The New Math for Old Student Loan Debt – Episode #416

The government added some new twists to old student loan debt. Now there are numerous reasons why you may need to rethink your repayment approach. If you have student loans, not understanding the changes could prove costly. On this episode of the Dentist Money Show, Matt talks with Travis Hornsby of Student Loan Planner, who explains the new requirements and new math.

Show notes:
StudentLoanPlanner.com

 

 

 

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Podcast Transcript

Matt Mulcock:
Hello everybody. Welcome to another episode of the Dentist Money Show. Today we are talking about one of the most important topics on probably most of your minds right now, which is student loans. We have Travis Hornsby from Student Loan Planner here to talk about all the important deadlines to be thinking about before the end of the year. All the different new programs that are out, specifically the SAVE Plan. He highlights how complex things have gotten in some ways in a good way, right? There’s a lot of different options and strategies you can implement that maybe weren’t there before with these new programs. So, Travis is here to talk all things student loans. Super valuable conversation. I hope you enjoy the show.

Announcer:
Consultant advisor conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors a registered investment advisor. This is Dentist Money.

Matt Mulcock:
Welcome to the Dentist Money Show, where we help dentists make smart financial decisions and avoid the bad ones along the way. I’m your host, Matt Mulcock. I’m actually filling in, as they used to say in the good old news days. I’m filling in for Ryan. He’s on a flight right now. So this is, I feel showing up for a concert and the cover band is there instead. So here we are, but here with Travis Hornsby, student loan planner, founder, and CEO, right. Travis, you founded in, you’re the CEO of student Loan Planner.

Travis Hornsby:
That’s correct. But you know, I know we’re the cover band, but Taylor Swift comes on after us. So you definitely wanna pay attention to the shows.

[laughter]

Matt Mulcock:
Yes, exactly right. Well Travis, thank you so much for being here. As I was telling you before we went on, we’ve been talking a lot about this in our client only huddle. We’ve had a bunch of Facebook lives about this, just what’s happening with student loans, and I know we’re going to jump into it, but as we’ve been having these meetings about, man, we got to start putting out some more education and content around, around student loans. You were the first person that all of us mentioned. So this is your, I think, your third time on our show. So I’m sure a lot of people, and then I know you’ve made the rounds in the, you know, obviously around student loans. But if you wouldn’t mind, let’s just start with just maybe a brief background of you and how you got to this point.

Travis Hornsby:
Yeah. So, used to be a bond trader, traded about $10 billion of bonds doing that. Built up a lot of Excel skills, kind of saw student loans from the vantage point of a relationship. So I’m married into student debt from my wife’s medical school loans. And I just sort of felt it’s not crazy to beat the market in the bond world ’cause it’s not quite stocks, right? It’s less efficient and there’s, you’re taking very risk adjusted bets. It’s very small bets you’re taking, right? So you’re, but you’re hoping to outperform by 10 basis points or something like that. It’s very risk control.

Matt Mulcock:
Yeah. Over big amounts of money.

Travis Hornsby:
Yeah, a big amounts of money. Yeah. So it’s, so sort of looking at doing that with my life, but then I saw my wife, how easily she could get six figures in savings just from a deep understanding of the student loan rules. And I was like, this is a lot easier [laughter] And so you could call it laziness, but you know, I was just, this seems a lot more, important and useful application and my skills to do this. So that’s kind of why I did it. And then she deserves the credit for telling me, “All my friends need this help too, and so you should charge them because they desperately need it.” And so I just kind of fell into it and then got busier than I could handle on my own. And then we added one consultant that did great job, and we added a second and a third and it kind of spiraled from there. So we’ve got, I think is terrible that, I don’t know.

Matt Mulcock:
Spiraled upward. Spiraled upward.

Travis Hornsby:
Spiraled upward. Yeah. Or accelerated, launched from there. So I think we’re up to, I think we’re up to 15 to 20 consultants. It’s bad that I don’t know exactly how many but we’ve got a lot. And so we do hundreds of plans in a month, is a typical month for us.

Matt Mulcock:
Wow. That’s awesome. And no, first of all, that’s not, that’s a sign of your growth when you’re like, “Oh, we’re somewhere between 15 and 20.” I mean, you’ve grown a lot, which is obviously a result of how well you guys have done and what value you guys add. So I think last time you spoke to us, I want to say it was like half that, if I’m remembering correctly.

Travis Hornsby:
Yeah, it probably was.

Matt Mulcock:
Mainly not this. It was a lot less.

Travis Hornsby:
I’d say spiraled ’cause [laughter] I don’t know if people can tell, but I’ve been a little stressed…

Matt Mulcock:
‘Cause you feel like…

Travis Hornsby:
Well, it just, you know, we had a week last week where we had almost 500 people book in one week, and…

Matt Mulcock:
Oh my gosh.

Travis Hornsby:
And so we got a backlog going out till October, and it stinks to have a three month waiting list, you know, it doesn’t matter if it’s good from a business perspective, it just sucks as a human, right? You know, your audience is going to get that, somebody’s a new patient and they come in and they want to get an appointment and you’re like, “Great, come see me in eight months.” It doesn’t…

Matt Mulcock:
Totally.

Travis Hornsby:
It doesn’t feel good, even if it’s good for business perspective. So we’re onboarding some new folks, we got them trained up. So I think that by the time today this show comes out, I’m committing to having that booking availability problem fixed. [laughter]

Matt Mulcock:
Yeah. Awesome. That’s great. So let’s talk about that. I think the main reason, obviously we reached out to you and you were so graciously agreed to come on and help our audience with what’s happening in the student loan landscape. So maybe, just let’s just back up and kind of talk about what is current, kind of how we got here when it comes to student loans. From the start of COVID to like, and we don’t have to walk through step by step, but just kind of a brief overview of how we got to this point and what’s happening now.

