Speaker 0 00:00:08 What's up everyone. Welcome to the finance for physicians podcast. I'm your host, Daniel Raimi. 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
[email protected] let's. Jump into today's episode. Jeff. How's it going, man?
Speaker 1 00:00:28 Great. Daniel, how are you? How have you been?
Speaker 2 00:00:30 I'm good. I'm glad to have you back on the only issue is have like the cold. So you're going to have to do all the talking today.
Speaker 1 00:00:40 Is that okay? Yeah. Well, I've never been accused of being short winded or, uh, or too short on anything, so I'll give him my best. Perfect.
Speaker 2 00:00:48 I think we'll do great. Well, I was thinking we, uh, we've had some questions come in and I thought we could kind of do some quick snippet, uh, dig into some of these questions. The first one I thought we would talk about is student loans is kind of a timely topic, especially with all these changes. So a lot of people are just kind of asking, like how do I get my ducks in a row in preparation for it? So, you know, that's a question for a lot of people, cause you're starting to think about applying or even just on the front end of maybe getting started with PSLF. Um, what are the things people should start doing as they kind of either start in the program or maybe they're progressing through and they're getting close to that, uh, actual final application. What do you got Jeff? So
Speaker 1 00:01:30 I think, uh, it depends on where you're at in the process, but starting right at the beginning, if you're just getting started is to make sure that your loans are in repayment and your payments start accruing and they're on a plan that works for PSLF. Yeah.
Speaker 2 00:01:46 Yeah. Good point because it's not always as straightforward as you might think. So for example, I talked with someone a couple months ago and they were in forbearance, but not COVID for bearings, you know, so COVID for Barron's counts for PSLF purposes. So each little $0 payment you make, which is kind of funny to say, but for every $0 payment you make in COVID for Baron. So that's a checkbox for the 120 Checkmarx versus a straight up forbearance. All the other forbearance types don't count. So this person was not getting qualified team also like the loan type, uh, like the type of, uh, repeated plan that you're in is important to I've I've come across people that are in graduated or extended graduated for it. It's a repayment plan type. Those payments don't count. They were making payments, but they don't count. So what are the payment plans and accountant job?
Speaker 1 00:02:40 Yeah. For the payment plans that count, you got to make sure you're on one of the four different income driven repayment plans. Mm.
Speaker 2 00:02:50 The most popular ones.
Speaker 1 00:02:51 Yeah, the most popular ones, probably there's two of them that would be the most popular there'll be pay and repay pay pay as you earn. So these are fun acronyms, right? Let's give some alphabet soup, make this sound like Greek, but pay as you earn and revised pay as you earn.
Speaker 2 00:03:08 Right. And then you got IBR is less, less popular. IBR is less popular for the old folks like me. We, we, you know, it was more common, but
Speaker 1 00:03:17 Got some older loans out there. It might be your only option. Uh, one of the, one of the only options, well, not one of the only ones, but, um, one of the best options, a few of them might be off the table at that point. And then there's a really old one, the income contingent repayment, right?
Speaker 2 00:03:30 Oh yeah. I don't know if I've ever seen anybody.
Speaker 1 00:03:32 Yeah. That is not really a great one, but probably the first, uh, the first income driven repayment plan that was out there. I think that started in the nineties and, uh, is pretty useless, but right. But anyway, yeah, we want to make sure that we're on a payment plan that counts towards PSLF and uh, so yeah, getting started with probably pays you weren't or revise pays you aren't would be at least a starting point, especially now if you're, if you're a recent graduate or recently moving into repayment.
Speaker 2 00:04:02 Yep. What else would a other steps let's talk about early in the game, especially
Speaker 1 00:04:08 Yeah. Early in the game. So we want to make sure, like we said, we want to make sure that those payments start accruing towards PSLF early on. And when you first get out of school, what's the default option for these loans
Speaker 2 00:04:22 Just to go into grace period. Have what is it? A six month grace period. Yeah. When you hit finish school from, from, you know, loan types. Yeah. So for
Speaker 1 00:04:30 Most loan types, there's a six month grace period where nothing really happens. Right. There's no payments going on,
Speaker 2 00:04:38 Which sounds kind of good. Cause you're like, ah, yeah, I can wait Tim, start making payments, get started making income to kind of get caught up on life.
