Department of Education basically chose them to do that. But I think in their defense — even though I think that they’re not a great servicer at all — they’ve been given very little guidance, I think, by the Department of Education. And they’ve really kind of had to make it up as they’ve went. So you know, I think when PSLF was put into place by George W. Bush, his administration, President George W. Bush, his administration, I think the thought was like, well, we have kind of 10 years to figure this out. The problem is is that we really need to have a set system in place 10 years ago so people kind of knew if they were on track or off track because I think that’s the most devastating part is you read these stories, and people are like, “I thought I was on the path for forgiveness. It could have been my loans were FEL loans,” which aren’t eligible, which were a predominant loan a couple years ago. Or, “I was in a graduated repayment plan,” which you can’t be in that repayment plan for that. You have to be in one of the income-driven plans. So the news is devastating because we’re talking potentially hundreds of thousands of dollars. But I also think, like, it kind of reminds me of the numbers, 29,000 applied, it’s almost like when they talk about like acceptance to West Point. It’s like, if you open a file, you’re part of that stat. But you might not actually have even entertained it at all. So it might be someone who’s opening up a file and just saying, “Hm. I’m five years in, maybe I’ll give it a shot and see where I’m at.” But yeah, I think the news, it is a little bit sensationalized, but there is some truth to it in a sense that, you know, the forgiveness rates — and they’re almost like unicorns, people that are out there that are being forgiven. To me, and I’ve asked FedLoan Servicing, how come you guys are not like pointing at these people and trumpeting the fact that they — I don’t know, it’s like a marketing thing that I just don’t understand. But yeah, it’s a super interesting case because the numbers don’t support I think what I think a lot of lawmakers thought. We’re now questioning, is this program really valid?

Tim Ulbrich: So if there’s any pharmacists that are out there that are part of this 289 in terms of applications that are approved, contact us ASAP.

Tim Baker: Yes.

Tim Ulbrich: Right? I mean, to your point about the unicorns, I mean, it feels like this mystical program of like I think people are getting it, but we want to meet somebody, talk to them and really have that conversation. So to your point, though, Tim, looking at the data that was actually in this article from the U.S. Department of Education, a third of applications were denied — a third — because of missing information. So they’re not even complete applications, you know. It kind of reminds me of when you look at application numbers into pharmacy school, well, if they didn’t complete the application, you know, obviously that can inflate the data a little bit. What’s interesting, though — and this comes directly from the article — they say, “But they’re not meeting the program’s requirements because they’re often given insufficient or sometimes bad information by the companies that the government pays to manage these student loans.” And I think it’s worth reiterating that the federal government, when it comes to federal student loans, is contracting out the management of those loans to companies that are out there. You’ve mentioned several of them, Nelnet and Great Lakes and all these companies that are out there. And we’ve talked before, I think we’ve thrown them under the bus many times, so we probably don’t need to do that again. But the point here is that you cannot rely on a customer service agent at one of these companies to be giving you advice on whether or not you have all your t’s crossed and your i’s dotted. Whether that’s fair or not, I think that’s the reality of where some people are getting in trouble like the example you gave of they’re not in the right loan or they’re not in the right repayment plan.

Tim Baker: Right.

Tim Ulbrich: So let’s just make sure our listeners are crystal clear on what the right loans are because I think there’s a misperception out there that if you have federal loans period that you qualify. And you cannot stop there. You have to be in the right loan to make sure you have qualifying payments. So what is that?

Tim Baker: Yeah. So I mean, it’s essentially a direct subsidized or unsubsidized loans. And there’s actually even some confusion about does that include Stafford loans, which are kind of like the new direct? Because if you put Stafford loans into the studentloan.gov repayment estimator, it shows up as an unqualified loan for one of the four income-driven plans. But the easy ones that we know that don’t really apply are the FEL and the Perkins loans. And that’s I think where a lot of people were misstepping. I think if you are unsure, and you’re entering in the program, just consolidate the loans, meaning you turn one or more loans into one loan. And basically, that achieves the square peg, round hole. Now, if you’re halfway through PSLF, and you’ve been paying and your loans are questionable, you’re not going to want to consolidate that because when you consolidate, it actually restarts the clock. So I think I had a case like this, I might have mentioned it.

Tim Ulbrich: Yeah.

Tim Baker: You know, the borrower, she had like $500,000 in loans, and half of them were in FEL and half of them were in direct. And we essentially consolidated the half that were FEL, restarted the clock on the PSLF, and then her other loans we just left alone. So she’s happy now, she’s almost there with those. But again, like, the program shouldn’t be, the program shouldn’t be this complicated. But so if you’re unsure, and you’re entering the program, just consolidate them. It’s cleaner, I think, to track your loan. It’s just a weighted average of all of your interest rates. It doesn’t really help you versus like the refi option, which you’re not going to want to do if you’re going after PSLF. But consolidation, I think, would be key to just make sure that you’re in the right type of loan.

Tim Ulbrich: So the third thing we want to talk about is what we think those pursuing PSLF should do with this article. And to be frank, as I looked at this and I read this and after I got over the initial panic moment that I had online, I thought, if you’ve been crossing your t’s and dotting your i’s, I don’t really think there’s anything new for you here except for making sure you’re crossing your t’s, dotting your i’s. If you want to get a second opinion, I think that’s a good practice to consider. I gave you the website earlier, yourfinancialpharmacist.com/crushyourloans, where we have lots of information in terms of articles that you can read, making sure that refinance if you’re pursuing forgiveness is not an option, but if you’re not pursuing forgiveness, you can evaluate that option. Or you can look at a one-on-one student loan consult to get a second opinion. Submitting the employment certification form annually, we’ve talked about making sure you’re doing that. And again, not relying on these third-party companies to be your source of information that you ensure that you have everything correct, making sure you’re doing the things that we’re talking about here in this episode. The other thing I want to mention here, Tim, is that we’ve talked about before that we believe if you’re in on PSLF, you should go all-in on PSLF. So what do we mean by that concept of going all-in on PSLF?

Tim Baker: Yeah, so many times, one of the things that we like to do just as humans is we kind of like to revert to the mean. So this would be, hey, I’m pursuing PSLF, and I get a bonus or I get a tax refund, and I’m like, oh, I’m just going to apply a little bit. I’m feeling a little guilty because I’ve just been paying the minimum on my loans. This has happened, so if you’re laughing out there, this is actually conversations that I’ve had — that I want to throw a little bit more towards my loans and make some progress. The problem with that is you can’t — in the loan situation, you have to basically fly one flag. You can’t go after PSLF and throw extra at the loans because that’s kind of contradictory to what you’re trying to achieve. Just like the other end of this is kind of going all-in on the loans, just being — this is really the Tim Church method. So essentially, the goal if you are seeking PSLF is to lower your payment as much as humanly possible. So this in turn, basically maximizes your forgiveness. So the way that you do that is you make sure — you have to essentially lower your AGI, your Adjusted Gross Income. So the way that you do that, the way most pharmacists can do that is by maxing out their retirement plan, their 401k or their 403b, which for 2019 is going to be $19,000 for the year that you can contribute. It’s going to be maxing out your HSA, which I think for a single person in $3,500 for 2019 and then $6,900 or $6,950 I think for if you’re a family. So by putting money into those buckets, it lowers your AGI, which lowers your calculated payment because when you go and certify with your repayment plan every year, they actually look at your IRS — it connects to the IRS and looks at your tax return to get that number. So the lower that number is, the lower your payment, and the more that you’re going to be forgiven. So the idea of hey, you get a tax return or some of the money that you’re then going to apply towards that doesn’t make any sense. Now, it feels good and it feels like you’re making progress and you’re doing the right thing, but it’s contradictory to the strategy that you’re implementing. And for a lot of people, that’s just hard to swallow because the idea is that the PSLF is a very passive program, so we want to interject some active steps, but really, the most active thing that you can do with PSLF is really just to lower that AGI and put as much money into those accounts that I mentioned.

Tim Ulbrich: Yeah, I think when it comes to PSLF, you don’t want to meddle in the middle. I mean, you don’t want to — to your point — be making extra payments. The goal is to maximize forgiveness, which you do through minimizing your payments, which you do through lowering your AGI I think it’s also worth noting and reminding listeners in this section that we believe you can’t just look at the numbers when it comes to your student loan repayment situation and plan, right? This is a great example where you’ve got to balance the math with your feelings around the debt, with your feelings around the unknown, and really doing the calculations to say, how much am I going to save potentially through the PSLF program? And is it worth the unknown? Is it worth the — news like this coming out, is that going to upset or bother me? Is it worth the potential challenges I have if I don’t like my current position and I want to change jobs? And I think all of that is important to consider as you’re evaluating the potential savings that could come along with PSLF. The next item, Tim, is that there’s been some recent news — not so recent now, but in the last 3-4 months that came out.

Tim Baker: Yeah.

Tim Ulbrich: The recent news about PSLF that I think is giving us some insights into the future of this program and maybe some insights in terms of where the federal government views this program and their commitment to seeing it through, at least for the foreseeable future. And that was that $350 million was authorized by Congress to basically make up for the situations where people maybe weren’t in the right plan or weren’t in the right option. So tell us a little bit about that and your takeaway from that news.

Tim Baker: Yeah, so in March of 2018, the Department of Education announced this new program that’s called the Temporary Expanded Public Service Loan Forgiveness Program. And essentially, it’s to aid borrowers who thought they were on the right path for forgiveness but were ultimately denied for one reason or the other. So basically, Congress earmarked $350 million, which is kind of like, you know, they’re not going to expand that, but they’re essentially — as people are applying for this type of forgiveness, the funds will be exhausted. But essentially, the demographic, obviously, is a large demographic of people that thought they were on the right path, but to me, I think this is one of the reasons why I think that PSLF has legs because this is Congress basically earmarking more than a quarter billion dollars for this problem and I think recognizing the fact that the government didn’t roll out this program as efficiently as possible. So I think for me, the fact that they’re willing to put this amount of money for the oops situations that are out there — obviously, $350 million out of a $1.5 trillion issue is a drop in the bucket, but there’s a smaller percentage of people actually looking at forgiveness, but I think it’s a tip in the right direction in terms of I think where Congress views this in terms of longevity.

Tim Ulbrich: Yeah, and I think that’s reassuring. You never want to predict the future, but I think the other aspect to consider with the recent election is now that we have a split Senate and House, I think the likelihood of mass transformation of what currently is status quo is probably unlikely. So certainly something to watch going into future elections. But I think those that are in it, in our opinion, can feel somewhat safe and secure in the future of that program. The final thing, just to wrap up here, is just a reminder of resources that we have available to help you out with next steps if you’re wondering, what does the future hold for me as it relates to PSLF? Again, yourfinancialpharmacist.com, we’ve got lots of information, resources. Episode 018, we talked about this in detail. We’ve got some blog articles on this, we’ve got lots of information just in general on student loans. And a huge shoutout to Tim Church, who has really taken ownership of the new link that we have at yourfinancialpharmacist.com/crushyourloans, where that’s really your one-stop shop if you’re thinking about whether refinancing, staying in the federal government system, paying them off, pursuing PSLF, or whatever option, really making sure that you’ve got the best plan in place. So everything from DIY, ultimate guide to how to do that, all the way up to one-on-one consult with Tim Baker if that’s the right option for you. So Tim Baker, great stuff. Anything else to add as we wrap up?

Tim Baker: Yeah, I would just say that if you’re listening to this episode and you’re thinking, man, why would you ever want to kind of go through this every year and have to recertify? The fact of the matter remains that you can’t argue with the math. So I recently did an analysis, a student loan analysis for actually someone that just got done residency on the west coast. And he had about $420,000 worth of debt, student loan debt, which is a large number. And when we actually broke down basically the decision table, basically his most expensive, the total amount paid over the course of the loan, he was looking at about $580,000 versus the PSLF program, which was about $155,000.

Tim Ulbrich: Wow.

Tim Baker: So when we talk about like you can’t argue with the numbers and like that, or it could be a six-figure swing, that’s what we’re talking about. And then the second part of that is like the monthly payment is a lot lower. Like you’re looking at $4,800-4,900 per month in that most expensive versus $1,000 and change. So if you’re sitting there and you’re thinking, man, why would anyone do this? I would say, not so fast. You know, I think that’s the power of looking at this and getting it all on one page and one almost decision matrix because that’s how much the needle can swing with regard to this program.

Tim Ulbrich: And Tim, in that example, that doesn’t even account for the savings that would be accrued, right, over 10 years in 401k’s or other…

Tim Baker: Exactly. Yeah, so it’s even more. So you’re looking at a $400,000 swing and then some. And then what would you have in your 401k after those 10 years or that HSA over those 10 years? Yeah, it’s a huge number. So yeah, and that’s why, Tim, I think too is I think really, people should almost consider this as part of their benefits package. You know, if you’re looking at a hospital or another nonprofit, and you know, a hospital’s going to pay you $105,000 versus somewhere else that’s going to pay $115,000-120,000, those numbers, that’s a drop in the bucket comparatively. So I think it’s important to kind of view that as a whole package as well.

Tim Ulbrich: I think that’s great advice, especially for the students and maybe the residents that we have are listening that we tend to evaluate job offers I think often solely on that generic amount that a pharmacist is getting. Those are the details that matter, right? If you’re working for a qualified employer, and you do the math that you just did in that example, obviously, that becomes much more lucrative. And I think to your point and the example that you gave there, that highlights that obviously as you’re indebtedness number grows, the math on the PSLF becomes better. And so again, making sure that you do the math, on top of that, how do you feel about the debt? What does this mean for you? And for each and every person, you may get to a different conclusion. And I think that’s the value in looking at this on an individual basis. So Tim Baker, as always, great stuff.
Tim Baker: Yes.

Tim Ulbrich: And have a great rest of your week.

Tim Baker: Yeah, you too, Tim.

Tim Ulbrich: And as we wrap up, I want to again thank our sponsor, CommonBond.

Sponsor: CommonBond is a on a mission to provide a more transparent simple and affordable way to manage higher education expenses. There approach is no big secret…lower rates, simpler options and a world class experience, all built to support you throughout your student loan journey. Since its founding, CommonBond has funded over $2 billion in student loans and is the only student loan company to offer a true one-for-one social promise. What that means is that for every loan CommonBond funds, they also fund the education of a child in the developing world through its partnership with Pencils of Promise. So right now, as a member of the YFP community you can get $500 cash when you refinance through the link YourFinancialPharmacist.com/commonbond. Again, that’s YourFinancialPharmacist.com/commonbond.

Tim Ulbrich: And one last thing if you could do us a favor, if you like what you heard on this week’s episode, please make sure to subscribe in iTunes or wherever you listen to your podcasts. Also, make sure to head on over to yourfinancialpharmacist.com, where you will find a wide array of resources designed specifically for you, the pharmacy professional, to help you on the path towards achieving financial freedom. Have a great rest of your week!

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YFP 077: Making the Financial Transition from PharmD to Residency

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Making the Financial Transition from PharmD to Resident

On episode 77 of the Your Financial Pharmacist podcast, Tim Ulbrich, founder of Your Financial Pharmacist, interviews Dr. Michael Murphy, a 2018 PharmD graduate of THE Ohio State University College of Pharmacy and current PGY1 pharmacy practice resident in ambulatory care at Ohio State. Dr. Murphy served as the APhA-ASP National President from 2017-2018. In this episode, Dr. Murphy and Tim talk about his financial transition from student to resident, what he wishes he would have known financially during pharmacy school and how being involved in professional organizations has put him on the fast track to a successful career.

About Today’s Guest

Michael Murphy, PharmD is a PGY1 Pharmacy Resident in an Ambulatory Care Setting at The Ohio State University College of Pharmacy. Born in Columbus, Ohio, Michael attended Hilliard Davidson High School and then headed down the street to complete his undergraduate degree and attend pharmacy school at Ohio State. During his time at the College of Pharmacy, he found his passion in advocating for an enhanced educational experience for today’s student pharmacists and for the future of the profession. Michael focused on these passions through involvement in student organizations and has held several volunteer leadership positions where he served his peers and profession, including his term as the 2017-2018 American Pharmacists Association Academy of Student Pharmacists (APhA-ASP) National President. Michael is interested in pursuing a career in academia where he looks forward to training the next generation of pharmacists and advocating for the advancement of the profession.

Join APhA

Join APhA now to gain premier access to YFP facilitated webinars, financial articles, live events, resources, and consultations. Your membership will also allow you to receive exclusive discounts on YFP products and services. You can join APhA at a 20% discount by visiting www.pharmacist.com/join-now and using coupon code ‘AYFP18’. For more information about our financial resources, visit www.pharmacist.com/financial-education.

Summary

On this episode, Tim Ulbrich interviews Dr. Michael Murphy. Dr. Murphy went to Ohio State University and graduated from his undergraduate degree with no loans. He began taking loans out for his first year of pharmacy school and took out the maximum amount for four years.

Q: What would you have done differently then now that you know that borrowing the maximum amount isn’t the best option?

A: Dr. Murphy explains that he would have learned about budgeting, monitor your day-to-day spending and also shares the importance of not taking extra student loans out for vacations. After your first semester, you can figure out how much money you actually need instead of just continuing to borrow the maximum amount.

Q: What’s your strategy to make finances work well in marriage?

A: Dr. Murphy shares that communication, cutting costs where you need to, and working together to set fun goals helps are ways to help make your finances work well in a relationship.

Q: Did the indebtedness ever play a factor in deciding to continue your education/residency instead of getting a job right away?

A: Dr. Murphy said this definitely played a factor, but he has seen his mentors go through residency and be able to pay back their loans. He said that he looks at residency as an investment to move his career forward and knew that was the best choice for him.

Q: How are you deciding which repayment plan to choose?

A: Dr. Murphy says that originally he was very ambitious and chose the standard repayment plan for his loans. Now, he and his wife are working with a financial advisor to see what will make the most sense. They are going to switch to an income-based repayment plan and work on paying off other loans first. He has a goal of paying off his loans in 10 years.

Q: How did you make the decision to work with a financial planner?

A: Dr. Murphy said that he wasn’t familiar with student loan options, retirement or investments and thought that going to an expert was the best decision. They chose someone that other family members have used and they feel comfortable working with him.

Q: What tangible benefit do you feel like professional organizational involvement has played for you as a student but also in transitioning to residency?

A: Dr. Murphy said that it’s important to think about what brings value to the money that is being spent. APhA is always fighting for the future of the profession so pharmacy remains relevant and a successful provider. APhA provides resources to help you prepare and practice at the highest level. The relationships that have been formed, although intangible, provide so much value.

Q: After joining a professional organization, what advice do you have for students and new practitioners to further their involvement?

A: Dr. Murphy suggests to take a small positive risk like applying for a leadership position or starting a new project that you are interested in. If you are unsure of how to get more involvement, ask.

Mentioned on the Show

APhA
YFP Episode 072: Investing Mind Tricks: How Behavioral Bias Affects Our Decisions
YFP Financial Planner
Start: Punch Fear in the Face, Escape Average and Do Work That Matters by John Acuff
The Mayor of Castor Street: The Life and Times of Harvey Milk by Randy Shilts
YFP and APhA Partnership
Your Financial Pharmacist

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to Episode 077 of the Your Financial Pharmacist podcast. Excited to have a special guest on today’s show, Dr. Michael Murphy, past president of APhASP, current pharmacy resident at the Ohio State University, excited to talk with him about his transition from student to resident. And obviously, now I just officially began my new job at Ohio State. So excited to be here alongside another Buckeye who’s been a Buckeye for a long time. So Dr. Murphy, welcome to the show.

Michael Murphy: Hey, Tim. Super excited to be here. Thanks for having me on the show.

Tim Ulbrich: So I’ve only been at Ohio State, Michael, for a week. And man, the Ohio State culture and energy and that traditions and the legacy, it’s no joke. It’s a lot of fun. And you’ve been there awhile. What — nine years now?

Michael Murphy: Yeah, I’ve been there for nine years. And you know, I don’t think they can get rid of me. I love being a Buckeye, all of the opportunities that it provides to me, my career, and of course, getting to go to those football games, that’s fun too.

Tim Ulbrich: Absolutely. I have to up my game when it comes to Buckeye gear. I’m lacking the Buckeye gear. So as I’ve gone into work over the past week and been in other people’s offices and been there for a Buckeye Friday, I’ve realized that I’ve really got to up my game in that area. So why don’t we start by just tell us a little bit about yourself, including your decision to enter pharmacy school. Why did you want to be a pharmacist in the first place? A little bit about your journey through the PharmD and then ultimately, what led you to choose and pursue the residency training and the path that you’re doing right now?

Michael Murphy: Sure. I’d be happy to. So I am Columbus, Ohio born and raised. I grew up in Hilliard, which is a suburb of Columbus. And while in high school, I started taking some science classes. I took chemistry. And I knew immediately that I loved science. Actually, this is kind of funny. I was the proud only member of the high school chemistry club.

Tim Ulbrich: Only member.

Michael Murphy: Yes. I was real popular in high school. Around the same time, I started volunteering at the Ohio State Wexner Medical Center. I had volunteered, I would take patients from their rooms to their cars when it was time for them to go home. And I just loved seeing these patients on their best day because they were finally getting to go home. So I knew in high school that I loved science, I loved health care, and I was trying to find this way that I could tie those two ideas together. And around the end of high school, my grandfather ended up passing away. And he had been a pharmacist in the Cleveland, Ohio area for about 50 years. And it’s kind of funny how I just learned more about him throughout the process of, you know, him passing away and learned more about the impact that he had made on his community and his profession. And I’ll never forget going to his funeral and seeing all these community members come out that I had never really heard about before, but he’d made a huge impact in their life as this local community pharmacist. And I knew right there that that was the profession for me. I wanted to be a pharmacist so I could make as big of a difference in my community as my grandfather had. So I knew from 16 that I was going to be this pharmacist. And I went to Ohio State with that in mind and stuck around for eight years, and here I am.

Tim Ulbrich: Yeah, and I love that story, Michael. I remember when you were in your national presidency of APhASP, talking a lot about finding your legacy and finding that place that you have in the profession. And hearing you link that back to the inspiration from your grandfather is such a cool story. And so you go into Ohio State — and for those that don’t know and while it’s changing right now, Ohio State is a 4+4 program, so you do four years of undergrad and you do four years of pharmacy school. Obviously, you mentioned that you’re in year nine with your residency. So when I hear eight years, I think, holy cow, we’re starting to think about student loans. This is obviously a financial podcast. So talk me through the financial journey. Did you have loans coming out of undergrad in a pharmacy school? And how did that transition work?

Michael Murphy: So I was really lucky in undergrad. My parents were able to help me significantly with my undergraduate tuition, so I did not have loans coming out of undergrad. But going into pharmacy school, I went through the first year of applying for the FAFSA and seeing that transition. It was pretty significant. And I immediately started to feel that burden, just knowing that this money was not mine. But I should be spending it. It was a weird transition. But now, going through pharmacy school, I took out the max that I could for those four years. And I definitely — there are some things that I wish I had done differently, now looking back. I’m glad for my experience, it was a very positive experience during the pharmacy school. But there was definitely things I could have done differently to help myself now that I’m in this financial situation that I am today.

