Speaker 1 00:00:08 What's up everyone. Welcome to the finance for physicians podcast. I'm your host, Daniel RI join me as we dig into what it looks like for physicians to begin using their finances as a tool to live better lives. You can learn more about our
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Speaker 1 00:00:26 What's up guys. I, uh, I was having a conversation with, uh, with some clients. We work with one on one today and, uh, they had brought up a pretty, pretty interesting point regarding Sioux unit loans and some of the unintended consequences of all these big programs coming out. And I thought it was a great, a great point to talk about with you guys. Um, and it's probably affecting a lot of people. We've seen it happening firsthand with some of our clients, you know, at least struggling with the, the temptation here. So, so I'm gonna be, I'm gonna be talking about what this, what, this is, what this was and how, you know, how to avoid this temptation causing problems in your world related to some of these big student loan perks that have come out recently. Okay. So what am I talking about? The biggest thing that I'm talking about is, uh, COVID forbearance on student loans.
Speaker 1 00:01:28 So COVID forbearance on student loans. Basically, they, this has been happening. What has it been since March, 2020? So it's over two years now, the government has stopped requiring any payments on student loans and, uh, has stopped charging interest on pseudo loans. And it's just been extended again till the end of August. So that is, you know, generally really good news, especially for PSL F because you would otherwise, I mean, that's just one payment that counts towards PSL still. So, you know, zero is much better than the alternative payment when it's all gonna get forgiven at the same time, either way. So generally it's really good news, but the point that came up in my conversation that I was referring to earlier was, um, what are people doing with the money? And so that's such a good question. And I, I would pose a question to you.
Speaker 1 00:02:23 Like, what do you think, uh, the average person is doing with the money, cuz they were otherwise having to pay student loans. So now they have this money in their budget and their, you know, take home, pay to work with. And so what do you think the average person does with the money? I mean like what does the average person do with the pay raise? What does the average person do with their paycheck each month they spend it, I mean, that's just what that's like the American way. So that's the temptation is to spend the money and in the conversation I was having, it was, it was related to real estate, which is, that's the part that was very interesting and not thought about this. And they were saying, you know, know, maybe this is also part of this whole real estate explosion of, uh, demand is, and it definitely has some effect.
Speaker 1 00:03:06 There's millions and millions of borrowers that have now no student loan payment and have had not had one for two plus years. And I mean, that, that makes it a heck of a lot more appealing to be buying a house or buying more house. We have people we work with that, you know, we're paying several thousand dollars a month or more to the student loans. And then that stopped in March. So 2000 a month, I mean, that's like a lot more house that you could potentially buy. And so this temptation would be to like spend more, maybe a little more, maybe you just don't think about the numbers as you're approaching that, uh, decision. But, um, but this whole PSL F or this whole COVID forbearance thing, it puts more money in your pocket, but the temptation would be to spend some more all of that money.
Speaker 1 00:03:58 So I wonder are how many people that have been going through this have gotten started to get used to that money coming into their pocket. And, and if that's the case you're in for a little bit of a, or maybe a lot of a rude awaken awakening when they eventually, or I guess if, but I mean, eventually they're gonna come back on, the payments are gonna be required again. And so that's gonna cause a lot of problems for people that did get it acquainted. You're used to those dollars in their normal budget. Uh, and it'll cause some problems, it might even cause some changes in like the real estate market as an example. I mean, like if you take away, so right when that happened in March, they added effectively like millions and millions of into the people's hands to, to do what they wanted with it.
Speaker 1 00:04:46 And so that money, you know, typically gets consumed or spent on stuff. So whenever this thing kicks back on, it's gonna take that away. So that's gonna have an effect on people's consumption and who knows what that does to things like the market or real estate or whatever. I don't, I have no idea. I mean, I would think it, it will have some effect. So, so that's, that's the big point I wanted to throw out there is if you're in the world of like COVID forbearance, just the key is just have awareness of what's going on. What happens is people bury their heads in the same end and they don't pay attention to it and they just kind of roll forward, but awareness is key. Um, the other big thing I wanted to point out is for, for these programs, they're mostly income based payments happening.
Speaker 1 00:05:37 So if you have been in training or your 'em was lower at the beginning or prior to COVID and has increased during COVID and is now substantially higher after COVID or, you know, I guess we're still in it, but uh, on the back end that has a huge effect on your student loan payments. So we work with some people that were, you know, maybe paying a hundred, $200 a month on their loans in March when they stopped. And then when their payments gonna start back, you know, in August, if it happens in August, maybe it's 3000 a month, so, you know, huge increases in payments. So it would be worthwhile to understand what your payment is gonna be in August or September, I guess, especially before you make big financial decisions or make commitments, or maybe even like, you want to be really responsible, like figure out what that payment is and you should be saving that much money somewhere, call it a student loan savings account, but like put it somewhere at a minimum, you should be saving that.
Speaker 1 00:06:44 So you just don't want to get used to that money in your budget. All right. So I wanted to throw that idea out today. Hope it's been helpful. Um, hopefully not, not many of you, hopefully most of you are able to kind of withstand that temptation and navigate this pretty well. And, uh, you know, but we all have that temptation. It's, it's just one of those things that, uh, you know, as, as people, we, the temptation is always gonna be to kind of turn a blind eye to this type of stuff. So, um, as always, I, uh, enjoy chatting and, uh, going through this apologize for the kind of congestion CLO knows today. So look forward again to talking next time. We'll talk later as always, thank you so much for joining us today. If you found this valuable, please give us a review on iTunes and share with a friend.
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