These Changes May Be Coming to Your Student Loan Debt – Episode 241

With so much talk about student loan debt, what does the future hold?

On this episode of the Dentist Money™ Show, Ryan interviews Travis Hornsby of Student Loan Planner, experts at helping dentists and other professionals figure out what to do with their large loan debt. 

In a wide-ranging interview, Ryan and Travis cover the CARES Act pausing of federal loan payments and how long that might last; what the future may hold for student loan debt; why a tiered approach to your debt might make a lot of sense for you; and a whole lot more.

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Podcast Transcript

Ryan Isaac:
Hello, everybody. Welcome to another episode of the Dentist Money Show. Thanks for joining us today. We talk about one of the biggest pains you will ever feel in your career and life as a dentist. I’m, of course, talking about the student loan. Today on the show, we’ve got Travis Hornsby from studentloanplanner.com. We talk about everything going on with student loans, refis, rates, COVID, federal actions, everything you need to know about the current state and future state of student loans. Stay tuned. Thanks for joining. 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. Now, here’s your host, Ryan Isaac.

Ryan Isaac:
Welcome to the Dentist Money show where we help dentists make smart financial decisions. I’m your host, Ryan Isaac joined by a man who knows more about probably your biggest pain in life than anything else you suffer from, should be the student loans. Travis Hornsby from studentloanplanner.com. Travis, thanks for taking time joining us. How are you doing, man?

Travis Hornsby:
I’m doing great. My teeth are sparkling. I went to the dentist a couple of months ago. As soon as it opened up, I decided to be the guinea pig. No cavities, so I’m fantastic.

Ryan Isaac:
[crosstalk 00:01:18] man I try my hardest to do my checkups and get my hygiene done, but I’m still, since childhood, like a reluctant dentist visitor.

Travis Hornsby:
I love going to the dentist probably because I haven’t had a root canal yet.

Ryan Isaac:
That’s probably why.

Travis Hornsby:
Yeah. I always get new toothbrushes. I don’t have to go out and buy them at the store. It’s-

Ryan Isaac:
Very economical when new toothbrush and supplies. Well, Travis, we have so many questions for you. What a hot timely topic talking about student loans and student debt and kind of all the stuff that’s going on. Let’s do it quick. First, give us some intro or background about who you are, what is the studentloanplanner.com company. We’ll go from there.

Travis Hornsby:
Yeah. The federal student loans are probably the most complicated consumer debt that exists in terms of just all the options, how to manage it, what do you do, what’s the smart way to do it. It’s not like a credit card. If you have a credit card, you know what you have to do. You have to pay it off or declare bankruptcy. Those are the two options, or settle it. It’s like a binary decision, like, get rid of it or don’t get rid of it. Your credit’s screwed for a while.

Travis Hornsby:
The student loan stuff, you can do all kinds of stuff. Me personally, I got into this because my wife’s a physician. She had a lot of medical school debt. She got really bad advice, cost us at least five figures, probably six figures just in terms of getting forgiveness done the right way. She was one of those people that could have benefited from forgiveness and then got bad advice and then ended up losing out on a lot of money. I was a bond trader at the time, so I was very quantitative, excelled models all day trying to figure out how to do actively trade bonds which is really different from trading stocks.

Travis Hornsby:
You have to go pick up the phone and call Goldman Sachs and say-

Ryan Isaac:
Old school.

Travis Hornsby:
Yeah. I’d like to put in a bid for 10 million New York City [GEOs 00:03:11] coupon with four. I want a bid 390 yield or something like that. It’s just real different.

Ryan Isaac:
Then the other human is like, “We cannot do that. We can do this [crosstalk 00:03:25].”

Travis Hornsby:
Exactly. Exactly. They’ll say, “No How about 3.8%?” You settle on 3.85. It’s just [crosstalk 00:03:34]. It was it was exciting. I was working for one of the largest money managers in the world and certainly great career path. My CFA subs own on that portfolio management kind of path. As fun as this can be sometimes, it’s just not what I like the most. It’s not what makes me most excited. I saw this opportunity to help people which is what I really like doing, plus, use the quantitative skills of modeling a really complex problem that we had problems with personally.

Travis Hornsby:
I thought, “Okay. This is kind of a idea. I’m just going to go try to do this instead.” I did. The thing that helped us get the escape velocity was the spreadsheet that we put out got viewed 500,000 times. I say we. At the time, it was just me. I put out this spreadsheet. It got shared a bunch. People realized that I knew more than the average person about what I was talking about, and so, people started reaching out to me for help.