Tim Ulbrich: So let’s talk about that for a minute because I think you brought up an important point that is very, very common that obviously the trend I think is typically to take out the maximum amount of student loans. I did, and I didn’t really think about it in the way I now reflect back on it, right? Which is just part of lessons learned. So obviously, that being one thing you might do. What advice would you have back for your P1 self, looking and saying, OK, I came out of undergrad, I’ve got no student loans thanks to the help of my parents. Now I’m entering into pharmacy school and kind of starting to escalate that indebtedness because of the borrowing the full amount. What would you have done differently in terms of borrowing that money or budgeting through that phase? And what are some things you wish that you would have known during that time?

Michael Murphy: Well, one, I would have introduced P1 Michael to the word “budget.” I think that would be one thing. I watched my money somewhat. But I wasn’t too concerned when it came to little things like going out for dinner or getting lunch, cups of coffee, the normal things that every student needs to do. And when I was thinking about some advice that I could give to a first-year student pharmacist, I would say definitely don’t do what some of my friends did, which they took their extra student loans and they went on these extravagant vacations. Never do that. But also watch your day-to-day because looking back now, that is some of the times that I spent the most money because I would say, “Oh, I’m too busy to go to the grocery store on the weekend. I have to study.” So I would end up having to go out for dinner multiple times a week and go out for lunch. And that stuff adds up quick. So watching the day-to-day can be a significant change in what you can do to help with some of this financial burden. And then after that first semester, you can figure out how much money do you really need? You probably don’t need that full amount. You can budget for yourself to make financial smart decisions now so you’re not regretting them in four years.

Tim Ulbrich: Yeah, absolutely. And I think a couple things there that really stand out to me, Michael. Obviously, the concept of the budgeting piece, of course. But also just the reality of the nickel-and-diming of those expenses, right? And I think we all feel this now. I mean, I’m thinking of the last time I just logged onto my Huntington checking account, and none of those charges look extravagant, but something here, something there, something there, and obviously, those add up over time. And then I hope for the students that are listening to the podcast, you know, they heard that message of reevaluating how much you really need because we’ve been preaching before on this show at anybody who will listen that when you’re borrowing money in school, obviously that is accruing interest. And then that’s going to capitalize when you graduate and you get to the point of active repayment, which you’re just coming up on now and we’ll talk about here in a minute. And so I think it’s for those that have gone through this situation, and you’re looking at yourself in a situation like Michael and somebody who has around the average indebtedness or myself, somebody who had a little bit more, that certainly you want to learn from the lessons and the actions that you took. But obviously, there’s only so much value in beating yourself up. But for those students who are listening, try to figure out what could I do differently right now? And how could I pivot to be able to make some different decisions? So let me transition this a little bit — my understanding, you got married during pharmacy school to your wife, Robin. Is that correct?

Michael Murphy: Yeah, we got married right after my P1 year. So we actually got married about four days after my first year of pharmacy school. And that was a rough transition in itself because the idea is you’re planning about a year to a year and a half before the wedding. And starting pharmacy school and that transition, things just got put off initially to winter break. And then winter break, we were like busy with holidays and seeing family, and things got put off again. And then all of a sudden, we were scrambling. But everything turned out perfectly, as it always does.

Tim Ulbrich: And one of the questions that I always like to ask any couple or anybody on the show that’s working together with somebody else — and obviously, your situation being unique that you got married during school and you’re adding somebody else’s financial picture into the mix. But for you and Robin, what works well for the two of you? I mean, when you’re hitting all cylinders with your finances and you’re doing this well — we all know that that’s not all the time or we’d be lying, right? — but when it’s working well for the two of you, what is the strategy to make that happen?

Michael Murphy: So I think the most important thing is communication. Working with your significant other to set goals that work for both of you so that you can help cut costs where you really don’t need to be spending money. So I’ll use the example of eating out. That’s an easy way to make a pretty quick transition to you just going to the grocery store, preparing ahead of time, setting yourself up for success so you’re not going out to lunch multiple times a week. But also working together on setting fun goals. So part of financial planning, at least for me, is not just about cutting back but using your extra funds in a responsible and valuable way for your own experiences. And I think that’s pretty important. So you’re not just cutting back, but you’re really using those extra funds for something that means a lot to you. So if that’s for me and Robin, that’s going out and exploring a local craft brewery or going to a local restaurant and doing the things that we love to do or taking a quick day trip or for Robin, who is a dairy farmer, going out and seeing some of her favorite cows and maybe putting in a bid at an auction for a cow.

Tim Ulbrich: That’s awesome. I remember — correct me if I’m wrong — but when you were explaining to me before you recorded of what Robin’s doing, you mentioned something like the dairy farm equivalent of like APhA from an association standpoint. Is that right?

Michael Murphy: Yeah. So she works on her parents’ dairy farm a couple days a week. But she also works for the American Guernsey Association, which is what I liken to the APhA for dairy farmers.

Tim Ulbrich: That’s awesome. I love that. So let’s talk about this transition. So you go through eight years of school, undergrad, PharmD, you come out with roughly the average indebtedness, a little bit less than that. And one of the questions I often get — and my previous job was working with students, thinking about how this financial piece plays into the career decisions that they make. And I can comfortably say I felt like it was rare five, six, seven years ago that many people were thinking about this financial piece in a significant way of impacting the decision they made on residency or no residency. But that seems to be changing a little bit as the indebtedness continues to grow. And so my question for you is did the indebtedness — obviously you decided to pursue residency — but did the indebtedness ever play a factor that you thought, eh, maybe I will or maybe I won’t do this because of that dollar amount and the debt you had, versus just going out and getting a job and starting earning an income?

Michael Murphy: Hmm. That’s a good question. I mean, it was definitely a factor. I didn’t put too much weight into it because I’ve seen so many of my mentors go through residency and take that year of investment in their future and into their careers. And they’re able to still pay off their student loans, and it’s not significantly contributing to any problems that they see in the future. But it was definitely a factor. And I guess it depends on the way that I think about residency. Some people think that, oh, you’re taking a pay cut for that year. I think of it as me paying for this experience. And for me, I want to make sure that if I’m paying the difference between what I’m making as a resident and what I would be making as a starting salaried pharmacist, that that experience is worth it for me for my growth and for a springboard for my future career. So I felt like that investment made sense for me. It doesn’t make sense for everyone, but it made sense for me and for my career goals. Now, the idea of not being able to start paying off my student loans as quickly and as hard as I would like to, that’s definitely been something that I’ve been thinking about a lot lately, especially as now I received my first notice from Nelnet, the company that is managing my student loans, saying that my first paycheck is due to them.

Tim Ulbrich: On your birthday, right? Happy birthday.

Michael Murphy: Yeah, it’s due on my birthday, which is just —

Tim Ulbrich: That’s cruel. That’s just cruel.

Michael Murphy: But I’ve seen some of my friends now that started just right off in the community, and they’re able to put more of their monthly salary to their student loans. And you know, it’s just a difference in what we’re able to contribute at this time.

Tim Ulbrich: Michael, one thing I love that you said that just hit me — and I’m going to use this as I talk to student pharmacists, and I wish I would have this mindset — is looking at the residency training year as something you’re paying for — and I love how you said basically, the difference. So if you take a pharmacist is making $100,000, just for an even number, and you’re being paid as a resident whatever, $40,000 is an even number, that you’re making that investment of essentially — one way of looking at it is saying, “I’m taking a pay cut.” The other way of looking at it is say, “I’m investing $60,000 toward this component that’s going to advance my career and the skills and the development of myself.” And I think that’s huge as a mindset shift, right? I mean, if you think of it that way, all of a sudden, it changes probably how you’re getting the most value out of that experience and from your preceptors and the mentorship and all of that. So I love that. And I hope that you’ll continue to shop that message to anybody that will listen because I think that can be such a game-changer for people to make sure they’re getting the most of that year, to look at that year as an investment. So you make this transition into residency and now, as you mentioned, here you are. Here you are in essentially November at the time of recording this, and you get that happy message that hey, grace period is up. And I always joke on the show, I feel like the grace period is anything but gracious because the interest is still accruing, but you don’t have to make payments. All of a sudden you have to make a payment, nonetheless on your birthday. How are you going about making the decision of which repayment option you’re going to choose? Because so many people get hung up, as we’ve talked about before on this podcast, making that decision. So how did you and Robin work through as you’ve had this time in the grace period to say, OK, once I go into active repayment, this is the best game plan for us?

Michael Murphy: So for me, when I initially went through exit cousneling, I was a little bit too ambitious and thought that, oh, I’m going to be making x amount of dollars per month, I will definitely be able to contribute much more than I actually can. So I picked, initially, one of the standard repayment models, which with my student loans is over $1,000 per month, which is just too significant for what I can currently pay on a resident salary. So I’m now going through the process of working with Robin and working with our financial advisor, which is one of the first things that I did once graduating. I can’t advocate that enough to students is to find a financial advisor, start getting advice early on. But working with our financial advisor to find out which repayment plan would make the most sense for me, especially this first year in residency. And we decided an income-based repayment model would be the one that makes the most sense for us because right now, we can spend some time focusing on some of our other debt, like Robin’s car loan, like Robin’s student loans that are a little bit smaller. And then we can be paying off some amount to my student loans as well. And then eventually, we will be able to bring all of these payments together and be putting our full force towards my student loans. The idea that was shared with me is this idea of a snowball that you’re slowly building up steam over time and as the snowball rolls down the hill, it builds and builds and builds, and eventually, you’re putting your full force towards this one student loan.

Tim Ulbrich: I like that. And so what I heard there is essentially, you had jumped out of the gates and said, “OK. I want to do the standard repayment, the 10-year repayment.” The reality of that, of course, is a big payment if we’re looking at let’s say $150,000-160,000 of student loans, resident salary. So then you took a step back and said, OK. For you and Robin, what are the other financial goals you’re trying to achieve, what other debts are you trying to pay off? How much income do we have in our monthly budget that we’re working with? And then obviously, that led you down the path of one of the income-driven plans. And it sounds like you’re still kind of working through which one of those. Is it PAYE? REPAYE? Is it one of the IBR plans? The old IBR? The new IBR? But I know for many — and I’m guessing this is the thought for you as well — that that is a floor, but then obviously, as time goes on, you can of course make extra payments if you decide to in the income-driven plans. Is that the thought you have?
Michael Murphy: Yeah. Unfortunately, I am still very ambitious. And I think that my biggest goal would be to have these paid off in 10 years. And I know that’s probably unrealistic, but I believe in stretch goals.

Tim Ulbrich: Yes.
Michael Murphy: If you shoot for the stars, you may not get to the stars, but you’ll probably get a lot farther than you would have if you’d aimed low. So I figure I’m going to aim for 10 years, get everything paid off, and if it ends up being 12, hey, at least it’s better than 20.

Tim Ulbrich: So Michael, my prediction — just knowing you and working with other people — my prediction is it’s going to be 5 or less for you. And I think that’s why I think that’s going to happen is as I’m sure you’ve talked with other people, I know I experienced this myself, once you start catching the fire of actually seeing that snowball rolling down the hill and getting some momentum, you just get fired up about making it happen quicker, and it impacts how you make other decisions. So certainly no guarantees, but we’ll touch base and kind of follow the journey. But that’s my prediction here is 5 years or less. But I like what you said there about the timeline. So you did mention, which is interesting because not many new graduates choose to work with a financial planner or financial advisor. And I know many new grads, myself included when I graduated, struggle with evaluating the benefits of what that planner can provide versus obviously the investment in doing that and engaging that relationship. So how did you and Robin make the decision that for you, it was best to pull the trigger to invest in and purchase in terms of the value of working with a financial planner?

Michael Murphy: So for me, I mean, this is going to be showing a little bit about myself, I guess it came down to my naivete. I wasn’t too familiar with some of these different student loan options that I could choose between and also just this idea of investing in my future and in a retirement plan and trying to set up some of our investments. I’d always heard this idea that you need to start early, but that’s kind of where the advice ended. I didn’t really know where to go from there to start early. So I figured that I should probably reach out to someone that has more experience than me, just like how our patients come to us for advice on their medications, I figured I should probably go to the expert for advice on what to do to set myself up for success. So that’s the reason that Robin and I reached out to someone that had worked with members of our family before to help them plan for their finances. It was someone that we knew and trusted and we knew that we would feel comfortable with. And we reached out to them, and our first visit was very positive. They talked us through what the next six months are going to look like and what we can do to help start paying off our student loans and at the same time, start investing in our retirement and 40 years down the line and what we want our future to be. And I thought that was interesting because initially, I was just going to think about my student loans. But if we start investing now, we’re going to see significantly more benefits later on than if we waited. So I thought all of that advice was really impressive. And it gave me a lot of confidence that I made the right choice to reach out to someone for help.

Tim Ulbrich: I really appreciate your maturity for you and Robin. I feel like — as probably other new grads can relate — I felt like coming out of school at 24, and even though I had $200,000+ of debt, I felt like I liked the topic enough and want to learn about it that I’ve got this myself. And the piece I forgot and it took me awhile to realize is that so much of this, especially for new practitioners, is so complicated with all these moving pieces and parts. But also, so much of this is so behavioral that even if you have the knowledge and especially I think in a situation with a spouse to have a third party help work through a financial plan can be incredibly powerful and keep you accountable in that plan, even if you have the right knowledge. Ultimately, so much of this topic can be behavioral. And Tim Baker and Tim Church just talked about recently about the behavioral biases that come with investing. And so we have been advocating over and over again on this show about the benefits — and while it may not be for everyone — what you should look for, questions you should ask to make sure you’re working with somebody that has your best interests in mind. YourFinancialPharmacist.com/financial-planner, we’ve got lots of information that will help you hopefully find and ask the right questions to be working with somebody that we think will help you holistically and comprehensively work on your financial plan and not just focus in on one piece. And I like what you said there, Michael about obviously, it’s just much bigger than just one part, whether that be student loans, investing or any part of the plan. So finally, I want to shift gears and talk about your involvement in professional organizations because obviously, you had a very notable role as the national president of APhASP and for those that don’t know, again, correct me if I’m wrong, Michael, APhASP I believe is 22,000+ members strong. Does that sound about right?

Michael Murphy: So depending on the year, we usually hang out around 30,000 members.

Tim Ulbrich: OK. I’m underestimating. So incredible number of student members, all colleges across the country. Obviously, a very highly sought-after position. And in my opinion, the office of the president of APhASP is a reflection of really the cream of the crop of students across the country that are seeking this position. So first of all, congratulations and kudos on getting selected for that position. I know I got to see you kind of work throughout that year and had a chance to have you on campus at NeoMed and visit with our students, which I know you provided them a lot of inspiration. And so one of the first questions I want to ask you is, what tangible benefit — and I’m sure there’s more than one here — but what tangible benefits do you feel like professional organization involvement has played for you, both as a student, but also in this transition because I know I hear from many new practitioners, they struggle with the tangible benefit of the membership. And they’re purely looking at maybe the cost of joining and can’t necessarily see how that’s going to play a role in their professional development or other areas. So what did that mean for you as a student and mean for you as you’ve made this transition into residency?

Michael Murphy: So for me, now I think that is a very important question because we need to think about what brings value to the money that we’re spending. I think that’s what is so important about this podcast is thinking about what we are spending our money on and making sure that it is all of value. And one of those valuable experiences that I always know that I will spend money is my membership to APhA. And that’s because it brings value to me when I was a student, it brings value to me as a new practitioner, and it’s going to bring value to me throughout my time as a pharmacist. And that’s because APhA is constantly fighting for the future of the profession to make sure that the pharmacist will always be a relevant and accessible healthcare provider. So for me as a new practitioner, some of the tangible benefits that I have been able to get are resources. So it can be overwhelming all of a sudden going from this shift, from student where you have this safety net to the pharmacist. And it can be scary of all of a sudden thinking that, whoa, I am the last line of defense. I need to make sure that I am as skilled, confident, as possible so that I can take the best care for my patients. And I think that APhA, through their practice division, provides a great level of resources so that you can practice at the highest level of your potential. Additionally, I know that some of the resources that you can gain through attending their conferences are out of this world. I just went to the MP Day of Life for the first time in July in Washington, D.C., and I learned about this woman’s health initiative out of Indiana, and we listened to a woman’s health pharmacist and learned about some of the different resources that they use in their practice to ensure that they’re using the best oral contraceptives for their patients. And I took that resource and I use it just about every day in clinic, where I’m getting questions from different physicians, asking which oral contraceptive do I pick? There’s so many different ones with different ideas. Which one should I use? And it’s nice having this resource that I was able to get because I attended an APhA conference. And then I mean, the tangible benefits, I can go on and on. But for me, some of the greatest value is in the intangible — the relationships that I’ve been able to form with my friends going back from 5-6 years ago when I first started getting involved in APhA to the relationships that I’m forming every day with different APhA members. And one of the things that is nice about APhA is not just health systems pharmacists or community pharmacists or managed care pharmacists. It’s everyone. And you can really find different ways that you can get to know pharmacists from across the spectrum so that you can find out ways that you can help them, and they can find ways to give back and help you in your career.

Tim Ulbrich: Yeah, that’s great stuff. I couldn’t agree more. And I had the opportunity to serve as our chapter advisor of APhASP at Neomed and, you know, what I always heard over and over again is there’s a hesitancy from some students to jump in. But once they jumped in, they got involved in the meetings, they attended a national meeting, maybe a mid-year meeting, they got involved in advocacy — once they saw it, you know, and it became real to them, obviously they caught fire. And that was so much fun to watch. And the follow-up question I have for you is I think we have many students and practitioners that are listening that are thinking, OK, maybe I’ve joined an organization before, but I didn’t go anywhere beyond that. And so they didn’t necessarily see the value in continuing that membership. So outside of, of course, making that initial decision to join, what advice would you have for students or new practitioners to then further get involved so they can really experience the value of their involvement?

Michael Murphy: So I think one of the best things that you can do is to take a small positive risk. And if that risk is you saying that you’re interested in running for a leadership position, let’s say one of the new practitioner network standing committee applications that are going to be due on Dec. 1. Take that small positive risk. If you want to get more involved, you can do it. Take that risk. If you’re a student pharmacist, and you’re saying that “I want to make a difference in my community,” start a new patient care project that follows your passion in your community and reach out to your chapter executive committee to find ways that you can get involved and make a difference out in the community. There are so many ways that you can get involved, but what you need to do is ask. Reach out to your local leaders or to your leaders within the new practitioner network, and find out ways that you personally can get involved. I just heard a interesting quote from one of my preceptors the other day. And I think it’s just perfect. And the quote was, “A hungry person with a closed mouth never gets fed.” So the idea is if you don’t ask for food, you’re not going to get fed. You’re not going to get fed with what you need. But if you reach out, you ask for what you need, then you will see results immediately. So reach out to your local leaders, reach out to the new practitioner network, the new practitioner advisory committee, and they can give you the resources that you need to get involved more, get that full value from your membership.

Tim Ulbrich: I love that. It reminds me of one of my favorite books I read a couple years ago called “Start” by Jon Acuff, and it’s that idea of taking that idea, taking that risk and that next step and inevitably, any time you do that, the next door opens and it keeps going from there. And I think it’s just part of that mindset that you spoke of earlier. OK, we’re going to finish up the show and have some fun. We’re going to put Dr. Murphy on the hot seat. I’m going to give four questions in a rapid-fire format. Quick question, quick answer. So first question I have for you, Dr. Murphy, the greatest opportunity you feel like we have as a profession right now here in 2018?

Michael Murphy: I think our greatest opportunity as a profession is to realize the impact that we can have out in our community. I believe that the future of pharmacy is in the community and is a mixture between the community pharmacist and an ambulatory care pharmacist, working almost as a primary care pharmacist. But we need to advocate for ourselves to our patients and our legislators so that we can make a difference in providing preventative care for our pharmacists.

Tim Ulbrich: What do you think is the greatest threat that is facing our profession right now?

Michael Murphy: The greatest threat, that is a good question. For me, I think the greatest threat is feeling content, feeling like this is as great as it can be. I always know that any situation can be better if we have an innovative stage of mind and we realize that through hard work today, we can see positive results in the future. We just need to get to work today. So I think our biggest threat is just feeling content. But I know that we can overcome that if we get to work today, and we will see results tomorrow.

Tim Ulbrich: What’s one step that those are listening can take to help advance the profession of pharmacy?

Michael Murphy: Reach out to another healthcare professional or to your patient and ask them to write a letter to their local legislator about the impact that pharmacists can make in their lives. And this will show that pharmacists don’t just make an impact, and pharmacists aren’t just fighting for themselves, but other members of the healthcare team and their patients can see the impact of pharmacist-provided care. And that will help advance pharmacy on a state level and the national level.

Tim Ulbrich: Awesome. My last question is I know you’re a learner. So what are you reading these days, either for fun or even to help develop yourself further?

Michael Murphy: Sure. So one of the books that I’m reading right now, and I feel like I’ve been reading this for awhile because residency sure is busy is the biography of Harvey Milk. And he was the first openly gay city legislator of a major city in San Francisco back in the ‘70s. And it’s really interesting reading about how this person fought against all the odds. He fought against all these people that were saying that he didn’t deserve to be a leader, but he knew in himself that he was a leader. And he didn’t listen to those people that were trying to tell him the type of person that he needed to be. He listened to himself. He listened to that voice inside that was saying that he should go out and make a difference in his community. So I love reading biographies because I love reading about how great people became great. And it reminds me of this idea that I once heard from one of my favorite professors — that if I read about how great people become great, maybe someday I can be great. And that’s what I strive for every day.

Tim Ulbrich: I love that, Dr. Murphy, and thank you so much for coming on the show today and for being an inspiration for me and many others as well and, of course, for your commitment to the profession of pharmacy. I really do appreciate it and think many listeners are going to get great value from today’s episode.

Michael Murphy: Thanks for having me, Tim. It was a ton of fun.

Tim Ulbrich: So before we wrap up today’s episode of the podcast, I want to again thank our sponsor, American Pharmacists Association.

Sponsor: Founded in 1852, APhA is the largest association of pharmacists in the US with more than 62,000 practicing pharmacists, pharmaceutical scientists, student pharmacists, and pharmacy technicians as member. Join APhA now to gain premier access to YFP facilitated webinars, financial articles, live events, resources, and consultations. Your membership will also allow you to receive exclusive discounts on YFP products and services. You can join APhA at a 20% discount by visiting pharmacist.com/join-now and using coupon code ‘AYFP18’. For more information about the financial resources we offer in partnership with APhA, visit www.pharmacist.com/yfp

Tim Ulbrich: And one last thing if you could do us a favor, if you like what you heard on this week’s episode, please make sure to subscribe to in iTunes or wherever you listen to your podcasts. Also, make sure to head on over to yourfinancialpharmacist.com/ where you will find a wide array of resources designed specifically for you, the pharmacy professional, to help you on the path towards achieving financial freedom. Have a great rest of your week!

