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White Coat Investor Podcast
MtoM #215: Dentist Pays Off HPSP Contract and Finance 101: Credit Scores
00:27:41
Today we are talking with a dentist who is completing his HPSP contract. He shares with us the positives and the negatives of his four year contract. He said he definitely came out ahead financially going this route and he is very excited to complete...
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- [00:00]
Dr. Jim Dahle
This is the White Coat Investor Podcast Milestones to Millionaire celebrating stories of success along the journey to financial freedom. This is Milestone to Millionaire podcast number 215. Dentists pays off his HPSP contract. Full disclosure. What am I about to say is a sponsored promotion for locumstory.com but the weird thing here is there's nothing they're trying to sell you. Locumstory.com is simply a free, unbiased educational resource about locum tenants. It's not an agency. They simply exist to answer your questions about the how to's of Locums on their website, podcasts, webinars, videos, and they even have a locums 101 crash course. Learn about Locums and get insights from real life physicians, PAs and NPs@locumstory.com all right. By the way, those of you who just matched, congratulations. If you did not, I'm sorry. Sorry. And I hope that good things happen to you as you scramble or apply again next year. Figure out what to do with this next year and that your career works out in the way you want. We have a match week sale@studentloanadvice.com it ends tomorrow. So March 25th is the last day. Anyone who schedules a meeting with student loan advice between 17 March and 25 March. You don't have to complete the consult in that time period. You just need to schedule it. We'll get our Fire your Financial Advisor Resident course free after they've had their meeting with a student loan advice consultant. Let a professional guide you through the best options to manage your loans. Our experienced staff has consulted with more than 2,300 borrowers on over $720 million in student loan debt. You can potentially save hundreds to thousands of dollars with your custom student loan plan. The average client saves $160,000 on their student loans. You can go to studentloana advice.com and sign up today and if you do so by the 25th, you'll also get our Fire Year Financial Advisor Resident course totally free. All right, we've got a great interview today. It was another great milestone I don't think we've ever had on this podcast before, but stick around afterward. We're going to talk for a few minutes about why your credit score is not your adult gpa. Our guest today on the Milestones to Millionaire podcast is Steven. Steven, welcome to the podcast.
- [02:25]
Steven
Thank you for having me.
- [02:27]
Dr. Jim Dahle
Tell us what you do for a living and how far you are out of school.
- [02:30]
Steven
So I'm A general dentist in the United States army, and I am just shy of five years out of school.
- [02:37]
Dr. Jim Dahle
Okay, did you do any residency training or go straight in after finishing school?
- [02:42]
Steven
So I did a one year advanced education and general dentistry residency through the army right after graduation.
- [02:49]
Dr. Jim Dahle
Okay, but that didn't count toward your payback?
- [02:51]
Steven
No, unfortunately it was a neutral year, so I ended up sticking around an extra year in the Army.
- [02:58]
Dr. Jim Dahle
Okay, so for those who don't know about the Health Professions Scholarship Program, it's a little bit misnamed, right? It's a contract program.
- [03:06]
Steven
Yes.
- [03:07]
Dr. Jim Dahle
They pay for four years of school and give you some sort of a living stipend, and then you typically owe them a year for a year. And so if they pay for four years of dental school or four years of med school, you owe them four years, you know, as a practicing dentist, as an attending physician, et cetera, above and beyond whatever type of postgraduate training you did, either with them or not with them. Okay, so let's go back in time a little bit. Well, first of all, let's talk a little bit about what we're celebrating because you got something big coming up soon. Tell us what we're celebrating today.
- [03:40]
Steven
So in a little over a month, I'll finish back my HPSP payback and I will be on to practicing as a civilian.
- [03:50]
Dr. Jim Dahle
Yeah, pretty awesome. Now, you said this is a month from now. As we record this, we're at the end of March. Why are you done in a month? Shouldn't you be done in like three months? Did you save up a whole bunch of terminal leave or something?
- [04:04]
Steven
I did. I was kind of thinking about whether it was best for me to take my leave as I went or to save up a bunch and exit early. And kind of the best thing for me in my situation is to get out a little bit earlier instead of sticking around till June.