Travis Hornsby:
They’re like, “We’ll pay you for help.” I said, “Okay. Well, let me try to do this.” That’s how we perfected this model of charging people for one-hour consultations to make student loan plans. That’s all we do. That’s allowed us to sort of be the Starbucks of student loans where you’re going to get good quality for a much more affordable price than a lot of other sources of help out there. I like to think because we have that narrow focus, we’re probably the best at it, I think, because that’s all we do.

Ryan Isaac:
That’s cool, man. What year did that all kind of start snowballing for you?

Travis Hornsby:
We’ve been doing about four years. It’s about 2016, have advised about a billion dollars of student loan debt so far.

Ryan Isaac:
It’s amazing. Well, let’s go right into some of the things that are on top of everyone’s mind. If someone’s listening to this later down the road and somehow forgot about the year 2020 which I don’t think anyone probably ever will, we are still in the middle of the COVID year and the shutdowns and states reopening and reclosing. There’s all sorts of programs coming out from the federal government and still a lot of question marks up in the air. Most dentists probably got back to work in the last four weeks or so, six weeks. So, kind of a crazy year. Let’s just start there.

Ryan Isaac:
What changed in the student loan world because of COVID?

Travis Hornsby:
Well, they did something they’ve never done before in history which is they put all the student loans on pause. They just paused everything, zero payments, zero interest. This was unprecedented. This has never happened before. They’ve done it for Hurricane Katrina victims or the tornado hail storm in Kansas or something. They’ve done that before for a very small area, but never the whole country. They did that, gave everybody credit for forgiveness. That’s going to expire September 30th. I’m very closely monitoring whether or not they’re going to extend that basically on Monday. That’s when they’re going to start debating it.

Travis Hornsby:
I’m awaiting drafts and bills that are going to come out to try to figure out if it’s going to get extended, but that’s a short-term thing. I’ve got a lot of pain in my tooth. I want to get the right drug in there to numb the pain until Wednesday. That’s the equivalent whereas your long-term treatment plan, that’s what we’re really focused on. That’s why we’ve continued to see a lot of people continue to book our services even though they don’t have to pay anything.

Travis Hornsby:
I was thinking that would fall off a cliff just because you don’t have to pay anything. Why think about your loans? But that’s-

Ryan Isaac:
That’s why you discuss it. Yeah.

Travis Hornsby:
Right. The thing is that’s not what we do. We make long-term plans for people’s loans where they don’t have to worry about it anymore. This is just a temporary reprieve. I was excited to see people continue to recognize that value. I think in terms of what does it mean for the long term, what’s going on in 2020, here’s what it means. The government is very likely to fulfill its forgiveness promises. It’s very likely to keep the rules as generous as they are now or even more generous long-term. How do we know this? Look at the trend of programs in society. We’re moving towards more accommodative policy by the Fed. We’re moving towards more even more center-left proposals from a policy perspective.

Travis Hornsby:
Again, it’s very clear. You’re seeing more and more programs that are passed. Do you think that you’re going to go the other way and say, “We’re going to take away loan forgiveness. We’re going to take away income-based repayment.” There’s no chance of that happening. I think that’s one thing people should realize. I think that’s what 2020 has really showed me, is that forgiveness can work out really well. You just have to figure out whether or not you’re a good candidate for it.

Ryan Isaac:
Okay. We got the pauses. We had some Federal help come through in different ways, unemployment benefits, and some different things like that. Anything else you’re watching for that might be an extension or new benefits added, anything like that?

Travis Hornsby:
Well, there will be probably. I would be a little surprised if they don’t extend the Cares Act a little bit longer. Specifically, I think that they’ll probably extend it through either the end of the year or maybe as much as June like anything in between, June 2021 and December, end of this year. That’s what I would believe. If they started payments again, again, I’d be a little surprised. I could see them doing that just because it’s Betsy DeVos’s education department right now. I would not be too surprised if they didn’t extend it either, I guess, but I would say base cases, they’ll extend it.

Travis Hornsby:
But again, that’s just going to help out people a little bit short term. I think that the thing that we really need to be thinking about is right now, if you owe less than 1.5 times your income, your taxable income, then, you should probably refinance and pay it back. I’m talking about not including any interest freezes. Just during normal times, obviously, if you have federal loans right now, don’t refinance. I’m not saying to do that. I’m just saying during normal times, if you have a DTI, debt-to-income ratio below 1.5 to 1, then, you shouldn’t refinance.

Travis Hornsby:
You’re making 200,000 a year, if you have dental school debt less than 300K, you should refinance that maybe to a 20-year term first, just to keep the payments low and then just knock a bunch down on that debt and then refi it again to a super short term and just pay it off. That’s a great strategy for somebody. Somebody in that scenario, we tell people, “Focus on your dental practice if you’re trying to own a practice. Focus on that goal first.” Get your loan on something like repay which is going to get you interest subsidies. Then, you’re going to focus on refinancing and paying it all off once the practice is secured. That’s kind of one dentist scenario.