Travis Hornsby:
I’ll go even further back than that, but I’ll do it quickly. So think about student loans like a sandwich. Every time they come out with a new set of rules, instead of replacing all the contents inside the sandwich, they just add another layer, right?

Matt Mulcock:
Like that, yeah.

Travis Hornsby:
So Sputnik was the beginning of government involvement in student loans, that you had the higher education act during the great society in the ’60s got even more involved. And then for a long time it was just governments guaranteeing banks loans to students. So that was the system we had really all the way up until 2010, when the student loan program got nationalized, that it’s all direct loans now, except for people that take their loans out of the federal system by refinancing them to private lenders. Right? So the problem is there’s a bunch of legacy loans out there from before 2010 and the old system, and there’s all these new direct loans that are out there from the new system. And then in terms of the layers of the sandwich, what’s kind of happened is you had the Obama administration obviously is the one that took it all to the direct loan system on the federal side only. And they kind of wanted to bring benefits to borrowers sooner than the statutes allowed them to do that. So they came out with a bunch of executive orders. And so remember the sandwich mentality, right? So then you got the pay plan, and then you got the repay plan, right?

Matt Mulcock:
Repay, yeah.

Travis Hornsby:
And the IBR and all these different layers, right? And the reason for the layers, ICR, the reason for the layers is just because there’s stuff that can’t get done when Congress doesn’t agree on anything. So the executive branch says, “Hey, let’s expand these benefits and make new programs instead of getting rid of old ones. And so then you had a bunch of layers of programs. And then President Trump basically didn’t do anything on student loans either for or against. He left the system very much in place besides the student loan pause, which was a big deal, obviously. Extended that… It extended it going up to a presidential election, then President Biden came in and extended it multiple more times. And so, three and a half years is a very long pause on student loans.

Travis Hornsby:
And coming out of that obviously we’re at the point where we’re going into another presidential election. And so if you were restarting payments, you cannot have the optics of a massive default rate, of a dysfunctional system, right? And so the solution that’s given for that is let’s create a new plan, but let’s make it so much more generous than all the other plans, that it will be the one plan to rule them all. So that’s how this is being marketed for dentists. It’s not that easy. There are some huge benefits with this new plan that will save some people in the audience a ton of money. And then there are other people who actually need to ignore this new plan and do something different. So that’s the big historical context of it all and then there’s a bunch of key deadlines that we’ll get into I think in today’s show…

Matt Mulcock:
Yes, for sure.

Travis Hornsby:
That people that people need to know in terms of just how this is going to affect them.

Matt Mulcock:
Got it. That’s a fantastic summary and you made the reference to three and a half years of it being paused. We literally, it started to become a joke on a joke, every time we were like, “Oh they said it’s going to start again.” And this day and then literally every quarter we’d get delayed and we’d make another joke about it. Finally we’re just like, we’ve stopped guessing when this is actually gonna happen. So I guess quick follow up to that, I think I know the answer to this based on everything we’ve read and we’ve seen, but is there any possibility, you said going into the election year, is there any possibility the rug gets pulled again and something changes? Or is this, how ironclad is this of everything going into place?

Travis Hornsby:
You’d have to have COVID 2.0.

Matt Mulcock:
Okay.

Travis Hornsby:
In the next month.

Matt Mulcock:
There you go.

Travis Hornsby:
And it’d have to be a new COVID. It’d have to be something that’s totally unexpected.

Matt Mulcock:
Got it.

Travis Hornsby:
So in other words, they kept the ability to pause loans in a new national emergency but that’s not happening with a very high degree of probability, right? So, it’s also this is like a congressional law. So that was part of the deal, was they codified it into law, where Biden does not have the choice. Honestly, I think you know both sides try to provide political cover. Right? This is why you can be confident that it’s ending. Biden actually probably wanted this to end because of just how many problems it was causing for him. Pausing, pausing, pausing is not doing anything. It’s just kicking the can down the road.

Matt Mulcock:
Totally.

Travis Hornsby:
But he couldn’t, for constituencies in his own party, be seen to be the one restarting payments. Republicans needed to show they were caring about the budget, the deficit, right? So that’s why they both basically agreed to put it into law because it helped both of them I think.

Matt Mulcock:
It’s interesting you’ve highlighted this a couple times of just the optics and the battle in Washington and how a lot of this stuff gets done based on the optics, even this SAVE Plan which I want to definitely take some time and have you break this down. But that got through but the student loan forgiveness, the full-on forgiveness did not. And you tell me if I’m wrong here, but everything we’re seeing in the numbers where we see is well, the SAVE Plan is probably going to have a bigger impact for most, or at least a lot of people.

Travis Hornsby:
So, yeah, if you really think about a typical dentist, a typical dentist is going to get more money from the SAVE Plan in the first two years of their career than somebody getting 20,000 of cancellation would have gotten if that thing had gone through.

Matt Mulcock:
Sure.

Travis Hornsby:
So, it’s actually, it’s interesting how the math works out It’s very pro dentist if you want to think about it in terms of for sure people to have the debt. There’s I mean from an optics perspective, there’s another round at cancellation that’s being attempted right now but pretty much all observers think that that’s just got zero chance of succeeding. So that’s just an example of there’s all these things that do matter in student loans, there’s all these things that don’t matter There’s sort of headline grabbers and it’s just helpful for people to be able to sort through which is which.