Speaker 1 00:04:46 Exactly. But the fun part about income based are income driven repayments is that they're based on old income. Right. And in fact, we, for income that, you know, it looks back at the most recent tax return that you filed in general. I know we're in kind of a funny time where I could look back two or three tax returns at this point. Uh, but in general, we're looking at what happened in the previous year. And so if you just came out of med school, it's very possible you had no income. And if you had no income, what would an income based repayment be?
Speaker 2 00:05:22 Well, I think it might be zero. Zero.
Speaker 1 00:05:26 Yeah. And so if it's calculated as zero and you're making those payments, I got quotation marks up with my fingers. You know, that starts accruing those 120, uh, you know, ticket stubs, golden tickets. Sometimes we like to talk about, of getting towards those payments and anything that is less than what you would normally pay is giving you value on, on student loan forgiveness. It's just adding up
Speaker 2 00:05:53 Golden tickets. That's, we're reading, uh, Charlie and the chocolate factory with my son right now. And it reminds me of the golden tickets there. But these are, these are kind of like, you know, golden ticket there. These are extremely valuable, but with the PSLF payments, they're like especially valuable the less you're paying. So those golden tickets in early in training w the $0 payments or in COVID for parents, uh, those are particularly valuable for purposes of PSLF.
Speaker 1 00:06:22 Yeah, absolutely. So the more you can make low cost payments, the better you are.
Speaker 2 00:06:28 Yeah. So getting those payments going earlier, there are some strategies to skip grace period. The simplest most straightforward one is just to consolidate your loans because you can opt to, because technically you can't skip grace on certain types of loans, but by consolidating, they give you this option to, you know, you're technically starting a new loan and you can opt to forfeit or skip grace period. And that's kind of the work around they're typically early in, on in training, but other what other types of strategies get your ducks in a row early on? So that's
Speaker 1 00:07:01 Number one is just to make sure that you're accumulating payments that would qualify, I guess the next piece is to make sure that you're working at an employer that qualifies, right. Um, there's, you know, a couple of components to that. You've got to have the payments and the right payment plan. And that has to coincide with being employed full time at a non-profit or government agency. Right.
Speaker 2 00:07:26 And the ones that are like, if you're at a 5 0 1 C3, that's a type of nonprofit. Like a lot of hospitals are 5 0 1 C3, especially like residency fellowship programs there a lot of times at 5 0 1 C hospitals. So if you have that set up, that's usually that's the most straightforward and you know, we'll be qualified, but, uh, sometimes it's like tricky with the nonprofit non 5 0 1 C3 places. So there are a fair amount of hospitals that are that as well. They're not 5 0 1 C3, but they are. Non-profit how confused. That's like a word using how that's worded. So if you're at a non 5 0 1 C three nonprofit, it's especially important to make sure that that particular organization qualifies because it's not as straightforward. You have to, there's a little bit more, um, you know, you have to, there's some like small print essentially.
Speaker 1 00:08:20 How do you get started on that? How do you get started finding out if you're you're at a nonprofit or can you confirm that along the way?
Speaker 2 00:08:28 Yeah. I mean, you know, the best possible thing to do would be to proactively, um, consider your job choices and look at what their business structure is ahead of time. So if you're, for example, if you're looking at D resident residency programs, I'm sure that's a question you can ask. And like the interview process might look like and keep doing it, but like, you know, it's, it's for the better, uh, most residency and fellowship programs are 5 0 1 C3, but there are a few that are not, so it wouldn't hurt to ask, are you a 5 0 1 C3 hospital is the company that will employ me 5 0 1 C three. And if you can get a definitive answer and then same thing going into practice, that's probably even more important is, you know, verifying that information. Sometimes it's not as easy as you think it should be, but, um, you can typically, if you find the right person, you can get that verified, um, ahead of time.
Speaker 2 00:09:23 And then once you're actually employed there, the true test comes when you go to get your payments verified, you know, through your loan servicer, as of this recording, it's fed loans, you can spend cinder, you send in a loan verification or employer verifications what they call it. Or some people call an ECF. Um, it's just a form, or you can submit it online sometimes, but you submit the form and your employer signs off on that. And then the loan servicer, uh, uses it to count your payments. And then they verify it, uh, based on whether or not they consider the payments qualified and the employer qualifies.
Speaker 1 00:10:01 Yeah. And so how often do you like to see people doing that employer certification?
Speaker 2 00:10:07 You know, um, in general, probably every year is a rule of thumb. Um, but I think right now, so fed loans is out piecing out of the business. We didn't mention,
Speaker 1 00:10:17 I thought we would have to circle back to that.