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YFP 071: Ask Tim & Tim

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Ask Tim & Tim

On Episode 71 of the Your Financial Pharmacist Podcast, Tim Ulbrich, Founder of YFP, and Tim Baker, YFP Team Member and Founder of Script Financial, tackle 10 listener questions that were posed in the YFP Facebook Group, covering a wide array of topics like investing, refinancing student loans after pharmacy school, taxes, and more.

Have a question you would like answered on a future episode of the show? Make sure to join the YFP Facebook Group to pose your question to the YFP community or shoot us an email at [email protected].

Summary

Tim Ulbrich and Tim Baker field 10 questions from the YFP community. The first question asks about the pros and cons of a traditional 401k versus a Roth 401k. Tim Baker explains that “Roth” means after tax (Roth 401K, Roth 403B, Roth IRA) and a traditional 401k means pre-tax. He explains that there are different participant contribution amounts to 401Ks and that you are able to have a traditional IRA and Roth IRA that you can put aggregate money in each year in separate systems. Question 2 asks, what is something you wish you would’ve started in pharmacy school based on what you know now? Tim Ulbrich says first become educated, especially around student loans, work in school to help set yourself up for a career to to form connections and skills, and, lastly, look at the amount of money you are borrowing as real money that you’ll need to pay back. Question 3 asks how to start earning interest on monetary gifts a child has received. Tim Baker responds that first you need to know the goal of the money. From there, you can put it in a high yield savings account or CD or put it in an index fund. However, a 529 is probably the best vehicle for the money to be put in, as it offers tax advantages. Question 4 asks about unconventional pharmacy jobs. Tim Ulbrich says that 45% of jobs are in community pharmacy and 30-40% are in residence training, however there are still many different avenues of unconventional pharmacy jobs to explore. The best advice is to find a mentorship, either within your college or outside, to help you see other possibilities. Question 5 asks about online banking and suggested companies other than Ally. Tim Baker says that it’s important to gauge the ease of use, customer service, and fees charged. These online bank accounts are best used for separate emergency funds or storage accounts.

Question 6 asks if there is any benefit to staying with the same home and auto insurance or switching companies for a better rate. Tim Ulbrich suggests that you should assess the price with the service you receive. Nickel and diming policy coverage over a company you are happy with should be avoided as it’s important to put value over relationship. However, if there is a significant savings, then, of course, switching makes sense. Question 7 asks what should be taken for an initial appointment with a financial advisor and what questions should be asked. Tim Baker says it’s important to ask good questions, such as how would we interact and how often, are you fee only or fiduciary, how is the fee calculated and how are you compensated? If you are going to a financial advisor strictly for guidance with student loans, be aware of how much knowledge they have. Question 8 asks if anyone has repaid their student loans through the federal government with income based options, such as IBR or PAYE, and if the better option is refinancing student loans after pharmacy school. Rim Ulbrich says that you have to assess what the best repayment option is for you. Run the numbers, look at the feelings you have toward carrying student loan debt for 20-25 years, assess your financial goals, and lay our all of your options. From there, you are able to make a decision. Question 8 asks if it’s better to file taxes married filed separately when a spouse is eligible for PSLF. Tim Baker explains that there are situations that married filed separately is the right way to go, however, it depends on the repayment plan. He suggests to do a tax projection and student loan analysis to see if you’re approaching the situation in the best way possible. Lastly, question 10 asks if someone should stick with federal loans to keep a minimum payment down or refinance to lower their interest rate. Tim Ulbrich suggests that as the interest rate market rises, refinance offers may not be as attractive. If you refinance on $100,000, a 1-2% interest rate change in refinancing may largely affect how much you are repaying. Regardless of the math, refinancing is off of the table if you are pursuing PSLF.

Mentioned on the Show

CommonBond
YFP Facebook Group
Have a question about investing? Ask us!
YFP Episode 70: Pre-Planning for Tax Season with Paul Eikenburg
Nate Hedrick, Real Estate RPH
YFP Episode 69: Carissa Explains It All: How One Pharmacist is Accelerating Her Financial Goals Through Rodan & Fields
YFP Episode 63: Intro Into the Side Hustle Series
YFP Episode 38: The Happy PharmD’s Journey to Becoming Debt Free with Alex Barker
Tony Guerra’s Pharmacy Leaders Podcast
YFP Episode 53: One Pharmacist’s Journey From Financial Ignorance to Financial Independence with Tony Guerra
Nuts and Bolts to Hiring a Financial Planner Guide
YFP Episode 15: Financial Planning Series Interview with Tim Baker (Part 1)
YFP Episode 16: Financial Planning Series Benefits of a Financial Planner (Part 2)
YFP Episode 17: Financial Planning Series Questions to Ask – Hiring a Planner (Part 3)
YFP Episode 62: The ‘Other’ Forgiveness
YFP Episode 18: Maximizing the Benefits of Public Service Loan Forgiveness
YFP Student Loan Course
Schedule a Tax Review
Student Loan Refinance Calculator
Have a question and want it featured on the show?

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to Episode 071 of the podcast. Excited to be alongside Tim Baker as we dive into an Ask Tim & Tim episode where we take a wide array of questions, 10 from the YFP community that were posed in the YFP Facebook group. So Tim Baker, how you doing?

Tim Baker: Doing well, how about you, Tim?

Tim Ulbrich: Good. So you’re back from Iceland. Welcome back. How was the trip?

Tim Baker: Oh, it was awesome. Yeah, it was great. You know, I feel like the last few weeks has been crazy, but it was good to get away. I think I literally didn’t touch my phone for about a week. So now I’m trying to get back into the swing of things, but Iceland is an interesting place to visit for sure.
Tim Ulbrich: It seems like I’ve noticed a lot of friends from college and coworkers are taking that trip, it seems like on the East Coast here. I know Cleveland has direct flights over to Iceland, I’m guessing something similar by you guys. Seems like a popular destination to begin to see that part of the world.

Tim Baker: Yeah, it’s funny because like prohibition ended like for beer, I think in like the late ‘90s — don’t quote me on that — which was interesting. But I think since then, the tourism has become the biggest staple in Iceland, moreso than fishing. But you have a combination of just like incredible scenery, like almost where you’re on a different planet. And of course, beer drinking and things like that. So yeah, it was great. It’s one of those vacations where you’re out in the country, but it’s somewhat affordable. It’s expensive when you get there in terms of like food and things. But oh man, it was great. Just good to get away and reset and, you know, I’m ready for the final quarter of the year.

Tim Ulbrich: Yeah, welcome back. We’re excited to jump into this episode. And we’re actually getting together end of this week in West Palm Beach, Florida, where Tim Church lives. We have a YFP retreat, so excited to be jumping into all things YFP. And actually, as a part of that time that we’re together — to our listeners, we’re going to be recording an episode that’s taking all questions related to investing. So if you’re listening to this episode and you have a question, all questions investing, shoot us an email at [email protected] or jump on the YFP Facebook group and pose your question and we’ll make sure to feature that on the upcoming episode where we do that Q&A session. Alright, so here’s the format. We’re going to go back and forth. We have 10 questions, great questions from the community. We’re going to read the question, we’re going to answer them between the two of us, and then we’ll jump in with some feedback that the community has provided as well. So Question 1, Tim Baker, comes from Nidhee (?), and he asks, “What are the pros and cons of a traditional 401k versus Roth? Currently, I’m trying to maximize my traditional 401k. Any suggestions would be helpful.” What do you think?

Tim Baker: Yeah, such a great question. And you’re starting to see more and more 401k’s offer a Roth component. So just kind of to break this down for listeners who are kind of a little murky about this, anytime you see “Roth” before 401k, 403b, IRA, you’re going to think after-tax. So the money that gets thrown into that account is after-tax. Now, if you see a traditional 401k, traditional IRA and traditional 403b, you’re going to think pre-tax. So the money goes into that bucket pre-tax. And typically, the opposite is true when the money comes out. So it goes in pre-tax, it usually grows tax-free, and then it comes out taxed. And then the opposite is true if it goes in after-tax, it grows tax-free, and it comes out tax-free in the after-tax world. So to get back to the question, I think the Roth component is actually a great component to the 401k because a lot of pharmacists because of their salary, they make too much to actually contribute directly to a Roth IRA. So when you sign up for your 401k or when you’re adjusting your 401k, you’re going to want to see if there is a Roth component and if that makes sense for your particular situation. In our last episode, we kind of talked about all the different levers to pull when it comes to, you know, should I pay the tax now? Should I defer the tax? What does that look like? And this is actually one that you can do. So a lot of people get confused by kind of the Roth 401k because it really, you can’t commingle those accounts. So it actually looks like you have two accounts when you’re funding this. So basically, you go in and you would see a balance for your traditional 401k. And if there’s a match, that’s where all your match dollars are going to go from your employer. But for your Roth, if you’re deciding to fund that, you know, those are basically funded with after-tax dollars. So you would go in and you would set up an allocation similar to your 401k, your traditional 401k. And essentially, the difference would be just if those dollars are taxed or not. So that’s essentially the basics there.

Tim Ulbrich: Tim, one of the questions I often get here — and I think it’s good just to clarify for our listeners because the term “Roth” gets confusing when they see it as a Roth 401k versus a Roth IRA. Does the Roth contribution towards a Roth 401k go towards or impact the total of the $5,500 that you can contribute in a Roth IRA? Or are those completely separate buckets?

Tim Baker: Yeah, to kind of draw the lines around the 401k and the IRA. So you as a participant in the 401k, you can put in $18,500 — these are 2018 numbers — per year in aggregate between a traditional 401k and a Roth 401k. In the same breath, you can also have a traditional IRA and a Roth IRA that you can put an aggregate $5,500 per year. So these are, they’re essentially separate systems. So if you put money into a Roth IRA, it doesn’t necessarily affect how much money you can put into a Roth 401k.

Tim Ulrich: Got it, thank you.

Tim Baker: So the next question for you, Tim, is a great question from the Facebook group. “My name is Steven. I recently joined the group, and I really enjoy all of your posts about business and financials. I am in my third year in pharmacy school and wanted to ask you this question. Knowing what you know now, what is something you wish you would have done or started in pharmacy school?” That’s a great question.

Tim Ulbrich: Yeah, great question, Steven. And first of all, kudos to you for being proactive as you’re in pharmacy school. I think so many in this community — and I think some even commented in the feed of the question that you posed saying, “Hey, I wish I would have been thinking about this sooner,” and I know that’s something, Tim, that I often think back of, wow, what would have happened if I would have actually dove into this topic, been a little bit more proactive instead of reactive where looked up, had a ton of debt and then tried to figure it out and felt the pain. And that was the beginning of trying to figure this out. And I think that gets to the point of my answer to Steven’s question. If I had to go back and do it all over again — and this is not a sexy answer — to me, it’s all about being educated, specifically probably around student loans for many of the students that are listening. You know, I think as I look back, I was trying to dabble in the Roth IRAs and learn some other things here or there. All the while, I had student loans that are accruing above $152,000 at 6.8% interest, I didn’t have really a solid emergency fund, and I was just doing things out of order because I didn’t have a good education and understanding of what it meant to have a solid financial base. And that even, to me, trickled into new practitioner life where I was getting ahead of myself in some areas around kids’ college saving and other things at the expense of having, again, a solid emergency fund, the right life insurance protection, making sure I had end-of-life planning documents, all the things that we’ve talked about before around having a solid financial plan. So Steven, the one thing I would do, which you’re obviously doing, is getting involved in this topic, being educated. And hopefully you can inspire your peers and your friends and your coworkers to do the same. The other thing that I would do — and I know a couple people had responded, and actually, we had a response from Steve, who is another fourth-year student. And one of the things he mentioned was definitely work in school. And I would advocate for that. And I know I had a lot of faculty members who would tell me, “Hey, don’t work in school. You’ve got to focus on your academics.” Of course you have to graduate, otherwise your degree and not having one is counterproductive. But many students who can balance these things — I’m not saying you need to work 30-40 hours a week. But obviously a little work experience is going to, you know, provide a little bit of a financial component. But probably more important, it’s going to set you up for career components, going to allow you to begin to form those connections in your network, and I think as I now see new practitioners coming into the workforce, I think it gives you those skills that you just aren’t going to get in school, right? Dealing with difficult customers and time management and coworkers and understanding all of the things beyond the books and what you’re learning in school. So Steve, if you haven’t yet too, make sure to take a look at the responses from your peers and some of the group because there was some great feedback around — you know, I really like what Vbar (?) had to say about “borrow only what you need for tuition and fees because these student loans are killers.” And we say this over and over again on the podcast that if you look at the average indebtedness of a pharmacy graduate, those numbers are often double what are the numbers for tuition and fees. And that’s because of the borrowing that’s happening for cost of living expenses. So do everything that you can, especially in the interest rate market we’re in for student loans, everything you can to minimize the costs you’re borrowing while in school.

Tim Baker: And I think just to piggyback on that, Tim, one of the things that I think I hear quite a bit is it’s almost like Monopoly money, you know, like the loans you’re taking out. So I think if you can, you know, in your mind, make it real. And I think the best way to do that is to, you know — I know that with the average debt load being $160,000, I know that a standard — that equates to a standard payment of like $1,800 and change. So if you have loans that are $320,000, then you’re looking at a $3,600 payment. So obviously listeners, if you’re P3, P4, you’re going to know more or less where you’re going to fall in that, so I think — like you said, if you can work — anything you can do to kind of make it more real. And I think once it becomes more real, then you’re more likely to actually be intentional, I think, with what you’re trying to do, whether it’s working or just being more frugal as a student. I think the sooner you do that, I think the better you will be as you enter into repayment.

Tim Ulbrich: Great advice. Great advice. Our third question comes from Rachel in the Facebook group, who says, “My husband and I just had our first child and want to start earning her interest on the monetary gifts we have received for her. Any advice and suggestions?” So Tim Baker, I’m guessing maybe there’s a question behind the question here around college savings for kids or just investing money long-term for a child. What are your thoughts? And what do you do with clients typically in this arena?

Tim Baker: Yeah, I think the question with the question would be like, well, what’s the goal? What are we thinking we want this money for? If we want something that’s a sure thing and we want to be able to access this when the child is growing up for whatever reason, then something like a high-yield savings account or a CD might be the best bet. If it’s more of a long-term goal and we don’t really have an education goal in mind, maybe it’s just sticking the money in an index fund. But more acutely, I think the 529 would probably be the best vehicle to put money into that these monetary gifts, even some of these 529s are getting pretty creative. Like I know the Maryland 529, you know, I can send out links to grandparents and aunts and uncles and say, “Hey, contribute to Olivia’s 529.” I think the big advantage there is you typically, most states will give some type of tax deduction. And even with the new tax code we talked about a little bit last episode, you know, the 529 can now be used for kind of secondary school, high school, middle school, that type of thing. So you can actually use it as a pass-through to get a state tax deduction. But then longer term, you can invest it similarly like you would your 401k, your IRA, where you’re putting money in there and as it accumulates over 15, 16, 17 years, it provides a return on the investment that you can apply towards your child’s education. So you know, there’s a lot of I guess different sides to the answer. And same thing with 401k’s and IRAs and things like that, not all of them are created equal. So you’re going to want to really pay attention to fees and the investments that are there for you. But obviously, your state is going to play a role in that. But those would be kind of the top things that I would rattle off in terms of advice and suggestions.

Tim Ulbrich: Yeah, just a couple things to add there, you know, especially knowing where we are in the year and coming up on the month of November, if Rachel, if her and her husband are thinking 529 — and I don’t know, I’m guessing this is every state in terms of the income tax deduction, I know here in Ohio I think the limit to that is $2,000. And so depending on the amount that they’re looking at doing, there may be a play there to divide some between the 2018 and some between the 2019 year rather than going above that $2,000. And I think you and Paul did an awesome job last week talking about that in the context of tax. The other thing I think about here, Rachel and to the broader community that’s listening — and Tim Baker, you helped I think Jess and I realize this, that not only the why of what the goal is, what you’re trying to do, what you’re trying to achieve, but I think for those of us that graduated with tons of student loan debt, we tend to probably be compensated a little bit too much on the other side when it comes to kids’ college because we want to avoid that, naturally, for our own kids, right? And so I’m not suggesting here that Rachel, you and your husband take your child’s money that was received for your child, but I am just bringing up the point that as you and your husband talk through this going into the future, making sure that college savings for children is done so in the appropriate context of your own financial plan. And I’ve seen a lot of new practitioners, myself included, who, again, to my point earlier, maybe don’t have those foundational items like the right insurance and emergency fund, etc. but are running off saving for kids’ college, and that’s 18+ years away. So again, just thinking about the priority and the order of things within a financial plan.

Tim Baker: Yeah. I’ve actually had some clients like stop at a certain amount of kids because their goal was to pay 100%. And I mean, obviously, it’s a personal choice. But there’s different ways you can go about funding education, it’s important to kind of talk with your partner and maybe a planner to kind of work through that. So great question by Rachel. So Tim, next question for you is — this is from Elise. “With the ever-changing pharmacy job market, I’m starting to think more about unconventional pharmacist jobs, i.e. not in hospital or retail. I think in school, we’re kind of programmed to believe that those are our only two choices, so it’s hard to even know where to begin looking for what else is out there. I’m wondering if anyone has experienced doing something other than hospital or retail that they really enjoy and is financially stable, offers good perks and benefits. Thanks.”

Tim Ulbrich: This is a great question, Elise. Thanks for taking the time to pose it. And I got fired up when I saw this question, Tim, because in my former day job at Neomed, I did a lot of career counseling, advising with our students. And I cannot tell you how often I heard from our own students, even as a P1 or a P2, even before they’ve really been getting along that path of looking for jobs, there tends to be this mindset that Elise is describing of, I’ve got one of two options, right? I’ve got retail community pharmacy, and I’ve got hospital pharmacy, which more often than not means residents to train.

Tim Baker: Right.

Tim Ulbrich: And really, if you look at the workforce data, the reason people think that is valid. If you look at the last workforce survey that was pushed, 45% of all pharmacists’ jobs are in the community pharmacy sector. Now, that can be obviously retail chains, CVS, Walgreens, etc. It could be independent pharmacies, but that’s almost half of the workforce. So that’s why I think you see — and depending on the school that graduates, you’ll see these numbers upwards of 50, 60, 70% depending on the region and the job that they have available. And then I know at Neomed, we saw 30-40% of our grads every year would go into residency training. So you put those two together, and that’s 80% or so of a graduating class. And so I think it’s easy for students and new practitioners to think these are my only two options. And for those listening that also have this question, please make sure to go check out the Facebook group and look at the answers because there’s some great examples out there that were highlighted of people that are doing different things. Somebody’s working for a hospice, pharmacy benefit manager on the side. People that are in pharmacy informatics. Nate Hedrick, who we’ve had featured on the show, the Real Estate RPH, during our September series on home buying, talks a little bit about his job working for a pharmacy benefit manager as a sales team clinical liaison. So very unique, niche position. And he actually I know did an in-patient hospital residency. So there’s many different paths and options, and I think the advice I would have to somebody asking this question is begin to find the mentorship and the people that are going to offer you this viewpoint, if you don’t feel like you can get it as a student at the college that you’re at. So are there new practitioners, are there people with an organizations, associations that you’re connected with that have these positions that are the “nontraditional” or unconventional positions that you can begin to form those relationships and networks and get them to help you along this process because the reality is we all know pharmacy’s a small world and we know that when it comes to these niche markets, it’s all about networking and building those relationships. So if you want to find something beyond the hospital, community pharmacy world, go find those practitioners who are out there. You know, you’ve talked before on this podcast, Tim, the 1,000 cups of coffee. You meet with people, have them introduce you to three more people, and keep going and going and going. And it may take 10 or 20 or 30 conversations, or it may take two, but doors will open over time. And you’ve just got to put the work and effort into doing that. The other thing I would just highlight, Elise, in response to your question, is if you haven’t done so already, check out the side hustle series that Tim Church has been doing on this podcast, episodes 069 and 063, also in episode 038, we had Alex Barker from the Happy PharmD on talking about his journey. He’s got some great context — or excuse me, he’s got some great information on the unconventional jobs that are out there. And then Tony Guerra, pharmacy leader and podcast host, we had him on in episode 053 as well, did a great job of talking about some of these other options. So Elise, thanks for your question. Alright Tim Baker, question 5 here comes from Lane inside the Facebook group. “What other banks do people use besides Ally? A Google search showed Northfield Bank offers higher APY.” And I think maybe we’ve brainwashed our audience unintentionally about Ally because you and I are Ally users, and we get giddy when we get the rate increase emails that come. I think they usually come on Friday afternoons.

Tim Baker: Yeah, and I think I missed the last one because when I was researching a bit for this question, I saw that Ally’s now at 1.9%, so I think I missed that last bump, which I’m pretty excited about.

Tim Ulbrich: So what — and maybe, so Lane is asking here what other banks do people use? But maybe there’s a better question here — not to hijack her question — is what should people be looking for when they’re choosing a bank specifically for more of that long-term savings, you know, emergency fund and whatnot.

Tim Baker: Yeah, so I think that having a bank set aside for kind of your long-time savings like emergency fund and storage account, which might be like a travel fund, a car maintenance, a home maintenance fund, I think what you’re really trying to find is something that there’s ease of use, there’s an app, there’s a website, that doesn’t charge fees, that you can move money in and out fairly easy. And for me, like when I started kind of recommending, I found that when I started working with clients, this was kind of a topic that came up over and over again. Where should I bank? And where should I put money? And again, it’s not something that most financial planners I think even think about because it’s very much investment-centric, and we’re not really thinking about budgeting and debt and things like that. But this was kind of a key question that came up over and over again, so when I did research on this topic awhile ago, those were some of the things that I was trying to figure out. OK, where is the best bank to park money and get a little bit of return and not be charged fees and all that kind of stuff. So I actually tested out Ally, Synchrony Bank, Capital One, and I think Barclays was the fourth one I looked at. And although Synchrony at the time was kind of providing a little bit more return, I just found that from a great experience across the board, Ally was far and away better in terms of opening accounts, moving money in and out of it, just the app, all that stuff. To me, I think Ally was head and shoulders, even I think above Capital One 360, which obviously is a huge bank. So again, I’m a big proponent of kind of keeping this type of banking kind of separate from your everyday kind of monthly expenses. So if you bank with BNC or Chase or something like that, I like kind of a separate entity that is going to park kind of your emergency fund and kind of those storage accounts for those particular goals. So that was just my experience in testing these out. And obviously, you know, it’s a little bit of an arms race because these companies are putting money into their apps and things like that. But at the same time, I think Ally — and even for me, I know, Tim, you and Jess are using Ally. And again, we don’t get any type of benefit from talking about Ally. I just think that they have a great solution.

Tim Ulbrich: You know, it’s funny how far we’ve come in this online banking. Do you remember when Ally came out and it was kind of like, really? Are we going to do banking online? I remember those days. And you know, great customer service and I think you can obviously find that with other banks as well, but I think looking at some of the components you mentioned is great advice.

Tim Baker: OK, so next question comes from Kara. “Home and auto insurance question. Is there any benefit to staying with the same company? We have had the same company forever, but I called MetLife to get quotes because I can get a corporate discount through my employer. For the same exact coverage, auto policies are almost half as much. Switch and save money?”

