Rob and Paul host Travis Hornsby, founder of the Student Loan Planner which is a financial consulting firm focused exclusively on helping people manage their student loan debt.

To date, Travis and his firm have personally consulted on over $650 million in student loan debt, which is believed to be more than anyone else in the country. And more importantly, they’ve helped their clients save a projected $120 million which translates to about $47,000 in average savings per client.

In this episode, Rob and Paul chat with Travis about the pitfalls of and best practices for managing student loan debt, including how mismanaging student loan debt can stymie a dentist’s ability to get a loan for a practice purchase and/or start-up (in ways that are not necessarily intuitive). Spoiler alert – it’s not a good idea for dentists to DIY student loan debt.

Listeners who want to learn more about Student Loan Planner can visit www.studentloanplanner.com/, email them at Help@StudentLoanPlanner.com and check out the Student Loan Planner podcast: www.studentloanplanner.com/category/podcast/.

Full Transcript:

Paul: Hey dentists and friends, this is Dr. Nacho. I'm so excited to be doing the Dental Nachos Supreme CE coming up soon. It is going to be 24 hours of live-streamed virtual CE brought you on your couch when you watch live it counts as live. Miss an episode, it's going to be up in the group for the entire year. To learn more about this awesome opportunity, reach out to us at dentalnachos.com or email supreme@dentalnachos.com. My number one amigo Rob is going to be one of the presenters for the Dental Nachos Supreme. It's going to be awesome. You're going to love it. It's going to be CE brought to you on your couch. Don't miss out.

Intro: Welcome to the Dental Amigos podcast with Dr. Paul Goodman and attorney Rob Montgomery, taking you behind the scenes of the dental business world. All the things you didn't learn in dental school, but wish you had. Rob is not a dentist and Paul's not a lawyer, but since Rob is a lawyer, we need to tell you that this podcast is for informational purposes only and shouldn't be considered legal advice. Listening to this podcast does not and will not create an attorney client relationship. As is always the case, you should formally consult with legal counsel before proceeding with any legal matter. Learn more about the Dental Amigos at www.thedentalamigos.com. And now here are the Dental Amigos.

Paul: Hello everyone, I'm Rob Montgomery. I'm joined as always by the head nacho himself, Dr. Paul Goodman.

Paul: Great to be here Rob.

Paul: It's good to see you Paul, and welcome everyone to another episode of the Dental Amigos. Today we're going to talk about student loan debt and we're joined by Travis Hornsby, who is the authority when it comes to this subject. Travis is the founder of the student loan planner, which is a financial consulting firm focused exclusively on helping people manage their student loan debt. Travis started the company after helping his physician wife navigate ridiculously complex student loan repayment decisions. To date, Travis and his firm have personally consulted on over $650 million in student loan debt, which is believed to be more than anyone else in the country. And more importantly, they've helped their clients save a projected $120 million, which translates to about $47,000 in average savings per client. So, real numbers, Paul, and Travis is a charter financial analyst and brings the background and skillset from his former life as a bond trader where he traded billions of dollars in bonds to help people make good decisions about managing their student loan debt. So we're lucky to have Travis with us today and now without further ado, here's Travis Hornsby. Welcome, amigo. And thanks for being on the show.

Travis: Yeah, it's great to be honest, the shame that you have to be a bond trader to understand student loans, isn't it?

Paul: It is. It's very telling. Before we start trashing, start with some hard hitting questions. You're in St. Louis, so if we came out there, uh, where would we go for nachos and what's your favorite nacho topping?

Travis: That's a great question. So, uh, I personally like barbecue pork nachos that are in the restaurant just below where we live. It's this place called barbecue saloon in the central West End. So that's a great place to get some really interesting nachos. It's kind of the kind of thing you probably wouldn't find in a place that had really intense barbecue scene.

Paul: I liked the idea and for the first time I'm now, I'm now I'm treatment planning - that's a dental term - my nacho consumption. Cause I might come to St. Louis for a big ASDA event and then in 2020 so I'll hit you up for those nachos.

Travis: Yeah. And my backup plan for nachos is going to a St. Louis Cardinals game. They have these tater tot nachos, which is a little bit untraditional, but they put all the good stuff on there. Jalapenos, sour cream, all the different things you can imagine. And you can only get those certain parts of the ballpark. So, you know, we're, we're really creative with nachos in St. Louis.

Rob: I like that. It's good to have a backup nacho plan, Paul, you got to respect that.

Paul: I like that. Contingent contingency nachos. Always be prepared. I like it.

Rob: It sounds like more like special occasion nachos than a backup. That's the decadent treat, you know, it's like a, you know, game day special occasion nachos.

Rob: Hey Travis. So, tell our listeners a little bit about what you do and what student planner does for their clients.

Travis: Sure. Yes. A student loan planner is basically a specialty firm. We only do student loan planning, so of all the things in the world that dentists can get helped with that's all we do is just help people figure out what to do with their student loan debt. Luckily, that's more than enough for us. It's a pretty big problem, right? So we charge a flat fee, it's around $200 basically, and we analyze all the different repayment options and try to explain how that fits into somebody's practice purchase decisions, or if they're already in a practice, how they run their practice, how that relates to their student loan debt. Our goal is to basically make the student loan anxiety go away completely. Or at least significantly reduce. So that's, that's the real outcome of a consult is once somebody understands exactly what's due, student loans are not nearly as terrifying or worrisome anymore and people kind of get on with their lives and focus on growing their wealth and doing all the things that normal people want to do. Like start a family or buy a house, and run your practice. Things like that.

Rob: Right. That's cool. So, um, I mean you say that, you know, you're looking at all the numbers and looking into the data. As I said, and when I was talking about your, your background before we started talking about nachos. This sounds like something that was perfectly suited to, you know, a skill set that you, that you have and what you've kind of brought to the industry with your bond trading experience to tell our folks a little bit about that and kind of how you've been able to really leverage that to provide useful service to, to people in the student loan consulting space.

Travis: So, you know, when I was trading bonds, I was working for an active fund manager for tax free or municipal bond debt. So it was, it was really pretty intense from a data perspective because you're looking through a hundreds of thousands of different funds trying to find ones that you think are mispriced or kind of ignored. It's really different than the stock market. It's just a heavily kind of programming, Excel-based world. But I really cut my teeth there and learning about Excel modeling and then ended up dating my now wife who had all these student loans for medical school. And I thought I was going to be easy. Right? I mean you have student loan debt kinda, you think it's straightforward, you just pay it off.