Matt Mulcock:
Got it. And so let’s break down the SAVE Plan if you wouldn’t mind just what are the key points? What are the things you’re saying it’s a dentist friendly, what is the SAVE Plan and what are the key things they should be thinking about?

Travis Hornsby:
Yeah. So couple high level things to think about from this, right? So I’ll, and I’ll just go ahead and say a couple of key deadlines for people to know.

Matt Mulcock:
Yes, that’d be great.

Travis Hornsby:
So, July 30th, the SAVE Plan goes into effect. That’s what they’re saying. We’ll see if that’s actually true.

Matt Mulcock:
Yeah.

Travis Hornsby:
That technically, they probably have some time because interest starts again, September 1. So that’s about a month after they’re claiming this plan is going to go into effect, right? So what does that mean? So the SAVE Plan is taking over the repay plan. So if you are on the repay plan, you’re gonna be auto enrolled in the SAVE Plan. The things that are changing are you’re getting a bigger deduction before you have to pay anything. So it used to be about 1.5 times the poverty line, was your deduction. Now it’s gonna be 2.25 times the poverty line. So this really shows up in a big way, especially for people with big kids or big kids [chuckle] funny. I’ve got little kids, so that’s why I’m saying thinking big kids.

Matt Mulcock:
Yeah me too.

Travis Hornsby:
Big family sizes. Many children is what I should have said.

Matt Mulcock:
Yeah. [laughter]

0:12:35.3 TH: So if you have many kids, this is a big deal. So how big of a deal is it? So let’s say you’re… Let’s say you’ve got a family size of five. The deduction, the new deduction is gonna be be about $78,000 dollars before you have to pay anything. So say you’re a dentist for the stay-at-home spouse, we’re just throwing out a random number, right? You can make a ton of money before having to pay a dime. Now, when the deduction was much lower in terms of what it used to be. So that’s one big change. The other big change is that dentists would want to know about is being able to file taxes separately, so you can file separately for taxes with this new plan and exclude your spouse’s income. So there’s nuances within that as well. So probably about seven in 10 dentists live in, what we call common law states. And so that’s states where if you file separately, it’s just straight up everybody’s income goes in separate returns. It is what it is, if that makes sense. So community property states are where if you file separately, you’ve got to split your income 50-50. So that’s about three in 10 dentists probably. And so filing separately that can give you opportunities if you have a higher income than your spouse or if you have a lower income than your spouse, then you might need to engage in some legal alternative documentation of your income.

Travis Hornsby:
So that’s a cool opportunity that exists with SAVE that didn’t exist with the repay plan. And then the third big thing is the interest subsidies. So there’s an unpaid entry subsidy on repay already, it’s 50% of your unpaid interest, is covered for by the government. But the new plan is gonna be be a 100% of your unpaid interest. So think about what this means for a new dentist graduating, right? You’re in dental school year four, you walk June 2024 and you graduate. So if you get your loans onto the SAVE Plan as soon as you can, your payment is based off of your prior year earnings. So let’s say you made nothing ’cause you’re a student. So that means for the next 12 months after graduation you have 0% interest because you have a $0 a month payment. Year two, you maybe made, let’s say you went to work in September ’cause you’re getting your license straightened out or whatever, right? So maybe you made $40,000 that year. So because the deduction for a family size of one’s about 32,000 you’re only paying 10% on the amount above 32,000 that you earned in that calendar year for year two. So that would mean you’d be paying 10% on $8000.

Matt Mulcock:
Wow.

Travis Hornsby:
So your annual payment would be $800, about $70 a month. So let’s say your annual payment’s $800, but let’s say you have 300,000 of dental school debt. So you’ve got 20K of interest that’s supposed to accrue. So your interest payment is only the $800 that you paid annually. The other 19,200 of interest is fully paid for by the government. So effectively what this new plan is doing is it’s creating a 0% interest rate in year one and a 0.2% interest rate in year two for a lot of people. And in year three, then it’s more significant because you’re looking back at a full calendar year worth of earnings. Right? So kind of some more complications are, a lot of people have been in a repayment for like a long time, right?

Matt Mulcock:
I was just going to ask about this. Yeah. How does that impact it?

Travis Hornsby:
And so the thing is, if you try to get onto this plan and you’re on a different plan, they might ask for your income information early. And if you’re going for forgiveness, you want to make as many payments with as low payments as possible, right? You don’t want to sign up just to get an entry subsidy that might not be that relevant to you. So there’s a bunch of people on income-based repayment pay as you earn, other repayment plans that if you tried to switch over to this new plan just to get the entry subsidy, you should cost yourself money ’cause maybe you’re going for forgiveness anyway. So that’s one example of what not to do. Another thing is, is there’s a couple more deadlines to talk about. So September 1 interest resumes again. October 1 payments resume again.

Travis Hornsby:
So if you were making payments pre-COVID, your payment October 1 is supposed to be what it was pre-COVID. Basically for most people that’s going to last until 2024. December 31, end of this year is the deadline to get additional credit under something called the IDR account adjustment. So let me explain kind of how this works. So let’s say you’re a dentist, you’ve been a dentist for 15 years and let’s say you kind of messed around your loans, you’re in a few years of forbearance, you signed up for a non-income based plan, then you realize you need to get an income based plan, right? And you’re like…

Matt Mulcock:
This does not sound like a dentist. [laughter] Or every dentist that’s out there kind of just bouncing around.

Travis Hornsby:
Right. Bouncing around, just trying to figure it out. You eventually kinda get settled on something and then you’re like, “Okay, I need to get serious about my loans.” Whatever. But then COVID happened and so you’ve got three and a half years of additional credit towards forgiveness from that. So the thing that you can do with this IBR account adjustment, such a big deal is the Biden administration is allowing consolidated loans with the government to get credit based on the loan that’s the oldest in the mix you throw in. So that’s the layman’s terms explanation of what they’re doing. So an example would be…

Matt Mulcock:
Got it.

