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Private Practice Startup Podcast
Episode 116: How to handle six figure student loans as a therapist
00:29:33
Travis Hornsby
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- [00:03]
A
Welcome to the Private Practice Startup, where we inspire you from startup to mastery. We chat with entrepreneurs, experts in the mental health and business arenas, and successful private practitioners to give you the tools needed to make your dream practice a reality. Visit theprivatepracticestartup.com for awesome resources, free trainings, and so much more. Here are your hosts, Dr. Kate Campbell and Katie Lemieux.
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B
Hey there, Startup Nation. Welcome back to another episode of the Private Practice Startup podcast.
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A
I am one of your hosts, Katie.
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B
Lemieux, and we are here with my other co host.
- [00:38]
A
Hey, everybody, it's Kate Campbell. We're here online. Yes. We're all three podcasting from three different places, which is so fun. I didn't have to drive the hour commute to Katie's house today. I was thinking as I was getting stuff done this morning, I'm like, oh, man, this is so much more productive. This is like way, way smarter. We need to do this more often because it's.
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B
I was thinking the same thing.
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A
Yeah, it sounds good, it's working well and it's much better. Much more efficient. So. Yeah. We're here with Travis Hornsby today. Hey, Travis, what's up?
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C
Hey. Great to be here.
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A
Good to have you here.
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B
So Travis is going to be talking to us today about how to handle six figure student loans. As a therapist, that makes me want to, like, put the hand over my head. Thankfully, I paid off my student loans, I think in 20, 20, 2016, so I said bye. Bye. But I know some of you guys struggle with that, so this is really important, especially if you guys have those massive loans. It's like a mortgage. Oh, well, Travis is going to help you guys with that today, so that's really awesome. But before we get started, if this is your first time joining us, we want to say welcome. It is such a pleasure to have you. You are our vip and for that, we have a gift for you. All therapists need paperwork. Whether you like it, love it, hate it or not, we have attorney approved private practice paperwork and we want to invite you test drive ours. So we'd like to gift you our HIPAA form for free. And the way to grab that is head over to privatepracticestartup.com head over the resources tab and look for the HIPAA download and you can get that for free. Last week on our show, we had Gordon Brewer. Gordon talked to us about creating a private practice that is financially sustainable. So we talk a lot about mindset and that, but also really being brutally honest with your numbers, knowing your why and really as a therapist, a lot of times we do have a lot of shame in the sense of we.
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A
Want to help others.
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B
And then money and shame and helping others, it just kind of all gets jumbled in this kind of pot. So really identifying what kind of lifestyle you want to live and doing that unapologetically because you deserve that. You help others. You transform lives and our world and what we do is so important. So check out that really awesome conversation with Gordon on last week's show. So before we dive into the topic, we'll take a quick break for our sponsor.
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A
Today's sponsor for today's episode is Gusto. If you're in private practice, you most likely wear a lot of different hats. And some of those hats are totally cool. But some like filing taxes and running payroll? Not so great. That's where Gusto comes in. They make payroll taxes and HR actually really easy for small businesses. Its fast and simple payroll processing. They also offer benefits and expert HR support all in one place. Gusto automatically pays and files your federal, state and local taxes so you don't have to worry about it. You can knock that additional item off the to do list and it's all automated, which is so awesome. Plus they make it easy for you to add any health benefits or even 401ks for you or your team. So let them wear one of your many hats. You have better things to do and more important roles to focus on. Listeners get three months free when they run the first payroll. You can also try a demo and see for yourself how amazing Gusto is@gusto.com pps as in private Practice Startup. You can also find the link on our Show Notes page so make sure to check that out. There are so many ways to keep your practice organized, but TherapyNotes is by far the best. They're easy to use, secure platform, lets you not only do billing, scheduling and progress notes, but also create a client portal to share documents and request signatures. Plus they offer amazing unlimited phone support. So when you have a question, they're there so you can get help fast. Get started with TherapyNotes today, trusted by over 60,000 professionals. Go to therapynotes.com and enter promo code PPS as in Private Practice Startup and you'll get two months for free. Also you can listen to episode 54 where we interviewed Brad Pliner and took an in depth view into their ehr.