Travis: Right. But when I found was that there was all these payment plans where you can pay based on your income and there were loan forgiveness options and then there was also the ability to refinance and it was a bunch of different companies that offered refinancing. So suddenly it went from this one path kind of thing where you just pay the government back what you borrowed to all of these different choices where you could potentially save a lot of money if you got it right. And so we actually thought we were eligible for this not for profit, a loan forgiveness program because she worked at an academic hospital. And it turns out she got bad advice and she consolidated her loans and she'd be on the wrong repayment plan. The collective cost of that was probably like $60,000 or $70,000 in terms of lost money that we kind of missed out on just because we got crummy advice.

Travis: And I thought, golly, this is pretty lousy. And so she had some friends in the medical field but veterinary field, dental field I kinda thing. And uh, you know, sort of started helping them out part time just for fun. Um, and then, you know, I traveled the world for a little bit and basically just decided to make this my full time thing cause there's a lot more fun than flinging around bonds. Cause the, the, the differences in the bond world, super competitive. Like there's very smart people on wall street, right? It's really hard to do well outperforming the market really in anything, even in something as inefficient as municipal bond trading. But in student loans, you know, I can frequently see somebody, you know, tens of thousands of dollars on a projected basis because it's super complex and you know, the person you're competing against is the federal government, which doesn't necessarily have a huge profit incentive on this, right? So people can just get tripped up, kinda like their taxes. I would say there's a lot of analogies between taxes and student loan repayment because it's very complicated. And if you do a great job, it's not like anybody is upset because it's literally the government that's, you know, the on the other side of the table. So that's what we do in a lot of cases is optimized forgiveness programs. And then sometimes it makes sense to just pay it back and so bullet advise somebody on the best refinancing option.

Paul: That's awesome. Travis, a couple of things that come to mind for me. Uh, some of the things I do, I help coach young dentist and Rob and I work together and a lot of transitions. And I also, uh, work with you. I know more senior dentist, we call them seasoned aged dentists, SAD, cause that's, you know, fits there. I said medium age dentist and if you're on not Dental Nachos we call them MAD, like me, and baby age dentists, BAD. So these BAD, MAD and SADs are in this space together and there's a lot of misinformation. When would somebody ideally start working with you? You know, if you're a dental student or resident or you're out of school, when, when would be the first time they'd connect with you to sort of start to evaluate this?

Travis: Yeah, I mean, you know, you can do it before you even go to dental school. Do you know anybody that's in that boat? Because we have a pre debt consult for people to know what they're getting themselves into. Um, we launched that like maybe a month or two ago. Uh, our main service is after you graduate. So literally anytime you, after you graduate, if you have more than probably a hundred thousand student loan debt as a dentist, if we can probably help you enormously. So, and you know that the best time is as soon as you graduate. But you know, generally we can help somebody no matter how far away they are from graduation. And somebody in dental school, the best advice I could give someone is finish. No matter what, just get, get your degree. Like you're not going to be able to change a whole lot about your, your borrowing strategy once you're already in school. So I would just say take out mostly federal loans and you know, we can help somebody who's really unsolicited on doing a consult in dental school. They can just book the same plan as everybody else does. They'll just be fewer actions steps to take. So I usually tell people, wait until you graduate and then just read our website before that.

Paul: Gotcha. That's good. That's great advice. I like to Rob use this term, I like to repurpose this terms. Interesting. Now I've thought about it. He uses the term drill down. He's not a dentist. It just makes, it makes me believe he always wanted to be a dentist and always wanted to be a lawyer. That's why we have this podcast.

Rob: See Paul I spent so much time with dentists I don't even realize it's just like the subliminal thing.

Paul: I have a question. So I like stories and you know, I think our listeners would appreciate and it would help me, you know, and I know we'll talk about a lot of different things, but I feel like these loan repayment options are like playing a game with my five-year-old Daphne where the rules change all the time. I'm like, I thought it was safe over here. It's like, nope, we're not safe over there. And you know, from what I try to understand is like, tell us about like, I leave dental school $500,000 in debt and I'm going to do income based repayment. I know that's you're paying based on your income, but what happens to all the leftover debt? And people say that, you know, there's a lot of things start around tax bomb, things like that. So as we get dig into things here you can give us just a story of somebody graduated $500,000 a debt. They're going to make $130,000 a year as an associate. And what income based repayment actually means.

Rob: Yeah. I'm curious too and how that works.

Travis: What I like to tell people is in America, this is how you understand the big giant mess that we have with student loans in America. So worst case scenario, your student loan debt is just a tax that you give the government in exchange for funding your education. So if you're an associate with $120,000 income and $500,000 in debt, you can't think about that $500K in debt as a debt. Otherwise, if you did, it would make you totally screwed. Because think about $500,000 in debt, I mean, it's paying $5,000 a month. It's $60,000 a year. Your take home pay at $120K of income is probably going to be $80K so are you going to live on $20,000 a year and throw $60K your debt? You're not going to do that. And if you do, you're not going to get into a practice.

Travis: You're not going to buy a house, you're not going to get married. And then what the heck did you become a dentist for? Right? So that's, that's kind of the worst case scenario is that 500K is not actually a debt, it's a tax. So income based repayment is a percentage of your adjusted gross income. It's a percentage of your taxable income, right? And it's 10% for most people of your taxable income. And then we'll talk about the tax bomb in a little bit if you wanted to kind of simplify it. You know, you pay based off of your income for 20 to 25 years. At the end of those 20 to 25 years, you have to pay a big tax bomb on the forgiven debt because the forgiven debt is treated as if it were a bonus happening in that year all at once. So you have to pay, you know, say 30, 40, 50 percent on that forgiven debt all in one year.

Travis: And here's the really interesting insight. So that 10% of your income payment, if you pair that with putting about 5% of your income into mutual funds and say a brokerage account, then you will probably have enough to cover that tax bobm. So what that means is if you look at the 10% towards the loans and the 5% towards your tax bomb that you're putting away in investments, the sum of that's about 15% so here's the analogy that I like to make. If you're an associate making 120K, what you're essentially doing is you're losing 15% of your income to the government in exchange for them paying for your dental education, right? And then the reality is, is if you look at tax rates in Germany, they're like, you know, 50 something percent. And maybe in America they're 30 something percent. So what I like to tell people is, because you went to dental school, worst case scenario, you're basically like a German citizen.