Tim Ulbrich: Yeah, this is a great question. And actually, I just went through this in the move of getting a re-quote on home and auto. And you know, obviously as Kara mentions, the number half as much, it’s hard to not say, switch. But I think you always have to consider this in the context of price versus the service that you receive. And obviously, there’s a point where you’re going to be able to save a significant amount of money. But don’t — I guess what I’m trying to say here is don’t nickel and dime policy coverage for a company that you’re happy working with that you have a quick connection if you need it and that is responsive, obviously, in the times that you need them to be responsive. And Nate Hedrick really highlighted this for me as I asked him for his input as I was shopping around on home and auto. And that was his advice back to me is, you know, look at the total cost of the policies. And if you’re talking about saving $20 or $30 and you have somebody that’s an email or a phone call away that you have a relationship with, you have to put value to that relationship. Now, obviously if you’re talking about a policy that’s half as much, unless it’s just atrocious customer service and you’re not going to be able to get that same coverage, then obviously there’s a point where switching makes sense to save some money. The other thing I always encourage people to do is make sure you look side-by-side, whether it’s a home or auto insurance policy, look side-by-side to see the coverage that you’re getting is the same because if your deductibles are changing or coverage isn’t as good, obviously that may explain the price difference. But if you loko side-by-side and say, “OK. All coverage is equal,” now you’ve got to really weigh this against what is the level of the relationships and the customer service and how much am I going to save on this? Kelsey also makes a good point. In responding to Kara, she says, “I think it depends on the company. Some will now give you money back after x amount of years you don’t have a claim. My sister is an insurance agent, and the company she had me switch to will give us back 25% of our payment if we have no claims for three years.” So obviously, that policy is built in a way that incentivizes that relationship over time. So different factors that you have to consider as you’re looking at these different companies. Alright, Tim Baker, question No. 7, Devin asks, “Hello everyone, I’m meeting with a financial advisor tomorrow, and I was wondering if there was anything I may forget to bring them that you all think would be helpful. I’m a recent graduate.” So recent graduate, going to meet with a financial advisor, what information should they be bringing? Or what questions should they be asking? What do you think?

Tim Baker: I think typically when I meet with a kind of a prospective client, I don’t have them bring anything except for questions. I know some people’s process is different. They might start kind of getting down to some of the details of kind of the work they would do and everything. But for me, I think it’s just a matter of like do I have a connection with this particular person? Do I see myself working with them for a long period of time? And in Devin’s case, it might not be a long period of time. It might be I’m just trying to get a few questions answered and then I’m going to move on. So that would be kind of the question that I would ask first is how would we interact? And how often? I think the big thing is — and again, I’m biased here — is are you fee-only? Are you a fiduciary? You know, how is your fee calculated and compensated? Can I clearly see what I’m paying you? And nine times out of 10, these will send financial advisors squirming. And I think if you see that, then it’s probably a good indication to kind of go in the other direction. You know, just a lot of financial advisors, they have minimums. So you have to have — it’s kind of like, hey, I can help you, but only if you have a quarter million dollars or something like that.

Tim Ulbrich: Right.

Tim Baker: Or I don’t have minimums, but typically when you don’t have minimums, typically that particular client is maybe ignored more so than someone who does a quarter million dollars. So I think there’s a variety of questions. I think some of my FAQs that I would give a person to ask their financial planner — and I think a big one is around like what are the conflicts of interest? Are you a fiduciary? Are you fee-only? And from my experience, the majority of financial advisors out there — and I can say this with confidence that the majority of financial advisors out there are not going to be keen on a lot of the issues that pharmacists deal with, and the big one being student loans. A lot of — one of the reasons that I decided to kind of move on from my last firm was because there wasn’t a whole lot of understanding or process around student loans, which obviously is a major pain point for pharmacists. So if Devin, if this is one of the big things that you’re going to talk with a financial planner about, ask good questions because I would suspect that a lot of people in our Facebook group, a lot of our listeners, know more about student loans than some of my counterparts, sad to say.

Tim Ulbrich: Mhm. Yeah and Devin, make sure to check out YourFinancialPharmacist.com/financial-planner if you haven’t yet done so. Again, YourFinancialPharmacist.com/financieal-planner. We built out an entire page really getting to the gist of your question. We have a free guide that answers a lot of what to look for in a financial planner. We have a list of questions that you can ask inside of that document. What are the qualifications you should be looking for, some of the things that Tim talked about there. And then also on that page, we have referenced episodes 015, 016 and 017, where Tim Baker and I talk through a lot of this as well. And on that page, for those that are interested, you can also schedule a free call with Tim Baker if you’re interested in learning more about working with a financial planner and the value that he can provide. Alright, Tim, I think we’ve got three more, right?

Tim Baker: Yeah, let’s do it. So this question is from Sabina. So the question is, “Has anyone repaid student loans through the federal government and utilized the income-based options such as PAYE or IBR, both of which list forgiveness after 20 years as an option. Any recommendations on that approach versus refinancing with private companies?”

Tim Ulbrich: Yeah, thank you, Sabina, for your question. And what really she’s asking here about is what we called in Episode 062 “the other forgiveness.” So we’ve talked a lot on the show about Public Student Loan Forgiveness, PSLF. In Episode 018, we talked about that. I think we’ve mentioned it probably in 15 other episodes, right?

Tim Baker: I think so, yeah.

Tim Ulbrich: And I’m glad we did because I posted in the group last night, there’s a lot of negative news coming out about PSLF, and I’m not going to get on the soapbox right now. News article that 99% of borrowers that applied for forgiveness didn’t get it. And while you and I think we both agree that the federal government and the loan servicers could do 1,000,000% better job than what they’ve done in terms of the PR or the press and all of this, if you really dig into the details of why people aren’t Public Student Loan Forgiveness, most of it if not all of it really isn’t a surprise. It’s either they haven’t consolidated to the right loans, they’re not in the right repayment options or they’re not working for a qualifying employer. So as I mentioned on that episode, dotting your i’s, crossing your t’s is critical. If you have questions, let us know. But what Sabina is asking is about the other forgiveness, non-PSLF forgiveness. So if you stay inside the federal student loan repayment system, and she mentioned two of the income-driven repayment plans, PAYE and IBR, after a certain period of time, 20 or 25 years, depending on the plan, there is an option for forgiveness. And the key here is you do not have to work for a qualifying employer, which is different than PSLF. However, the amount that’s forgiven is taxable, unlike PSLF, where it’s tax-free. So there’s some planning that has to be done with tax. All that we covered inside Episode 062. And so I’d reference our listeners to Episode 062, Sabina the same. And also, she’s asking about refinance. And I think the question here behind the question is what is the best repayment option for Sabina? And I know many of our listeners and followers have that question. Should I refinance? Should I stay in the standard 10-year repayment program? Should I choose one of the income-driven repayment plans? Should I go PSLF? Should I not? If I do refinance, is it five years? Seven years? Ten years? Fifteen years? And we talk a lot about choosing the best repayment option, and we’ve got a full course around that topic, specifically that I would point our listeners to as well. So Sabina, without being able to dig into the numbers, this really comes down to lots of different factors such as running the numbers on each of these options, what’s the math? What are your feelings towards having these loans around for 20+ years? What are other financial goals you’re trying to achieve? What’s your progress in those goals? And I think at the end of the day, what I’m trying to encourage you and our listeners to do is to lay out all of the options, refinance, no refinance, forgiveness, no forgiveness, PSLF, non-PSL Forgiveness — and then from there, look at all the numbers, consider some of the non-math factors, and you can move on and make that decision to ensure that you’ve got this big decision and you’ve made the best decision for your financial plan. Tim Baker, question No. 9 is from Blake, who asked, “My wife is a PA, and I’m a pharmacist. She’s eligible for PSLF, and I am not. She’s set up on an income-based repayment plan, but this will be the first year where we both have a full year of income when we go to file our taxes. We’re wondering if there is a best way to file taxes to keep her payments low to maximize the amount that’s forgiven. I didn’t know if we filed our taxes as married filing separate, would it be more beneficial than filing together?” What do you think?

Tim Baker: Yeah, it’s a great question. And it’s kind of similar to our last question. It’s kind of difficult to dig into without all of the nitty gritty details. But you know, I would say that I think that there are situations where with student loans and spousal income that married file it separately is the right way to go. And I actually have a few clients that are doing that. It also depends on what repayment plan you’re in. So if you’re in a REPAYE — and if you’re in PSLF, those are going to be the two that you are really going to want to look at is Revised Pay as You Earn and Pay as You Earn. One of them, REPAYE, it doesn’t matter how you file. It’s going to count both spousal income. Pay as You Earn, it does matter how you file, depending on if you do file married filing separately will only account for the one spousal income. So I think you have to actually sit down and maybe do a tax projection, so we talked about that last time. If you’re interested, YourFinancialPharmacist.com/tax, we’re doing tax projections right now. And maybe actually couple that with kind of a student loan consult, student loan analysis, just to see am I approaching this the most efficient way as possible. Now, it is a pain in the neck to file with your spouse to file separately for 10 years. That’s not fun. And for nine out of 10 scenarios, just strictly from a tax perspective, married filing separately offers few benefits. But if you look at it, and your benefit or your payment is hundreds of dollars a month or even equate to thousands of dollars per year, the tax benefit might not equate to that in terms of married filing jointly. So again, I think that your question, it does, Blake, it does have legs. And there are scenarios where it does make sense to actually not file jointly with your spouse, especially if you’re looking at PSLF. And it kind of just depends on some of the income and the underlying numbers with the loans themselves. Alright, Tim, last question here is question No. 10. This is from Joshua. So Joshua says, “I’m on course to pay off student loans in a relatively short period of time. I noticed that refinancing my federal loans to a private lender would decrease my interest rate, as expected. But because I’m set to pay off the loans in a small period of time, the amount saved in interest is relatively small for a pharmacist’s salary. Would it be wise to stick with the federal loans with the option of utilizing a graduated repayment option to keep my minimum payment low in case something unexpected happens that doesn’t get paid for by insurance, like having a baby, etc.?”

Tim Ulbrich: Yeah, this is a great question, Josh. And Tim Baker, I don’t know your thoughts on this, but I have a feeling we’re going to get more of this question as we see the interest rate market rise. You know, I think a year ago, we had our student loans that were hovering around, what, 6-7% fixed rate? And some of our listeners were getting refinance rates in the 3-4% and obviously some a little bit higher depending on your credit and all those types of factors, debt-to-income ratio, etc. But I think as we see the interest rate market rise, then obviously we’re going to see refinance offers become maybe still attractive but not as attractive. Would you agree with that?

Tim Baker: Yeah. Absolutely. I mean, the interest rates on here are a huge thing that’s hanging out there. I think it will always be competitive in the five-year or the seven-year, but if you’re doing like a 10-year and you’re at 6%, I think eventually that market will dry up.

Tim Ulbrich: Yeah, I mean, obviously when you’re talking about potentially refinancing $150,000-160,000 and you look at 1-2% interest rate change, that can be huge, you know.

Tim Baker: Yes.

Tim Ulbrich: And we’ve done the math before on some fairly conservative numbers, and we estimate that somebody who has the average indebtedness can definitely save around $25,000-30,000 in refinance, depending on your individual situation. So and I like the way Josh asked this question because I can tell he already did the math. And that was the first suggestion I would have for our listeners is go to YourFinancialPharmacist.com/refinance, shoutout to Tim Church, who worked hard to build out a refi calculator, so you can look exactly to see as you get quotes from different lenders exactly what is the difference? How much are you going to save? Is it worth it? And based on those savings, you can then make the decision — or projected savings — you can make the decision to switch or not. Now, I must clarify, any time we talk about refinance, you know, regardless of what the math says, if anybody’s pursuing loan forgiveness, obviously refinance should be off the table because once you refinance, you’re taking yourself out of the federal system into the private system. You’re then making yourself ineligible for a refinance — or for forgiveness, excuse me. So for those who are not pursuing forgiveness who are then doing the math on a refinance, now the question becomes what am I giving up by getting out of the federal system? And how much am I saving? And is it worth whatever I am giving up? And you’ve talked about before several times on this show that 10 years ago or so, there was some vast difference between the benefits of the federal program and the private system. And those really have gone away because as you’ve made the point, when you have such a lucrative market, those private companies have to be competitive against whatever the federal system is offering. And so I think as we now look at some of these major lenders that we have, obviously pumped on our page as well, SoFi and LendKey and Common Bond, etc., you know, they really are becoming apples to apples with the federal system, with of course the exception of the forgiveness clauses. Now, there’s a couple lenders that are still out there that do not offer a discharge on death and disability, so of course you need to look at that as a factor. And if you’re going to get a much better rate from them, you have to weigh that against the risk that you’re taking on there. But for me, it’s starting with doing the math, seeing what the savings are, and then making the decision as to whether or not you’re going to switch. And again, YourFinancialPharmacist.com/refinance, we’ll give you the information to get started. The other thing I want to add here, which is the second part of Josh’s question, is would I just be better off with a smaller minimum payment in an extended or graduated plan in case something unexpected comes up? Now, I think this goes all the way back to budgeting and financial planning and really trying to get a feel for what are you locking yourself into month-to-month. And the thing I would say here to Josh is don’t forget that you can refinance more than once. So if you’re looking at your monthly budget, and you’re saying, “Oh, I’d be really squeezed by a five-year refinance, but I feel really comfortable about a 10-year, and then I’ll reassess in 12 months or 18 months or whatever,” you can always refinance into a 10-year, and then you could reevaluate that into the future. Or you choose a lender that allows you just to make those extra payments, right? Which are all of the ones that we have listed on our website. So don’t feel like you’re locked out of that because of a refinance. You could choose a longer term period and then you could obviously make extra payments or you could reassess and re-refinance at a later point in time. Alright, Tim Baker, good stuff. This was fun to take on these 10 questions. I think we’ll be doing more of this. So again, as a reminder to our listeners, if you have a question that you would like featured on the show, shoot us an email at [email protected] or jump onto the YFP Facebook group if you’re not already there, join the 1,700 other pharmacy professionals, great conversation, great community, and certainly you ask a question, you’re going to get a lot of good feedback in addition to Tim and I — Tim, Tim and I jumping in as well. As we wrap up another episode of the podcast, I want to again take a moment to thank our sponsor of today’s show, CommonBond. CommonBond is a on a mission to provide a more transparent simple and affordable way to manage higher education expenses. There approach is no big secret…lower rates, simpler options and a world class experience…all built to support you throughout your student loan journey. Since its founding, CommonBond has funded over $2 billion in student loans and is the only student loan company to offer a true one-for-one social promise. So for every loan CommonBond funds, they also fund the education of a child in the developing world through its partnership with Pencils of Promise.Right now, as a member of the YFP community you can get $500 cash when you refinance through the link YourFinancialPharmacist.com/commonbond. Again, that’s YourFinancialPharmacist.com/commonbond. And one last thing if you could do us a favor, if you like what you heard on this week’s episode, please make sure to subscribe in iTunes or wherever you listen to your podcasts. Also, make sure to head on over to YourFinancialPharmacist.com, where you will find a wide array of resources designed specifically for you, the pharmacy professional, to help you on the path towards achieving financial freedom. Have a great rest of your week!

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YFP 062: The ‘Other’ Loan Forgiveness (Non-PSLF)

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On Episode 062 of the Your Financial Pharmacist Podcast, Tim Baker, owner of Script Financial and YFP Team Member, and Tim Church, YFP Team Member, talk about the ‘other’ forgiveness through the federal loan system. Many borrowers aren’t aware that this program exists, so Tim and Tim spend this episode shining a light on the details of the program and who should consider it.

Mentioned on the Show

YFP Student Loan Refinancing Resources
Script Financial
YFP Facebook Group
YFP Episode 018: Maximizing the Benefits of Public Service Loan Forgiveness
YFP Student Loan Course
YFP Blog: Defining and Calculating Discretionary Income for Student Loans
Set Up a Taxable or Brokerage Account

Episode Transcript

Tim Baker: What’s up, everybody? Welcome to Episode 062. I am here with my co-host, Tim Church. We are going to talk all about the ‘other’ loan forgiveness program. Tim, I’m excited to be here with you. What’s going on?

Tim Church: Hey, Tim. Glad to be be back on and excited to hear that you and Tim Ulbrich are going to be heading down to south Florida coming up in a couple months.
Tim Baker: Yeah, this will be our — so I think Tim and I just booked our flights. We’ll be down for our T3 conference to talk Your Financial Pharmacist business in West Palm Beach, Florida. I think it will be our first meeting there, so we’ll finally be able to meet Andrea, and you’ll be able to not travel for one of our meetings for once, right?

Tim Church: Exactly. And I’m not going to have to go into the snow, and you guys are going to have to bring beach attire. Get ready to go.

Tim Baker: That’s true. I can work on my base tan. Yeah, so today, Tim, we’re going to talk about — you know, we talk, obviously, student loans a lot on the podcast, but we’re going to talk a little bit more about the non-PSLF forgiveness program, which a lot of people don’t know is a thing. So you know, I’m interested to kind of talk with you and kind of we’re going to take a more casual approach, I think, and just talk about the program and some of the details behind it. But what are the — I guess for you, what do you think are some of the reasons why, you know, people or pharmacists come out, and they don’t, they’re not aware of I guess some of the strategies that are out there. Why do you think that is?

Tim Church: Well, I mean I think we’ve talked about it many times that not every school is going to put personal finance in their curriculum and make it a priority. And some schools, they have it as an elective. But really, the bare minimum that students have is as they come out and as they graduate is they have the exit loan counseling, which as I think we heard from many people that that’s just not enough. It’s just such a small amount of information that they get, and so it’s really hard to sort of cram everything in there that you need to know about your loans. And with so many repayment plans and structuring and different dates and eligibility, I mean, it can be very overwhelming to kind of understand and know first of all, your options, but then all the nuances within all of those options.

Tim Baker: Yeah, it’s funny. I had a meeting with a resident, so I work with some students and some residents, and we were talking about her loans. And I was asking her what her strategy was, and we’ll break down the difference between strategy and repayment plans and things like that. And you know, she was kind of in this deferral period. I was looking at kind of some of the questions that I was asking, I was like, man, we need to switch this up. And I asked her about like had she considered forgiveness or PSLF, and she didn’t even really know what PSLF was. And you know, I think sometimes when I look at our Facebook group, and I see some of the conversations there, there’s a lot of people out there that are kind of in-the-know with their student loans, and I think they understand the different strategies and the plans available to them. But I think that there are also some that don’t know. And for this particular case, we’re talking $200,000 in loans. It’s a big deal. So I think having all of the different strategies and repayment plans kind of in front of you is important, and really breaking those down is important because, you know, you can make decisions, you know, in residency or as a new practitioner that are going to affect really the next 10-20 years of your life. So I think it’s important to kind of talk through those. So let’s talk about that, Tim. When we’re talking a student loan strategy versus a repayment plan, what are we talking about here?

Tim Church: Yeah, that’s a great point. And I think so many people get these two things confused because repayment plans, really, they’re going to dictate your minimum payments over a designated term, and that really could be in the federal system, could be a refinance, but basically, you have a set plan that says how much you’re going to have to pay a month and at least over a minimum period of time. But when you’re talking about a strategy, you’re really looking at your comprehensive game plan on the most effective way how you’re going to tackle your loans. And really, for most people, it’s going to be, well, what’s the strategy or game plan that’s going to save me the most money? And really, that strategy could be executed using a number of different repayment plans, especially if someone is going to keep their loans in the federal system and pay them off that way or whether they’re pursuing one of those forgiveness programs. So one of the things that we’ve kind of talked about is when you kind of look at very broadly, if you’re looking at your student loans, what are those main strategies that you can kind of look at and analyze? And really, for a lot of people, they’re going to be looking at really three different broad strategies. So the first one — and we always talk about this because a lot of people are unfortunately not eligible, but it’s great if you have it, is tuition reimbursement programs. So a lot of those are through the federal government, through the Veterans Affairs, Indian Health Service, Public Health Service, National Institute of Health, so there’s great programs that exist, just unfortunately, there’s not a lot of people and not always everyone is eligible because that’s essentially free money that your employer is giving you or matching you. And then so to the next big, broad kind of strategy is non-forgiveness, so everything that’s outside of the forgiveness realm. That could be refinancing your loans through a private lender or it could be keeping your loans in the federal system and just paying them off through one of the repayment plans. And then besides that, really you have forgiveness, and that can even break down, and that’s where we were kind of going with the Public Service Loan Forgiveness or what we would call non-PSLF forgiveness or the ‘other’ forgiveness.

Tim Baker: So when we say the non-PSLF forgiveness — so I guess to break that down a little bit, you know — so let’s first talk about, why don’t we first talk about PSLF, and we’ll just kind of walk through that. So you know, typically, when I talk with clients, and I’m looking at their student loans, typically kind of the rhythm of this is that they have to work for a certain type of employer, like you mentioned. And typically, that is a 501c3 nonprofit. So if you don’t know if your company’s a nonprofit, there are different resources out there that you can check it out and see if they are. You have to have the right type of loans, so that’s typically the federal loans that we’re talking about. You have to be in the right type of repayment plan, which is typically one of the income-driven plans, so the ones you’ve heard of, which are IBR and ICR, and then the newer ones on the block are pay-as-you-earn and revised pay-as-you-earn. You have to make the right amount of repayments, so in the PSLF, it’s 10 years. Those have to be consecutive, you’re basically looking at 120 payments. And then you prove it, and you typically do that with your employment certification form. And then when you do that, you apply for forgiveness, and you receive tax-free forgiveness. So that’s kind of the way it works, and like I said, we’re not going to spend too much time on PSLF, but — I don’t know, Tim, should we kind of talk about some of the updates now in terms of that program? And then we can kind of shift to the non-PSLF forgiveness?

Tim Church: Yeah, I mean really, not much has changed. There’s still the questions that are on the table about the uncertainty on the longevity of the program — you know, will it be capped at a certain level? Will it still exist in the future? I’ve kind of been searching off-and-on on the Internet to see how many cases of people that have been actually received forgiveness, and really, I still only see just a few out there.

Tim Baker: Which is amazing. It’s amazing when you think about it because of the problem — whoever is running PR for like the PSLF or fed loan servicing really kind of needs to look in the mirror because it has such a bad reputation, but I know it’s happening. We don’t know, but when we were making this student loan course, I called fed loan servicing just to kind of get an inside opinion of where PSLF is going, and you know — to kind of give a little bit more background on what PSLF is, it was put in place when George W. was in office and then basically, both administrations then, both Obama and the current administration under Trump either talked about capping it or eliminating it completely. So there is some risk to that. I think what is comforting in some regards is in March, which is probably the most recent news when it comes to the forgiveness program is that the Congress has allocated $350 million for those that were seeking forgiveness that didn’t quite line up everything for them to be in forgiveness. And actually, I just read an article from Forbes, who this lady was, I think she was like eight years into forgiveness, but she had FFEL loans, and FFEL loans, unfortunately, are not eligible for forgiveness. You have to actually consolidate those first, so — and I actually have a client that’s kind of going through the same thing. She was halfway through forgiveness, and not all of her loans were in the right type of loan, so she essentially has two different clocks, one that was in the correct type of loans, and one that wasn’t. So the point being is that Congress, the government, has allocated some funds for those, mistake cases that in all intents and purposes, they should be forgiven. So there’s that. Now, to shift gears here and kind of talk about the non-PSLF forgiveness. So if we kind of use the same type of rhythm in talking through non-PSLF is don’t — in terms of the right type of employer, it doesn’t matter who you work for. You could work for the circus and still receive non-PSLF forgiveness. So it doesn’t matter if your employer is a nonprofit or not.