- [04:23]
Dr. Jim Dahle
Yeah. So this is what I did, too. I saved up a month of terminal leave. It was easy to get one month. It was a little bit harder to get two months. So I saved up one month. But I remember how happy I was driving off base, leaving that town after four years in the military, deployments hanging over my head the whole time, having to dress the way I was told to dress and live where I was told to live and salute who I was told to salute. I was squealing as I drove that u haul away from the base. And so I'm pretty excited for you, too, to be finished with your. With your payback. But I'm curious how you're Feeling now looking forward to it here in a few weeks.
- [04:57]
Steven
Yeah. I don't know if it's quite hit me that it's real that I'm able to get out quite yet. It's something I've been looking forward to for a long time and I just, I'm very excited. I can't wait.
- [05:08]
Dr. Jim Dahle
Yeah. Let's go back in time a little bit. Let's go back in time to when you. You'd just been accepted to dental school and you looked at the price T. Yes. And you realized this is really expensive stuff and you had a decision to make. Tell us about making that decision.
- [05:26]
Steven
So my undergrad had had army, air Force, Navy recruiters come and speak to the pre health club several times and it wasn't. It was something that sounded like an interesting adventure, but nothing I considered too seriously. And then once I interviewed at my state school, which is where I ended up going and seeing the cost of attendance break down. I like, man, I don't know if I want to take care of all this with loans. So that's kind of why I went in that direction.
- [05:57]
Dr. Jim Dahle
Yeah. How much do you think you would have owed if you had paved for your school in with loans?
- [06:01]
Steven
Oh, that's a really good question. Probably 300 to 325.
- [06:08]
Dr. Jim Dahle
That's actually not too bad these days for dental education. But we got to keep in mind we're talking about a date nine years ago. Right. You spent four years in school, a year in residency, and now four years in the military. So. Okay, well tell us about what was good about your time in your in the military. What did you enjoy?
- [06:25]
Steven
I really received some really great training in my one year residency. I've made some great friends, had opportunity to meet all kinds of amazing people from different walks of life. It's been a great opportunity to kind of learn and grow. As I started practicing, I've had some opportunities to do things I would have never pictured myself doing. I was an AM attached to the 82nd Airborne. So I've been jumping out of airplanes. I volunteered to go to Africa for a humanitarian mission. So a lot of really good came came out of this. Besides just the financial.
- [07:04]
Dr. Jim Dahle
Yeah, that's pretty awesome. I would have loved to jump out of airplanes while I was in the military. It was not an option for me. So that would have been a lot of fun, I think. And the humanitarian bit to Africa sounds way better than the three weeks I spent in Chile not allowed to leave the base where we built a 10th hospital. Tell us about where you're stationed during your active duty time.
- [07:24]
Steven
So I did my one year residency at Fort Benning in Georgia, and then I've spent the rest of my HPSP payback at Port Bragg in Fayetteville, North Carolina.
- [07:36]
Dr. Jim Dahle
Okay, so in the Southeast, most of that time. And did you have any deployments? Did you go spend any time overseas other than that humanitarian trip to Africa?
- [07:44]
Steven
I have. Not being with the 82nd Airborne, it's very. They don't have any set deployments. It's more of a response force. So I've been kind of on call, so to speak, for several months at a time in case we get activated, but I've not been sent anywhere.
- [08:00]
Dr. Jim Dahle
Yeah, what a difference between 20 years ago and the ops tempo of everybody's being deployed all the time. Back when I was in.
- [08:07]
Steven
Right.
- [08:07]
Dr. Jim Dahle
Very different. Okay, so tell us about the downsides. What did you not like about paying for your schooling using the HPSP contract and about your time on active duty? Yeah.
- [08:18]
Steven
So for me, the cons were kind of where I ended up living. I didn't mind Georgia, but I, quite frankly, have not enjoyed living in Fayetteville, North Carolina. I can't wait to sign out and drive as far away as I can, and then I have a decent amount of freedom to practice how I want. But, you know, there's some issues with, you know, getting the exact supplies and materials that I think might be best for patients. And then the other thing would be we do a lot of training and we'll go to the field for weeks, sometimes up to a month at a time. And that really can kind of disrupt your personal life, especially if it's on shorter notice. It's a little hard to plan.
- [09:03]
Dr. Jim Dahle
And I think you need to describe for our listeners because I have a pretty good idea what you're talking about when you're talking about going to the field to do some training. Tell them what you're actually doing when you're going to the field to do some training.