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B
I love how like a financial sponsor is a sponsor by a financial topic. So that's like perfect. So Travis Hornsby is a cfa. What does that mean? A Chartered financial analyst.
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C
Yeah, yeah, exactly. You got it. No, you got it.
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B
Cool. So Travis used to trade billions in bonds for the world's largest mutual fund firm before he decided he wanted to help people like his wife, who had had a big negative net worth. And he has helped over a thousand clients eliminate debt as a source of stress. So let's just kind of dive in, I guess. Let's dive into the place of, like, where did you decide to kind of leave that behind? And what made you decide that you wanted to help people in this fashion?
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C
Well, sure. So people who have money in tax exempt bond funds are disproportionately rich. So if you have so much money that you benefit from a tax exemption for municipal bonds, then you are probably multimillionaire. And so that, you know, there's nothing wrong with working hard and making money for people like that. But it wasn't something that necessarily got me up in the morning, excited every day. I think that it's a lot more rewarding to see somebody who goes from a place of complete financial insecurity to the path of being on the road to financial independence and security for their family. And that transformation is really gratifying to watch that happen. When I was doing the Wall street bond trading thing, I basically just decided that I was just going to leave that behind. I took a gap year, traveled around the world, and then decided that I was helping my wife manage her student loans. And she said, hey, you should help my friends out. They're in great need of this. I did that, started writing about the topic, and used some of those bond trading excel skills to put models out there on the Internet. And a lot of those kind of just went kind of a little viral, and people just really needed the help. That's how Student Loan Planner started.
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A
That's awesome.
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B
And what does your wife do?
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C
She's a physician, a surgeon.
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A
Very cool.
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C
Yeah.
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A
This is one of the things about podcasting from different places. We both have questions at the same time. So I'm going to raise my hand.
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B
Old school style. Yes, Kate?
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A
I'm going to raise my hand. Yes. I was curious, though, Travis, before we dive into your topic today, where did you travel across the world?
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C
I went to about 40 countries. I went to all over Europe, Western, Central, Eastern Europe. Then I did that for maybe like four or five months. And then I went down to spent some time hanging out with the girlfriend, then girlfriend, now wife, and stay with her for maybe like a month or two months. And then I went down and traveled with my best man in the wedding. We went down in Latin America and went to maybe 10 or 11 countries down there, all through Mexico, all the way down to Panama.
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A
So yeah, it was quite the gap year. That's amazing.
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B
That is amazing.
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C
And I was really into the financial independence movement and I kind of felt like I was done working. I honestly was just so exhausted from doing the work that I had done that I was just. My idea was I was just going to write books and just blog and I didn't have a specific focus. And then when I was asking for my father in law's blessing, Mary his daughter, he said no. And what.
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B
Did he go like straight out or there was like, yeah.
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C
He was just like, no. He's like, you don't have a job with a stable income. And my, you know, mother and father in law, or first generation, you know, immigrants to this country. And so they, you know, believe in working hard, having a high stable income, like making sure you're a good worker and a good provider, that kind of thing. And I think that he was just kind of worried about me and what my long term plan was. Kind of makes sense. If you were going to have your child marry somebody, you'd want them to be kind of a normal person, probably. Right. And that was a little odd, I guess. And so part of the motivation for making student loan planners successful too was, well, I don't want to go back and work in a typical corporate environment because that's just not my call. So that's one of the reasons why when that happened, I was like, oh my goodness, this thing has to be successful. I don't have a choice.
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B
Nice, interesting, interesting. I would love to get like tips on like your travel, but I know that's not what we're talking about today, but did you come home in between at all?
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C
I did, yeah. I would usually come home and spend some time at home, recharge, relax, see family and friends, go travel again, come back. So I did that. I actually went probably three times. The last time was only for, you know, a few weeks, but with my younger brother to kind of show him the ropes.
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A
So cool.
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B
Well, if I do need travel tips, I'm calling you.
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A
Back when I was in my early 20s, I went and backpacked around Europe for six weeks and that was like the most amazing adventure. So you make me think of that and it was so much fun and I can't wait to do it again someday.