Speaker 2 00:10:19 Okay. Matters further fed loans, which is like the PSLF loan servicer. They're like out of the business, they're like, we're done with this. This is a train wreck and he's not, I don't know. They didn't say that they are, they have decided to no longer service, uh, student, uh, PSLF program and students. So, uh, there, they will be switching over, over the course of the next year. So that's important because going back to your question, how often I think what I would do is try to get as many payments verified with fed loans before the switchover happens as possible. Ideally, I mean, in a perfect world, you get a hundred percent of every payment certified and like checked off and ver you know, through employment certification the day before fed loans, you know, switches you to another service here. Cause that's like, once you get employers certified, it's like the golden ticket, you know, that's about as good as you can get.
Speaker 2 00:11:15 Um, and then it's an easy handoff. It's going to be difficult for them to S you know, have a data transfer issue. They verified payment, um, because those loan servicers switch off typically, or historically are kind of a mess. So if you can, um, clean up your file, get all that verified right before that happens. That's the optimal time. So that would be kind of going outside that normal 12 month routine of verifying payments is ideally, you know, maybe you think about verifying right before that happens. And then the other time I would think about verifying is like, if you're a 12 month cycle, um, a lot of our, uh, clients and planning firm do it around time of the income verification process. Cause that's just another annual thing here to think about. And so the only, so if fed loans, the servicers changing, that's a good time to do it.
Speaker 2 00:12:04 And then the other time I would do it outside of that 12 month cycle would be, you know, right before you're going to apply for PSLF. I think it's a good idea just to do it, like at that, you know, 119 payment or something, or 120 payment, just to be like, just to verify, I don't know. I w I that's how I would be, I would want to just kind of double check and do it a little more frequently right before that happened. There's another thing though, that they check in that employer certification. We haven't mentioned, that's important about getting your ducks in a row is because they're looking at verified payments, like the type of payment they're looking at verified employment, which we've talked about those two, but what's the other big thing they're looking at.
Speaker 1 00:12:42 The other thing that, uh, we see them looking at was loan type. Was there yeah. The loan.
Speaker 2 00:12:48 Yeah. Yeah. So we, we were actually talking about this earlier today. I was testing Jeff to see if, uh, he knew he knows, but a loan type is, uh, we don't see it as often now because there's, you know, it's less common that you have non-qualified loan type, but, um, any non-direct loans that you have, they don't qualify for PSLF. So if you're trying to get your ducks in a row and on the front end, you need to make sure all of your loans are direct. And if they're not, what, what, what can we do to potentially work around that one?
Speaker 1 00:13:24 Yeah. So if they're not direct loans, um, you know, maybe they are a Perkins loan or a FFL, well, those are two pretty common ones. They can actually be consolidated into their own direct consolidation loan, you know, as you kind of go through that process, maybe decide, you know, how, how far ahead am I on all these other payments? You know, are these loans going to be hanging out for a long time afterwards? Or does it make sense to, does it help me out financially to get these into a consolidation loan and on track for PSLF as well? Um, but yeah, you can get them into a consolidation loan through student aid.gov, get the process started there, but what you want to be careful of when you do that is not consolidating all those. If you have a combination of summer perk and summer fel, some of them are direct loans that have been in repayment for five, 10 years. Well, independent repayment, 10 years, congratulations, hopefully, you know, a direct loan. You don't want to consolidate that because that is a problem with PSLF that those 120 golden tickets, if that direct loan gets consolidated in there as well, resets the clock, restarts the clock,
Speaker 2 00:14:38 All it's like burning your golden tickets. It's I'm no good. And that was happening a lot more. I see it every once in a while, but it was happening a lot when early on in the program, when people didn't understand it, there was actually some, uh, advice student loan advisors that would always do that on the front end, no matter what I think there still are that like, kind of offer consolidation services, but that's, you don't have to consolidate all your loans and you definitely don't want to consolidate loans with the golden tickets already, or they've already gotten qualified payments. Cause you know, you're essentially throwing those out the window. That's a biggie. What about as you get further along and you've kind of, you know, you're getting towards the middle or end of that, you've got some payments, you've got the kind of the routine. What are some things to be thinking about as you get further down the road in regards to those ducks around, hopefully
Speaker 1 00:15:27 Things start to feel a little bit more on autopilot as you go, where you've got your cadence of, of when my income's being re-certified, uh, how I need you to handle that. But actually depending on, on the timing of income certification, it, you know, you can start to play around with, you know, do I get that certification in a little bit earlier and file on an earlier tax return? Or is it later, so timing that's where you start to go with the timing of how do I optimize this?
