Finance: Why I Consider the Loan Forgiveness Program as a Risky Chance

When you graduate with a loan as large as I have ($550,000 in debt!), it is easy to view student loan forgiveness programs as the superheroes of our lives. There are many different loan forgiveness options that you must choose from, but once you’ve chosen one, you are given the choice of paying a sliver of your income every month, with the promise that at the end of your program, the remaining (accruing) balance will be wiped forever from your life! It’s an ultimate quick fix to a problematic giant standing in the way of your financial independence. The small monthly payments are on autopay and the looming terror is out of sight, out of mind, for the next twenty or twenty five years. So why the skepticism?

Twenty five years is an extremely long time. I know, because I have barely passed my twenty five year mark. I also know that because after I add on twenty five years, I’d be over fifty. To be honest with you, I don’t want to keep this lifestyle up until I’m fifty. A lot can happen in twenty five years. The immediate assumption is that no matter what happens in the future, we will be grand-fathered in this loan forgiveness program.  But although it’s an immediate assumption, it doesn’t mean it’s logical or true. Because nowhere in the fine print does it say that. But our brains are wired to make up stuff that will put us at ease. And so, some like to reason that this must be true, and I know I can’t convince them otherwise. Because, what do I know?

Well, here is what I know.

  • I know that there are people out there who chose a ten year loan forgiveness program. Only to be told after their ten years that they do not or no longer qualify. Some haughty know-it-all will likely say, “Well, that’s THEIR fault for not knowing their own program!” But as we all know, they don’t make programs easy to know. The fine print just keeps getting smaller AND longer.
  • I know that my sister took a five year contract with a charter school in a city far away from her family and friends with the promise of getting $40,000 forgiven from her student debt after the five years. However, you cannot apply for the forgiveness until you’ve completed all five years. Last year, the amount forgiven changed. It went down to $17,000. Still a good amount, but not the promised $40,000. Her five years ends in June. So in June, she would have given up five years of her life living in this far away city to only get back less than half of what she thought she was going to get back. Which is depressing to think about, since she turned down multiple amazing opportunities with higher pay for this program.
  • I know that in the ONE year that I have been out of dental school, there has already been talk of the loan forgiveness program being extended to THIRTY years. An additional five years of minimum payments, a continually accruing debt, and a higher percentage of your loan that you have to pay in taxes at the end of it all. More, more, more.

Therefore, you are right in saying that I just don’t know. I don’t know the future one year from now, so I sure as heck don’t know the future twenty five years from now. I don’t know who will be in the government, who will be controlling our laws, how the program will change, if the program will still apply to me, and if the program will even exist. And with a loan this large, I will not leave this up to chance.

What I do know is that I CAN tackle this giant, so I WILL. I will not let him rule over me, stop me in my path, instill any fears or doubts.

Will you tackle him, too?

 

Finance: The First Year of Paying Down $550,000 in Student Loans, An Update

Hi guys! So it has been about a year since our search for a future home turned into a commitment to pay down my massive student debt instead. I figured I would give you an update as to what paying down $550,000 at 6.7% interest looks like.

We arrived at our decision to tackle the loans aggressively in April of 2017 (our decision tree, here). The most important thing to note with a loan this large is that committing to it means REALLY committing to it. It wouldn’t be advantageous to choose to pay down the debt, and then fall back to IBR midway. From a numbers perspective, you would just lose unnecessary money that way. If you choose the loan forgiveness route, then the goal is to pay AS LITTLE MONTHLY PAYMENTS AS POSSIBLE, so that a huge chunk gets written off. If you choose the standard repayment option, then the goal is to pay AS MUCH MONEY AS SOON AS POSSIBLE. So, with a steely grip on the reality that we did not want the debt to dictate and shape our lives for twenty five years, we went head first.

Here are the numbers.

To be completely honest with you, $550,000 is a ballpark estimate. The real number is a principle amount of $538,933.50 and an accrued interest of $35,101. Meaning the total was actually $574,034.50. YIKES!

So what did we do? We decided that we will essentially live off of one income, and use the other income towards loans. We figure, out parents raised us on a single person’s income, so this can’t be that difficult especially since we don’t even have kids yet. The verdict: We were right! It was surprisingly easy. Which makes me wonder, where were we spending all that money before hand?! I don’t even want to know….

With that being said, we have been successful at making our minimum payments of $6500 per month! YAY! We were even able to add a little extra every so often due to diligent saving habits (See The Ever Growing List of Things I’ve Given Up In The Name of Frugality!). But that does not take us as far on the path of financial freedom as we would like. It took us a few months to completely pay off the interest that had accrued, but it must be remembered that the loan is at 6.7% interest. So that means that interest continues to accrue over all this time. So what does that look like? Well, once the accrued interest was paid off, approximately half of the $6,500 was going towards the interest accruing per month. Which means that the loan is only getting paid down at a rate of about $3,000 per month. And that, my friends, is how lovely interest works! Womp, womp.