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C
Yeah.
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B
So let's dive into the topic, kind of share with us how it got started. Share with Us kind of. I don't know where you want to get started in this. This topic, so.
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C
Sure. Well, I mean, I'd love to kind of start off asking you two questions. You know, what are the typical kind of folks that you talk to in terms of their student loan debts coming out of their programs these days? Like, what kind of numbers are you hearing in your space?
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B
I think I'm gonna let Kate answer that. Cause she does have a PhD, and so she, like, did the whole. The whole thing.
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A
I did the whole shebang. But I luckily, and I'm very blessed to say this, never had to do it with student loans. So I don't have the student loan struggle. I have a lot of compassion and empathy for those who do because it's really hard to pay them off. And from some of the interns that I work with and some of the other therapists, it can be. I mean, it's pretty costly every month. I heard the other day that someone's being charged $800 a month for student loans. And that's just for the master's program for PhD. I mean, it's well over 100 grand to get a PhD. And that's really costly when you're starting out as a clinician. And early on, clinicians really don't make a lot of money, unfortunately, especially in community mental health and treatment programs, enough to afford the cost of living down here in South Florida. I know it's probably different all across the US So I don't have specifics from my own experience, but just from what I've heard, it's very overwhelming.
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C
And what would you say is, like, the typical income for a therapist, like somebody that goes through, you know, your.
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A
Site, it's around a teacher's salary for clinicians who are just starting out, and then, you know, could range anywhere if they're not in private practice, if you're. If they're in treatment programs or community mental health could be high 30s on up to maybe 55 at most. @ most. And then in private practice, significantly higher. But that takes time for clinicians to get to that point where they're making six figures plus and really able to make more income.
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C
Sure. So then I asked that just because I want to kind of talk about two different scenarios. So the first one who. Let's say that she is doing the community mental health kind of program, working full time, making 40k a year. Let's say she's got 100,000 in student loan debt. So that kind of a person could really benefit from something. Called the Public Service Loan Forgiveness Program. That's a program, that's a ten year program. You pay based on your income. And at the end of those 10 years, any remaining balance that you have leftover is forgiven tax free. So let's say you're making 40,000 a year. What they do is if you're on the revised Pay as yous Earn or the Pay as you Earn program, then you're going to pay 10% of your discretionary income. So discretionary income is what your income is minus basically the federal poverty line times 1.5. So if you kind of do a little bit of math there, let's say that that leftover amount after you do that subtraction is $20,000. And so then you would take 10% of $20,000 and that would be $2,000 annually. So just divide that up into monthly payments. Maybe that's like 150 to $170 a month. Right. So this $40,000 income person, even though they have $100,000 receipt of loan debt, could be paying like $160 a month, give or take. And if you could pay that $160 a month for 10 years while you're working full time in one of these facilities, then your loans that you have not been even touching the interest on would be eligible to be forgiven tax free, which is tremendous. So in other words, you're talking about cutting the cost of a six figure education down to maybe like $20,000 or so.
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A
Wow.
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Wow. Now what do you, what, what does one have to do to be eligible for that?
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So you have to consolidate your loans. Usually the best thing to do is to consolidate your debt right after you finish graduation. However, you don't necessarily have to do that to be eligible. You just have to have direct federal loans. So what you can do is log into your loan servicer and look at the title of all of your loans. And if it says direct in the name of the loan, then that's an eligible loan for Public Service Loan forgiveness. And after 2010, the government started issuing these loans by default. So like everybody has direct federal loans after 2010 because the government took over the student loan lending. So for recent grads especially, they probably are in a pretty good situation in terms of having their loan set up the right way. Now the second part is once you have the right loans, you have to make sure you're actually paying on the right plan. So a lot of people will sign up for the extended plan or like the standard plan because they think it Makes them feel good. Right. Like, if you're paying 700amonth on your loans and you're gonna be done in 25 years, that feels okay. Right? Like, you at least feel like it's gonna end eventually. Right. So, like, Kate, you mentioned, like, the $800 a month, right? So that's probably somebody who is trying to pay back her loans in full. And the issue is it's like a.