Travis Hornsby:
The other dentist scenario is somebody who needs to go for forgiveness. And somebody who needs to go for forgiveness usually has a debt-to-income ratio above 1.5. In other words, they make 200K, but they have 400K in debt. That person-

Ryan Isaac:
I mean you got new associates, but making two to 250 with 600 plus in debt. Yeah. That’s pretty-

Travis Hornsby:
That happens a lot. Then, there’s a lot more complicated scenarios than this. I’m doing the real basic one. This 400K debt person needs to focus on retirement, needs to focus on maybe setting up a profit sharing plan, needs to focus on their assets and their investments and savings and not worry about their student loans because it’s going to get forgiven. They just need a plan for the tax implications of that. That’s where we are right now, but here’s what’s going to happen or here’s what could happen that could really throw this off.

Travis Hornsby:
One, you could have them eliminate taxes on student loan forgiveness. Right now, if your loans are forgiven, you have to pay income taxes. That’s a big deal. Taxes on 400 grand plus interest is a huge amount. I think they will probably eliminate taxes on student loan forgiveness. Okay. I think they will. It would be. I think it will happen at some point. I just don’t know exactly when they’re going to do that.

Travis Hornsby:
But I think that they will do it. I can go into a lot of detail why. I don’t want to bore people, but I think that they will eliminate, I think, the student loan forgiveness taxes at some point. If you eliminate that, then your debt-to-income ratio for refinancing needs to be one-to-one. If you have 200K in debt and 200K in income, then you should refinance. You had 250 in debt. You probably shouldn’t. That’s if there’s no forgiving, there’s no tax bomb basically.

Travis Hornsby:
Now, the thing that people need to be paying attention to is there’s two competing plans for student loan reform out there that I think are potentially going to pass. Well, I would say could pass. I don’t want to say will pass. We have to see what happens with the election.

Ryan Isaac:
[crosstalk 00:12:30] One of the headlines for this could be into next year-

Travis Hornsby:
Yeah, 2021. Spring of 2021 I think is when they might try to push something like this through, but one plan which I could potentially see happening with Trump winning reelection would be the Senate plan which is to allow people to pay 10% of their incomes through their paycheck withholding which for dentists would be a huge deal. That would be awesome because I want people to think about dental practice owners are usually S corporations. You pay yourself a wage. A lot of dental practice owners that we see are paying themselves 120,000 a year, just kind of seems like a number that I just sort of pull out of a hat and just say, “Okay. 120K.”

Ryan Isaac:
[crosstalk 00:13:15] common number.

Travis Hornsby:
Yeah. 10,000 a month, right? Who could argue with 10,000 a month? What they would do this Senate bill would allow people to pay 10% of their incomes from their paycheck withholding. Right now, it’s 10% of your AGI which includes distributions from the practice and things like that. Imagine you’re making 350K a year. 120 of it is wages.

Travis Hornsby:
This new bill allows you to pay 10% of 120 instead of 10% of 350. That can make a lot of people that might be very skeptical of loan forgiveness be great candidates for it. Then, the other option that Biden wants to do is allow people to pay 5% of their incomes instead of 10. Biden wants to cut payments literally in half. If that happened, then, what we have modeled is that that DTI of refinancing. Now that drops down to only 0.6. That’s really, really bad. In other words, you have 200K in income. You’d have to have below 120K in debt to justify not going for forgiveness. Biden’s-

Ryan Isaac:
[crosstalk 00:14:21] no dentist almost.

Travis Hornsby:
Right. Exactly. [crosstalk 00:14:24] Basically, virtually, the entire dental profession if Biden’s plan passed in full would need to pursue forgiveness and not refinancing which would be a huge deal and would be a scenario basically where dentists would pay a lot less in their education, but likely, they would have to pay a lot more in taxes. That’s a thing that might happen. I don’t know. I don’t try to discuss whether or not this is all a good idea and everything. I’m just trying to kind of finalize [crosstalk 00:15:00]-

Ryan Isaac:
What could be.

Travis Hornsby:
What is? I’m just trying to analyze the tea leaves here. I think that there’s a lot of different arguments out there for what to do with student loans. That’s not my job. I try to focus on what does it mean for you. That’s my big crystal ball right now is that people that think I got to pay this off, that is not where things are trending. By all means, if you live in a basement in your parent’s basement live on rice and beans and you put every dime towards your loans for three years and pay them off, and even if you shouldn’t have done that, will you end up wealthy? Yes, but it’s not because you paid off your debt. It’s because of your savings.