So, $55,367.22 was paid towards interest. Only $28,632.78 went towards paying down the principle amount. When my husband first looked at the little pie chart graph that I hard on the corner of my computer screen summarizing our progress, he said, “Well, THAT’s depressing!” For someone who is only looking at that, it CAN seem pretty depressing. However, I know better. This. Is. Amazing.

The accrued interest is already out of the way, which tells me that next year is going to look a LOT better. I can already see a higher proportion of the monthly payments being applied to our principle. It started out as slightly less than half of our payment being applied to the principle. However, as of early this year, slightly more than half is being applied to principle. I know it’s hard to look at this as any way other than a linear projection, but it really, truly is an exponential one, albeit with a slow start.

The amazing part is that we have survived our first year and our lives have actually been much improved. Choosing this journey has nudged us to be proactive with our life, not only with our financial decisions, but also with our lifestyle choices. We are experiencing less stress than when we felt helpless and unable to address the student loans. We are experiencing more happiness than when we were trying to buy our way to a meaningful life. I work less than I did last year, and love myself more. We are healthier and have better relationships. And it all started with us learning how to get our finances in order and in our efforts to remove money from our life equation.

I am very happy with this decision and I am excited to see what the next year of payments will bring.

PS: I am excited that we will hit the $400,000’s during me and Mike’s birthday months in June/July!

Also, for the curious, I have never, not once, felt regret in funneling extra money towards my student loans. I have felt buyer’s remorse. I’ve regretted going out to eat. I have regretted going to events that required spending money. I have regretted buying gifts that I know will end up in a landfill some day. But I have never regretted letting go of money in exchange for a little slice of freedom. I’m just saying.

Freedom: Why I Choose to Stay Part Time

When I first graduated from dental school, I imagined myself working as many days as possible at multiple offices to lead a “successful” and rich lifestyle. The goals were like any other typical goals, pay down student debt, buy a huge house in Southern California, travel the world, buy nice things to fill the house, start a family and raise children, etc. I wasn’t quite as intentional back then with my lifestyle as I am now, as you can probably tell. But I was ready to enter the workforce and “getter done”. After so much schooling, I felt like I was behind everyone else and I needed some catching up to do.

So how did I end up here?

The first person who ever suggested I work part-time was my financial advisor. We had just met and we were delving into what our goals were for the future and what our ideal lifestyle model would be like. When I rushed headlong into my ideas of working 6 days a week at multiple offices, for the rest of my life until I retire at past 65, he stopped me then and there and asked me to consider an alternative. Burnout is a prevalent result in dentistry. Due to the high stresses of the job, a majority of dentists experience burnout at an earlier age than they would like, which causes them to either cut down significantly on the days they work or quit dentistry all-together. My financial advisor, who deals with mostly newly graduated dentists, have seen time and time again, young new grads quitting dentistry a few years out of school. Despite my whole-hearted belief that this could never happen to me, he highly recommended that I limit myself to only four or five days a week. Long-term, he says that that would be most conducive to the lifestyle that me and Mike were trying to live. Off course, with anything anyone says to me, I took it with a grain of salt, but was still slightly stubborn in my ways. I had barely started work at that time, and was really feeling professionally driven. To me, I have watched my parents before me, and my friends around me, work the usual 9-5, Monday to Friday every week, and I (arrogantly, pompously, and ignorantly) assumed that I was more capable than that. I felt like I could take on the whole world at that point in life. We all feel like superheroes when we are young and naive.

And maybe we could, but does it mean that we should? The second person who insisted I work part-time was my boss. A little back story on where I work and my relationship with my boss. I started working at an office five minutes from my house at the age of 19 years old. I was a volunteer at first, but the office manager (who happened to be the wife of the dentist who owned the practice), saw my drive and interest and decided to train me from scratch to be a dental assistant. She paid for my x-ray licensing exams, bought me scrubs, set up one-on-one training sessions with the dental assistants, etc., etc. She basically became my second mother and took me by the hand and showed me the ropes. She held a lot of belief in me and I grew confidence and independence under her wing. She saw my love for writing, and actually had me write the entire website for the office from scratch. Every single written word on that site was mine, and I became so proud of it. She was very trusting, patient, and just all-together generous with her time. Eventually, I started working as a dental assistant on the IV sedation team, which was being run by the owner of the practice. He, too, had the same generosity as his wife, and shared so much knowledge, tips, and advice. I knew I wanted to be a dentist since I was eight years old, but I did not come to love dentistry until I worked with them at this office. These two people became my second parents, and did as fantastic a job as my first (real) parents in raising me to find my self-worth, as well as instilling in me the core need to put others first when it comes to doing dental work. When I graduated dental school, I reached out to them and they made room for me in their two practices to start my journey. Again, they’ve trusted in my abilities, although I do not know what they ever see in me, but I hold a lot of respect and feel a lot of gratitude towards these two people. They are the type to hold the best interests of those around them to heart, and I trust them fully and hold their opinions quite highly.