Tim Church: Are there pharmacists in the circus, Tim? I wasn’t sure. Is that some of your clients that are in there?

Tim Baker: I think some of them either they feel like they’re working in the circus or they want to work in the circus.

Tim Church: Oh, OK.

Tim Baker: So sometimes, that’s the case. But let’s say we’ll keep it positive here, so it doesn’t matter who the employer is. They still need to be in the right kind of loan, so this is your federal direct loan. So again, no private loans can be forgiven here. They still have to be in the right type of repayment plan, so that’s one of the four income-driven plans. And they have to make the right amount of payments. Now, this is typically over 20 or 25 years instead of the 120, so this is the 240 payments over 20 years or 300 over 25 years, depending on what type of repayment plan. You don’t really have to prove it, you still have to re-certify your income every year, which is going to basically change your repayment, and then you apply and you receive forgiveness. Now, what’s left out of there that you heard me say with PSLF is that with PSLF forgiveness, it’s tax-free forgiveness. In the non-PSLF program, it’s taxable forgiveness, so what does that — Tim, what does that mean when I say taxable forgiveness?

Tim Church: So essentially, any amount of money that you have left at the end, any balance remaining on your loans at the time of forgiveness, the IRS basically treats that as income. So whatever you make 20 and 25 years down the road, your income from the previous year plus whatever amount is going to be forgiven will be tacked on as income. So essentially, you would be responsible for paying any of the taxes for that. And I think we’re going to break that down in a little bit more detail later on in the episode. But I want to kind of shift back to what you were talking about in terms of the years, in terms of the repayment period. So you’re kind of talking about you’ve got to have direct loans, you have to be in an income-driven payment plan, and actually, you can also be in a standard repayment plan actually counts, which doesn’t really make much sense. If you were in the standard repayment plan, you’re on track to pay it off in 10 years. But in case you started out in the standard plan, you could have made payments and then shifted over. But those would still count if you shift later, at a later point down into an income-driven plan. But when you looked at the different income-driven repayment plans, that’s where the timeline is a little bit different. So if you look at the revised pay-as-you-earn or re-PAYE, really it comes down to whether your loans are all undergrad or whether they’re going to be professional. So we’re talking for pharmacists, most of those are going to be for professional study, most likely. So if you have any loans that are for a graduate or professional degree, that timeline is going to be 25 years. So basically, you have to make those 300 payments over that timeframe in order for those to count. Now, and contrast that with the pay-as-you-earn or PAYE, that’s going to be a 20-year period. So the same thing will be true if you’re in the new IBR, or income-based repayment plan, it will also be 20 years — so if you’re a new borrower on or after July 1, 2014. And then for the old IBR, or the ICR, income-contingent plan, that’s going to be a 25-year repayment period.

Tim Baker: Who ultimately should consider this strategy when we’re viewing their student loans? Because like, you know, I hear a lot of, you know, I hear a lot of kind of chatter of, you know, looking at, you know, extended or extended graduated repayment plans that are out there, and which way to go in terms of, you know, if you’re not eligible for the PSLF program. So who ultimately should look at this program?

Tim Church: It’s a great question. And I mean, even just to kind of take a step back and think about it, like who wants to be in debt for 20-25 years? That’s a long period of time when you think about it. But I think there are some cases where it’s definitely something that you have to consider. There’s no perfect example of this, but I think the people that we’ve talked about quite a bit in the course and going through that is if you have a very huge debt-to-income ratio, so we’re talking at least 2-to-1. So for example, your income is $120,000, but you have student loans of $240,000 or more, then maybe this is something that’s on the table. And I think the reason that it becomes something that’s on the table is that if you start to look at the 10-year repayment for somebody with just massive student loan debt, I mean, that can be a huge chunk of your income every month, I mean, just to be able to make that payment. And then not only that, when you look at your other obligations, if you have other debt besides student loans or you live in a high-cost area, you know, that could be something that’s very difficult to do to even make that. And then you could say, well, what about refinancing to an extended period as well? And depending on how big the loan is, I mean, that can also be pretty difficult to pay. And again, if you’re extending that out for 20-some years, well, if you can get part of the forgiveness benefit, then you have to sort of look at that as being a potential option.

Tim Baker: Yeah, so whenever we talk about student loans, I always hearken back to the student loan course because I think one of the best things about the course is the decision table. So you basically, you look at your standard, the best repayment plan for non-forgiveness and non-PSLF forgiveness and PSLF forgiveness. And obviously, if one of them isn’t on the table, the PSLF, you cross that off. But it shows you very deliberately, you know, how long you’re going to — what the term of the loan is and what your total payment estimate would be after that. And the math, you know, the math typically doesn’t support any of the extended standard repayment plans. You’re either going to be looking at a standard plan or, depending on your strategy, looking at one of the two newer income-driven plans. And you know, the borrowers that have that larger debt-to-income ratios, anything that, like you said, Tim, is above 2-to-1, this would be something to consider. But the other thing that you have to really worry about is that tax bomb that comes at the end of that 20 or likely 25 years. So you know, if you have $100,000, which in some scenarios, that will definitely project out, that means that $100,000 that’s forgiven will be taxed. And if your taxed at a 25% income tax rate, then that’s a $25,000 tax bill, which is a little bit of a kick in the pants, you know, considering that you just were in debt for 20-25 years, and now you’re paying a large tax bill again. So I mean, there are different strategies to save for that, but you know, this is really a case where, again, if you’re in that. But I think one of the things that I think we’ve talked about amongst the Tims is at what point do we really — and maybe some pharmacists are at this because they understand the math behind it, but at what point do we view kind of that nonprofit status for the employer as almost part of your overall benefit packet. So like as an example, if I’m a new pharmacist and say I’m carrying $200,000 worth of debt, and I have a job for a nonprofit that pays me $100,000, and I have a job at a for-profit that pays me $120,000, I don’t think that we can look at that as well, this one place is going to pay me $20,000 more. I think that we really need to be a little bit more reflective and say, OK, if I look at this in totality and I look at the fact that, you know, you can’t argue with the math — I know I said this before — you can’t argue with math. And I know Tim Church, like we did this with your loans in retrospect. You can’t argue with the math of the PSLF. So if you are a believer, kind of like I am, that PSLF does have a little, that the program has legs, I think we really need to consider that as part of it. Like I did a student loan analysis for an individual, she’s actually a lawyer, so a non-pharmacist, and she walked out of the meeting saying, you know, I need to get back. She was in a nonprofit sector as a lawyer. She’s like, I need to get back to that because there’s no way that I want this hanging over my head for 20 or 25 years, and I don’t want to pay the I think it was $80,000 — or not $80,000, maybe like a $50,000 tax bill. I don’t know, Tim, what are your thoughts on that?

Tim Church: Yeah, I think you’re absolutely right that you have to consider that. And I think that a lot of times, people don’t. They’re looking at just standard salary, standard benefits and kind of what they’re looking to do. But as you’re going through that job search and how you’re going, I mean, that certainly is part of it. I mean, are you going to be working for a 501c3 or government entity? And is this something that could potentially change the course of how you pay your loans off? I mean, it’s a big deal because we’re talking over a long period of time, but also you have to look at that opportunity cost. So if you don’t pursue the PSLF or don’t go after it, then you’re losing that opportunity to potentially put a lot of your money towards retirement and other things. And I think that’s actually one of the things I wanted to go back to is that somebody that has a very high debt-to-income ratio and is coming out and just could feel extremely overwhelmed and they’re thinking, how do I even make these student loan payments? How am I even going to make those? Even if I refinance, maybe it’s going to be a huge chunk of my monthly income and even if I did that, how am I going to start retirement account? How am I ever going to get a house? How am I going to fund my children’s, my kids’ education? So I think like when you look at those, put that on the table that it can be very, very overwhelming. But if you’re sort of in one of these programs, in the program of non-PSLF, and you say, I can make income-based repayments, then I think that’s actually important to talk about as well. So how are those income-based repayments, how are those calculated? And I recently just put out a post on the website on how to define and how to calculate it because it has a very specific definition when you’re talking about these income-driven repayment plans. But most of the plans, so if we’re talking about re-PAYE, PAYE or the new income-based repayment, it’s going to be 10% of your discretionary income. Well how is discretionary income calculated? Well, that’s going to be based on your adjusted gross income, and that’s going to be — you’re going to subtract that from the poverty guideline. So those come out every year and change based on inflation and are relatively — they’re the same for all states except Alaska and Hawaii.

Tim Baker: All the Lower 48.

Tim Church: Exactly. And then your spouse’s income is only counted if you file jointly in most of the plans and in re-PAYE, it’s regardless of how you file your taxes. But when you look at that, when you break that down, you know, those payments can No. 1, they can be more manageable, but just like we’ve talked about with PSLF that funding retirement accounts and things like that, you can actually lower your payments that you’re making towards the loans by taking advantage of some of the tax benefits that are available.

Tim Baker: Yeah, so essentially, what you’re saying is that there are a few ways, a few levers to pull to lower your AGI, your adjusted gross income, and what you’re essentially doing is you’re deferring money into things like a 401k or a 403b or an HSA or a traditional IRA that allows you to kind of pay your future self but also lower the AGI, which will lower your payment and then hence, maximize your forgiveness.

Tim Church: Yeah.

Tim Baker: Go ahead, Tim.

Tim Church: No, and I was going to say too, now, some people may be listening to that and say, Well, if I’m lowering my payments towards my loans, won’t I be having a higher tax bill at the end of the forgiveness period, so whether that’s 20-25 years, and part of that is true. The balance may be a little bit higher, but I think the other thing to keep in mind is, you know, we talked — what did you mention? A $25,000 additional tax liability, could be something greater, but you also have to think that wherever that money is going to be in 20-25 years, is really going to be eroded. So it’s kind of hard to think about, I think, in today’s value because 20-25 years, you know, if you have to cover an extra $25,000 of income taxes, that may not be as — that’s really not going to be as substantial as what it would be today.

Tim Baker: So this might be a good part to bring up, we had a question on the podcast, Melissa from Salsbury, right down the street for me, asked, “You quoted on one podcast that after x number of payments, that one might qualify for non-PSLF. I’ve been paying on-time and extra for 16 years, didn’t know if I might qualify or soon qualify.” She talked about what she — looked like she had some proceeds that she could use, that could apply extra towards paying off the loan. So Melissa, thanks for asking the question on the Facebook group. I would say that if you qualify for non-PSLF, so you’ve been paying for 16 years, it’s really going to depend if you are in direct loans, so if you have Stafford or FFEL loans, those might not have qualified. So essentially what I would do is, you know, just look at your loans and see how long you’ve actually been paying. Those 16 years, are they all for direct loans? And you could be very well close to a forgiveness where you can actually apply and seek forgiveness, but it’s going to depend on really what kind of loans you’re in and what repayment plan. Typically, you’re probably in an income-driven plan. I think the second part of this is if you’re seeking a forgiveness — and this is kind of where we talk about you’re either forgiveness or you’re not. If you’re in a forgiveness strategy, whether it’s a PSLF play or a non-PSLF forgiveness play, you never want to throw extra money at the loan because essentially, you’re almost flying in the face of your strategy. So if you’re a Tim Church, and you’re being super aggressive on paying off the loans, he wants to plow as much money toward that loan as humanly possible because he’s not seeking any type of forgiveness or anything of that nature. If you’re on the other side of the fence where you’re trying to pay the least amount towards the loan, you want to basically maximize your forgiveness. So you wouldn’t apply any extra savings or money to the loan. So in your case, unless you find out that you are not on track to be forgiven for that non-PSLF time period, you would take that $25,000 and apply it elsewhere, whether it’s, you know, to plus up your emergency fund or apply that towards retirement savings or something like that. So I wanted to call that out, it’s really going to depend on your situation. So hopefully that answers your questions, but thanks for asking it. So what else, Tim Church? What else should we cover with regard to the non-PSLF forgiveness play.

Tim Church: Well, I honestly think if you’re really considering this option, I mean, one of the things I probably — if I were someone that was saying, this may be an option for me, a good play, I would really seek the help of an accountant. And the reason I say that is because No. 1, you have to think about the tax implications later on down the road. But you also have to think about what repayment strategy you should be in. And the reason that comes into play is we talked about that whether you have a spouse is going to depend on what kind of payments you’re going to make based upon that strategy and how you file your taxes. So really, it comes down to the repayment plan but also how you file your taxes and then preparing for that. So there’s a lot of different factors that go into the calculations, so I think having someone really go through and crunch the numbers and make sure that you’re on the right path that’s best for you, I think is really, really important. And then I think the other thing talking about is, OK, you’ve kind of said, OK, I’m comfortable with that tax bill coming up in 20-25 years. Well, how do you actually prepare for that? And you know, we’ve kind of talked about — you and I have before, that really, you know, there’s a couple different ways to go about it. One is you could just put money in a savings account and just have enough money for when it’s time to pay that extra taxes. But you know, why is that not a good idea, Tim?

Tim Baker: Typically, it’s not a good idea because you have such a long runway that, you know, if you — even right now, a lot of the better savings accounts out there are paying — they’re paying decent, you know, 1.5-2% interest, which is the highest it’s been in a long time. If you kind of believe in my philosophy, which is over long periods of time, the stock market will take care of you. And this is like 10+ years, so this would be 20-25 years. If you believe that over long periods of time, the stock market will take care of you, then you really should be investing your money there because you’re not going to touch it. Same thing with, you know, a lot of younger professionals with their retirement funds, you’re not going to touch it for a long, long time, so the market could go up and down and left and right, and so in a similar example, if you’re looking to build wealth for the potential tax bill that’s out there, I think some type of low-cost index fund is most appropriate to, you know, pay off the minimum amount of your student debt and then to put, you know, we’ve got to calculate it out, but to put a sum per month that you’re just buying into the market and letting it do its thing over time.

Tim Church: And so that should really be a separate account versus the retirement. You know, we were talking about —

Tim Baker: Exactly.

Tim Church: You can lower your AGI, and you definitely want to be saving for retirement over a 20-25 year period. But that’s probably not the best way to save for the tax implications because you could have penalties and other implications, and so really, you kind of have a separate type of investment account that you’re really designating for the tax bill. And one of the other things that I have actually heard come up in some political discussions is that that tax bill, there’s a potential that they could even eliminate that at some point. Now, obviously, that would be a good thing if you were saving and preparing for it all those times and then all of a sudden, the government said, ‘Hey, you know what, you actually don’t have to pay the extra taxes.’ I mean, that could be a great thing. But along the way, you’re doing the savings anyway.

Tim Baker: Yeah, and actually, you know, if listeners are interested in opening up that type of taxable or brokerage account, we actually put a link, you can open one up at Script Financial and fund it within like 15 minutes. So we can do that. But essentially, those types of accounts are, they’re not retirement — most retirement accounts if you take them out before 59.5, you have a penalty. This is essentially, you know, it’s like a savings account, but you can actually invest it. And that’s the idea. To kind of talk about that, yeah, there is some conversation about allowing all forgiveness to be tax-free, not just the Public Service Loan Forgiveness. And I think that could be an option. That definitely could be an option. I think to kind of circle back on the longevity of the program, I think it’s — it is a very political thing. I think it’s easier to eliminate the non-PSLF program, which is what we’re talking about today. I think it’s easier politically to do that, so I think if you start seeing things, forgiveness programs kind of be chopped, I think the non-PSLF would go first before the PSLF. So yeah, so I think — could they do that, where it’s, you know, it is tax free forgiveness? Yeah, they could. But then they could also say, ‘We’re going to keep PSLF, but we’re going to completely eliminate the non-PSLF,’ because you know, from a political standpoint, you know, it’s hard to say, ‘Hey, I’m a teacher or I’m a doctor, I’ve been paying into this program for eight years, and now you’re going to pull the carpet out,’ versus whatever profession. So that’s just kind of my thought is there’s a lot of ways this could go. Again, if you are uncomfortable with having the debt hang over for 20-25 years, or you’re really uneasy about the longevity of either the PSLF or the non-PSLF, you know, this wouldn’t be something that you would necessarily want to pursue. But I think again, the situation, you know, math-wise, especially if you have a higher debt-to-income, it’s going to be one thing you should at least consider to look at.

Tim Church: Alright so Tim, good work. I think we covered a lot on the non-PSLF forgiveness program. So just to kind of recap what we talked about here, so typically, this particular program is really for individuals or borrowers that they don’t have access to the PSLF program, typically this would be for someone that has a higher debt-to-income ratio, but the things that are similar across the board here is that in the non-PSLF, it doesn’t really matter who you work for. You want to make sure that you are in direct loans, those federal direct loans, that you’re making your 20-25 years worth of payment, most likely with PharmD’s, it’s going to be 25 years worth of payments in the re-PAYE, and that you are kind of certifying your income every year. And then at the end of it, you apply for forgiveness, and you receive taxable forgiveness. You have to worry about that tax bomb. So ultimately, lots of risks that play into this particular forgiveness program, but I think given those particular set of borrowers, it does make sense to at least consider. So Tim, good to have you on this episode as co-host and looking forward to next time.

Tim Baker: Thanks, Tim.

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YFP 060: One New Practitioner’s Lessons Learned Accruing $224,000 of Debt in 7 Years

Posted on by yfpadmin

On Episode 60 of Your Financial Pharmacist Podcast, Tim Ulbrich, Founder of Your Financial Pharmacist, interviews Brianne Porter, a new practitioner and faculty member at The Ohio State University College of Pharmacy, all about her journey of going into more than $220,000 of student loan debt, the plan she has put together to pay off this debt and the lessons she has learned along the way.

About Today’s Guest

Brianne Porter, PharmD, MS is Assistant Professor of Pharmacy Practice at The Ohio State University College of Pharmacy. She is primarily responsible for co-coordinating and teaching in Integrated Pharmacotherapy 1 and 2. Her research interests include community practice advancement and the scholarship of teaching and learning. In addition to her position with the college, she moonlights with a local independent pharmacy to bring those skills and experiences to the classroom. Brianne is actively engaged in APhA, serving as the Chair of the NPN Education Standing Committee, AACP, and OPA. She is passionate about community pharmacy practice and about getting students excited about and prepared for upcoming changes in community pharmacy practice.

Mentioned on the Show

YFP Student Loan Course
YFP Facebook Group
Seven Figure Pharmacist by Tim Ulbrich, PharmD and Tim Church, PharmD

Episode Transcript

Tim Ulbrich: So Brianne, welcome to the show. Thank you so much for joining me.

Brianne Porter: Thanks for having me, Tim.

Tim Ulbrich: So excited for this recording, and I’m pumped up about your journey, and as I mentioned to you before we jumped onto the recording, we’ve done several debt-free episodes, but I think what I’m really excited about is your willingness to share your story as you’re really in the thick, in the weeds of this journey of paying off student loan debt. And you and I had a chance to meet all the way back — I think it was actually at AACP we met for the first time. Is that correct?

Brianne Porter: Yeah. It’s been a couple years.

Tim Ulbrich: Yeah. So at the time, you were just starting your fellowship — and we’ll talk a little bit more about your career journey and so forth — but your fellowship at Ohio State along with your Master’s degree. And at the time, I didn’t know anything about your financial journey. So I’ve learned more along the way, I know you’ve attended a couple presentations we’ve done, we’ve talked a little bit about student loan repayment strategies and options, and what I know from your story is that you obviously had a moment of conviction, an “Aha!” moment where you said, ‘There’s got to be a better way to do this.’ And I don’t know where that “Aha!” moment came from, but I’m excited to learn that on the recording and this episode today. So before we jump in to the details of your story, I first want to say thank you for your willingness to come on the show, for your willingness to be vulnerable with our listeners, and I’m confident that your story is going to inspire action from others in the community. So in advance, thank you for that.

Brianne Porter: Sure.

Tim Ulbrich: OK, so let’s jump all the way back — if I have my facts correct — all the way back, you graduated from pharmacy school at The Ohio State University in 2014. And it’s my understanding at that point, you had no student loan debt prior to starting pharmacy school. So you graduated in 2014, but prior to starting pharmacy school, you had no student loan debt. Is that correct?

Brianne Porter: Yeah, that’s correct.

Tim Ulbrich: So how did you manage to get through undergrad debt-free? Tell us a little bit about that story.

Brianne Porter: Yeah, so I was really fortunate. I actually went to undergrad at Ohio University in Athens. And I was really fortunate to get a scholarship that not only paid full tuition for four years, but it also covered my living expenses, I got a stipend in the summer to do some experiences, go travel and do some different things, and so really, when I was an undergraduate, during my undergraduate studies, all I really had to worry about was spending money. I had a job, and I made money, and I had spending money. But really, I didn’t have to think about what college cost or anything like that. I was really living a pretty good life at that point. I was very fortunate.

Tim Ulbrich: So you’re crushing it through undergrad, you’ve got scholarships, you have no student loan debt, so I guess one of the upsides of this story is it could be worse, right, if you had undergraduate student loan debt that was accumulating. So fast forward then, you graduate with your PharmD in 2014, tell us a little bit about your total debt load at the point of graduation. And then take us through your decision, your journey, in the postgraduate training and fellowship and ultimately why you decided to defer your loans through that period.

Brianne Porter: Sure. So I feel like this is the reason I reached out to you, Tim, is because as I’m looking back on this time and thinking about decisions I was making, I’m thinking, oh my gosh, how many people probably are making those same decisions. Like, please, let me help stop you from doing this. But yeah, basically, whenever I started pharmacy school, I’m going to go back even a little further because I think this part’s kind of important for the students listening. But when I started pharmacy school, because I had that experience in undergrad, I don’t think that I was very intentional. And I know we’ve talked about intentionality before, but I was not intentional at all about thinking about how much money I needed. I’d had four years paid for, and I think because I didn’t have any responsibility for my undergraduate education that I wasn’t really thinking about what it actually cost to go to college. And I had the same mindset that everyone has, which is that I’m going to graduate, I’m going to be making $100,000+ a year, I’ll be able to pay those off in no time, it’s no big deal. So every semester, whenever I did my applications for the student loans, I would just get like an offer. Like, ‘You’ve been offered this much. Accept all, or enter a different amount.’ And I think that if one slight change would have just been instead of offering me the max amount, they would have just had a blank and said, ‘How much do you need?’ I probably would have been more intentional, right? But you know, being a student and being fairly irresponsible at the time, I basically just rationalized in my own mind, well, I know what tuition is, and I know that I need to cover living expenses, and this is the first time I’ve lived alone. I live in a city, I’ve always lived in small towns, so instead of really thinking through or trying to estimate those costs, I just thought, you know what, I’m going to need it. Pharmacy school’s going to be stressful enough as it is, I’m just going to take the max amount. I’ll be able to pay it back, no problem. So I went through that, and even through school, I mean, I worked all through school. And I, again, used that money for maybe joining organizations or spending money or whatever else I needed. I mean, I had a car break down at one point. So like, it was kind of like an emergency fund, so to speak, as a student. And I think that even throughout those four years, it never really dawned on me like what this payment would look like whenever it came in, even that $160,000, which is what I graduated with. But even thinking about that total number, it never dawned on me like, how much money is that actually going to be out of my paycheck? And how hard would I work for that paycheck, you know? I felt very comfortable with that, oddly enough. But I had $160,000 of debt, and I was very comfortable with that.