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A
Full rent payment a month, which is. That's hard to swallow.
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C
Well, yeah. And so what's tragic there is if she is making that payment when she doesn't have to. So that $800 a month payment, if she is eligible to pay based on her income, then her payment could be like $150 a month or something like we're talking about. So what's crazy is, even though that payment would be $800 a month, if it's not a payment that she signed up for that's based on her income with one of these government programs, government repayment plans, then that's not a qualifying payment. Those payments do not count for loan forgiveness.
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B
Wow. Now, does someone have to be like, have a job for this or can they be in private practice?
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C
So we're gonna talk about that second scenario because that's a different set of different situation, and that's actually cool. But you can still make it work in private practice, so we can definitely chat about that. So for this, you have to be employed full time at a government or not for profit employer. So that's like a lot of different places in the therapy world. Right. At least it's not as difficult to get that kind of a job as a therapist compared to if you're, you know, a veterinarian or a dentist or something, where, like, private practice is pretty much the main option that exists.
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B
Yeah. And a lot of times when therapists are new to the field, a lot of times they do go to community mental health or a government type agency.
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A
Mostly community mental health, I would say.
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Or at least in this area. So I know I did. I always say I did 11 and a half years, like, it was a sentence. And community mental health, it kind of was. But this would be, like, perfect for someone just getting out of their master's program if that's where they're gonna go, like, jump on it. You never know.
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C
Right.
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B
And if you're like, you know, I know that Kate actually has someone in her group practice that going through her PhD as well and still working full time, like, so if you are even going into a PhD program as well. And you're gonna be working in community mental health. You're not ready for private practice. This would prob really perfect for you, right?
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C
Yeah. The nice part is that, you know, a lot of people could do this for 10 years, have their loans taken care of. And once their loans are gone, they'll have no debt. And they could definitely feel really comfortable going out and doing their own private practice at that point because you know, they won't have anything holding them back. Now the other flip side to this is somebody who wants to get started right away, that's actually okay too. So let's talk about this second scenario. So we'll say, say a person has 125,000 in student loan debt. She's brand new grad, wants to be a private practice owner, but they're concerned like, well, how am I going to make this work? So as long as you have the typical things that an entrepreneur has to have to be successful, like an emergency fund and a business plan, like all these things that you guys can help with, that's the main thing. You have to have to be successful even if you have a bunch of student loan debt. And the reason for that is if you are planning on like Kate, you said some people make six figures. So if that's your plan to make six figures one day then, and you have 125,000 of student loan debt and your spouse doesn't have any debt, then that debt is going to need to be repaid at some point. Because your debt to income ratio is somewhat attractive if you're having a six figure income with a low six figure debt. So if you have a hundred thousand of income, 125,000 of debt, you're gonna pay your debt off in full and not really receive any forgiveness. So what's, what's cool is with these government repayment programs, there's one in particular called Revised Pay as yous Earn. This program is a 10% of your income program. Kind of like what we were talking about with the loan forgiveness. So you can sign up for this plan even if you're not gonna long term do loan forgiveness. And what's cool is, you know, I would, I would imagine maybe I can ask this question, what's a typical income for like the first three years of practice on average?
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B
That's a good question.
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C
I'm guessing low.
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A
Well, yeah, it really depends. It could be anywhere between 45 to 60 to 80 to 100. It just, it really just depends.
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B
And I would even say sometimes like 20. But I think then you're still doing the balance of like full time work.
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A
Full time practice for a side hustle practice then.
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B
Yeah, But I would say sometimes it depends. And this kind of goes to your point about like, having a business plan and having a clear marketing plan and knowing where to put your money to make your practice grow, which a lot of times clinicians just starting out don't have. That I know. Kate just shared with me. She had a conversation with someone the other day about like, the field of dreams mentality. It's like, well, I'll just go into practice and I'll have 10 clients a week and things will be great. And it's like, I would say, like, lower sometimes maybe.