Ryan Isaac:
You have no spending and you save all your money.

Travis Hornsby:
Yeah. Your time to financial independence or financial freedom would be very minimal based off of just your savings. Those debt payoff disciples, those people will be fine no matter what. They listen to on a podcast, but I just want people to know that those people out there that want to live a normal life and have a decent savings rate of 20%, but still go on nice vacations.

Ryan Isaac:
Yeah. Some balance.

Travis Hornsby:
You can live a super balanced life regardless of your dental school debt. You can essentially treat your dental school debt as a tax instead of a debt which is a wonderful transformation because then, this thing turns into a percentage of your income. You can really say, “Okay. This is going to be this percent of your income for the loan payments, and this percent of your income for the tax bond.” If you put those two together, one thing is you can minimize those strategically by figuring out how to get those to be as low as possible, but you can also say that, “Okay. If my total tax percent is, say, 12 or 13% including the effects of the tax bond savings and the student loan payments.” If you’re making 200 grand a year, knock off 12 to 13% for the combined effects of loan payments and tax bond savings and ask yourself, “Am I better off with that net income than if I had been a dental assistant, or if I had been a corporate employee at some Scottsdale corporate office park, or if I had been somebody not calling the shots from my own practice?”

Travis Hornsby:
That’s really interesting because, then what it tells you is the reason schools are charging so much is because dentistry still is a really good career. It still is a great decision because you don’t have to pay back the debt in full because they’re charging you a percentage of your income. If NYU lost access to unlimited federal student loans, they would have to close their program down pretty much overnight because they’re charging six or $700,000 dollars for the four-year degree program and six or 700 grand for an associate income. A lot of cases, it’s 120 to 140,000.

Travis Hornsby:
You’d have to literally lose 100% of your income just to make the payments on a 10-year plan. Clearly, if you have to think about dentistry with the old rules, dentistry doesn’t make sense as a career anymore, but if you think about it with these new rules which are defined based off of this really complex government program, it actually is a great career and will continue to be a great career and will be one that you can easily provide for your family and live a good life with. That’s the good news, is that people shouldn’t be so dreary on the future of dentistry.

Ryan Isaac:
Cool. Let’s go back to the refi subject that you were on. On your Webin, you can let us know where to turn for some good resources for the listeners out there, but what’s changed in the world of refinancing? There’s a question. We get a lot from listeners and in our Facebookers, like, where do you begin analyzing… And you gave some parameters on refi yes, refi no based on some of the multiples of income, but where do you turn? Where do you start? Do you refinance all the loans into one big one? Do you keep them into separate loans? What if it’s husband and wife? I’ve had clients that are like, “Well, let’s refinance her loans first, keep his on interest only for a while, then, refinance his later.

Ryan Isaac:
Walk us through some refinance situations and especially how it’s going to be moving forward.

Travis Hornsby:
I’ll say that, usually, this idea that I’m going to hedge my risk and have one of us refinance and one of us not refinance, usually, that’s a really bad idea. Usually, there’s some other stuff going on like that you don’t know about. There’s no such thing as hedging your risk by having one of this sell your giant loans to a private lender and one of you not. You should really figure out jointly what is the best strategy. And I’ll say married couples have the hardest time with the loan planning because it is extremely complicated.

Travis Hornsby:
I even didn’t appreciate how complicated it was for the first couple of years I was doing it, but there’s all kinds of things that married couples are not aware of like community property rules in West Coast states, distribution of payments, proportional payments based off of the size of the debt relative to the total marital debt. There’s a lot of stuff. What I’ll say is let me put the caveat there. Right now, only refinance private loans. Right now, until this Cares Act interest rates is over and whenever that is, only refinance private loans. The one thing is we try to get the best deals anywhere on the internet for refinancing. That’s another part of what we do.

Travis Hornsby:
Studentloanplanner.com/refi, R-E-F-I, that’s going to have all those banks listed. [crosstalk 00:20:25].

Ryan Isaac:
[crosstalk 00:20:25] are out actively out there like looking for the deal shop and talking directly to the refinance institutions and lenders.

Travis Hornsby:
Right. If you just Google search refinance student loans, the problem is you’ll find a lot of lists of banks that all pay commissions to the website publisher, but they don’t give you anything back. They don’t give you any kind of bonus for refinancing. They just take that full commission. What we do is we basically rebate a lot of that commission to turn a lot of that money that we would have got into a cash back bonus for the reader.

Ryan Isaac:
Interesting.

Travis Hornsby:
The person that’s clicking on it, so, imagine if you could buy term life insurance, but get some of the brokerage commission back. That’s basically what it’s [crosstalk 00:21:08].