Tim Ulbrich: Mmhmm.

Brianne Porter: But then I decided very last minute, I made a rash decision to apply for residency. And I was very lucky I matched, but at that point, I hadn’t really thought through the financial aspect of that. So when I was finishing pharmacy school, I had already accepted a job with Target, and I was going to be making about $120,000 at the time a year. And so even with that $160,000, I was like, well, I’m going to make $120,000. I’ll pay it off in a few years, no problem. Which is a funny joke now. But then whenever I matched for residency, I thought, oh my gosh, I’m going to be making like a third of what I was going to be making, what I was planning to make, so now I’m going to have more expenses with travel to conferences and different things. What am I going to do? And just a side note — I think it’s kind of funny how as a resident, we think we’re so poor. I think because we compare to what the pharmacists make, but if you think about it, people raise their families on significantly less than what we make as a resident. So I wish that I would have that moment of realization back then to know that, yes, you can very easily live on this much money. And yes, you can very easily make payments on your loans with this much money. But again, I think I was really good at talking myself into deferring or talking myself into I need more money because I just didn’t have that appreciation for my undergrad. So fast forward three years, I completed a PGY1 and then a two-year fellowship and a Master’s. And luckily, the Master’s was included in the fellowship, so I really did only have one degree to pay for, which is kind of sad that I landed at $224,000 with just one degree out of three that I have. But regardless, I finished my postgraduate training in 2017 and then suddenly, I got the final statement of $224,000. And that was a little more sobering, I think. That was a lot of money.

Tim Ulbrich: And I think that speaks to, you know, a few things that really stand out to me that I hope current students pick up on. I think your initial description of the process in which you borrow money — it’s very easy, almost like it begs you to take all that you need, right? And for cost of living and other things. And I think really taking a step back and saying, to your point, if this were a blank slate, and I really did my budget and did the math, what would I actually need and how can I minimize as much as possible what I’m borrowing because at the end of the day, an unsubsidized loan — as obviously you have experienced firsthand — an unsubsidized loan, that interest is accruing all the while that you’re in school. And so the other big takeaway for me is if there’s current residents, new practitioners listening — and I know certainly you’re not alone in this, Brianne — is deferment is real in terms of the impact it can have. And for you, obviously that went from $160,000 to $224,000 because of three years of deferment. And one of the things I always encourage resident or new graduates to think about is that even if you’re unsure about exactly how things are going to shake out, if you opt in to an income-driven repayment plan, because of how they’re calculating your monthly payment looking back at the previous year tax return, you’re going to have a very, very low — likely have a very, very low monthly payment. And so better than deferring, you can go into active repayment, and then obviously, you can start to pay it from there and get ahead of the interest over time. So thank you for sharing that. So you started with $160,000 from your pharmacy degree, you end up with $224,000. And I think my follow-up question to that is, as a new practitioner with life coming at you in many different angles and priorities, things that you want to do and accomplish, how does $224,000 of student loan debt, how does that practically hinder you as a new graduate? What impact has that had on you?

Brianne Porter: Yeah. It has been — I’m not going to lie to you. It’s been pretty awful, actually. And not to say that I don’t have a lot of good things in life, I definitely have much to be grateful for. But I had no idea how much this was going to really impact not just how I felt but other people in my life, how it was going to impact the decisions that I got to make, the things I got to do with my free time. So you know, for example, because of some other poor decisions, I also had some credit card debt, and so my credit score isn’t fantastic. And then I got married, and we wanted to buy a house. And we were able to buy the house. My husband, luckily, he had his undergraduate paid for as well and went straight into a job and was saving for several years. So he was very financially stable, actually, which was very lucky for me. So we were able to get a house, but it’s like, now we have the house, we have things that happen with the house, you have to repair an AC unit or a furnace or whatever the case may be. Or you have to get new windows, and these things come up. And because of my student loan debt and my monthly payment, we’re so strapped that it’s like, we can barely pay the bills that we have. We have a little to go into our emergency fund for those sort of things with the house or other things that might come up. But we do not go on vacations, we do not spend a lot of money on anything expensive. I mean, I can’t tell you the last time I went shopping for fun. I mean, I guess probably if you’re financially responsible, you’re really not just going shopping without a budget anyway, but I just have felt very strapped, quite the opposite of what I thought in pharmacy school and residency, to be honest. And it’s a real bummer.

Tim Ulbrich: And I think what you’re describing is what Jess and I felt, what I hear from so many other graduates is this feeling of, you know, I had one thing in mind of what this income would provide in terms of, you know, the feelings of that income. And then all of a sudden, it’s like, wow, I really feel like I’m living paycheck-to-paycheck despite this income. How is this happening? And obviously, as we’ve talked about many times before on this podcast, big student loan payments, other big purchases, a home, other priorities, quickly will evaporate the income that you have in any given month. So what I really want to find out from you is I know in our conversations before — which by the way, I’m very much looking forward to becoming a coworker of yours soon at The Ohio State University — so I’m pumped up to be working with you, but I know as we’ve talked before in different venues and settings is that I can tell you have an energy and a passion and a motivation to get after this whole topic of personal finance. And obviously, through you journey, I think it’s fair to say that you kind of wandered into this and really maybe didn’t always have that passion, energy or motivation. So what was the “Aha!” moment for you where you said, “There has got to be a different way of doing it.” Was it seeing that balance of $224,000? Or was it a combination of factors and things that came together?

Brianne Porter: Yeah, that’s a great question. So there’s a lot of things to address in your question here. I think the big “Aha!” moment, honestly, was not the balance. It still hadn’t hit me because really, if you’ve never had much money in life, that balance still doesn’t really mean anything to you. $224,000 I’m like, OK, well that’s six digits. What does that really mean? OK, I’ll tell you what it means. It means when you make a little over $100,000 a year, and you get your paycheck and taxes and everything else come out, your health insurance, all the things that you don’t account for when you think about that $100,000 income. My student loan payment was one-third of my take-home pay, which is significant, I think.

Tim Ulbrich: Yes. For sure.

Brianne Porter: And what my lender did, which was kind of sneaky, is they kind of started throwing the loans back one at a time. So my first payment was like a couple hundred dollars and then a little more and then a little more. But then my final payment came in, like the final amount that it was going to add up to, the first time was $2,300. Now, that’s a lot of money. You know? So it really hurt to pay that out on the beginning of the month and be like, wow, I just lost $2,300 this month.

Tim Ulbrich: That’s when it gets real, right? When you see that number, and you’re like, OK, here’s my paycheck after taxes, here’s what’s going toward student loans, here’s the house payment. And like you said earlier, what’s left after that? I mean, I think that’s the moment where it goes from almost feeling like Monopoly money to, ‘Holy crap, this is real. And I’ve got to do something about this.’ So one of the things I know is that you’ve been a really active member of the Facebook group, the YFP Facebook group — which for those that are not on there listening, please jump over and join the conversation. There’s so much support and encouragement and helping one another, it’s been really fantastic to be a part of. But it makes me want to ask the question, like for you, what role has community played in terms of people being around you and helping you on this journey? Whether it’s your spouse, peers, coworkers, family or friends. Talk a little bit about community aspect and accountability for you on this journey.

Brianne Porter: Yeah, I think that’s a good question. To be honest with you, when this all first started to unravel or kind of maybe unfold is a better word — when it started to unfold in front of me and I really realized the impact of the decisions that I had made, I was really embarrassed because it’s like, here I am, a pharmacist, I’ve got a Master’s degree, I mean, on paper, I look like I should be very intelligent, right? So how did I make these decisions? And how did I justify them in my head? So I think that I was really embarrassed that I wasn’t more intentional up front and that I really didn’t take that responsibility to just learn more about finances. I mean, totally honest here, I still don’t know a lot about financial things, which is why I purchased your book because I wanted to learn more about that. And so that’s really what kind of, you know, drew me in, but I was really embarrassed by that. Like I didn’t talk about it to anyone, and I didn’t talk about my debt, I didn’t talk about the choices that I had made. And I certainly didn’t want to ask other people because I didn’t want to then feel obligated to share, so I felt like I was really — especially when I started getting that payment every month, that bill and making that payment, I was really feeling very isolated and kind of trapped and just feeling almost like I couldn’t breathe. You know, I really felt like I was struggling to figure out how to manage with it and how to make decisions and what to do with it. And I think that the community that really helps me the most really is the Facebook group, the Your Financial Pharmacist Facebook group, which is why I’m so active on it. And I think that the thing that is so nice is to just get on there and see that I wasn’t the only person who made these decisions, and I’m not the only person who doesn’t know what certain things are when it comes to financial things, I guess, you know, financial terms. I don’t have any background in business. I never had to take any classes like that in any of my training, and I never opted to, so I really don’t know anything about it. And that group just made me feel like I wasn’t alone. And then I think it gave me the confidence to start talking about things a little bit more openly, so that was really powerful for me, actually, that group.

Tim Ulbrich: And so I want to follow up with that and talk a little bit about how you got to the decision of what your game plan is with your student loans. You know, we’ve talked a lot about on this podcast when we’ve done speaking events, there’s so much to be said for getting it right when it comes to having the optimal loan repayment strategy. And knowing you work for technically a PSLF-qualified employer, I know you and I have talked a little bit about refinance, you have all your federal options. So just walk us through briefly, what was your process or strategy to come up with your game plan when it came with why, for you, this was the option that you were going to go forward with in terms of paying back your student loans.

Brianne Porter: I appreciate you asking that question because it was actually, as I’m sure you know from some of our conversations, a journey that I really struggled with a lot, even once I started to get educated and really understand what the different options meant because that’s the first thing, right? When you’re a student and you’re doing the exit loan counseling, for any students listening, that is not good enough on its own. You have to learn more about what’s going on because I went through that counseling, and I still really didn’t understand what all of my loans were and what the payback plan for those were and what compounded interest is. Like I really didn’t understand any of that stuff. But once I became educated, again, through the Your Financial Pharmacist community and the book “The Seven Figure Pharmacist” and really understanding what those options were, sitting them down side-by-side, I still really struggled. And I’ll tell you why. So I owe $224,000, and as you mentioned, I work for an institution that would qualify for Public Service Loan Forgiveness. So yeah, sure, it probably makes a lot of sense to the average person to just say, well, you’re going to pay a lot less if you do Public Service Loan Forgiveness, so why wouldn’t you do an income-based repayment plan and go for that? But I am very risk-averse, actually, so to me this idea that that could go away at any time and I would have all of these small payments that I made that are really compounding interest as I went was very unnerving. Like it was keeping me up at night thinking about, can I really do this? Could I make this leap? So for the first year out of training, my first year as faculty at Ohio State, I actually opted into the 10-year standard repayment. And I did not refinance, which was another mistake that I’ve made. I’ve made every mistake you can possibly make. Yeah, I did not refinance. And for that first year, I was making those $2,300 a month payment. And the reason that I did that was the uncertainty of PSLF but then also, I’m the kind of person that I just like to attack something and get rid of it as soon as I can. And so I really just wanted to be done with this. I wanted to try to get this done in 10 years or less and know that I paid it all, I don’t owe anyone anything, and I’ve moved on. But kind of what we were talking about earlier, how that really impacted me, we were — my husband and I just felt very, we felt very trapped. We felt like we couldn’t do anything that was fun, we created a budget, and we were living by the budget. And that was really great, we paid off credit card debt, we paid off all kinds of other debt outside of this, actually. But we still felt like, wow, this is really strapping and is really suffocating in a lot of ways. And it just feels like we’re not really going anywhere, right? Because especially at the beginning, you’re kind of not really going anywhere. So at that point I realized I needed to either refinance or just go bite the bullet and go with PSLF and hopefully everything works out and the program continues or I’m grandfathered in or whatever the case may be if things were to change. And when we looked at refinancing, we found that even with the lowest possible rate that we could get, down around 4%, with my husband co-signing and everything, it was still only a matter of $300 or $400 difference a month. And so for us, that didn’t feel like enough to justify to continue on that repayment plan. So ultimately, I decided to opt into the income-based repayment plan. I get my first bill tomorrow, and I’m really excited to see that it’s over $1,500 difference. So you know, we want to look into investing and building our emergency fund more and things like that as well, but we are excited to have a little extra in there to be able to do something fun, you know, when we get the time or when the opportunity arises, very first world problems I’m talking about here.

Tim Ulbrich: Yeah, but I think your story is such an important one that matches up with so much of what we preach here on this podcast and even in the YFP student loan course is that there is no one right solution that we can blanket cover everyone and say, ‘This is the best option,’ right? You said something like, you know, these could keep me up at night. And for somebody else, that may be a very different scenario. Or maybe the math looks better on a refinance. And maybe somebody isn’t as interested in investing or maybe they’re not as conservative. So all the factors come together, and I’m so glad to hear you’ve thoughtfully walked through those and obviously worked with your significant other to do those, to say, OK, collectively for us, this is the plan going forward. And that may be very different for somebody else, and certainly that’s OK. And I want to go there then, since you mentioned even before and also through that last segment there, you know, your significant other obviously has become a very important part. You guys are in this together, you’re doing it together. He came in with no debt, right? You mentioned that earlier.

Brianne Porter: Right.

Tim Ulbrich: So I think I would love to hear from you, just what you’ve learned through that experience where maybe for others that are listening, one person’s coming in with a ton of debt or all the debt, somebody else has no debt. And just some of the feelings that you’ve had around that and how collectively, you’ve come together to work it out and say, OK, yep, we came in at different starting points, but we are a team, and we’re trying to do this together. So talk us through that.

Brianne Porter: So we — obviously, he came in, like you said, with no debt. And I came in with a lot of debt, so that was our first point of kind of not really being on the same page. But then we were also raised very differently financially. And so we approached finances in general very differently. So I think I talked a little bit earlier about how I was embarrassed about my debt and how I got there. And so to be honest with you, I was not up-front with him at first. It took me years of dating to really come clean about what I owed in student loan debt. And because we weren’t married, because we weren’t paying on it, I wasn’t paying on it at the time, he really, he didn’t know. And poor guy, I waited until we were engaged to drop that bomb on him. So he was in a situation, you know, he’s like, wow, what am I going to do now?

Tim Ulbrich: He’s not out now, right?

Brianne Porter: Yeah, but he’s a good sport. So he has — you know, and I said we’re very different in how we approach finances. I’m much more the — nowadays, at least — I’m much more the let’s count every penny, let’s keep track of every penny, let’s budget every penny. You know, I want to know where all my money is going now. And I’m very intentional. I learned my lesson, but I’m very intentional now. Maybe I was too intentional. But he is a lot more laid back and he is of the mindset that it all works out. So he’s on the opposite end of the spectrum. But because of that, he was very relaxed when I shared with him my student loan debt. And he said, you know, we learn lessons. That’s what life is about. But what are we going to do moving forward? And I think that was the biggest thing is just coming clean about it and then really sitting down and coming up with a plan versus his motto, he’s very laissez faire about things, and he’s very comfortable being like, we’ll fix it out. But at that point, we both agreed, we need a plan. This is very significant. We need to plan moving forward.

Tim Ulbrich: Well and just kudos to him to embrace that and say, “Hey, this is what it is. And it’s now our problem collectively, and we’ve got to figure this out together to have a plan.” And I think that’s great advice for those that are listening that may be struggling through or maybe even people that are in that dating phase. And you know, I think my advice would be the earlier, the better. You know you can get some of these topics on the table. And I know for Jess and I, personal finance wasn’t something we talked about before we got married. And all of a sudden, you’re thrown into it, and you’re dealing with it. Now you’re coming up with the questions of should we merge our accounts and how do we budget together? What goals are we trying to achieve? You know, all of these factors come together and so obviously, the earlier the conversations, the better. So two questions I have left for you are a little bit lighter questions, but I think part of your journey here is to share with others to hopefully help them along their journey as well. So pharmacist peers that are listening or students that are still in school, what are a couple pieces of advice you would have for them in terms of, you know, how they can prevent maybe some of the mistakes that you made along the way.

Brianne Porter: For pharmacists, I guess I would say those of you who are in my shoes right now, you’re now practicing, you’re making a little bit more than a resident or a student would make, it’s just don’t be afraid to jump in. I know I’ve been at a lot of your presentations and on your webinars, Tim, and you talk about this a lot. Like the first thing is be real and look at your numbers and just get down with that. And so I think that’s, you know — I heard you say that, but I think that when you’re always thinking about what do I have and you haven’t really wrestled with the numbers yet, you haven’t been plain with yourself about what’s actually there, that looming concern about what might be there or what that looks like is sometimes twice as bad as what’s actually there. So I would say just take a look, be really honest (gap), think about what motivates you. I know you’ve also talked about motivation quite a bit. And I think that’s really what it comes down to. Like you said, there’s no right answer for anyone. But if you avoid and you don’t confront this problem, like no matter who you are or what motivates you, that for sure is not going to be a successful thing. I can tell you from experience, it’s not successful. I guess for the residents, I would say dont’ defer. Like you mentioned earlier, Tim, even that income-based — you’re a resident, your income-based payment is going to be next to nothing. There’s literally no reason not to make those payments. So I definitely would not defer during residency. And then for the students, my best piece of advice is if you’re being offered the maximum amount or fill-in-the-blank, just put your hand over the maximum amount and pretend like it’s not being offered to you and actually calculate what you need, even if you’re just making approximations and you want to just slightly overask to meet, that’s fine. But if you just automatically select, you know, taking out the max amount, you’re always going to use that. No matter what, you’re going to put that money to use, and you’re going to owe it at the end. And you, trust me when I say you cannot appreciate how much money that is right now when you’re a student. You just cannot.

Tim Ulbrich: Great wisdom there. I wish I would have heard all three of those things through my phases as a new practitioner, as a resident and as a student. So you alluded to earlier that, you know, I think for you maybe this topic is one that you haven’t necessarily had as much education previously on and maybe one that doesn’t come as naturally. But obviously, you’re committed to learning more about the topic in terms of your own professional development. So what works for you in terms of learning more about this topic? Is it books? Is it podcasts? Is it webinars? What is the strategy that you have to develop yourself in this area?

Brianne Porter: Well, obviously, Your Financial Pharmacist teaches me a lot.

Tim Ulbrich: That’s a good one, yes.

Brianne Porter: But in all seriousness, I do tend to really utilize the resources of the Your Financial Pharmacist community as my primary source. If you think about how you approach Pub Med searching — I’m going to go nerdy here for a second — but I always, you know, when you find a good article, and then you look at the other references that that article has referred to or referenced. I kind of approach this the same way. I have found this resource to be extremely valuable for me. The book has been very eye-opening as far as really putting things into perspective and being at the level for someone who doesn’t have a lot of background knowledge on the topic, that I can actually understand what’s going on. And then a lot of things that I hear on here or read in a book, kind of resourcing out from there. I think podcasts are really helpful for me because I can listen while I drive and then that’s where I do a lot of thinking versus the book where it’s easy to kind of passively read and not take it all in. But I definitely find this community to be extremely valuable and a great resource. And like I said, you can then find other resources from Your Financial Pharmacist. But it’s been my main source.

Tim Ulbrich: Yeah, thank you for the shout-out. And I think my encouragement to the audience would be, if it is YFP, great. I’m glad to hear that. If it’s not, find whatever resource is going to keep you motivated on this topic and keep you learning. It’s a lifelong journey of learning and making mistakes, and learning and growing and making mistakes, and learning and growing, and you repeat that cycle over and over again. So if it’s YFP, if it’s something else, making a commitment to develop yourself in this area of personal finance. So Brianne, I want to again just thank you for your vulnerability, your willingness to share your story with our listeners. And I know this topic can feel so overwhelming and weighty at times. And I think it’s easy to avoid the pain, as you mentioned, wish it all weren’t there, turn the other way. And what I love about your story is you are choosing differently. You’re choosing to embrace the pain, you’re choosing to dig in, make a commitment to turn the ship around and invest in yourself in the future. So what an incredible, and I’m hopeful we can have you back on the show to share your debt-free journey and to talk about what life is going to look like once you have all of those loans paid off. So thank you again for coming on the show.

Brianne Porter: Yeah, absolutely. Thanks for having me, Tim.

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YFP 059: Life After Debt Free…Now What?

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On Episode 59 of Your Financial Pharmacist Podcast, Tim Baker, founder of Script Financial and YFP Team Member, interviews Adam and Brittany Patterson. On Episode 31, Adam detailed how they paid off $211,000 of student loan debt in 26 months. Adam and Brittany are 2015 graduates from Auburn University Harrison School of Pharmacy. Brittany is a pharmacist at Children’s Healthcare of Atlanta. Adam is a pharmacist at Northeast Georgia Medical Center and Assistant Pharmacy Manager at Publix Pharmacy.

Mentioned on the Show

YFP Student Loan Refinancing Resources
YFP Episode 031: One Pharmacist’s Journey to Paying Off $211,000 in 26 Months
Mint.com
Script Financial
Dave Ramsey
Alabama Pharmacy Association (APA)
National Community Pharmacists Association (NCPA)
YFP Facebook Group

Episode Transcript

Tim Baker: Adam and Brittany, welcome to the Your Financial Pharmacist podcast. How are you guys doing today?

Brittany Patterson: Good.

Adam Patterson: Great, thanks for having us.

Brittany Patterson: Yeah, thanks for having us.

Tim Baker: So I would say, Adam, and you did a good job on Episode 031 when you were last on detailing your amazing debt-free that you did and excellent job of calling out Brittany and giving her credit to this journey of paying back debt, but I’m so happy, Brittany, to bring you on and kind of hear your side of the story. That episode, in particular, has been a huge success. It’s actually our third most downloaded episode with almost 1,600 downloads. And I think it just resonates with a lot of pharmacists out there. So kind of if you would, tell us a little bit about yourself and walk us through kind of — Brittany, I guess I’m talking to you of this debt-free story and kind of recap, you know, how it came to be, how you got through it. And let’s go from there.