Travis Hornsby:
You you had a loan from undergrad from long time ago, took time off between dental school, went back to dental school, forbearance, blah, blah. If you consolidate before December 31, you get credit on that new consolidated loan based off of the oldest loan in the mix. So after December 31, it’s gonna be weighted average. So for example, if you got a $3,000 loan, but 200 something thousand of other dental school debt, that new consolidated loan, if you mash them all together can get credit like you’ve been paying consistently on an IDR plan since you were an undergrad. So that’s…

Matt Mulcock:
Got it.

Travis Hornsby:
A massive deal, right?

Matt Mulcock:
Yeah, it’s huge. And so, sorry, what happens after December 31st if they don’t do that?

Travis Hornsby:
Then it’s weighted average. So then if you have a bunch of dental school debt that’s got five years of credit. You’ve got an undergrad loan with 15 years of credit, then you mash them all together and your new consolidated loans got 5.5 years of credit because the dental school debt is so much bigger than the undergrad loan. So that’s…

Matt Mulcock:
Got it.

Travis Hornsby:
That’s expiring. So some people need to consolidate desperately and then some people that consolidate will give up that super low payment from pre-COVID. That’s gonna be, that’s basically gonna be get recertified at a much, much higher income level. So a whole bunch of people last certified pre-COVID with 2018 tax returns. So 2018-2022 is an eternity for a young dentist. I mean your income could have doubled or something like that over that period of time. And so that’s what I’m, that’s why this is so complicated. That’s why we have 500 people book in a week, and the other thing to add even more complexity, the July 2024 is the pay plan. That’s a plan that a lot of dentists have signed up for, because the repay plan did not allow filing separate historically and the, and the repay plan is 25 years and the SAVE Plan’s also 25 years until forgiveness for dentists. So the pay plan is attractive ’cause it’s 20 years instead of 25. And so what they tried to do with this new SAVE Plan is they said it’s the one plan to rule them all, but this is kind of the carve out if you will. So basically the pay plan’s 20 years repays 25. So what do we know about dentists exponential incomes, right? For a lot of them, right?

Matt Mulcock:
Yeah.

Travis Hornsby:
And so if you can shave off those final five years of payments, that’s a really big deal. And so then you have to look at what’s the difference in payments between the pay and the SAVE Plan. And what we find in a lot of our modeling is the difference is around a hundred to $200 a month cheaper on the SAVE Plan. ‘Cause the SAVE Plan’s got a little bit better deduction. But if you’re somebody who’s making a good amount of income, shaving off that final five years of 2000 a month payments is far more important. So the reason why this is relevant is because if you do qualify for pay, they’ve also created a deadline where after July 2024, if you’re not already on it, you will not ever be allowed to sign up for it. And so that’s a pretty intense thing to do because, And so the interesting nuance for this is anybody who became a borrower for the first time between August, 2007 to July of 2014, so if you started undergrad or you started taking out loans or whatever during that period of time, this pay deadline seriously affects you. It’s a really big deal. Any dentist really needs a careful look at this, because it could mean tens of thousands of dollars, even hundreds of thousands of dollars depending on your income, of additional payments, that you might not need to make. Probably tens of thousands if I think about the math. But I mean, it’s like a brand new Mercedes worth of difference for a lot of people and…

Matt Mulcock:
For sure.

Travis Hornsby:
And so that’s a really big deal. And so for people that are new borrowers as of 2014, so you took out your first loan ever after 2014, you qualify for something called new IBR, which is the same thing as the pay plan. It’s a 20 year plan. And it’s available a lot longer. So it’s kinda like everybody has some layer of complexity for sure right now. But I would say in terms of who most urgently needs to talk to somebody, if you kind of stack ranking it right, I would say, somebody who has been in, has had loans for a long time, that’s the most urgent because that’s the person that’s gonna miss out on like years of extra credit that they’re not gonna be have to pay thousands of dollars a month on by taking action now.

Matt Mulcock:
Yeah, it sounds like they’re the ones that have the most flexibility possibly as well. I guess with complexity comes flexibility, but it sounds like those are the ones that have the most options perhaps to like make some changes here.

Travis Hornsby:
So like 30 something, 40 something dentists, 50 something dentists even, that group could save a massive amount of money by looking at their stuff before the end of this year. The other group that could save a bunch of money is probably people who have an interesting tax situation or maybe they live in a community property state. So just for reference, those are Washington State, California, Arizona, Texas. There’s a few more than that. It’s basically like if your state used to be a part of Mexico before the Mexican American war, you probably live in a community property state. Kind of a fun fact. But in terms of the impact of all this stuff, I can’t overstate how big of a deal it is because the other thing, in the past is we never had married filing separately tied to interest subsidies before. That wasn’t a thing. It was either or, like either you have a really low payment or you get interest subsidies, but not both. And now the SAVE Plan is offering both, right?

Matt Mulcock:
Both. Yeah.

Travis Hornsby:
And so a lot of dentists are gonna wanna have a hard look in the mirror and say like, should I actually refinance? Like, should I actually pay down my loans? If you could get a really low interest rate, you might say, well, should I just take my money and put it in a money market at 5%? And just keep waiting to see. I’ll give an example. So like a lot of people are really pro-refinance. We have always been cautious about it. We think there’s a great time for people to refinance, or we think there’s a lot of good opportunities for people to refinance that need to, right? We historically have always tried to mitigate that conflict of interest. So for people that don’t know, right? Anybody with the student loan website at all, that has links that go to these private companies, right? Gets paid a referral commission if you go through the site. And so our approach has always been, well, we wanna have the highest cash bonuses because we’ll take that out of our advertising commission, to get people the best deal, but also to mitigate that conflict of interest as much as possible. So if you think about a fee only fiduciary is not getting revenue from anywhere, right?