- [19:38]
C
So what's cool is like this program that I'm suggesting is actually something that's perfectly built for that kind of ramp up. So, you know, at least most businesses, like friends that I talk to, like, you know, your first couple years, like, you can just break a profit, stay in business, like you're doing okay, you know, as long as you're seeing consistent growth and the recurring revenue is growing and those kind of things. So with this revised page Word program, you can pay that like, hundred or $200 a month, but you're accumulating interest of like, maybe seven or eight hundred dollars a month alone because of a high interest rate. So what's cool about the revised Pay as yous Earn program is that they subsidize a portion of that interest every month if your income is low relative to your debt.
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B
Mm.
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C
So your taxable income. So if you're making $40,000 a year, you owe 125,000, and you would normally be accruing interest at like $800 a month. If you're on this revised pay as you earned, you might accrue interest at a rate of like $400 to $500 a month instead while your income's low. And then once your income grows up to a point where it's kind of high relative to your debt, that subsidy disappears. And then at that point, you could refinance your loans with a private lender, and you're basically selling them to a private lender and promising that private lender you'll pay them back instead. And because you have a high income relative to your debt, they're going to give you a lower interest rate in some cases than the federal government would. So you could cut a 6 or 7 or an 8% interest rate down to like 4 or 5, 5 and a half percent, something like that. So the strategy there is, while you're trying to be successful in private practice, pay as little as possible, try to save as much as possible and have a lot of liquidity for those unexpected events that happen in business so that you can grow. And then have your student loans put onto a plan where you'll get an interest subsidy which will save you thousands of dollars a year. And then when you're finally up to the point where your income hits that level that you were expecting and you can pay it off, then consider refinancing your debt with a private lender and getting a cashback bonus, kind of like for credit cards. You can get cash back bonuses for refinancing. Also refinance to slash that interest rate to get out of debt even faster.
- [21:46]
B
That is so I didn't even like, know this world existed. And my mind goes, because I, I'm a private lender in real estate, so my mind almost goes to like, well, how does, how is the lender's money protected?
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C
Yeah, great question. So student loans are the most difficult kind of debt to discharge in bankruptcy in the country. Okay, gotcha.
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B
So it's protected that way.
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C
So yeah. So you, I mean, student debt is an unsecured loan. Right? There's, there's nothing you can't, you know, take somebody's brain when they don't pay. Yeah, exactly. I get to hold on to your license, you know, for the next 10 years until you pay me off. Right, but. So, but what, Basically the, what the law says is that you can garnish, like assets, wages, like. It's actually a very powerful collection mechanism in most cases. So for that reason, the private lenders out there are more comfortable giving lower interest rates to people who are really good credit risks. So if you have over like a 650 credit score, you always pay off your credit card every month on time. You have maybe a reasonable mortgage payment compared to your income. You don't drive a brand new BMW with income that doesn't support it. Something like that. Then that lender is basically saying, well, treasury rates are 3%. I can lend to you at 5%. And that's an attractive bond, so to speak. That's an attractive asset to own for an investment because people over a 750 credit score default maybe 1% of the time, for example. I'm just making these stats up. But that's what the investor is thinking. That creates an opportunity because the private government gives the same interest rate to people whether or not they're a basket weaver or a brain Surgeon. So that doesn't make any sense. So what's cool with refinancing is that higher income individual can get the better interest rate, whereas the person that's doing the basket weaving. I'm joking, of course. But they get to keep that interest rate that's a lot lower than they would get in the private market.
- [23:47]
B
Gotcha. So where do you kind of come into all this equation?
- [23:50]
C
Sure. So we make plans for people like one time flat fee plans at a fraction of the cost of what a financial planner would charge. So we'll come in and basically analyze people's debt, tell them exactly what to do to save the most money to pay it off, make sure that their student loan strategy is matching what they want for their life strategy. That's one of the big mismatches that we see a lot is like somebody will be paying $800 a month. Kate. But they will, you know, and wanting to start their private practice, but that's not at all aligning to what they want because maybe they wanted to do that private practice startup. And they're putting all this cash flow into their debt. So they feel like they're afraid to start the private practice startup when they could be cutting their cash flow significantly, which is going to give them more flexibility and safety to succeed.