Travis: Okay, you're paying a higher tax rate. So it does it make sense that you went to dental school and you're making $120,000 a year and losing 15% of it to taxes. Would you rather be that or would you rather be a dental technician or the hygiene person making 60K with no student loan debt. Clearly it's much, much better to be that associate with $120K and $500K of student loan debt because you have that potential for upside and worst case scenario, you're just losing a percentage of your income to the government. Right? And what's even cooler is, let's say you start crushing it, let's say that, you know, they get some, some coaching, they get their mindset right? They go and open a giant practice or acquire a giant practice and they increased their revenue even more. And let's say they're making $500,000 a year and they have $500,000 debt.

Travis: Well if you pay 10% of your income, you're gonna pay the whole thing off at a higher interest rate than your credit risk really reflects. And so if you get to the point where you know, you start having your payment be super high, where you start thinking, man, I sure wish I could get out of this tax, you know, then you can really kind of convert that payment into just a think of it and thinking of it like a debt and you can just try to pay it off and you can get a lower interest rate through refinancing. And so that's really pretty, pretty awesome if you think about it, I mean as messed up as our system is, what we've essentially created is a system where we sort of have this socialized system where the person who borrowed the debt actually pays the extra taxes for it instead of all of society.

Travis: And then also the government gives you the ability to kind of buy yourself out of that, you know, conundrum if you're making a lot of money by just paying it back as a debt. So really that's, that's pretty, pretty great. The main problem of course is all of the tax revenues the government is collecting is not going to be nearly enough to cover all of the loan forgiveness. It's going to happen. And so at some point they're going to realize that and at some point they're going to realize they've created something kind of like a Medicare or social security that is this giant entitlement program that they didn't fund.

Paul: It seems like an extremely generous offer from the government, because if you make $150,000 a year as an associate and you're on income based repayment, you're going to feel like you make about $120K right,

Travis: Right, right. Exactly. Yeah. Actually the the future of loan repayment, I would not be too shocked because because student loan repayment right now is basically a tax. This tax has been getting less and less impactful over the past 10 years. Meaning that it started off where it was 20% of your income that you had to pay. It's called income contingent repayment. This is the only option that existed prior to like 2009 and you know 20% of your income shoot, you know you're going to pay the debt off at a really high interest rate. So you might as well just go ahead and pay it back. But then they made IBR in 2009 and IBR is 15% of your income. So they made it less. Right. And then there was an executive order in about 2013 where they came out with the pay as you earn program and this is 10% of your income, but not everybody was eligible for it.

Travis: Okay. And that was 20 years until forgiveness instead of 25, right. And then, and you know, their most recent, you know, a 2015 2016 timeframe, they came out with a revised pay, which is 10% of your income, but basically everybody's eligible for it. And it comes with some interest subsidies, too. So there's, there's a whole bunch of complexities that I don't want to get to drilled down into. You know, we'd be looking at things under a microscope and I'd probably lose some people. But the key thing to note is just that this tax, if you will, has been getting more and more generous for borrowers over the past 10 years. So it's just been a one way trip to making the repayment terms based on your income better and better and better in terms of if you have huge student debt and you're not making enough to just straight up pay it back. So yeah, absolutely a concern that, you know, it's been getting not only generous, it's been getting more and more generous. So, you know, do they change that some point? Right.

Rob: That's cool. And I think what you said a few minutes ago, really what you're talking about with all this stuff and when you're making the decision and like looking at debt, you know, you said, don't, you know, don't look at it like it's $500,000 in debt. It's really, really an opportunity to make money. What we're really talking about is, is cashflow, right? And now that you're going to invest, you know, or take this loan to give you the opportunity to earn more money. And obviously, you know, you can be debt free, but what good is being debt free if your salary is much lower. So it's sort of like a theme that Paul and I talk about a lot that Paul says, I don't quote this because I can't, I don't have the street credit to say Demp dentist cheap. But you know, where, you know, a lot of times I think people become obsessed with, you know, avoiding debt and you know, at the end of the day the cashflow is more important than debt. I mean, debt is one aspect of the equation, but you know, at the end of the day, if, if having some debt helps you to make more money, then that means you're gonna have more profit.

Travis: Absolutely. I got an example of that if you want me to share it. Sure. So there was a case where we had a dentist with about 150,000 of income doing pretty well as associates, and she wanted to open her own dental practice and you know, she did this before, uh, talking to us. So this is kind of the danger of the DIY solution. You have a lot of debt. And she basically said, okay, I get all these things in the mail from these refinancing companies and so I'm going to go ahead and refinance my student loans. Right? And so she refinanced it to I think like a seven year term, something like that, you know. And so she ended up having a required payment that she signed up for, um, for of like, you know, $6,000 a month or something like that.

Travis: Right. And so the reason she did that was because, well she's got $400K in debt at a 7% interest rate and then she could get a, you know, 3.8% interest rate if she refinanced. And so she's thinking, I'm going to save like $12,000 a year in interest or something like that. Right. And so she did that and then the bank looks at her cashflow and it's like, we don't want to give you a practice loan. And we gave a required payment of six grand a month. And then the banks looked at her for a mortgage and they say, we don't want to give you a mortgage for a payment that you have to make up $6,000 a month. And so then what she did is, because she was so myopically focused on the interest costs on her student loans, she prevented herself from getting a bigger shovel to go out and get a higher income by being a practice owner until she pays down that debt to a low enough level for the banks to not be concerned.

Travis: And so what we kind of recommended in that situation is you can refinance from a seven year to a 20 year, you know, to reamortize the loan and get a lower record payment. And so that can take, you know, her payments from like $6,000 a month to maybe like $2,500 or $3,000 a month, something like that. And, uh, and so that kind of approach, um, and I think we might've suggested to you that she paid down that balance a little bit. So then when they do the amortization, it's going to be even lower required payment. That kind of bailed her out of her mistake because she got a low enough debt payment that was required of her that she could still qualify for these things that were more important than just getting a lower interest rate.