Matt Mulcock:
Yeah.

Travis Hornsby:
With us, we kind of thought about it like, well, if we can get people a better deal, if they need to refinance, then I don’t have a problem with that ethically, you know? And what’s interesting is I’m gonna be give like an example of Kaiser Permanente in the physician world, right? This is a group that did not qualify for 10-year forgiveness historically. And so a lot of people saw that two and 3% interest rate that you could have gotten in 2021 and said, I’m gonna be pull the trigger, right? But we were preaching caution because what happened in these latest rounds of regulations is all these docs got pulled in to qualifying for 10-year forgiveness, but only if your loans are federal.

Matt Mulcock:
Under… Oh, okay. Got it.

Travis Hornsby:
Yeah. So think about this for dentists, like what’s the possibility that some future presidential administration says, “Hey, you know what, dentists do a lot of hard work in the community or something, maybe if you take Medicaid, we’re gonna be count you as being eligible for the 10-year forgiveness.” I’m not saying that that’s like a guarantee to happen, but what I am saying is, is anytime you’re thinking, should I pay off my loans or should I not? You gotta think about all the things that could happen and all the things that are likely to happen as well as the current state of things, if that makes any sense. Just because you know…

Matt Mulcock:
It really…

Travis Hornsby:
Yeah. If that makes any sense.

Matt Mulcock:
Oh, no. Go ahead.

Travis Hornsby:
Well, it’s just like if you could, rates are not that low right now, so you might get a five and a half or a 5%, right? A 20 year fix, right? So maybe you’re cutting that down from 7%, maybe that’s a good deal for you. It could be, it could mean if you’re making 500,000 a year, if you got 200K of dental school debt, that’s probably a good decision. It’s probably not a bad idea to do that. But I think a lot of people get way too excited about attacking their loans just because of how complex the rules are and how incentivized people are these days to not pay them down. You just wanna be real careful because if you commit too hard to paying down the loans sometimes might not be reversible and I might get in the way of doing other really important stuff, like fully funding your profit sharing 401k or buying a dental practice or setting up a solo 401k if you’re like a 1099 endodontist or something like that. So we just preach balance basically is my point.

Matt Mulcock:
This is what we were saying on our last client only huddle of like, it’s really hard to find a scenario, again, generally speaking, where this doesn’t benefit a massive amount of more dentists than refinancing which three years ago when rates were where they’re at the SAVE Plan didn’t exist before COVID all that, we were talking refinancing with a lot of dentists just because the ratio, the loan to value ratio or the income to the DTI on their student loans became so compelling that we’re like, look you’re gonna be pay this off with this income so much faster anyway. But the landscape has changed completely it sounds like.

Travis Hornsby:
Well and to be honest it’s gonna be keep changing. So if we really think about what’s happening there’s this gap of student loan reform that could happen between July of 2025 and July of 2029. So what’s interesting is the SAVE Plan they’re also creatively locking you into it. You can still refinance off of it but you can’t switch on to a different income based plan once you’ve been on it for five years starting in 2024. So there’s this 2025-2029 period where you’re kinda locked down and or you’re not locked down yet but after that point you kind of get locked down a bit. And so… But what’s interesting is what Biden did with these regulations is he took the existing plan and scrapped it and made a new one and auto-enrolled everybody in it. If you actually think about that a little bit that’s like a… If you wanna get forgiveness, if that’s your mindset of I wanna get forgiveness of the SAVE Plan it’s kind of a troubling precedent because a future president who has a different political viewpoint could say, “Well this is too expensive of a regulation. We have a national debt problem so I’m going to auto-enroll everybody out of the SAVE Plan back into the old repay plan.” Right?

Matt Mulcock:
Yep.

Travis Hornsby:
That’s why I think I would just say it’s helpful to have that full deep knowledge of it that’s kind of why we’re specialists in this field because it’s like there’s some plans that are written into law. For example the new IBR plan is literally written into the law and there’s stuff like the SAVE Plan, the repay and the pay plan that are not written into law. And so it’s kind of helpful I think to talk through, okay if you’re gonna be make the decision to not pay your loans and pay as little as possible how does that affect your investing plan? How you should be putting more money away somewhere else just in case you said, “oh man we’ve got a different president and they’re pushing people to pay their loans and now I’ve gotta address this. Am I able to do that in my budget?”

Matt Mulcock:
Yeah, yeah for sure. So you’re basically saying this is something I wanted to talk about. You just, you already brought it up which is great. Is just how likely is it that or how possible is it to change anything that’s been put in place right now? It sounds like you’re saying the new SAVE Plan and all the things outside of that IBR that’s written into law, this could, it sounds like I mean I guess they use the term easily loosely but it could easily shift with a change in political power.

Travis Hornsby:
Yes.

Matt Mulcock:
In the next few years if…

Travis Hornsby:
So if we have a Republican president in 2024 that wins that election I would expect that the SAVE Plan will be heavily looked at being reversed. So I don’t think that they’ll necessarily put everybody on a much worse plan than what exists today. But what I kind of think might happen is they might just say since the repay plan is being replaced with this new SAVE Plan they might just say we’re gonna be take everybody and put them back on the repay plan. If that makes any sense.

Matt Mulcock:
Got it. Yep. Yep.