Brittany Patterson: Yeah, so it’s great to be here. I know Adam talked a lot about our story. I guess he made it sound it like it was all nice and easy, but we really did have a big struggle, you know, those 2.4 years that we went through this. You know, we got that first letter, I guess six months when we got out, and it said, ‘Hey, great job finishing school, but you know, we need our money back.’ And that’s just something that we didn’t really talk about in school. And so we were texting all of our classmates, trying to figure out what they were going to do, and they didn’t know. And so we kind of bit the bullet and that’s why we just decided to refinance. Both of us came out working retail jobs, and so we refinanced, about a year into your retail, you got your job at the hospital. And that was hard because Adam was working night shift, and I was working day shift, so you know, he would be driving out of the neighborhood when I would be driving in the neighborhood. I think we would go three full days of not seeing each other. So it may sound real great, oh, only 2.4 years, but that was really — I mean, it felt very long when we were in the middle of it. It’s not as easy as it sounds. It was very hard work. But it was definitely hard work that paid off in the end. And we had that support of each other, we were on the same page with money. You know, that’s what we — when we just spoke recently to students, we told them that money is one of the biggest issues that couple fight about. And I feel like for us, that’s something that we never really have arguments about. We’re on the same page with money, and we’ve been kind of there since Day 1, knowing how we were going to refinance and everything. And so even though it’s been hard work, we’ve always been on the same page, and it’s definitely helped our marriage too throughout all of it.

Tim Baker: Yeah, it’s funny, when I was preparing for this episode, I went back and it’s one of the few times, actually, to go back as a listener. And I listened to Episode 031 again, and one of the things that Adam said was, smart decisions, hard work and sacrifices, those are really the three things that allowed us to propel you guys forward to pay off the debt. And another thing that Brittany, you mentioned was the refinance. I think you guys refinanced your rate of 6-7% over 10 years down to I think it was 4.25% over five years, kind of locking you into more of an aggressive payment process but also saving you about $65,000 in interest over the course of paying that off. So I guess for you guys, what has been since you paid off the loans, what’s been going on? Like what’s been the big driver of like where do you go from there? Like what’s been the big difference in life since the loans have been paid off?

Brittany Patterson: You know what’s funny is we were just talking about that this morning. I think we work more now than we did when we paying off loans.

Tim Baker: Really?

Adam Patterson: I can agree 100% with that.

Brittany Patterson: Yes. People are like, oh, your loans are paid off, you’re going to enjoy it so much. And I’m thinking, I think we work more now than we did then, but we’re so accustomed to it that it doesn’t seem like a big difference to us.

Adam Patterson: I think it’s about goal-driven too is setting your sights on what’s into the future and just trying to get there. But also, you have to enjoy every bit of it and take some time and have free time for yourself. But yeah, hustle’s been real. We’ve been hustling since we finished paying off loans, still keeping both jobs, Brittany’s been working a little bit extra too, and I work my full 70 and then turn around and pick up a whole other 44, 45 hours in my off week and then back around again, 70 hours again the next week. So it’s been nonstop.

Tim Baker: It’s funny though, because like I think what, you know, it’s kind of like the get-rich-quick schemes that are out there, one of the things I often say to clients and even when we’re speaking is, you know, the key here, especially if you want to retire early or if you want to get through the debt is a lot of it is just elbow grease and is just kind of putting your head down and working hard. There’s not a lot of fancy schemes or tricks. It’s about, you know, really maximizing income and being smart with, you know, budget. I know, Adam, you talked about how, you know, Mint.com was a big part of this. And Brittany, I know you are a Mint.com addict, it kind of is safe to say that.

Brittany Patterson: Yes.

Tim Baker: So and then just having that kind of 100% transparency between the two of you and really looking at it as your loans, but you know, so not much has changed. Obviously, I knew that you guys — and to kind of full disclosure here, you know, Adam mentioned he would be reaching out to me and Script Financial about working together. And you guys did in February, you kind of came on and became clients. And that’s why I have a little bit of an inside track to what’s been going on. But I was reviewing your finances, just in the time that you guys have come on, your net worth has grown exponentially. And it’s really just exciting to see because you guys obviously took a negative of the $211,000 and in two years and change, took that off the balance sheet. And now, you’re perpetuating that same type of mentality and really deploying your resources to your goals. So one of the things that you guys talked about when we did kind of the ‘find your way’ was experiences. And you guys took a vacation here recently. Where did you guys go? How was that?

Adam Patterson: We took a trip to Ireland. We went for a little under two weeks. It was breathtaking. It was amazing.

Brittany Patterson: So much fun.

Adam Patterson: Being able to cash flow pretty much everything and knowing you’re not having to worry about spending this, spending that, because you’ve worked hard, we’ve worked hard, we’ve saved for it. It’s a great payoff, treating yourself to something like that after you finish accomplishing one of those goals.

Brittany Patterson: Yeah, we didn’t have to limit ourselves on the trip, which is nice. We weren’t afraid about not being able to afford a dinner or buying a souvenir because we knew that we worked hard before we went on this trip, and we were able to, you know, buy the things that we wanted to buy. We didn’t go overboard on things, but we just knew that we didn’t have to limit ourselves while we were there, which was really nice.

Tim Baker: Well, and I know kind of when we talk about your goals, obviously experiences is a big part of that. And you know, like when I look at some of the things that we’ve done, you know, as kind of just simple, you know, we’ll get to kind of your next big goal here in a bit, but obviously vacations, so having a travel fund, you know, a savings account that you can cash flow, having a, you know, obviously a fully funded emergency fund, having your home purchase fund, which is kind of the next big thing on the horizon, I think those are just naming the accounts the goals that are out there, you know, psychology says that that alone is a big win. And you know, for me as kind of working with you guys, I know that, you know, if the next trip is Australia or New Zealand or Germany or attending a sporting event to the Panthers or Steelers or Cooperstown, whatever those things are that we kind of outline, my job is to kind of help you make sure that this is the next on the docket and we’re cash flowing those appropriately. So walk me through, you know, since the debt was paid, why did you guys — what was the genesis around, hey, we need to work with a financial planner? What was the big driving force to kind of email me and contact me and say, ‘Hey, Tim, we want to see if working together is a good fit.’?

Adam Patterson: I would say the first thing that got us talking about it is — and I tell other people this too — is we went to school to be pharmacists. We understand certain things when it comes to financial stuff, but we’re not a professional in that. So seeking out professional help, it was our No. 1 goal, whether we should have started before we paid off loans or not, that’s up in the air, but we tell people all the time, it’s never too early to find a financial planner or somebody to help you with that because that’s what their profession is. For us, it was being a pharmacist, serving patients and things like that. So seeking out a financial planner, it was our next step, our next goal simply because we wanted somebody to give us more directive, be able to help balance more things in our life.

Brittany Patterson: Yeah, and to hold us accountable. We know we do have a good income that comes in, but making sure we are putting that income towards our goals and making sure our budget is correct. Just we knew that you could help us more financially than we could help ourselves in that area.

Tim Baker: Well, and I think the other thing that I think resonates or resonated with me in the last story — I know, Brittany, like you just said, kind of confirms that is — I think one of the things that a lot of pharmacists do is they kind of drink that six-figure Kool Aid that says, hey, I come out, and I’m making x amount of dollars, I don’t really have to worry about the debt, it’ll take care of itself. And I think for you guys, and I know, you know, kind of the backdrop is Adam, you went through the Dave Ramsey — I’m not sure if both of you guys went through the Dave Ramsey stuff — but it was kind of this no-nonsense approach to paying off the debt. So talk to me, what’s the big thing right now that is kind of top of mind with where you want to take your financial plan and where we’re going? So I know the big one is the home purchase, right? So we’ve talked about this at length and what that looks like. So walk me through kind of where you guys currently are in that part of your financial plan and what you’ve learned thus far.

Adam Patterson: Right now, like you said, our next step is financially purchasing a home, working with you, setting up, figuring out what we can actually afford. I think that’s one of the biggest things and knowing that you’re not spending too much but you’re going to be comfortable. That’s something that we are working with you, getting approved, working with a bank to get approved. We have a real estate agent now, so we’re in the process of shopping for a home, whether it’s one month, two months, six months from now, we just know that we’re ready for it. And that’s what we’re doing right now is we’re continuing to work towards that goal.

Tim Baker: And I think, I think the idea was to be almost singularly focused on that, similar to what you were with the debt until you guys are moved into the house. And I know, Brittany, that’s kind of like, you want that to happen yesterday because you’re ready to make the purchase. But I think being smart about it and surrounding yourself with a team of people that have your best interests in mind. And I think sometimes that is lost in the home purchase process just because most people, most professionals are incentivized about how much you actually purchase in terms of the size of the house, but I think you guys are going about it, and I think when we went through, ‘Hey, what can we actually afford?’ it was with this discount that you guys are not going to be hustling like that for the rest of your life, you can actually afford something probably greater than you probably would be if you were kind of working consistently. But I think it’s been great working with you because I think you are very open to advice and kind of the education that surrounds a lot of these decisions. So from my end, it’s been awesome. And I think, you know, we see it a lot because I think your story resonates. So walk me through kind of what you’ve been doing speaking-wise since, you know, we’ve last had you on the podcast.

Brittany Patterson: I think — was it June, Adam?

Adam Patterson: Yeah, it was around June.

Brittany Patterson: Yeah, in June, we went to the Alabama Pharmacy Association convention, and we were invited to come speak to the students there. So there were Stanford students, and there were also Auburn students. And we went in, and we had a whole PowerPoint presentation, and it was funny because I don’t think we spoke until about 7, 8 o’clock at night.

Adam Patterson: Yeah, it was 7 or 8.

Brittany Patterson: And it was after they’d all been to the pool, they were all outside, all having fun, and I’m thinking, there’s no way they’re going to want to sit in here and listen to us talk about finances at all. And we walked in there, gave our presentation, and they ate it up. I was shocked.

Adam Patterson: It’s just — it’s crazy when we’re presenting and seeing these students’ mouths drop just because we’re providing them with this information that whether they knew about it or not, it’s just resonating with them and telling a story not in trying to convey that they have to pay off this much money in such a short period of time, but the fact that we’re giving them these resources that, you know, they’re just not provided in school. And I think Your Financial Pharmacist, I think we’ve all harped on this, is making the education relevant and putting it out there for everybody. That’s just something, it’s a passion that we’ve kind of taken up on now is wanting to speak at more events and do more things to try and share our story.

Brittany Patterson: Right, because I think it’s something that we wish we would have had too, coming out of school.

Tim Baker: Yeah, I think Adam, I think one of the things that you said was, you know, when you were looking around, kind of looked to your left and looked to your right at hey, what’s the best way to tackle the loans, there wasn’t really anything there outside of maybe like a colleague and a few opinions. So you know, I think shining a light on this and having more people kind of like just openly speak about some of the trepidations with their loans. We hear a lot of people say, ‘Hey, you know, if we would have known now what we know today, we would have made a lot better decisions,’ and I think that’s why, aside from the facts of, you know, the facts and figures around your particular case, you know, there’s no — like I said, there’s really no silver bullet. It’s just like, OK, we worked a lot, we sacrificed, and you wake up, and you’re through the loans. And now, it’s what’s next? So I think your story, you know, is amazing. But then, you know, the fact that you can stand in front of people and say, ‘A few short years ago, I was in a similar spot, this is kind of what we did,’ is really amazing. So do you guys see yourself speaking more? Did you enjoy that part of it?

Brittany Patterson: Yeah. We both really enjoy it. And we actually have another one in November coming up, and we’re speaking at the National Community Pharmacists Association in Auburn. And so we’re going to go back to Auburn and be able to speak to those students. They came up to us after, I think it was the president of NCPA from Auburn, she came up, she’s like, ‘Oh, we loved y’all so much. We really want to have y’all back. I feel like these students could really learn from y’all since this is something that we don’t hear much about in school.’

Tim Baker: Well, and I think, you know, and that’s what I’m kind of hearing more, especially from NCPA, you know, or at least people associated with, pharmacists associated with NCPA is, you know, the decision or start, you know, an independent pharmacy is so huge. You have to have your own financial house in order or at least have a plan to have it in order, so I think there’s a lot of — you know, especially with that group, you know, a lot of relevancy to say, ‘Hey, if this is something that I really want to pursue, you know, I need to make sure that, you know, this big kind of elephant in the room at least is accounted for and there’s a plan in place,’ and I think that’s a great group to be talking to. So I guess for you guys, if I’m a recent pharmacist grad, what are kind of the big takeaways — I’m a new PharmD, I’m out, I’m earning income, I have kind of the average $150,000, $160,000 in debt. What would be the kind of big takeaways for, that you would impart on me in terms of how to tackle it?

Brittany Patterson: I know no one likes to hear this, but the biggest thing that we did was we lived below our means, which I know everybody hates to hear that because you feel like you’re constricted, but we weren’t because we were so used to living like that in school. And I think that’s one of the biggest reasons we were able to pay off our loans. We weren’t buying expensive cars, we weren’t buying expensive boats. Nobody told the students. We had friends who went and bought cars and boats, and there’s nothing wrong with that, but we just didn’t want more debt on top of the debt we already had. So I think that was one of the biggest things was really watching what we were spending and not overspending.

Adam Patterson: Yeah, I would say that would probably be one of my biggest things is living below our means. Something other to add to that is, you know, work hard for what you’re given. I mean, there’s too many people that just expect or receive things, and it’s all about hard work. Like we’ve talked about before, you know, putting in the hours, trying to maximize that income. As a new grad, I mean, what else do you have to do?

Brittany Patterson: Right.

Adam Patterson: I hate to say it, but to go on top of that, while you’re working hard, you have to treat yourself every now and then. I think debt’s something that we all can get caught up, and just working nonstop but not ever reaping some of that benefit, some of that benefit is to take a vacation every once in awhile.

Brittany Patterson: Yeah, and we don’t really eat out much, and that’s something that, you know, we really appreciate when we do get to eat out. We enjoy those moments more because of the fact that we aren’t doing it all the time.

Adam Patterson: Right.
Brittany Patterson: So we don’t take those moments for granted when we are able to enjoy evenings out together, which is nice.
Tim Baker: Yeah, it’s a treat rather than the norm, right?

Brittany Patterson: Right.

Tim Baker: Exactly. Well, and maybe, you know, you grow an affinity for Mint.com and logging in every day, right, Brittany? And making sure that the spending is in line, and you’re good there, that would probably be another piece of that.

Brittany Patterson: Right, that is true.

Adam Patterson: What is it they say? Eat, sleep. And Brittany’s is eat, sleep, mint.

Brittany Patterson: Mint, unfortunately.

Adam Patterson: So I will add, you know, something we got a lot of questions about. As a new grad, don’t be afraid to reach out for help. Using your resources and everything, that’s huge coming out of school is finding the information and going off, adding to that is talking about a financial planner and stuff. You know, that question’s came up to us a lot. Should I invest in a financial planner early on? There’s nothing that hurts from investing in a financial planner early on because they’re going to be able to, you know, guide you to those resources also. So that is a big thing I would harp on coming out of school.

Tim Baker: Yeah, and I think to play on that, you know, in terms of extra resources, obviously, I think what we’re trying to achieve here at Your Financial Pharmacist is just with the Facebook group and the different guides, to have information and kind of a community surrounding the information to put you in a position to tackle the debt or investments or if it’s insurance questions, so you know, I know you guys talked about — to kind of bring it back to the loans is one of the big things you did is refinance. So if you are looking to refinance, you know, YourFinancialPharmacist.com/refinance, we have calculators, we have different refinance companies that will give you bonuses and we have podcast episodes that are about student loans. So there’s a lot of good information there if you’re a YFP listener that you can digest and kind of learn more about the process. And I think it’s key to continuously push the envelope in terms of what you want to do with your financial life. Well, Brittany and Adam, thank you so much for coming back on the Your Financial Pharmacist podcast and sharing your incredible story. It doesn’t sound like you guys have let off the gas at all. I know you took your trip to Ireland and took some of that time to decompress, but it sounds like with the home purchase and some of the other things you’ve got going on that, you know, you’re kind of going back to the hustle and making sure you’re making moves with your financial plan. So it’s been a pleasure working with you guys, and I can say that your story truly resonates with a lot of our listeners and just a lot of pharmacists out there that it’s truly inspiring. So keep up the good work, and we’d love to have you back for the next major milestone. So you’ve done the debt-free theme hour, maybe we’ll have you on for the millionaire theme hour when you hit that millionaire status for net worth. So again, thanks again for coming on.

Adam Patterson: Thank you so much for having us.

Brittany Patterson: Yes, we really appreciate it.

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YFP 058: How Good is the ROI of the Pharmacy Degree?

Posted on by yfpadmin

On Episode 58 of the Your Financial Pharmacist Podcast, YFP Founder Tim Ulbrich interviews pharmacy thought leader Deeb Eid, host of the Pharmacy Universe Podcast, about how rising student debt loads and a tightening job market are impacting the return on investment of the pharmacy degree.

Deeb Eid, PharmD started his pharmacy journey as a pharmacy technician learning the building blocks of what both efficient and non-efficient workflow operations could look like. He gained a deep appreciation for the role and potential of the pharmacy technician and continued forward with Bachelors and Doctor of Pharmacy degrees from The University of Toledo College of Pharmacy & Pharmaceutical Sciences in Ohio. His talents took him to Washington D.C. to become the inaugural Executive Resident in Association Management & Leadership at the Pharmacy Technician Certification Board. While traveling the country, he was able to present, meet with, and discuss the challenging and evolving atmosphere within pharmacy with a variety of stakeholders. He now serves as an Assistant Professor and Experiential Coordinator at Ferris State College of Pharmacy in Grand Rapids, MI working to mentor and inspire students while creating new avenues and opportunities. Deeb is the Founder and Content Strategist of Pharmacy Universe which is a social platform whose vision is to socially educate and engage the world about #Pharmacy.

Mentioned on the Show

Script Financial
Pharmacy Universe Podcast
American Association of Colleges of Pharmacy (AACP)
American Pharmacists Association (APhA)
Pharmacy Universe Episode 004: Finance and Education (Your Financial Pharmacist, Dr. Tim Ulbrich)
Pharmacy Technician Certification Board (PTCB)
YFP Episode 004: The Landscapes of Student Loans In Pharmacy Education with Dr. Joey Mattingly
AACP Graduating Student Survey
AACP Enrollment
AACP Degrees Conferred
Pharmacy Manpower Index (Pharmacist Demand Indicator)
Bureau of Labor Statistics (Pharmacist)
YFP Episode 053: One Pharmacist’s Journey From Financial Ignorance to Financial Independence with Tony Guerra, PharmD
Munger MA, Gordon E, Hartman J, et al. Community pharmacists’ occupational satisfaction and stress: A profession in jeopardy? J Am Pharm Assoc. 2013; 53(3): 282-96.2013
Ohio Pharmacists Association (OPA)
Art of Manliness Podcast
How I Built This Podcast
Impact Theory with Tom Bilyeu
The Third Door: The Wild Quest to Uncover How the World’s Most Successful People Launched Their Careers by Alex Banayan

Episode Transcript

Tim Ulbrich: Deeb, welcome to the Your Financial Pharmacist podcast. Appreciate you joining us.

Deeb Eid: Yeah, thanks, Tim. I really appreciate you having me on.

Tim Ulbrich: So you’re in Boston for the American Association of Colleges of Pharmacy meeting, AACP. So how’s Boston and how’s that meeting going?

Deeb Eid: Well, Boston’s a really cool place for anybody who hasn’t been there. I highly recommend coming and visiting. Lots of things to do, lots of things to see. And the meeting’s going awesome so far. I think there’s a lot to learn. It’s a little bit different for me, I’m used to the APhA crowd. But definitely meeting some new people, gaining some insight about what’s going on in pharmacy education, and also reconnecting with a couple old friends.

Tim Ulbrich: I’m so bummed I couldn’t go. I’ve been to that meeting several times. Great networking, great programming. I do have to say, as a Buffalo Bills fan, I’m a Patriots hater, so I’m not sad about that point about not being in Boston. I’m sure there’s lots of Patriots, Red Sox fans around. And what I want to do on this episode is, to be honest, I think we have a long overdue discussion about what’s the Return on Investment of the pharmacy degree? And last week on your show, the Pharmacy Universe podcast, which we’ll link to in the show notes, Episode 004, you and I had a discussion related to personal finance and the future, we talked about debt loads and what this means for new practitioners, but we did get off on a little bit of a tangent , which was good, about some of the evolutions of the profession and where we’re heading. And disclaimer for listeners before we jump into the weeds on the discussion is that while we’re going to make a case that the Return on Investment of the degree is down in terms of where it has been, we are certainly not dismissing the fact that pharmacists make a good income, make a good living. And the reality is as individuals, a pharmacist’s income is still well above the median household income in the U.S. So it’s all relative, but we are certainly talking here about the shifts and the changing market that we’re seeing over the last 7-10 years or so. So three parts of this show that we’re going to walk through. Part One, we’re going to talk about the impact of high debt loads and a tightening job market. Part Two, Deeb and I are going to talk about how doom and gloom really is the situation? Are we overplaying it? And in Part Three, we’re going to talk about the action because I think we have a lot of people getting fired up, a lot of people complaining, but what are we actually going to do about this going forward? So Deeb, before we jump into the national trends and start this discussion on the Return on Investment of the pharmacy degree, as a new practitioner yourself, tell us a little bit about your career story, your journey and maybe even how student loan debt has played its part in your own journey.

Deeb Eid: Yeah, Tim. So a little bit about my background and my story is I went to the University of Toledo in Ohio. Go Rockets!

Tim Ulbrich: Go Rockets, yeah.

Deeb Eid: And during my time there, I started out working in a pharmacy as a pharmacy technician pretty early on, basically right out of high school, started out that summer and started to really gain an appreciation for what happens in workflow of a community pharmacy. And it’s kind of like almost like an art, you know? You go and you work at different stores and you see things run smoothly, and then you go to a different store and you see things on a particular day, maybe run not so smoothly. And so through that process, I started gaining appreciation for the role of the pharmacy technician. Obviously went on, completed my PharmD and had a really interesting and awesome opportunity to complete an executive residency out in Washington, D.C. with the Pharmacy Technician Certification Board. And so through that experience, I was able to basically travel across the country, meet different people, see what’s going on within the profession and kind of like what you’re saying, meet new practitioners, meet people who have been in the profession for 20-40 years and hear their stories and hear what their thoughts are. And I think personal finance is actually a topic that comes up really no matter what just because of, yeah, what’s happening with student loan debt and asking people, oh, I can’t believe — and they’ll tell you, I can’t believe how much people are paying for school nowadays compared to back when I went to pharmacy school. And so my story relating to student loan debt is — and I’m not here to turn any of your listeners off — but to be honest with you, I was extremely fortunate, and I actually had my schooling — my father really actually helped pay for most of my schooling.

Tim Ulbrich: Awesome.

Deeb Eid: So I never really thought about student loan debt throughout my schooling. It wasn’t something that was a stressor to me. But what I did learn through the process is now reflecting back, how was that possible? How was my father able to in his personal life be able to support me in that way? And the other thing I think I learned was that everyone around me, this was one of the focuses of themselves, and so I needed to learn about it because, you know, people talk about it, so I want to be included in the conversation. But more recently, my significant other Kristen is also dealing with a situation now after she just graduated of looking at student loan debt. And so it’s a topic that even though I don’t have personal experience paying off student loan debts or worrying about it, it’s still something that I feel is extremely important because a bunch of people around me have it, and I want to be able to and need to be able to explain and help them and students, now that I’m an educator.