Rob: That's an awesome story. And you know, we see that often. And you know, I had several deals over the last few years where people had the misconception that Hey, I'll be more bankable if I pay down my student loans more aggressively and just throwing money at their student loans, living in their parents' basement and not having any liquidity. And you know, when banks go to make loans, they want to see that people have cash on hand. And really, so, you know, Travis, that's your story in the story I just just summarized, really illustrate two things. And I think when people are thinking about buying a practice, one, they need to have cash, they need to have liquidity, they need to have money in the bank if they're going to get a loan. And then two lenders don't really care about the debt itself, the size of the debt, what they care about is the monthly payment, you know, and they want to know what your obligation is to that student loan debt, how much you owe for your car on a monthly basis, how much you owe on your, on your mortgage. And then they want to make sure there's enough money to pay off pay off the practice loan. If you have $200,000 of student debt, $400,000 of student debt, that really isn't the factor when it comes to decision making, uh, from, from a lender standpoint. And so people, I think, you know, and I, I respect people's desire to want to, to, to limit their debt or keep their debt as low as possible. I mean that, that's a great thing. However, in the big picture, it's not as important as having cash and having cashflow.

Travis: What we usually tell people to do, if they think that they're going to pay their debt down zero, they can sign up for revised pay as you earn. And what that does is if you have a certain debt to income ratio, then the government will actually subsidize a portion of your interest while you owe more than a certain amount of your income to debt, you know. So they can get a payment in that case for that $150,000 income person, she could probably get a payment of around $800 to a $1,000 a month and she can probably get an effective interest rate after the subsidies are calculated at a similar level as if she had refinanced. And that subsidy furthermore is something that doesn't go away, even if you're making extra prepayments on top of the loan balance. So for that kind of an example, I would tell that person to get on revised page where, and if, if she wanted to pay it down to zero instead of go for forgiveness, which is another conversation. But if she did that, then she could focus on liquidity and get $50,000 of cash in the bank. And then, you know, I do think that once you get $30,000 of cash in the bank and you're putting a little way to retirement, you know, she, if she wanted to throw a lot of money at her loans and you know, pay down the balance, that's fine. Like, I don't have a problem with that, but we just want to make sure that the tail isn't wagging the dog, which is how a lot of dentists approach their student loan debt.

Paul: One thing I want to say, and Rob has this catchphrase is "friends don't let friends be dentists cheap." And I have this thing I've been saying. I like have these little acronyms, JFO, like just find out from someone who knows. I've seen dentists spend more time researching where they're going to go to dinner for their third anniversary rather than paying off their loans. And it drives me nuts. And I'm not even related to this decision. Like, you know, I don't know, maybe I'm just totally embraced my own incompetence in life, but I don't, I don't ever think I know what I don't know. And there's people like you, there's people like Rob who were like me and all different aspects. Yesterday on Dental Nachos I was driving and a nacho said if you want to get an associate contract, would you, you know, get a dental focused attorney? Would you ask a friend, because this happened from a Facebook message cause someone said, Hey Paul, can I have a copy of your associate agreement? I go, that's not even a thing. I did this poll and I was like, guys get it together. And one person goes, if I have money, I'll pay a lawyer. I go, if you don't have enough money to get an associate contract, you don't have enough money to hire an associate. She did say good point. So why are people making like just find out from someone who knows a longterm life decisions? You know, people will research, I don't know, some thing that's just not important where they're going to go for their anniversary for dinner and then they just do what they feel. They get something in the mail and they refinance loans or they, they print an associate contract off the internet or they buy a practice.

Paul: Sometimes we were like, I wish I had talked to you before I bought the practice. I'm like, yeah, tell other people to do so because I always think there's nothing bad can happen if you're on the right track that your advisor's going to say good job. You're on the right track. If you're not on the right track, they're going to say you're about to drive off a cliff. So you know, I just, for people to be able to talk to you for a few hundred dollars, Travis, it's like people should be running these things by you because I've learned a lot just in these past 15 minutes that I never knew.

Rob: Travis, you're not charging enough. I'm going to say that right now. I mean everything you just talked about, you know, with the subsidies and the interest rates, all that stuff like Paul, there's no way that people could avail themselves of all that. All these programs, you have to know what's available.

Rob: It's like you DIY something, you know, you can learn how to do it once. Right? And this is kind of like what we talk about, you know, buying a dental practice, it's a one transaction, right? You get one crack at it. Even if you, you know, want to spend all this time to try to figure it out to do it once it's like, okay, I'm never going to do this again. It's also not a cost that makes any sense. You know, like, you know, you could, as opposed to go talk to somebody who has represented somebody as a lawyer, a CPA, a student loan consultant, who has done this hundreds, maybe thousands of times and they leverage their experience.

Paul: I'm the only dentist in the room here, so I'll have to just stand up if I said, Hey, Rob and Travis, I could show you how to bond in a veneer. It's a set of instructions. There's 10 steps. Dentists would be like, you're never going to do it. Right. That's how you sound when you're going to do your own thing because you're not going to do it right. You're going to say what saline I guess is this thing. I'll rub it on the tooth. I mean are do people, not two people have all this extra free time in their lives where they want to try to research student loans and research associate contracts. But Travis, I do want to say something because I'm a really positive person and I like the positive aspect of the income based repayment. But I've had Rob do some great presentations for me and I come up with a title like when bad deals happen to good people, tell us just where the income based repayment goes awry, whether it's the behavior of the person not saving for the tax bomb or the concern that maybe they're going to change these rules. Cause it sounds like a great path, but just is there anytime where people get some dropped nachos on this path?

Travis: Just a quick point on that. Like, I mean, we're, we're trying to be kind of the Vanguard of the Starbucks of this world and in the sense that, you know, a lot of the people don't talk to me, they talk to our teams. We've got, you know, three or four consultants too. So, you know, the, the idea is, you know, a lot of things don't charge enough for their product, but if you can make it efficient enough and, and really hone the process and reduce the cost and do thousands of it, that's kind of what we're trying to do. But in terms of the, the question about, um, the, you know, the future of this and like, where's this going to go bad? Um, I'll give you one example. If somebody needs to go for forgiveness, then the smartest thing you can do is pay extra every month on your loans.

Travis: So an example of this is, for example, let's say that person is going to be a longterm associate, a $150K income, $400K borrower, and she just wants to be an associate for her whole career. Then that $400K is probably going to grow to like $600 or $700K over the course of the 20 years. And then she'll have to pay taxes on that forgiven balance. So basically the interest literally just grows at the simple rate of interest. And so what happens is, is a dentist will say, I've got an extra thousand bucks a month, I could be putting on my loans and I'm going to go to this income based thing, but I'm just going to put extra on it.