Ryan Isaac:
As a consumer. Yeah. Cool.

Travis Hornsby:
Right. That’s what our model is. That’s why I think people will find the best deals anywhere because of the way we do it with the low commission model, but in terms of how you go about doing it. Let’s say you’ve got 50,000 of private loans and 400,000 of federal. You’re just really making a lot of money like, say, 300,000 or something like that. that 50K, you could refinance that right now. If you can get a lower interest rate, go refi that private loan.

Travis Hornsby:
In normal times, if you’re trying to refi that 400K balance, what we like to tell people to do is use something called the refi ladder. The refi ladder is essentially think about like you’re on the top of a roof. I think about this a lot because my dad made me blow off leaves off of there [crosstalk 00:21:49].

Ryan Isaac:
The gutter cleaning.

Travis Hornsby:
Yeah, like 10 years. He just made me go up there with a blower. I’m just like, “Dad, if I fell off this roof, this is like way more money than what [crosstalk 00:21:58].

Ryan Isaac:
Yeah, but that was like the 80s and 90s. There were no safety rules. You don’t have-

Travis Hornsby:
Right. Well, it’s a lot cheaper to have your son do it because your son can’t sue you. Anyways, so I have this on my mind. If you’re on the top of a roof, you eventually have to come off of the roof. Hopefully, you have a ladder to walk down. With student loans, there’s like different rungs of the ladder that you can choose for the length of your term. The top rung of the ladder is the 20-year term. Then, the next step down is 15 and then 10 and then seven years and five years.

Travis Hornsby:
Five years is that bottom rung of the ladder closest to the ground where you’re going to get to zero the fastest. The problem with that five-year term is your payments are going to be 2% of your principal every month. If you have 400 grand of debt, your payments are going to be 8000 a month approximately. That’s a payment they could interfere with a whole lot. That’s a payment that can interfere with something like right now where you can’t suddenly practice for a while. Then, you get reshut down. You’re like, “What’s going on?”

Travis Hornsby:
Instead, you could do that 20-year payment for starters. That payment on a 400K balance would be like 2500 a month maybe, so a lot more manageable. The idea is you have the 2500 minimum payment, but you pay 10,000 a month because let’s say you have all the accounts maxed out, you’ve got some investments going and you decide I want to be out of this debt as fast as I can, I think that’s a great way to do it. You pay that 10,000 a month which is a lot more than what you owe, but your required payment is only 2500.

Travis Hornsby:
You pay your 400K down to 200K. Then, you refinance it again into maybe a 10-year. And maybe, you cut your interest rate another 1% percent or another half a percent. Then, you pay that 200 down to 100. Then, you take it from a 10-year to a five-year. Then, you pay it off the rest of the way. That’s the concept of the refi ladder is a lot of people think about refinancing. They think about a mortgage refinancing which is it has to be really worth it because there’s a lot of hassle getting the house appraised. It’s pain in the butt. You better save at least 1%. It’s actually the opposite with student loan refinancing. It’s like a five to 10-minute process. You get a cash bonus instead of having to pay for an appraisal. You actually get paid to do it versus have to pay to do it. Then, also, like I said, even if you’re getting only a quarter percent lower rate, it’s worth it to do.

Ryan Isaac:
If I’m hearing that as a listener or dentist out there, I might be thinking maybe it’s a easy process, but that seems tough to just think about with… Say, I run to practice. I mean there’s just so much with that. I’m so busy. I’m swamped. That’s where all my time and mental energy goes. Is that why someone reaches out to student loan finer and you guys keep someone on a ladder schedule if they wanted to implement that, but I’m just thinking, man, if I’m listening to that, I’m going, “I’m probably going to screw that up.” I’m going to [crosstalk 00:24:47] forget what it is.

Travis Hornsby:
Yeah. For 400 to 600 bucks, people press the easy button and hire us to do it, tell them exactly what to do and give them the detailed plan. Then, we do follow-up consults for 100 bucks cheaper than the initial one. If the person wants the easy button, yes, that’s available, and it’s a lot cheaper than… I should say more accessible. It’s probably a better term It’s a lot more accessible than… Just for example, somebody might be a new associate paying a few thousand bucks to have a full financial planning relationship. Somebody might be a big hurdle for them or it might mentally be a big hurdle for them whereas we’re accessible to everybody.

Travis Hornsby:
Dental residents hire us because a few hundred bucks is 1% of their annual income. You know what I mean?

Ryan Isaac:
Yeah.

Travis Hornsby:
That’s one thing that’s cool is the sooner we can help people, the sooner we can get them on that path to hiring to being able to easily afford a financial planner one day, honestly like in a lot of cases.