- [24:33]
A
So we, yeah, great resource. And I have several people in mind. I'm already thinking of that. I'm going to be like, okay, you guys got to contact Travis. Listen to this podcast, right?
- [24:43]
C
So, yeah, so like our fee ranges like from 300 to 600 on average for flat fees. That's like the paid plan. And then if somebody is already making like 100,000 in a private practice and they have a modest debt, then our site also has those refinancing bonuses that I mentioned. People can click and shop around on their own, ask us how good the deal is, and that's free to do. So we don't charge people for just applying through the links. That's like kind of a referral bonus deal where they get about two thirds on average of the referral bonus and the cash back bonus and we get about a third of it. And so that's one part of our business. The other part of our business is like, help. I'm clueless. I think I'm doing the right thing, but I'm not sure. I just want a second opinion. And for people who owe less than $200,000, that's the 295 flat fee rate. So that's what most social workers, therapists, psychologists, Anybody with that kind of degree would probably pay well.
- [25:42]
B
I was clueless until this podcast. So that's good to know that these resources sources are out there. And also, I like your approach.
- [25:49]
A
It's more.
- [25:50]
B
It's not just the student loan stuff.
- [25:52]
A
Right.
- [25:52]
B
It's what are your goals, what is it that you want to do? And this is how we can help you as well as help you with the student loan stuff. So I love that. That's great because one of the things that we talk about is really knowing, you know, your financial goals, what it's going to take to get into private practice, all that stuff. So you are such a great resource for that.
- [26:12]
C
Thanks. Yeah, we're passionate about helping people that help others. Right. So that's the reward for me is I get to watch somebody go from thinking like, they can't start a family, they can't start a practice, like they can't achieve what they want, their career. And then they learn about these like ridiculously complex loan rules and how to optimize them for their situation, and suddenly they're on the path where they want to be.
- [26:31]
B
Right. That's awesome. Well, Charles, we so appreciate you being on our podcast today and reaching out to us because I know that this is something that many therapists struggle with. So this is such a great resource for them to have a way to like, breathe a sigh of relief in regards to getting rid of that student loan debt and also make your dreams come true, because that's just really important. So Startup Nation, we wanted to thank Travis for his awesome knowledge and information and helping you help others, as he said. And we hope that you join us next week. Next week we actually I'm going to be interviewing Kate on the podcast, so that's going to be a lot of fun. Kate is actually in the process of creating and it's been a 10 month journey, really her perfect group practice. So she's going to kind of talk us through the idea of creating a practice, what that looks like, what you need to know, and just really overall her experience. So if you're in the process of creating or you have created or one day you will create your own group practice, or just your practice in general, you want to join us for that one. So Start Nation, we want to say thank you for joining us today. As always, we love when you show us the love. Whether that's an email, a review on itunes, or even a Google review, we're inspired by us inspiring you and that just makes us want to do more. So Startup Nation, have a fantastic and inspired day. Thank you for allowing us to inspire you from Startup to Mastery.
- [27:54]
A
See you next time, everybody. Thanks again, Travis. This was awesome.
- [27:58]
C
Sure. And the last thing I guess is if you have any questions, My email is travisudentloanplanner.com Feel free to reach out to me.
- [28:06]
B
That's right, Travis. I forgot to ask how people can get in contact with you, so thank you for that. And Travis also has a quiz that will be on our show Notes page, so you guys can go grab that. Trev, why don't you just share with.
- [28:18]
A
Them quickly about the quiz?
- [28:20]
C
It's just going to allow you to get an idea about whether or not you should be refinancing your student loans or going for loan forgiveness. So it's just a simple kind of free thing you can use to see which path that we think that you should take.
- [28:33]
B
Awesome. So definitely grab that, head over to the Show Notes page and you guys can get that. And if this podcast speaks to you, I would definitely recommend getting in contact with Travis so he can help you. So thank you, Startup Nation. Thank you for allowing us to inspire you again from Startup to Mastery. Have an awesome day.
- [28:55]
A
Thanks for joining us on the Private practice startup. Visit theprivatepracticestartup.com for awesome resources, free trainings, attorney approved private practice paperwork, and so much more. SA.