Travis: And so what they do is they pay the thousand dollars extra a month. That's $12,000 a year. So all that did was save them taxes on $12,000 20 years from now. So, you know, you paid like $1,000 a month now, and that thousand dollars is coming off of your forgiven balance after the end of the 20 years and you're saving $400 of taxes on that thousand a month. You're paying and you're also saving that $400 in $400 of 20 years from now dollars instead of today's dollars. So that's probably like, you know, even cheaper in today's dollars, if you adjust for purchasing power. So basically like if you're going to go for forgiveness then freaking go for forgiveness and don't screw around. Cause we see people do that all the time and basically what they're doing is trading a dollar for 15 cents.

Rob: If you thought about that as making an investment, you kind of did it reverse, you would never make that investment. You know, like I will put this money up for the right to receive a tax break 20 years from now.

Travis: Yeah, foolish right? And there's another thing too. Another big thing is this, what a lot of the dentists do is, you know, I don't know Paul how it was back in the day, but a lot of dentists like spending money. Is that still a thing

Paul: Yeah, we do. We feel we earned it. It's like when I feel like when I workout for 20 minutes, I feel I deserve a lot more nachos than for 40 minutes of working out. So that's a Providence. So I, we do, we feel like we deserve, it's not easy to be back there doing class twos in the back of the mouth. So we'd like to treat ourselves.

Travis: Yeah, yeah, exactly. So, where I think things really go awry is, what I've found is actually if you want to have a really high savings rate, it actually does not matter that much if you decide to inefficiently pay back all your student loan debt or if you decide to invest it, it kind of works out similarly, even if the, you know, student loan thing to tell you to do forgiveness that people just said says, you know, screw it, I'm going to just pay it back anyway. That actually doesn't have nearly as big of an impact is having a higher savings rate does. So what happens is people will do the income based plan and what they will do is that gives them a way lower cash loads that improves their cash flow. And they might become an, you know, an owner because of that. And but within what they do is they take that as a license to spend. Right. And so instead of that money that should be going into your mutual funds to cover your future tax burden or instead of it going into retirement to increase your assets are going into investing in a second location or growing the practice that you have. They just take it and they spend the money. And if you do that, and that is a recipe for, not disaster, but it's the recipe for "hold the handpiece" until you're 70 years old.

Paul: Yeah, that's a really good point. And maybe this is a good time. I'm a big Seinfeld fan. There was a funny episode where they said, we want to buy a present for this guy Joe Mayo. And Kramer said, that sounds like a wonderful idea, but this Joe Mayo guy sounds made up this forgiveness thing, it sounds made up. I mean if I lend $100 to Daphne and she was paying me off a penny a month, one point I'm just going to be like, don't worry about it Daphne. So who's telling these people, these students with debt, Don't worry about it. You're cool now. This boggles my mind. So I'd love for you to just walk me through what loan forgiveness is.

Travis: I mean, you know, this idea of paying based on your income has been around for a long time, you know, but the problem is is he did it from a, from an investor's perspective, like if the private market did this, they would only make this deal for people that were actually going to have an income, right? When the federal government does it, the federal government does not have an incentive to really care about what is someone's income is. Are they actually going to get paid back? So the accounting on this is so bad. It's not even funny. Like if you read some of the reports and the projections of student loan forgiveness when it first came out about what the government was expecting that they were going to make on their money. It's laughable, because what you've basically done is if you allow people to pay based on your income and you've charged people 7% interest, what's going to happen is the people with the really bad debt to income ratios where it's better to pay a penny on 500 grand every month.

Travis: Those people are all gonna stay in the federal system and then all the people that are making 500 grand with 200 K of debt from an NC dental school, they're all going to go to a private company and refinance their rate from 7% to 4% right? And so what's happened is the government projected that all of that 7% interest income was going to stay on the books, which obviously that's not true. And they also did not take into account the fact that a lot of people are going to have this huge incentive to go for forgiveness and the schools, especially having zero worries, you care nothing at all without charging people as much as they possibly can get away with legally charging without going to prison.

Paul: You're playing with the house's money, right? Yeah.

Travis: Yeah. I mean, I'm being a little facetious there cause you know, I mean obviously there's some, in a lot of cases they're spending on things that are, you know, I mean, you could make an argument that it's good for research or something like that. But I mean, in some of these cases, you know, they're charging people 700 grand for four years dental school. That's what the new projected number is for NYU for example, based on our internal calculations. So I mean it's just, there's no cap on federal borrowing at all. And so some of the schools figured this out and they said, well shoot, if there's no cap, let's just, you know, like you said, the house money, right. Just run the run the number up as big as we possibly can and as long as the students are paying based on their income, they never feel it.

Travis: So it doesn't really matter what we charge for school. So that's the big problem that's been created. And the internal estimates of you know, how much is this going to cost? The taxpayer are totally wrong. And like the government accountability office has done a couple studies showing people that they're trying to bring attention to this problem. Like for example, uh, I believe this, some of the loan servicers were not verifying family size cause you pay also kind of based on how big your family is. You have a bigger family, they give you a bigger deduction, right? It's very, very taxed-based kind of system. That's income based repayment. So it was a couple people believe it or not, but it certified their family size as having a family size of 93.

Paul: Oh, I mean Travis, I got to point this out for my listeners and you and maybe I always want to be an actor. I want to be like George Clooney, but I couldn't act. But maybe we got to start a movie. We're going to call it Rob, you, me and you. We're going to star in it called the big dental school short. Have you seen the big short? Because they were giving mortgages to dogs. And this sounds exactly like that. I mean, I mean this sounds exactly, they're just saying how many people in your family just write it down on this piece of paper. I mean, who's driving this, this whatever you call, this crazy bus, where they're giving the money that dental schools and that they never get the money back. It's not gonna affect everybody or it's gonna affect everybody in 10 years or so.

Travis: Yeah, I mean it's still like student loans are one point 6 trillion and mortgages are 8 trillion. Right? So, I mean, student debt is big, but it's, it's not, you know, housing crisis level. In terms of the risk that opposes, I would actually argue that, you know, social security, Medicare, those unfunded liabilities are going to be a bigger bill. This is just another giant bill that the government is not really preparing for. Right? So it just kind of fits that narrative of just having these massive bills in the future that we're not really thinking about. In terms of how this is going on, I mean, you know, the grad plus program, a lot of the dentists listening probably have grad plus student loans. That program was initiated in 2006 so that there was uncapped borrowing for federal student loans.