Tim Ulbrich: Yeah, and I think one of the things, just building off of what you said there, is you know, while obviously you had a very fortunate situation, if we look at the data nationally, 90% of all graduates have some student loan debt with the average amount being just now over $160,000, although we’re waiting for the new data here in 2018. And what I’ve heard, and I’m guessing you’ve heard from colleagues and peers and even those you’ve essentially interacted with your podcast at Pharmacy Universe, is that this is such a big stressor and weight on their back that one of my concerns here as we talk about the ROI of the pharmacy degree is we are in desperate need of innovation in pharmacy practice. And sometimes with innovation comes risk-taking, comes entrepreneurship and trying to build some new things. And one of my concerns, and one of the things we’re trying to tackle at Your Financial Pharmacist, is that you have this massive gorilla on your back that is maybe making you risk-averse, is stressing you out, obviously, that has an impact I think profession-wide in terms of what we can do in regards to being innovative. And so I would point listeners all the way back to Episode 004 where we interviewed Dr. Joey Mattingly from the University of Maryland, another thought leader, in my opinion, and we talked about very analytically what has been the impact of student loan debt in terms of new practitioners. And we got very granular and got very specific with numbers in terms of how it’s impacting graduates and how that’s changed. So let me paint a quick picture, and I’m going to dig into the weeds here a little bit on some numbers, so for those listeners, don’t tune me out here because I think the data does not lie. And we have to understand that the situation we are in right now is not a normal situation relative to, say, five or 10 years ago in terms of where we are as a profession. So I’m going to give some data here about debt loads, salary data, and then also we’ll talk a little bit about what’s happening to the job market. So first on debt loads, very simply, 2010, the median debt load was $100,000. 2017, it was about $160,000. So we had almost a 60% increase in seven years. And so I often hear people say, well, nationally, debt loads have gone up x%. True, but if you look at pharmacy education among some other health professions, that has outpaced the national average in a very significant way. Well, the other part to look at is if debt loads have gone up, have salaries increased proportionally? Because if they have, then we can make an argument that man, this really stinks that debt loads have gone up, but salaries are taking care of it. And the answer to that is they are not. So if we look at median salary for a pharmacist in 2010, it’s about $111,000. In 2017, it’s about $124,000. So I’m always looking at what’s the debt-to-income ratio of a pharmacist? And in 2010, that debt-to-income ratio was .9. In 2017, it was 1.28. So what’s interesting is if you look at pharmacists’ salaries alone, they are not keeping up with inflation over that time period. So even if we were to remove student loan debt and interest rates and the reality that some people are not in part-time work positions, those incomes are not keeping up with inflation alone. Of course, when you add in all these other factors, that situation becomes worse. So now we ask the question, Well, if we have people that are graduating with more student loan debt, salaries are not increasing proportionally, well, how much is their likelihood to get a job? What’s the job market look like? And there, we look to the Bureau of Labor Statistics. And what we see that as of 2016, there was just over 312,000 jobs in the pharmacy profession. And now, here is the statistic that is alarming to me, that the Bureau of Labor Statistics is projecting that over a 10-year period, 2016-2026, they’re projecting 17,400 jobs that would be increased during that 10-year period. But in 2017 alone, we had approximately 15,000 pharmacy graduates. So let me say that again. Over a 10-year period, they’re projecting just over 17,000 new jobs. But in one year alone, 2017, we had approximately 15,000 new pharmacists enter the market. So something has to give. Now, some people look at that and say, well yeah, of course people are going to retire, other things are going to change, but obviously that’s not going to make up for that difference. So there, we need to begin the conversation about what is the challenges, what are the challenges with the situation and what can we start to do about it? So in summary, we have higher debt loads, we have fewer availability of jobs, we have more graduates that are coming into the market. So Deeb, my question to you is from your perspective, as somebody who I look to as an innovator and a thought leader, what are the risks and challenges that you see with graduates that are coming out with rising debt loads and relatively speaking, a stagnant job market? What are your thoughts?

Deeb Eid: So I think first of all, some of the numbers that you provided there, again, are pretty interesting. When I take a look at the statistics and I see, like you said, the Bureau of Labor Statistics projecting that many jobs over 10 years. And you and I very well know that there’s a lot of people who are graduating from pharmacy school each year. I think some of the risks and challenges with graduates coming out having these rising debt loads is — you’re right. That’s the tough part is when you come out of school and you have this thousand-pound gorilla of student debt on your back, and you’re trying to figure out where to start off in life, right? So you have a lot of different things going on. You might be moving for a job or a position or a residency. This could be your first car buying opportunity, this could be your first home buying opportunity. There’s a lot of things that happen in those first couple years as a student who graduates, becomes a pharmacist and now looks at your paycheck and thinks, oh man, I have all this money now. And so that’s where I think it’s challenging because people are going to be stuck, to an extent, where you might get a job, you might not be happy with the job that you have or you might not be satisfied. But you know that you need that job in order to be able to pay for that car, pay for that home, pay for those student loans. And so that’s I think part of the challenge is yes, there’s going to be people retiring, so there’s going to be jobs opening up, but what I really think is interesting — and maybe we can talk about this is the opportunities that could come from people focusing their time on different areas and trying to think outside the box of what they can do to, you know, again, build a brand, build a market and figure out ways that pharmacy can be involved in healthcare in ways that are nontraditional from what we’re currently doing.

Tim Ulbrich: Absolutely. It makes me think back to Episode 053, we interviewed Tony Guerra from the Pharmacy Leaders podcast who his Episode 001, Pharmacist’s Journey from Financial Ignorance to Financial Independence, one of his suggestions that stuck with me and will stick me I think forever is this idea of as a new graduate, he took what he calls Entrepreneurial 8. So right off the bat, he took 32 hours a week — he actually tried to work 24, but they wouldn’t let him — 32 hours a week, and he said, you know, 8 hours a week, I’m going to begin to think about some of the things that I’m passionate about, pharmacy practice and how I can be entrepreneurial. Now, from the financial perspective, that to me is a brilliant idea and I think it’s great for the profession as well. Obviously, we’ll be advancing thoughts and ideas, but also, it requires somebody to be able to right off the bat say, OK, I’m not going to live up to my full income. And obviously, it starts to give you options and flexibility in the event that things change along the way. Now, student loans, if you’ve got $200,000 of student loan debt, is it going to be easy to say, ‘I’m going to take 32 hours instead of 40.’ And is that the best decision in the moment? You know, maybe yes, maybe no, depending on your personal situation. And I think that’s one of the biggest fears, if you will, that I have right now is that there’s this mentality that I’m feeling and that I felt as a new graduate of maybe you’re in your mid-20s, maybe you’re even a little bit older as a student, you’ve got over a six-figure job that’s right there, sign the paper. It’s comfortable right off the bat. Does it restrict you, though? And is it restricting what we’re able to do and evolve as a profession? And I think the reality of that business model is it’s gotten us stuck into a place of where we’re at right now. And there’s not necessarily as much room and opportunity for innovation, growth and risk-taking. And Deeb, I don’t know what you’re seeing — I know one of the things I’m hearing among our graduate is there’s this feeling, obviously in some sectors of work moreso than others, but there seems to be this feeling of I’m only a couple years out, what I had imagined this could be, it isn’t what I thought it could be. Now I’m looking up and I’ve got 35, 40 years left of work history, and I feel stuck. I mean, is that something that you’re hearing? What do you perceive to be the implications of that in terms of somebody so early in their career feeling like they’re stuck?

Deeb Eid: So I’ll tell you from a personal standpoint, I worked during my school, so while I was in pharmacy school, so I worked for about six years, so throughout the entire six years at Toledo, I was working. And I worked in a couple different — I worked in a couple different pharmacies. And to be honest with you, that statement that you made, that feeling of not really ‘I feel stuck,’ but it’s more of, ‘This isn’t really what I think I expected,’ or, ‘This isn’t really aligned with what I thought I would be doing,’ that was honestly one of the feelings that I had throughout those towards the end of those six years was I know what I’m learning in school, I understand what could be, but then there’s things that happen at work or there’s responsibilities that I’m doing at work that just doesn’t feel like I’m living up to the potential or you know, I could be doing so much more for my patients. I just am not able to or my company maybe doesn’t allow me to or the laws or regulations don’t allow me to do these things. And so that’s what I think for me, from a personal aspect, that’s where I felt I needed to do something a little bit different. Hence, why I went out and did my residency in an area that was a little nontraditional. But yeah, I mean, I talk to some of my former classmates and a couple other people out there who are newer into the profession, and it is something to think about. I’ve heard a few times here and there that, well, you know, you kind of get into this — it’s almost like a rhythm. You learned all these different things, there’s all this potential, and then it’s like your dreams and hopes are shot down.

Tim Ulbrich: Absolutely.

Deeb Eid: It’s kind of an interesting phenomena.

Tim Ulbrich: Well, and I think we know — for me, I’m very passionate about career development. It’s what I do a lot here at the university. And the reason is exactly what you’re saying. I mean, what we know and what I’ve seen in our alumni and seen in my own life is that if you’re challenged in the work environment, if you’re given autonomy, if you’re allowed to be creative in the way you think, if you’re allowed to be entrepreneurial even within an organization, that feeling of satisfaction that comes from that trickles over to many other areas of life, right? You walk home more confidently, and it can have an impact on relationships and other areas. And so one of the things that I’m passionate about, specifically for the financial piece, is trying to help people manage this financial component so that they can maybe look at an alternative job path. Maybe they can go back for additional training, back for additional schooling. Maybe they can start their own business and take a few more risks. And one other thing that really stuck out to me as I was preparing for this show — and you’re probably familiar with the 2013 study that was published in the Journal of American Pharmacists Association, JAPhA, that we’ll link to in the show notes. It was a study done by Munger, et al, which has had a lot of attention and debate. And essentially, they studied, take-home point is they studied over 300 community independent pharmacists, and their conclusion was that there was high amounts of dissatisfaction. Specifically, more than 50% of those surveyed stating that they were considering quitting their job. And I think that’s such an important point. And whether we want to debate is that representative, is that not, we know that and we have a pulse on that there is that feeling out there. And if we, as a profession, are going to move forward and be innovative and be forward-thinking and rock the boat and think about the way pharmacy’s been done, and think in the futuristic type of way and not look back at how it’s always been done, we’ve got to address this feeling that’s out there, and we cannot ignore that it’s out there. And I think one of the risks, to wrap up this first part here, one of the risks that I see — and the numbers support this — is we have a very significant decline in applicants into PharmD programs across the country. And that should be getting all of us fired up. So let me give you some data here. 2010-2011, we had approximately 107,000 applications into pharmacy school. 2016-2017, that number went down to 73,000 in that time period. All the while, the number of schools increased in a dramatic way. So in theory, we should have more applications. So we have more graduates coming out with less applications coming in. So that’s the transition then into the second part, and really what I want to discuss here for a few minutes is how doom and gloom is this situation? You know, we could stop here and say, the sky is falling. Are we over playing it? Is that reality? And to me, Deeb, it feels like that we’re at risk, as a profession, of being stagnant in the way that we do business when the market is clearly telling us the status quo is not OK. And when I say the market is telling us, I’m referring to the number of applications into pharmacy school, that’s an indicator of interest in the profession as well as what we’re seeing in the evolution of the profession. Most notably, we’ve talked recently on your podcast about the Amazon buyout of PillPack. You know, it feels to me that we’re at risk of becoming the Blockbuster in the Netflix world, right? So my question to you is how doom and gloom is the situation? Is it worth sounding the alarms? Are we too late? Or is this a trend that we can really start to reverse? What are your thoughts?
Deeb Eid: So a couple things come to mind when I think about the situation. No. 1 being what I try to do when I, from a big picture standpoint, when I look at the situation, I try to actually look outside of the profession of pharmacy. So what’s going on? What are the trends within consumer buying? What are people looking for? What is the average person on a day-to-day basis, what are they expecting out of the businesses, out of the services that they are getting from other places? So if you look at businesses like Netflix, like Amazon, like Uber, some of these ones that really, really, have come out of nowhere in the past few years but have really just become leaders across the board. So some of the things that I think about is you know, if you take a look at those organizations, what are three things that they focus on that we, as a profession of pharmacy, can learn from? And I think three things that I see is when it comes to the person on the other side of their services, No. 1 is that they help save people time. OK? So time is something that I believe any person out there would put a major premium on. If you can save somebody time in their life, that means that that’s time that they have to reinvest in something that they enjoy doing. So I think that’s a huge thing that a lot of these companies have in common. No. 2 is convenience. They’re making it more convenient for the person on the other side, right? So you want something from the store? You don’t need to go to the store. You can order it on Amazon, and it’s there the same day or the next day. You want to watch a new series? Turn on Netflix. There you go, you can watch the entire series. You don’t even have to move from the couch anymore.

Tim Ulbrich: Right. And now it’s predicting what you want to watch, right? It’s amazing.

Deeb Eid: Exactly, it’s telling you different things based on your shows. You know, you want to get somewhere quickly and again, know where you’re going and be convenient and safe, take Uber. And I know people will say, oh, there’s some stories with Uber that people have gotten hurt, but far and in between. But again, it’s that convenience. And then the third thing — so you know, you have time, you have convenience. And the third thing that I believe these places are doing is they are just, they’re listening to the consumer. They’re listening to their customers as to what they are looking for. And that’s why they keep improving their models. And so I think from a pharmacy standpoint, you know, for doom and gloom. Is the situation getting worse? Is it getting better? I think that in pharmacy, like you said, people are coming out, they have a lot of student loan debt, that’s limiting innovation, that’s limiting opportunities for people to be innovative. Sometimes, they’re getting into positions where they’re not going to be able to come in right off the bat and you know, kind of think outside the box unless they really spend time and effort outside of their jobs doing it. You have less people applying to pharmacy schools, you have a decent amount of graduates. And so I don’t want to say that we’re doomed as a profession, but I think that what we need to do is we need to start looking at the models that we’re utilizing and figure out where can we start to focus on those types of areas because the future consumer and the current consumer are somewhat different, right?

Tim Ulbrich: Yes.

Deeb Eid: So I think a lot of the people in today’s world in the future are going to expect that you can pick up your phone, hit a button, and boom, there’s a pharmacist on the screen. I want to have a conversation with somebody, I have questions about my medication, boom. A future consumer is probably going to expect they’re in their kitchen, and they’re about to have dinner, about to sit down for dinner. They can say, ‘Hey, Alexa, tell me about my medication. Am I able to take it with this type of food that I’m about to be eating? Is there any interaction?’ These are the things that are being built into society that I think the future consumer is going to expect, and that’s where I see the opportunity for, you know, people within pharmacy and graduates to be involved. It’s just not going to be in the traditional what you think of now where you’re going to get a degree, you graduate, you work in a pharmacy. I mean, those things are still going to be available, but I think that’s where the jobs and the opportunities are going to be is we’re going to have to start creating these opportunities so that we can continue to reach our patients in a way that’s convenient, that saves them time and that’s still quality.

Tim Ulbrich: Yeah, absolutely. And I think there’s so many good nuggets that you had there. I mean, to me, one of the things that I’m often thinking about that you highlighted there is we are at a point, I think, I believe, that we have to think about reinventing ourselves as a profession and the role of the pharmacist. We know the value, we have the data to support it, but we need to blow up preconceived notions about exactly how pharmacists have to operate and how pharmacy is done in every single setting that we operate. And I think one of the great advantages of these moments like we’re in as a profession is that with any moment like this comes unbelievable opportunity for innovation, entrepreneurship and growth. And as I used Blockbuster as a reference, Family Video is still around. I’m still trying to figure that out. I don’t understand that. But you know, with those models, there’s an opportunity to either evolve or not evolve. And so I think we can look at it one way and throw up our hands and say, ‘Ugh, this is terrible. We need to hold onto the way that pharmacy’s done, and we’re going to hold that out regardless of the things you mentioned, that time, convenience, understanding what the future consumer wants,’ or we can get together, have the uncomfortable, difficult conversations and say, ‘Let’s throw out the way it’s always been done at least in thought. Let’s brainstorm about alternative ways that it can be done. And let’s think about it from the consumer standpoint and also think about where technology, automation and other things are going.’ And I think you used some great examples there, even with Alexa is one example but just to get us thinking in a different way. So let’s move now to the call to action. What are we going to do about this? And I know we talked briefly about this in that last section, but we’ve painted a picture of the current reality we’re facing as a profession. And now the question is, so what are we going to do? What steps should we be taking? And what practical things can our listeners to begin to reverse this trend? What do you think, Deeb?

Deeb Eid: Yeah, so I think the very first thing that is, you know, low hanging fruit — and I would say this is probably something that anybody who comes across us, anyone who’s listening, no matter your situation, I think that if you can take at least one step in this direction, you’ll be definitely doing yourself a favor. Just learn about personal finance. Take advantage of, you know, things that you guys are doing here at Your Financial Pharmacist. Read a few different articles about it, learn about student loans if that’s something that you’re dealing with. Just learn about finance in general because I can’t tell you how simple it is to — you know, it’s just like learning therapeutics, it’s just like learning pharmacology. And it sounds very, you know, overwhelming, it sounds like, man, like I don’t speak this language, but it’s the same thing, right? You just have to put in time. It takes a little bit of effort, but if you do it step-by-step and utilize I think the community that you guys are building with Your Financial Pharmacist, that’s another awesome thing is you have other people out there who are going through the same things that you are and you can learn from them and you can ask questions and you can interact with them. And so that’s I think step No. 1 is really just taking it on your own onus to learn about personal finance because that, I believe, is going to save you a lot of stress in your future or wherever you’re at in your career. So I think that’s kind of one step that I see. The second step is having those conversations, like you said, those difficult conversations and coming up with these creative ways but really trying to, again, figure out in your current workplace, in your current situation, in your current life, what is something, what is one thing, what is one thing that you could be doing that could be challenging or helping to, again, look outside of pharmacy and figure out what that future person, what that future consumer might be expecting. What is one thing that you might be able to start working on that would be able to help the profession of pharmacy. So you know, that could be starting up a blog about your thoughts and your experiences and you know, how things might be different at your workplace or things that you’ve seen with your patient care or wherever you work. That could be starting up a podcast, you know, just like we’re doing here and just like I’ve done over at Pharmacy Universe and just talking to people and having the conversation, getting the word out there. That could be writing a book. I know that sounds very challenging, but you know, there’s a lot of great books out there that I’ve seen, and I think there’s not enough books out there about these topics that we’re talking about today, about how pharmacy is evolving and kind of what different opportunities that there could be out there. So those are kind of three areas that I could see. I believe personal finance is a big one, thinking about building a personal brand is probably the second one, and then the third one is connecting with the community and just figuring out how to disseminate some of your ideas and thoughts that you have — or at least learning from others that have those ideas.

Tim Ulbrich: Great stuff. And if I could add a few things to that list that are on top of my mind. You know, one for me is you’ve got to be a part of the conversation. So whether that means being active in your local, state, national organizations, you know, on this podcast, we’ve done a lot of work with the American Pharmacists Association. It could be your state pharmacy association, your local group, because to be a part of the change is different than just complaining about it, right? So pay the membership dues, get involved, be at the table. And second to that comes being a part of the change when it comes to legislation and advocacy. So if you want to see a change, I’ve seen this firsthand with the work with Ohio Pharmacists Association, it’s not as difficult or overwhelming as it may appear from the outside looking in. So engage in those areas. And then Deeb, one of the last things I want to mention here is I’ve been trying to do more self-development outside of the pharmacy space. So I felt like I kind of fell into this rut of, you know, I’m always learning from pharmacy literature, pharmacy conferences, all great, but there’s so much to learn outside of the pharmacy space, even outside of the health profession. So I’ve been listening to some podcasts and reading some books lately, watching some TED Talks. One of the things that’s catching my attention recently is some more U.S. History type of stuff. I was just listening to a podcast on FDR to Harry Truman and that evolution and struggles and challenges, one back to the American Revolution. And I think getting to think in a different way to say, here were leaders and individuals and people and times in our history that had very challenging points where they had to pivot and make a decision, and they had to rally people around them to achieve a shared vision. And so we will link to some of those in the show notes, but just getting out there and saying, I’m going to do one thing, like you mentioned. Maybe it’s getting out there and getting inspired from some TED Talks or books or podcasts or joining an organization and becoming more active. I think there’s lots that we all can do collectively as a group and a community to move forward. So what I want to do is end on a few rapid-fire, Q&A questions for you while I have you here. So I’m going to ask you questions, quick answers, and we’ll move through these one-by-one. So first question is, the trend in pharmacy applications, which is currently down, will continue over the next five years. True or false?

Deeb Eid: I think it’s true.

Tim Ulbrich: One piece of advice you’d have to a prospective pharmacy student in light of today’s conversation?

Deeb Eid: Learn about personal finance as much as you can.

Tim Ulbrich: Awesome. And finally, what is one piece of advice you would have to current students that are worried about the job market in terms of getting full-time work and the rising debt loads that they see?
Deeb Eid: I would say work on building your personal brand and make sure that you are utilizing your time so that you are one of the top candidates when you graduate and that you have options.

Tim Ulbrich: Great stuff. Deeb, thank you so much for coming on the podcast today. And for our listeners, we’ll link to the show notes, but if you’re not yet familiar with the work he’s doing over at the Pharmacy Universe, check it out. I’ve listened to the episodes you’ve published so far. I love the telehealth components, getting us to think different legislatively, trying to push the envelope, so thank you for the work that you’re doing over there and very much appreciate you taking the time to come on today’s show.

Deeb Eid: I appreciate it, Tim. And can I mention one thing? Because you had mentioned a couple of the different avenues of books and podcasts and that before I go?

Tim Ulbrich: Yeah, please. Please.

Deeb Eid: So there’s a book that I recently picked up — and if you’re not familiar, check out the YouTube channel, it’s called Impact Theory by Tom Bilyeu. It has some awesome interviews on there that really challenge you to think outside the box. So one of the interviews that I was watching had this particular person on here, and he wrote a book. And I actually just picked up the book here in Boston, but I’m going to recommend it. It’s called “The Third Door,” and it’s by Alex Banayan. And so basically, it’s this guy’s story about — I’ll give you a very quick summary. He says that there’s really three ways, that life is like a nightclub. There’s three ways in. There’s the first door, which is the main entrance, that’s where 99% of the people wait, hoping to get in line. They’re hoping to get into the club. There’s the second door, which is the VIP entrance. That’s where billionaires and celebrities get in. But then the one that no one tells you about, and that’s the third door. It’s where you have to jump out of the line, run down the alley, bang on the door 100 times, crack the window open, sneak through the kitchen. But he says that there’s always another way in and to be always looking for that way in. So I think that that kind of goes along with the theme that we’re talking about today.

Tim Ulbrich: Yeah, we definitely need a third door right now and people knocking on that door, so thank you for sharing. And I have a problem that when I hear of a book recommendation, literally within five minutes, I have to buy it. So I will be doing that right now and look forward to reading that on a vacation coming up in a couple weeks. So Deeb, again, thank you so much. And to our listeners, as always, thank you so much for joining us. Looking forward to joining you again next week.

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