Travis Hornsby:
Right? So that would be fairly easy to do. There would be lawsuits over it but you also have to think what’s the Supreme Court composition? More conservatives. So we think that they might just say yeah sure you can do this. So the soonest they could do that by the way would be 2026 in summer. So the good news I guess is you don’t know how they would do it. You don’t know if they’d create a new plan. You don’t know if they’d just block people from signing up for this plan. It’s very likely they could just say well anybody that wants to sign up for it it’s gonna be be blocked after a certain date. And then you’d have lead time or people that need to be on the plan could sign up for it. So I’m not… I think that the takeaway message from this should just be forgiveness is more of a thing than it’s ever been. There’s more ways to save money with it than there’s ever been. A whole lot of these things expire at the end of this year. And so if you’ve got extra money and you are unsure about what to do it’s probably not a bad idea to get on one of these plans and invest in getting a student loan plan or getting financial planning and take some of that money and putting it towards some other goals to just keep grooming your budget to attack the loans if you had to. But be very cautious about attacking it when it might not be helpful.

Matt Mulcock:
Yeah, yeah for sure. Are there… I’m wondering as far as obviously with dentists specifically a lot of times they’re gonna be have undergrad and then they’re gonna be have obviously grad loans. Is there a difference in this SAVE Plan between those two? Are they approaching them differently? Any nuance there at all?

Travis Hornsby:
Yeah I mean it seems they’re gonna be take a consolidated loan and just take it as 10% of income no matter what. And you have to appeal it if you want the weighted average. So basically for those that don’t know they’re saying 5% of income for undergrad only debt in 20 years still forgiveness on undergrad only debt and then 10% of income for a debt that includes grad school debt. And theoretically it was supposed to be a weighted average. Most dentists might take out 30K for undergrad and 300 for dental school. So it’d be like 9.5% of your income instead of 10. So I don’t talk to that too much ’cause it just it’s kind of complicated and it doesn’t make a big difference for dentists really. I think the biggest thing is probably the interest benefit because a whole bunch of people that came out would make great salaries and historically would refinance. Those people now need to be strategically on the SAVE Plan for a few years while they’re establishing their practice and their career. That’s a big change. People that wanna get that forgiveness happening sooner that were on a payment plan before COVID that wanna get that 20 year forgiveness, that’s a big thing to try to lock that in and make sure you’re set for that. Not recertifying your income unnecessarily, that’s a really big deal. I mean I can’t tell you how many payments that I see for dentists that are three 400 a month and if they re-up it’d be a thousand or 1500 a month ? So that’s…

Matt Mulcock:
Yep.

Travis Hornsby:
That’s something to be just super cautious about. So it’s just a… I mean it’s probably selfishly one of the most fun times to be a student loan consultant because there’s just so many ways you could save money and it’s none of it’s thanks to us. It’s just ’cause the programs that exist. It’s being a CPA that gets to deliver good news or something like that.

Matt Mulcock:
Yeah, Which it doesn’t happen all too often CPAs would probably say, but…

Travis Hornsby:
Yeah exactly.

Matt Mulcock:
What is thanks to you though as far as you guys helping navigate this, just going through this, I’m sure people’s heads are spinning and our heads have been spinning even going through all the different layers of this. I’m curious, and you’ve been in this now for quite a while and you’ve seen a lot of different changes, how surprising was this to you of them? Like once this got rolled out with all the back and forth for three years, how was this about what you expected? Was it better, worse? How surprised were you?

Travis Hornsby:
I was extremely surprised with the COVID pause. That came outta nowhere. I actually don’t think that if it was ever challenged that it would actually be legal the way they did it. One thing that’s pretty interesting about student loans is something’s legal until there’s a court case that stops it. That’s the thing you always gotta think about. And from what I can tell, something that people care about is anything over a hundred billion dollars in cost and if it’s less than a hundred billion dollars, nobody cares about it, in Washington that is. That’s why there’s a lot of these things like the IDR account adjustment that kind of flew under the radar. The SAVE Plan is projected by the Biden administration to be about $130 billion, cancellation was projected to be 400 billion. That’s why you saw a lawsuit about cancellation and not about this new plan. Now we might still see a lawsuit about it, I don’t know. But we’re just, I think part of it is like the optics thing, right? So like you gotta get a political payoff for doing stuff in Washington and…

Matt Mulcock:
Yeah.

Travis Hornsby:
When this is super confusing even for specialists in the field policy people look at this like, what is this? And they just try to move on to other things that are just more easy to understand or just have a better payoff for being involved in it, you know? That’s why I think a lot of these programs have bee allowed to survive just ’cause people don’t understand how much money people are gonna save on it. One example of this is the filing separately thing. This is a head spinner, but say you’ve got two dentists that both have debt, right? In the past I would’ve said file joint. But with these new rules, what’s gonna be happen is, let’s see, if you’ve a family size of five. So if you file a joint, you holistically get a family size deduction based on a family of five. But now if you file separate you each get a family size deduction of one less than your family size because you don’t get to count your spouse. It’s family size deduction of four each.

Matt Mulcock:
Oh, okay.

Travis Hornsby:
What does that work out to you? Family size deduction of four is about 66,000 times two. It’s about like 132,000. And for family size of five it’s about like 78. If you do that math, you’re protecting about an extra like 50K of income that you don’t have to pay 10% on.

Matt Mulcock:
Wow.

Travis Hornsby:
That’s a lower payment of 400 a month every single year if you file separate. And the cost of filing separate aren’t that large. That’s if the costs are not that large. Sometimes there might be some reasons why you would not want to ’cause the tax costs are so high, it just doesn’t make sense. But this is why this new plan is so complex and so interesting is because there’s all these nuanced loopholes that you have to do every day, do this to really understand the nuance.