Travis: And then income based repayment kinda came onto the scene in 2007 to 2009 and so each successive policy change made this, you know, kind of a perfect storm of problems. Right? And so really somebody needs to come in and probably and just say, okay, the maximum debt that you're allowed to borrow for dental school is $200,000. And that's that. You know, if somebody came in and did that, probably I would estimate maybe 25% of the dental schools would probably close or would admit probably 50 or 60 or 50 to 80% fewer students. That would seize up the supply a little bit, which you're probably help up, uh, you know, help prevent some of this sort of corporatization of dentistry that's going on with DSO is would probably protect it. Practice owners a little bit from just, you know, the race to the bottom in terms of fees. I will say that in dentistry it's not nearly as bad as some other professions. So here's a little fun one. Just cause I know dentists like to compare each other to other people they know.

Paul: it's always good when your boat is sinking if someone else's boat is sinking faster cause you're like, that makes me feel great. What about your boat? I just am happy. I am such a bad person. I'm happy someone else's boat is is sinking faster. Even though this had no impact on reality in any way, shape or form, just your emotions. But yeah, tell us who's worse off.

Travis: Yeah, don't go to pharmacy school. So 15 years ago, the pharmacy school acceptance rate was about 30 something percent. So it's pretty hard to get in pharmacy school. You could get $120K, $150K kind of income. Uh, wife was good, you know, good hours, low stress. But now the pharmacy schools, like in contrast, it's sort of the dental school, the pharmacy school accreditation body did a really poor job. And so they basically let anybody that wanted to open a pharmacy school. Now there've been some new dental schools and larger class sizes, but not nearly as bad as in the pharmacy world. So the acceptance rate for pharmacy school now is closing in on, I think 88%. So you, you went from a world where you know, it's pretty hard to become a pharmacist. You literally, you know, do you speak English? Okay, great. You can be a pharmacist.

Rob: It's not an exclusive club, right.

Travis: Yeah. Yeah. And so you're having a lot of problems now where the, there's this giant unemployment rates rising among pharmacists where it's really becoming a crisis in that profession. And the answer that the profession had was, Hey, good news. We're going to create all these residency programs where, you know, we'd have to pay a full time pharmacist. We used to be paying that person a hundred, $120,000, now we're going to create three residency positions or $40,000 and we're going to convince everybody that they need to do a two year residency to become a pharmacist because we're going to get a lot of free labor at it. So that is a really, really bad situation that's brewing in that profession. And that's directly caused by as the uncapped student one borrowing that's just allowed tons of people would come in and just flood the market by opening your pharmacy school. At least dentists have somewhat caps, the numbers, uh, you know, the schools that are, you know, are just, you know, charging way, way, way more per student

Travis: So they at least have the common sense enough to not just jack up the number of, of uh, you know, available seats just tenfold like there's been and you know, kind of the pharmacy role, the legal world you could say in some situations. Dentistry is still a good profession. It definitely has its challenges, right? If you want to make it w you know, as dentists and really make good amount of money, cap tap kind of have to have a business plan and try to avoid these saturated areas. That's really where the problems are happening is the schools that have expanded their class sizes, like, you know, in New York or Southern California, people that are staying there, there's just no jobs for them except, you know, being an associate, making 110K, 120K working your tail off or buying a dental practice, competing with everybody else, you paint this huge elevated valuation. Meanwhile, I talked to people and out of the way places like Wisconsin, Oklahoma, Minnesota, Texas that are in some cases making, you know, half a million to $1 million a year. You know, in, in some situations,

Paul: I want to say something for the record. I don't know what that means, but Rob says a lot. So I like to say it's a, this is the record and I want, you know, maybe somebody listen to this podcast five years from now and I, for some reason, and Rob knows me well sometimes on Facebook people call me Negative Nelly will started wearing bandaid on my face because I share this world. And when there's no face and you just type things on Facebook, it people are reading in their own voice. Like, I don't ever text my wife, we're out of paper towels because that could be construed as I am criticizing the number of paper towels. So it's exactly the same way. And I put some notes here about, first, I don't know if anyone's read the Rooster Bar by John Grisham, but I give you a summary of it.

Paul: It's a law school that's opened up just to charge students and they didn't have any jobs from at the end. So it should be called the dental school rooster bar, I believe, because I am on the front lines, maybe one of the only people on this line, if anybody wants to join me, they can. Trying to get young dentists jobs. Sometimes I get paid, sometimes I don't get paid and what I'm sharing with is I call myself Nacho Harry Markopoulos. You know who that is Harry Markopoulos? Markopoulos was the guy who said that Madoff was running a scam for five years and nobody listened them and then they're like, yes, it was a total scam. Right. So he's looking up, he's an interesting story. I see a world in the next few years where there's a significant number of unemployed new grads because my sense, my Nacho sense, is that dentists are working longer, dentists selling to DSOs, MADowners that have nice practices like I like, but I actually, I have a lot of dentists working with me, so I'm not a good example. A solo MAD owner who only has a part time associateship. I see a perfect storm. Like you said, Travis have some real employment issues and dentists who work in areas that they like we'll say go rural, just like you said Travis and that's right, right? Go to Wisconsin. But we should be telling people applying to dental school if they have to move anywhere in the country, that's a big part of their career. So it doesn't mean don't become a dentist, but right now we have dentists and I get inbox messages all the time. I have a job and you know, they can't cover my guarantee and they're going to stop. You're stopped with my guarantee. And I've, when I posted on Facebook, some dentists will shout out, go rural, but what does that mean? How are these jobs even being advertised? So I think we need to pull back and take a broader picture to look at what the life is like for a new dentists so we can help them. And what you said is great and share with them the reality before they're thrust out in minute one of a 60 minute or 60 a year. NFL, dentist and career.

Travis: Yeah. Yeah. Well, one one kind of point with that just to play a little devil's advocate. So one opportunity that could exist with DSOs is for people who really have passions for other things besides dentistry. You know with these income based repayment programs, you can pay based on your income, right? So if you're working three days a week making $80,000 you can pay about $500 a month on your student loans. Then just be saving, you know, a few hundred dollars a month for that tax bomb and you can completely cover your student loan burden. And so what I would posit is of all the jobs in the world today, how many jobs out there allow you to work two or three days a week making $60, $80,000 and losing maybe 10 15% of that to taxes. So a lot of people don't think that way because they think they've got this big student debt.