Ryan Isaac:
I was going to say let’s go really hand in hand because when you’re trying to plan for my payment’s 2000, but I’d like to pay 10 on this ladder strategy or a more aggressive debt reduction plan, but also you want to maintain some balance in lifestyle, in your ability to invest in your career, growing your income, saving for your future, yeah, it does help to have different people in your life to help you do that. I think that’s-

Travis Hornsby:
That was just a hypothetical example. It really depends on the person. If I hear I want balance, I want flexibility, I’m thinking about expanding my practice in a few years, well, then, yeah. 10K would be way too much unless you just have a massive cash pile like I’ve seen those cases where somebody who just says way too much in cash and they’re like, “Well, I’m just holding on just in case.” It’s like for what, the apocalypse? Then, it won’t be worth anything anyway.

Ryan Isaac:
As you’ve listened to our podcast, maybe there’s a question about your finances you’ve wanted to ask. It’s easy to get an answer. All you do is just pick up that phone, give us a call at 833-DDS-PLAN to set up a consultation or if you don’t want to call us, you can just go to the website at dentistadvisors.com. Click the book free consultation button and set it up. It’s free. Do it today.

Ryan Isaac:
A lot of people have multiple loans. They’ve got different loans at different ranges. Does it make sense to refinance everything to one big one or to keep them in multiple loans or what’s the best way to think about that?

Travis Hornsby:
Yeah. If you have private loans already, you should refinance the entirety of those private loans if you find a lower rate, but in terms of federal, a bunch of different loans, maybe you have some Perkins or some Heartland loans or private too, the answer is yeah, refinance all of it, but only if it makes sense. Refinance the whole thing if you don’t have any interest freeze obviously on. The decision is am I financially stable enough, and is my income high enough to justify refinancing and paying this off easily?

Travis Hornsby:
If it is, go do it. If it’s not, you should be going for forgiveness. That’s the thing is like refinancing a part of your loans, I think, is what a lot of people like to bring up. That’s almost always a bad idea, like, “Oh, I want to refinance my ones above 7%.” It’s actually a bad idea because then your federal payment stays exactly the same. Then, the private payment is just added on top of it. You should really refi the whole thing or nothing at all when it comes to federal loans. For private, you should always look to refinance those probably once a year.

Ryan Isaac:
Okay. How many couples have you met that are in seven figure student loan debt? Is it always just that’s tax bomb territory?

Travis Hornsby:
I would say probably maybe a dozen. Half a dozen to a dozen. I was thinking individuals. Couples probably three dozen couples, and a million together. I would say that it’s not always. I’ve definitely seen some cases where one spouse is an orthopedic surgeon. The other spouse is an oral surgeon. Yeah. It actually still makes sense to pay it off, but I’ll say usually that’s tax bond territory.

Ryan Isaac:
It’s still just comparing it to the income. A lot of times, dual specialty married couples probably going to have a higher income.

Travis Hornsby:
Well, I’ll say this too. I’ve seen a case where one person’s a specialist, maybe got a little family support during school and has 350,000 of loans with a 300,000 income. This balance has got 600,00 of loans with a 150,000 associate income. In that situation, maybe it makes sense for them to file taxes married filing separately and have the person with the higher income pay off their loans pretty aggressively whereas the person that has the high debt income ratio just files separately and does the pay as you earn plan instead. That’s a reasonable approach that accounts for both spouse’s situations.

Ryan Isaac:
Yeah. Interesting.

Travis Hornsby:
The other thing too is debt in a lot of cases is not split evenly if things don’t work out from a marriage perspective. Assets generally are split down the middle, but debt is often not split. I mean that’s something else you’d at least want to be aware of if anybody has that in their prenup or something. That’s also something to think about.

Ryan Isaac:
I guess you’re saying as things get more complex, you start adding business ownership and running practices together separately. It makes sense to involve a CPA, an estate planning attorney when you start making big plans for the future like that.

Travis Hornsby:
It does. One of my favorite podcasters, Dr. Howard Farran, always says that student loans are nothing. Your first divorce will cost you three million. There is a little bit of wisdom to that for men and women dentists. A lot of the times, that male or female dentist is the breadwinner in their family. It’s just something to be aware of. A significant amount of relationships don’t unfortunately work out. That’s just something to be aware of. Some people just say, “I’m going to take my chances.” That’s fine. That’s somebody’s personal decision, but I think that the key thing is those marriages that do work out like the joke about it costing you three million, I mean if you stay together, that millions are staying in your pocket and you’re working towards the same goal and having a pretty exciting retirement is probably many years sooner.