Matt Mulcock:
For sure.

Travis Hornsby:
Especially, ’cause dental folks have the largest debt, right? So the impact of advice is actually the biggest for dentists, physicians, veterinarians, professionals, right? The typical undergrad borrower with these new SAVE rules, I could probably save them, I think about 20 grand by talking to them, with the way the new mouth works, right? But that typical dental person that we work with saves maybe a 100, 150. Since we charge the same price to everybody, basically the ROI for a dentist is probably…

Matt Mulcock:
Just one up.

Travis Hornsby:
100 or 200x typically. Versus the lower multiple 10, 20, 30x.

Matt Mulcock:
For sure. So it sounds like… Like how many more strategies would you say, you don’t have to go one by one, but just in general, like you’re talking about the savings, how many more strategies does this truly open up for a dentist, like generally speaking? Compared to before, like someone calls you up before you have a consultation, there’s X number of ways that they could go. How has that changed now when it comes to the advice you’ve given?

Travis Hornsby:
I mean, that was not infinite, but close to it.

Matt Mulcock:
Yeah. [laughter] Yeah.

Travis Hornsby:
So one example would be, in the past, say you’re doing a residency, like an orthodontic residency, you could get your loans out of what’s called a residency deferment by requesting a waiver for that. So you could contact your servicer and ask for a waiver only for your dental school loans. You’d still be borrowing for the residency program. So that used to not be that big of a deal, ’cause you’re getting a 50% subsidy of your unpaid interest, you had to include your spouse’s income in the payment, so maybe it wasn’t that exciting. But if you can get 100% subsidy, that’s gonna raise the stakes there a little bit. And also, another thought is, say you always have dreamed of becoming a dental specialist. Maybe you’re a general dentist and you’re like, “Man, I’d kill to go be a periodontist or prosthodontist or endodontist or pediatric dentist or whatever,” the cost, if you wanna think about it, of borrowing is essentially zero. ‘Cause if you’re going for forgiveness already, layering on additional debt, all it’s doing is just saying you’re paying 10% of your income regardless. So the only actual cost of going back for training is your opportunity cost as a general dentist for the time and training. So that is still significant. I don’t wanna say that it isn’t. But it’s like not as significant as you might think.

Travis Hornsby:
And so, I don’t know, we have data, I’m sure you guys have data on the salaries of dental specialists, and it’s a pretty big deal. Particularly if you wanna live in an urban area or a high cost of living area, having that extra specialization can really enhance your earnings and give you additional quality of life options that you might not have. Certainly, if you are comfortable living in a rural area where the need for dentistry is quite desperate, then you could just be a general dentist to make a killing. But it’s just interesting to think about just the life implications of all this. I’ll give you another example. There was a couple that was in, I think Wisconsin. And they were driving like two hours a day each way to work in opposite directions because of loan forgiveness programs would pay ’em like 25K a year or something like that. And they did a consult with us, and they’d been doing this for like two years through the sleet and the snow. And I told him, “Hey, did you realize [chuckle] that this 25K is… Since you only get it for like four years and you’re going for forgiveness anyway, it’s a worthless benefit?” And it was like a really… This really long pause on the call.

[chuckle]

Matt Mulcock:
“Why you gotta do that?”

Travis Hornsby:
Yeah, I know. It was a very long pause in the call, and I think one of them said, “Well bleep.” [laughter] You know?

Matt Mulcock:
Yeah. [laughter]

Travis Hornsby:
And so the good news is they didn’t do that for an additional three years or whatever it was. So I guess the thing is, is student loans are kinda like a very complicated income tax. Maybe they’ll be different and they won’t be that way one day, in which case the traditional Suze Orman, Dave Ramsey type of advice will begin to apply again, perhaps. But until that happens, you wanna approach it like a CPA would, which is to say, “What are the loopholes? What’s this… What are the strategies? How do I take max advantage of everything?” And that’s… I think I’m biased, like I said, but I think that’s what we do better than anybody else in the world.

Matt Mulcock:
Yep. I would completely agree with that. And yeah, it sounds like more than ever, you can’t be taking a either dogmatic or simplistic approach to this stuff. The sandwich has been… The ingredients added to the sandwich, it sounds like, are, again, more complicated than ever. So just as we wrap this up, Travis, just would love to hear as far as like what would you say to dentists out there just kind of saying, “Here’s your next steps, here’s the next things that you should be thinking about?” Obviously, reaching out to or looking at studentloanplanner.com, I think would be number one. But just in general, what are steps they should be thinking about, obviously, to make sure they’re hitting these deadlines?

Travis Hornsby:
Yeah, I would say if you haven’t thought about your student loans in a while and if this episode’s sounded intense to you, if you’re like… I guess three different types of people. You don’t have any debt anymore, great. If you have any friends that you went to dental school with that…

Matt Mulcock:
They’ve already turned it off. They’ve already turned it off. Yeah, yeah.

Travis Hornsby:
Yeah, that’s true. But if you’re just listening to this for the walls, tell them about Student Loan Planner. And then if you have debt and this episode made total sense to you, then take action. Follow the free stuff at studentloanplanner.com. We’ve got a lot of calculators that a lot of DIY-ers use to try to attempt to figure out what their plan should be. I will say it’s a very high likelihood that you’ll cost yourself far more money DIY-ing this. You probably say the same on a lot of financial planning kind of stuff.

Matt Mulcock:
Definitely. Yeah.