Travis: I've got to work six days a week, which if you want to do that, that's certainly great. But you know, there, there are some, there are some, some options for people that are really feeling like they're struggling that don't want to be practice owners. Is that not everybody does. And you know, like for example, I'll give you one really great example of this recently we had an orthodontist who was making, I want to say like 250K and she was just like, she had like I think four or five kids and she's like, I honestly, I just wanna spend more time with my kids and like I liked being an orthodontist but I like spending time with my kids more and my husband makes a lot less than me so I got to work and I said well have you ever thought about this strategy, you know, of of basically paying based on your income doing this income based program so you can go three days a week and make 150K

Travis: She's pretty frugal. She doesn't need the 250K income. She was just working full time cause we had the big debt she thought she had to. Right. So I do think that there could be a lot of part time hours handed out, a lot of unemployment. But, the solution to that is to really utilize these income driven repayment programs. Even, you know, for startups, I mean people that want to take a flyer on doing a startup, uh, you know, all you need is that liquidity. If you have a 100K of cash and you've moved to, you know, Iowa or some random place like that, if you have connections somewhere where you feel like it'd be happy living there, uh, you can take out, you know, a couple hundred thousand get started doing a practice and, uh, your student loan payment can be subsidized 50% on your interest with this repay program pan through dollars a month until the practices successful. So I think that, you know, I, I like to think of the creative and really interesting options that exist out there for dentistry in the future. Uh, but yeah, like that, if you're, if you are thinking with the traditional mindset and everything, uh, I agree with you. I think there could be some serious employment problems.

Paul: We just have to tell people cause I'm just a big awareness person and I wanted to be a college professor for many years. Wear a jacket with a, you know, what are the arm patches and uh, I knew I'd have to move anywhere and I didn't want to do that. I just think that we should be telling young people who are getting into a career. And one of the things is that dental schools are very stressful for years and it doesn't mean you have to make a ton of money afterwards, but you put a lot of your whole life existence into four years. And if you have to tell if young people have to move away from their friends and family into a place where they don't know anybody to do a stressful job where there's no residencies, they just need to be fully aware of what that life is like so that they can make the best decision for themselves. And I just think you're doing an awesome job and hopefully Rob and I are are too and just sharing this awareness because that's the reality. And it doesn't mean it's a Debbie downer or gloom and doom. It just means that the, the nature of this industry is changing. And I think since dentists working in isolated areas, like Eric Cornelia said like caves, we just don't share this information enough. And there's a lot of older dentists are totally unaware that this is happening.

Rob: I think it's interesting when you talk about planning and I think it's, it's great, Travis, that you guys have a service where you will counsel people prior to going to dental school. And I think that when you're at that stage where you're ready to go to dental school, you need to know what you're signing yourself up for, what, you know, what are your, what's the expectation, where can you work and is it some place that's going to be lucrative? How much money do you want to make? How much money do you need to make? And you know, is this a possible scenario and how can it play out? Because we have this conversation with clients in a lot of different, uh, contexts, whether, you know, they're buying into a practice, hiring an associate, uh, buying a practice or even, you know, let's take it one step further, deciding whether or not to go to dental school. If you don't do this kind of planning beforehand, you're basically saying, I will take what's behind door number two. What's behind door number two? I don't know. I guess we'll find out, you know, after I start school, after I hire that associate, after I buy into this practice. And, you know, it's just reckless, you know? And, and those people, a lot of times things will work out,

Rob: Sometimes things don't work out so great. Sometimes it's a total disaster, you know. But in the, you know, quote on quote, the good news is that the dental industry still has very, very low failure rate. But we've talked about this Paul, that you know, there's a difference between, you know, not failing and thriving and you know, just because you're servicing your bank loans for your practice acquisition or your student loan debts and you're still able to feed yourself and your family does not make you a success story, you know? I think it's so important what you guys are saying. I think people really need to take note of this and hopefully anybody that is listening that is considering whether or not to embark on this journey.

Paul: I can embrace reality really well and I'm not a super emotional person. This is why a lot of people go, go to me to help them because I can put myself in their shoes. If someone told me I want to be a dentist, I want to take out the maximum amount of loans. And they said, I'd be willing to move to any of the 50 States. I say, go for it. You're going to be successful because there might be that job in Iowa. But there's another problem that I just want to bring up is that when these young dentists are finishing dental school and dental school does such a bad job with career development, how do they even find out that the jobs are available in these rural places? So that's just a whole part. I have some services that I try to create to help solve this. But one of the problems is I don't even know how to find them. Find these jobs. If somebody has a job in Maine and is looking for an associate, they can make $250,000 and someone who went to university of Texas would move there. I have no idea how to get connected with that job.

Travis: Yeah, I mean I think you just have to pay attention and listen to podcasts like this. I mean, you know, be a part of your Facebook group, like you know, be, be plugged in. I mean the dentists who really care and pay attention. I mean, there's the ones that get those opportunities.

Travis: Yeah. Yeah. I mean, you know that, I agree with you on that, on the having the right understanding of what you're getting yourself into. But one thing that I'll say is, no matter if you totally screwed, let's say you totally screwed yourself over, right? You're $600K in debt. You know, because you're from LA and you went to USC and used a volleys, wanted to live in Southern California, and you saw your uncle drive at a porch and he's a dentist. So you thought, okay, I'm going to go to dental school and that'd be a good life. And you come out and you're making $120K working six days a week at a DSO in Southern California. I mean, the rule about becoming an owner, it's still is true. I mean, you're still better off being an owner. You might, you might make, you know, uh, you know, a lot less money and you might work a lot harder than some other fields out there, but you'll do pretty well.

Travis: I mean, you know, 150K to 200K income in Southern California, uh, that's, you know, realistic as a, as an owner and that's a lot more money than you know, you would make as a, you know, just general project manager at some corporate place and you've got a lot lower risk of getting laid off. So I totally agree with you about no one on the front end. The problem is, is, I don't know if you believe this, but one time I posted on SDN, you know, that kind of popular forum for people looking to go to school. And I just said, I basically said that, I said, you gotta be really freaking aware of this problem if you're going to go because it's not nearly what you think it is. And I just got lit up. I mean, it was actually one of the most controversial posts I think ever in the pre dental section of the, of the site.