So when I started working with my boss and he asked me how many days I hoped to work, again I said 6 days a week. He looked at me kind of funny, as if seeing his former, younger self with the same fire in my eyes, shook his head, and then said to me, “You don’t want to work six days a week. It’ll burn you out. You’ll feel too tired to think and then you will make mistakes, and then you will feel less and less confident. Plus it wouldn’t be giving your best standard of care to your patients. In fact, I don’t want you working six days a week.” I was kind of surprised, but at the same time, I recalled my financial advisor saying the same thing and I said, “Okay.”

Initially he gave me three days a week, and then he bumped it up to four days a week, and then five days every other week. But I think he saw that I was looking for more. When one of the doctors at one of the offices left to fulfill her own dental dreams, he had me cover for her until he hired a new doctor, which then had me working six days every other week, and five days every other week. I was so excited for the chance, I jumped at it and went to town. I worked so much, and though I loved my job and went to work every day with a smile on my face (and, more importantly, left work every day with a smile on my face), I started to see what he meant. Burn out is a real thing, and although you may not feel it, it IS reflected in one way or another. Perhaps it is in your work, or the way you treat others. I started to lose that time that I used to take with my patients, and I was practicing more of an in-and-out type dentistry. The Hi- Let’s get to work – Bye! It wasn’t just dentistry either. I started to bring that home with me, relishing the space that I needed for myself, and taking away from the time I should have given to Mike and my family and friends. It only lasted a month or two before we hired a new doctor that fit well with our practice. But I saw what I needed to see, which was this.

You cannot take care of other people if you do not take care of yourself first. My job is built around helping others, whether that’s helping them out of pain, helping them feel confident with their smile, helping them learn about hygiene techniques that will prevent future disease, or just helping them understand more about teeth. I entered dentistry for this aspect of it, and to detract from my ability to help others to a high level of standard is selfish and wrong, especially when the driving force is money. Luckily, I also found a shift in my “needs and wants” in life, and I realized that I don’t need the money as bad as I thought. Sure, I still have bills to pay and loans to be free from. But I also used to spend on things that were simply wasteful. I cut that out and found that I do have the time, and space, to give to myself, before I give unto others.

My brother once asked me why I did not work more if I was so concerned about paying off my student loans really quickly. Fair question, since that’s all I seemingly preach. My answer is this. The reason why I want to pay off student debt quickly is not so I can be rich quicker. It’s so I can be free. If working more days now is required to get rid of the debt quicker, then all I am doing is trading freedom now for freedom later. The result of that trade would be a worn down, energetically deprived me, who would get less out of life in my earlier years than if I were to continue at a more moderate pace. The truth is, I just don’t think the trade is worth it. If freedom is what you seek, then there is no need to get more freedom in exchange for freedom. I think it all comes down to the question, “What do you value?” To be able to answer that question requires a lot of deep soul searching that I am not completely sure is even complete yet. But so far, I’ve come to the conclusion that things I value include aspects of life that cannot be found in the workplace. I value space – for a reset, to be mindful, to be open and to think clearly. I value health, which is prolonged by the avoidance of stressors and physical ailments via static postures. Speaking of stasis, I value trying to avoid stasis in all aspects, by always learning something new. I find that if I was at work all the time, I would not have the space or time to learn new things, which would be a shame, since I also value creativity and self-expression. Lastly, I value taking care of people, and it’s easy to forget that we are people too.

In 2017, I worked an average of 3 days a week. It’s almost laughable, that a young, arguably driven dentist, would work less than half of the year. Even though I worked alternating 4 and 5 day weeks, and a few months of 5 and 6 day weeks, I took multiple long vacations, some as long as 2-3 weeks. I no longer seek to fill my time solely with work. I am more mindful about drawing boundaries and really saying no in order to have the space to increase my own self-worth. I aim to learn new things about the world, and where my place lies in it. The time off has given me a better understanding as to why I do things the way I do and how I could live life in a way that is better for the planet and for the people. More importantly, I am able to implement that change. It’s not just all talk, but I actually get to experiment with different lifestyles and really DO. I spend a majority of my weekends solely with family members and friends, because I have my own weekdays off where I can spend it on myself. I like that I don’t have to detract from other people’s time. Time is like any other resource we have. Like money, if you have an excess amount of time, you are more likely to be liberal in giving it away to others. If you have little time, then you will be more stingy with it, wanting to keep it for yourself. Now I know that time is a better thing to earn than money. Off course, I could go out there and find other offices to work at on my days off, but honestly, I have come to realize the value of working part time. What started as a recommendation by my financial planner and a command by my boss has become an autonomous choice to choose freedom above all else. I wouldn’t trade the peace and happiness that I’ve found for a house, or a new car. Would you?