Travis Hornsby:
And then the people that listen to this episode and thought, “Wow, this is intense, this is overwhelming,” we can make it easy for a few hundred bucks. So that’s our business model. So studentloanplanner.com/book, B-O-O-K. Pretty easy to remember. You can type that into your browser and that’ll take you directly to the booking link. And I would just emphasize that you really need to schedule a call as far from before the end of the year as possible. So that would be my recommendation. Simply because if you need to take action, we want you to be able to do that action, have the stuff settle, and just confirm that everything happened the way it should with time to spare.

Matt Mulcock:
Definitely.

Travis Hornsby:
So think about you wanna do anything. Buy a dental practice, whatever. You want it to close by the end of the year, okay, if you wanna do that, you wanna make sure it closes like December 1, not like in the middle of holidays or something.

Matt Mulcock:
For sure.

Travis Hornsby:
So that would be the suggestion, is… And also, we have… Again, for other DIY-ers, we have The Student Loan Planner Podcast, where if you like this episode, you’ll like a lot of that kind of stuff. So those are the different resources, studentloanplanner.com, and the podcast to the same name for DIY-ers, and then studentloanplanner.com/book if you need a consult.

Matt Mulcock:
Yeah, no, that’s great. And I can, again, only… Like right now, more than ever… Again, just going through this, everything you’re describing in the SAVE Plan, and we’ve been reading about it on our side, trying to educate as much as possible, but obviously had to bring on someone… Had to bring on the expert. Just hearing it all, my head is spinning with all the different strategies or possible things that you could… The different directions you could go. And then most importantly, the level of consequence of getting it wrong, I’d imagine it’s kind of… It sounds like good and bad. There’s never been probably more opportunities to save on student loans. There’s also, it sounds like, never been a way to make more large mistakes.

Travis Hornsby:
Absolutely. You can casually make a low five-figure error in one year right now. [chuckle]

Matt Mulcock:
Yeah.

Travis Hornsby:
Very casually with one simple button push that was wrong.

Matt Mulcock:
For sure. Yeah. So, well, Travis, this is fantastic. Anything else? Any final words of advice or mistakes to avoid or next… Anything else that’s on your mind that you’d wanna throw out to the good people?

Travis Hornsby:
Yeah, I think the… I’ll say this at a high level, and this is something that kind of, I think, speaks to what both of our businesses can do for people. But don’t underestimate the power of getting specialized help for something in life. I think… I’ll give you a little vulnerable example here. I had two chipped front teeth, and it was pretty embarrassing. But I went to a prosthodontist to get that specialized restorative expertise, and now people can’t tell anymore. I can tell if I look really close in the mirror, you can see… Shine a flashlight, you can tell. But that was…

Matt Mulcock:
I’m looking at you right now. I can’t tell. I can’t tell.

Travis Hornsby:
Exactly. Yeah. So luckily… Otherwise, nobody would book with me if they could see how I really am originally. I’m joking around. But I think a lot of dentists don’t appreciate how complicated stuff is from the perspective of student loans or like, say you wanna sell your dental practice one day. Decades of tax lost harvesting and investing makes a massive difference. Donating appreciated shares to charity, massive difference. Selecting the right accounting method when you go to sell something out of your portfolio to buy the vacation house down payment, massive difference. So I think just there’s… Some dentist told me a joke or something that said something like, this dentist was like, “Yeah, my lawyer told me he could save me 10 grand. I was so excited, and he billed me for 20.” I mean, [laughter] I get that joke, like, I get it. But I think it’s fair to say like both of our businesses are not like that, right?

Matt Mulcock:
No.

Travis Hornsby:
We’re gonna add a… Either one of us, if you need us, will add a ton of value to your life. So I would just say the sooner you get that expert help in your corner, the faster you get to all these goals and get to the place you wanna be. So that’s what I would encourage the listener today, is just whatever you’re thinking about, financial planning, student loan planning, whatever, get off the fence. Spend the money, take the risk. And I would say that in life in general. So if you’ve got some big thing you’re waiting on, like buying a practice, expanding your practice, going back for a residency to be a specialist, whatever, you’re iffy on, take the risk. It’s a very low risk. Love to tell our dentist that. It’s very, very low risk to do this. Because it’s like you’re on the 20 yard line and you’ve got three seconds left in the game. All you gotta do is kick the field goal. That’s all you gotta do to win the game. And it’s like you probably want the guy who’s holding the ball for the field goal to be a specialist holder, versus just…

Matt Mulcock:
For sure. The water boy.

Travis Hornsby:
So those are… Hopefully, that’s a fun analogy to end on.

Matt Mulcock:
Yes. No, that’s great, Travis. I love what you said there at the end of, get off the fence. That’s something we’ve talked a lot about, I’ve been talking a lot more about internally in our business, but also with our clients when we do speaking engagements, is just having more of a bias towards action, and that’s really what you’re referencing. I think with stuff like this that gets really complicated, it leads to… Lack of clarity generally leads to lack of action. And so I think what you’re saying is get educated on this. We use Student Loan Planner, by the way, for education all the time. We’re always on there. And as you mentioned, we’re fee-only fiduciaries. We get no kickbacks from many of this relationship. We just think so highly of you guys. So I think really easy action item. As you mentioned, definitely reach out to Travis. Go to studentloanplanner.com. I think there’s, again, never been a time more critical, if you have any questions on this, to get with Travis and his team. So with that said, Travis, thank you so much for being on and adding so much value to all the dentists out there. I would love to maybe do a webinar or something, do some more content and education around this before the end of the year to help everybody out. So really appreciate your time.

Travis Hornsby:
Thanks for having me, Matt.

Matt Mulcock:
Yeah. And thanks everyone. Till next time. Bye-bye.

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