Travis: And uh, uh, you know, a huge number of people were so grateful and a huge number of people want to be banned from the site. And it was just so interesting. And all these comments are like, you know, this guy is an idiot. He doesn't know what he's talking about. My uncle's a dentist, he makes you know, $500K a year. And, uh, and I'm like, okay, like, do you know how to read a P and L and like understand what the difference between revenue and net income is and the, and also, you know, if you also know the difference of, you know, going back in 1970 and buying dental school tuition and practice prices in 1970 versus buying that practice today, you know, I mean, it was, it was interesting even when you try to help people, people don't want to hear it.

Rob: Amen. Yeah. Speaking for experience, people do not like to hear bad news, Travis.

Paul: It's like telling my five year old, she's really not going to be one of those characters from the descendant when she grows up. She's going to really be upset with me now. But it's the truth. But she's five, not 25. So I've, I've dealt with that. The three of us here have dealt with that and sharing awareness and reality attempt to help and getting some blow back there. But then those people come back later and say, Oh, that guy was really had my best interest at heart. And that's just, you know, I, appreciate you helping us. Travis I've learned a lot cause just sharing awareness. I just think it's such, so key at this time in a dental school, uh, life cycle or the dental industry life cycle.

Rob: Yeah. Travis, we really would love what you're doing and, you know, so how, how can people get in touch with you and learn more about student loan planner?

Travis: Yeah. So reach out at help@studentloanplanner.com. One of our CFP, CFA consultants we'll reach out to you. It's not me personally. Um, and then we'll tell you, you just make sure you tell us a lot about your situation so we can tell you if we think you're a good candidate for the consult service or not. Um, and then just in terms of getting the education, uh, we have the student loan planner podcast. So, you know, I'm assuming anybody listening to this likes podcasts. So we have a podcast where we give a lot of information away for free. So we have, you know, we do interviews, you know, you know, dental specialists, general dentists. Uh, you know, obviously other people to bring on, you know, a variety of different financial experts just for people struggling with big student loan debt.

Travis: So that'd be definitely something to look at, you know, in any place you listen to podcast. And then finally the websites, you know, studentloanplanner.com it's got tons of free info on there. If you scroll all the way to the bottom, you'll actually see, we have a whole section on Dennis. We probably have like 40 articles written specifically for dentists struggling with student loan debt. So, uh, whether you go kind of the version, tried to do the DIY option, I know we were kind of making jokes about that earlier, but I don't have a problem with people that want to get educated first. And then if you decide that, you know, get a kind of a custom plan, that's great too. You know, I'm, at the end of the day we just want people to be more informed. Uh, and, and I, and I think one, one thing I was thinking about when y'all were talking about that earlier is part of the gap is trust.

Travis: Dentists just don't know who to trust cause there's so many kinds of slime balls out there, you know what I mean, that are just trying to make a quick, you know, quick buck. Uh, so I think that's a good way to do it is maybe test out some of that free content or listen to some shows and, and just kind of, you know, gauge somebody's sincerity based off of that. And then once you're kind of over that hump and you can decide, okay, it makes sense to pay for this person cause they know they can really help me.

Rob: Well that's, that's the best client. You know, we're in the same boat. You know, you want people to be informed, you want them to be educated so that they can understand, you know, what questions to ask, understand the process. But you know, as we always say, that's not a substitute for actually following through and engaging somebody that that can help you, uh, help you do that. And you know, the things that, some of the things that you talked about today and what they see on your website, these are not things that people can possibly expect to navigate. You know, they can try, they might be okay, but you know, you can also make some really expensive mistakes and you know, with some of these things you don't get a chance to, you know, get a Mulligan. Totally, really great stuff. Travis, thanks so much. Yeah. Thanks for being on the show and taking the time Travis. Keep up the good.

Travis: Yeah. Thanks. Thanks for having me on. I'm going to go play down on some pork nachos here later.

Rob: Awesome. Some great, uh, suggestions and uh, and pointers there and what not to do from, from Travis.

Paul: It's just sort of, you know, unveiled or pulled back the curtain on what we need to know. If student loans is just another, another piece of our dental world where it's valuable to know it. Even if you don't have student loans cause you're dealing with associates and you might be involved with practice purchases and just need to know what, uh, the current state of debt is.

Rob: Yeah. Well people's economic state becomes, you know, your associate's problem becomes your problem for sure. Right. Uh, and I think in how he really, I think we got like the tip of the iceberg as to some of the details and all the minutia of, you know, what these different programs look like and the differences. And, you know, I understood what he was saying, but it's, you know, it's such a classic case that people should not be DIY in this because you've really, the, the, the decisions can, uh, and the mistakes can be really expensive.

Paul: And if you're gonna plan a ride the what's ride you're going to go on at Disney world, you probably should plan, which you know how you're going to pay your loans. So get this information. If you're going to dental school, if your first or second year, you know, it's just important, you know, wherever you are to know what you're going to be facing.

Rob: Yeah. And I hadn't, didn't realize that they would counsel people with, you know, the pre debt, uh, decisions, which, yeah, that's it. You know, before you sign yourself up for this. And as I said, you know, otherwise you're just like picking what's behind door number two and, and uh, you know, you're going to spend a lot of time and money before you, before that door opens to see what it actually is. And, um, you know, like anything else, you know, it's all financial planning and making good decisions with, you know, with data and information and with, you know, people that are knowledgeable, uh, consultants that, that have done it hundreds, thousands of times, who, you know, all day, every day. That's what Travis and his people are doing are following this stuff, tracking it, and thinking about, you know, better ways to serve their clients and better ways for people to plan their student debt and, you know, leverage that.

Paul: I've just, just find out from someone who knows this, my new catch phrase, if you're going to run a marathon and get up like you and Mark causes at 4:00 AM, and I just want to finish it, I could just, you know, go online and find out how to, you know, train. But if it's the marathon that determines my financial future, hire a coach.

Rob: In that context it seems obvious, right? But I think sometimes people lose sight of that. So, thanks, it's always fun Paul

Paul: Yeah. Great one Rob.

Outro: Thanks for listening to another great podcast with the Dental Amigos. And don't forget to tune in next time to have the dental business demystified. If you're looking for more information about today's podcast, you can find it on the dentalamigos.com. If you're looking for Paul, you can find Paul at drpaulgoodman.com and if you're looking for Rob, you can find him at yourdentallawyer.com. This podcast has been sponsored by Orange Line Media Group, helping dentists and other professionals create content people love. Find out how we can help you take your business to the next level www.orangelinemg.com.