Travis Hornsby:
The family that plans together is just way better off. Couples that plan for their student loans together just have an enormously better outlook and outcomes than couples that silo it or don’t talk about it. I mean I’ve seen some weird stuff like people are like, “I do not want this to affect my spouse.” It’s like, well guess what? There’s no way this doesn’t affect them. I have bad news for you. Either your income is lower, they have to file taxes and pay more in taxes from filing separately or you all split up and divide the assets in half.

Travis Hornsby:
No matter what, this is affecting your spouse. There’s no way around it. People need to just get over the awkwardness of talking about their student loan debt and start making plans together versus making their own plans. I think it would work out a lot better that way.

Ryan Isaac:
Yeah. I like that, man. I found that to be completely true in a financial planning situation. It’s always just so much easier when both spouses are at some level involved. Both don’t have the same level of involvement, but when there’s communication about the spending or how money’s getting invested or business decisions, it’s so much easier, man, than trying to do it, like you said, in a silo or loan.

Travis Hornsby:
One thing I’d recommend if you’re not working with the financial planner yet, just get some Mint or youneedabudget.com and just track your categories of where the spending goes because, ultimately, it’s like if my wife looks at me and says, and this is a super…. People won’t understand this reference at all, but she says, “Why did you spend the thousand dollars on those blues playoffs hockey tickets?” You know what I mean? Now, people are going to be listening to this.

Ryan Isaac:
There’s a few fans out there that know you [crosstalk 00:33:18].

Travis Hornsby:
I’m just joking. People are going to listen to this and say, “Sporting events. What are those?” People spend money to go to in-person sporting events.

Ryan Isaac:
[crosstalk 00:33:28] sit next to other humans. You paid a thousand dollars to sit ick to other human beings. That’s really it.

Travis Hornsby:
It was the whole thing. The whole family and first play-off, first Stanley cup in 50 years or something. But in all seriousness, it’s kind of like, “Well, yeah. That’s ridiculous purchase unless you have some sort of budget in mind,” and it’s relative to your overall goals, and you’ve agreed, like, “Okay. We’re going to spend no more than $5000 on sporting tickets this year.” Then, likewise, we’re going to set aside %$5000 dollars for close this year, and like, “Hey.” If I’m nagging her for a dress she bought for a couple hundred bucks, that’s toxic. That can really add up and cause negative emotions in a relationship.

Travis Hornsby:
If that’s in the context of this thing that we’ve agreed on over the entire year, then, I don’t really have any room to talk. [crosstalk 00:34:21] At the end of the same token, if she did have a big month and we’re going over budget on close or something, then, we have a conversation, is like, “Hey, is this spending limit realistic? Do we need to revisit this?” That’d be really helpful because I think a lot of people can fight about money. It’s just important to head that off.

Travis Hornsby:
The student loans, they’re one piece of the big puzzle. I think they just caused a lot of anxiety, and in some cases, depression. People feel trapped and they don’t have options. That’s actually not the case at all. In fact, student loan borrowers are just very much like any normal person. The only difference is you’re losing, like I said, a tax of a specific percent of your income is just coming off the top going to the loans. Then, you have that net income to work with after that. That’s exciting because dentists again have way more income than normal people.

Ryan Isaac:
[crosstalk 00:35:14]. Let’s go two more things really quick here. This has been awesome, and time’s just flying here. Two more questions. One of them, you made a post about some of the changing rules and laws in student loan servicing. Their post was about the coming chaos of student loan servicing. Touch on that. Then, we’ll just close this out with any action items you would give to people over the next six to 12 months.

Travis Hornsby:
Sure. The chaos is basically 10-year contracts approximately is what the student loan servicers get to manage your loans. A lot of people kind of tell me, “Hey, my loans just keep getting sold all these new companies.” Well, that’s not really exactly what’s happening. Basically the government pays private companies to collect its money for them. [crosstalk 00:35:58] Right. Exactly. It’s confusing because you got to go create a new log-in or you have to go make sure everything transferred over. That’s probably going to happen December of 2020.

Travis Hornsby:
Now, it obviously highly depends on who wins the election. Right now, Nelnet and Great Lakes are getting fired. It’s a little bit unclear what’s going on with Navient. Then, FedLoan is probably getting retained for two more years on a temporary contract. Basically, we’re in a situation where if you have a loan servicer with federal loans, you’re probably going to have to go create a new online account, make sure you’ve signed up for the new IBR plan, whatever it is. It’s going to be annoying, but it’s not going to be something you should worry about.

Travis Hornsby:
That’d be like your brokerage account. Company gets a new website or something. You just have to go create a new username and password. It’s just an annoyance. They’ll communicate a lot with you if you need to do that.

Ryan Isaac:
A logistical thing.