Speaker 2 00:15:55 Yep. Yeah. There's lots of strategy. That's probably a whole nother podcast. Yeah. Strategy to optimize BSL,
Speaker 1 00:16:03 Optimize it, but just to be on track, just, I think, make sure that as you go through any job changes, let's say, you know, you've been on track through residency and now you go to your next job, make sure employments are, is certified at that previous job for the full employment period. And then, you know, kick things off the same way, you know, each year, making sure that you're still on track that any discrepancies that start to show up, we're starting the review process. So you gotta go to that student loan servicer and I guess, figure out your evidence, um, find out, you know, they might have discrepancies on payments that are out there. Um, yeah. You gotta show that you made that payment, right. Have your, your evidence lined up, uh, where do you get that evidence? No.
Speaker 2 00:16:47 Yeah. So I guess I've not ever had to personally working with clients, I've never gotten to the point where we have to provide evidence, but, um, I could see that happening in my experience we have. So what we're talking about is let's say you've gone through your, um, 70 payments in you verified employment, but, um, after a second review you realized that you got like seven payments missing. For whatever reason, that's pretty common. I've, I've seen that a lot and there's a bunch of different reasons that can happen. But, um, when you see that discrepancy in their numbers versus your numbers, um, that's when you want to start reaching out to the loan servicer and asking some questions, like, first of all, like, why are there, why are these payments not qualified? And so it might be something simple, like, uh, well, you didn't verify employment for that period of time.
Speaker 2 00:17:42 That's an easy fix. You just verify employment for them. Or they might say, um, you were not in a qualified position at that time. And if, and if that's true, then like for instance, maybe you were working part-time for some time off in between training and practice or whatever. So those you can't really argue with, but in a lot of cases we see, um, it's just like, um, uh, they don't really have a good answer. And so, or you're getting mixed, mixed opinions. Um, but if, or maybe, you know, for sure they should be qualified. So in those cases, what you want to do is ask him to do like an internal review or an audit, or I'm not sure what they formally call it, but like you can ask them to review or audit the numbers. And those typically take forever to complete in my experience, but every time we've done them, once they finally get back, they have the correct. So that's, um, and there's a lot of, follow-up typically you can kind of, I think that's probably helps to speed along as you can kind of call the servicer again and be like, what's up with the audit that I did a year ago. I haven't heard back on that's what we were talking about that Jeff and I earlier today about circling back on one is they seem to be very slow with them.
Speaker 1 00:18:57 Yeah. And I, I don't know if it's going to get any faster with fed loans piece of it.
Speaker 2 00:19:02 Hopefully it does. I am trying to be optimistic about it. And I'm hopeful that the, uh, government finds like an on the ball, a company that knows what they're up against and that fed loans as kind of gotten it organized enough to hand off, but time will tell. And I would, from a planning standpoint, I would assume it's going to be a mess just to kind of plan for the worst and keep your records keep good. It's another reason to keep good records, because just assume that they're going to lose everything. And if you have proof that you have all these golden tickets in the form of like a employment certification letter, that's you can't really just, we got any other tips for ducks, keeping your ducks in a row with students. Well, just with,
Speaker 1 00:19:48 Uh, yeah, I agree. Hopefully that the next servicer for federal that replaces fed loans is better as that transition is coming up. And then kind of your, your, your point there about just keeping your own records is probably a really good idea to go ahead and as that service or changes over as fed loans is set to leave the arena here in December to just go in there, back up, you know, make a whole folder on your desktop, just pile everything that's in there in that folder, so that you have at least one set of records from what was there. And, you know, if you're one of, if you're one of our planning clients, you know, share a file of that with us, we'll keep a whole massive, it we'd love to sort through messages. Okay. So what we do, it happens with student loans and lots of other things too, but probably that'd be the best thing to get. Just get ready for that transition.
Speaker 2 00:20:42 Yeah. Awesome. Good stuff, Jeff. I appreciate it.
Speaker 1 00:20:47 It's been a pleasure. Daniel, talk to you soon as
Speaker 0 00:20:49 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. Also check out our
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