Travis Hornsby:
A logistical thing. It’s not a big deal. Just know that there’s just going to be a lot of chaos around student loans for the next couple of years just because of all the elections going to have a big impact on it and the system is very unsustainable obviously. You cannot have dental schools charging a half-million dollars for degrees. That’s just not going to work because if you’re not paying it directly, you’re paying it indirectly as a taxpayer.

Ryan Isaac:
Exactly.

Travis Hornsby:
That’s got to change at some point, but things to think about for the next few years, I would just say focus on what you can control. Another little tip I’ll steal from another dental podcast I listen to is you have to focus on the man or the woman in the mirror. He or she is going to be the source of your success or failure financially. It’s not going to be Bernie forgiving all student loans. It’s not going to be Trump rolling back student loan forgiveness. That’s not going to be yet.

Travis Hornsby:
What we consistently see is at a low savings rate, student loan changes can knock off five to 10 years off of your retirement date which is a big deal, but at a high savings rate, the worst student loan changes are really only going to change your retirement day one or two years. That’s cool because what it means is as long as you save and invest a lot, it doesn’t really matter that much what happens with your loans even though you do want to have a plan and not work an extra year just for the heck of it.

Travis Hornsby:
That’s what I would say. How do you focus on saving and investing a lot? Become a practice owner. I think that my thought on this is if you just think about supply demand curves back from Econ 101, it’s your supply curve is going to contract, I think, because a lot of old dentists are going to want to retire from this, and people will be stressed out, and people will think practice ownership is not a good idea.

Travis Hornsby:
I think the prices that dentist will be able to charge might actually get a little bit of pushback here. You might be able to push back a little bit against all these PPOs that have just destroyed revenues for a lot of dental practices with just how many new dentists there are like with just everything that’s happened. We might see increased returns from being a practice owner. I would suggest to somebody who’s on the fence about it, go ahead and do it. Get 10% down just to have it of cash for what the practice you want to own is and just go try to do that and don’t worry about the loan so much.

Ryan Isaac:
Man, I love that. If I had to give advice to any dentist just in 10, seconds I would say your savings rate is probably the biggest predictor of your financial future. That’s a great tie-in, man. Travis, thanks for spending so much time today. How can people find you? You mentioned a few resources on your website spreadsheet that was really popular for download. Give us a few resources, and we’ll link it in the show notes as well.

Travis Hornsby:
Yeah. Anyone listening to this obviously likes podcasts. We have a podcast, the Student Loan Planner Podcast. You can find that just by typing in Student Loan Planner on Spotify, iTunes, wherever you listen. That’s one resource. If you like reading the Student Planner Blog, if you just go there on a laptop or a computer or something, you’ll see a sidebar that has a lot of different categories. You’ll see a dentist category. If you click that, it’ll have 40 or 50 blog articles everything we’ve ever written about dentist or specialists basically.

Travis Hornsby:
That’s all free. We’ve got the calculator on the site which is free. That’s the thing we use actually in our consultations. You’re not getting our expertise if you get it for free. That’s why people still hire us is because we built it and understand it.

Ryan Isaac:
[crosstalk 00:40:22], man. [crosstalk 00:40:23].

Travis Hornsby:
Right. But we still give that away for free if somebody wants to opt in for that. That’s studentaloneplanner.com. You’ll see the blog. You’ll see all the information about working with us. Then, the student planner podcast would be the two places I would send people. Then, obviously, you can reach out. It’ll be pretty obvious on the site how to reach out.

Ryan Isaac:
Great. Well, Travis, thanks for taking time out of your busy week and lending your expertise. It’s been a fascinating conversation. This is on the top of everyone’s mind. So, appreciate it, man. Best of luck to you. We’ll catch you next time.

Travis Hornsby:
Thank you, Ryan.

Ryan Isaac:
Thanks, everybody. All right. My thanks to Travis Hornsby from the studentloanplanner.com. That was a pretty cool conversation. We still had so many more things to talk about. We’ll probably circle back in a few months honestly [inaudible 00:41:08] sometime early next year. A lot of things going on in the industry, a lot of things with federal involvement and with student loans.

Ryan Isaac:
If you have more questions about how your student loan repayment and how your student loans affect your overall plan, one of the things Travis mentioned was your savings rate which I thought was so cool. Give us a call. Let’s have a chat about your savings rate and how your debt reduction plan aligns with that and keeps it balanced. Go to dentistadvisors.com. Click on the book free consultation button, and get in touch with one of our advisors today to talk about the balance in your plan of your savings rate, your debt reduction, and how you can maintain balance in your plan.

Ryan Isaac:
Thanks for joining us. Thanks for tuning in. We love and appreciate the support as always. We’ll catch you next time.

Debt & Financing