- [09:15]
Steven
Yeah. So what we'll do is we'll set up the Role two, which is like a field hospital, several tents. We'll set it up and then we'll run patient scenarios. The dentist is usually the triage officer. So if we simulate taking a bunch of casualties, all go up front, triage, and that's usually a pretty intensive process. And then if there's any dental emergencies that walk in, I'll take care of that. Because we have a fully functioning setup. It's a lot of downtime, a lot of just sitting there reading a Book or hanging out with friends, but punctuated by periods of very intense activity for, for quite a while as well.
- [09:53]
Dr. Jim Dahle
Yeah. Gas mask on. Gas mask off. Gas mask on. Gas mask off.
- [09:57]
Steven
Yeah, absolutely.
- [09:58]
Dr. Jim Dahle
I've been there doing field training before. It's. It may not be what people are super excited about with doing with their career. And one of the things I, I didn't enjoy all that much about, about my time on active duty. I mean, obviously it's important to do training. If you're ever called upon to actually be the triage person in that situation, you need to know how to do it. But it's not exactly super fun times. Okay, well, tell us, what'd you make while you're in the military? What'd they pay you?
- [10:29]
Steven
So as you accrue more time and service, the pay goes up? I think my first year before taxes, about 104, 105,000. And then this past year, like 125ish.
- [10:46]
Dr. Jim Dahle
That's all in. That's counting your BAS. Bah. Everything.
- [10:50]
Steven
Yes.
- [10:51]
Dr. Jim Dahle
All right, so that is not, you know, I mean, I don't claim to be the expert on what dentists make, but that's significantly less than the average dentist is making out there. Even if you're an associate in somebody's clinic, you're probably making more money than that. So have you run the numbers on this? Did you come out ahead getting your stipend and all your schooling paid for and then making less money for four years, or do you think you came out behind?
- [11:18]
Steven
I think I came out ahead. I did the numbers once or twice when I first joined. And to be able to save for retirement and invest money like I have been, like, in order to live a similar lifestyle and still do those things and pay off the student loans in about four, four years, I would probably have been, I think I calculated needed to make like 3:25 to 3:40 pre tax. That's what I would have needed to make in order to pay back my loans and kind of have everything else be the same. And that's significantly higher than the average general dentist. So I would say I came out ahead.
- [11:56]
Dr. Jim Dahle
Yeah. Being done with your student loans as a dentist in four years is unusual. You know, most dentists are carrying their student loans longer than that and you're out of debt. You know, you had a time debt, not a money debt. You're done in four years. You know, my classic two to five year live like a resident period, you're done. And the nice thing about that is that's kind of Fixed. So if people are worried, they don't have maybe the discipline or whatever to make huge payments to their lender over that time period. It does give them the option to know that, you know what, this is done in four years, or if you save a bunch of terminal leave, it's done in three years and 10 months or whatever. So that part's a benefit as well. Okay. There's somebody out there sitting there staring at dental school. They're staring at med school going, you know, this sounds like an adventure. I'd like to jump out of airplanes. I'd like to go get stationed in Germany. I'm not thrilled about owing 400 or $450,000 in student loans. What advice do you give that person?
- [13:00]
Steven
I would kind of echo what I've heard you say on your podcast multiple times. It ended up working out well for me financially, but it's really the best deal if you want to be a healthcare provider in either the army or whatever branch. I think it was kind of undersold to me, the army aspect of it. I was very much sold by the recruiter. Oh, you're just gonna be a dentist, like, regular clinic and you won't have loans. Like, it'll. It'll be good. And I don't think that was done maliciously, but that definitely wasn't the case.
- [13:33]
Dr. Jim Dahle
So your recruiter hadn't been to dental school nor been a military dentist. Huh, that's interesting. Yeah, yeah, it is part of the issue, right? I mean, the recruiters are generally not college graduates. Right. They haven't been to undergraduate for four years. They certainly haven't been to med school or dental school for four years or done a residency. You know, a lot of them didn't even work in healthcare in the military. And so you shouldn't expect awesome information from the recruiter is what I've generally told people. And I tell them, you got to talk to an attending in your specialty or a dentist doing what you want to do, who's on active duty right now. That's who you need to talk to. That's who you need to get the information from. Would you agree with that?
- [14:16]
Steven
I would 100% agree. I've had the privilege of talking to several pre dental students who are considering the scholarship. And I've been very honest about the good and the bad for me personally. And I think out of the handful of students, some have applied for the scholarship and accepted it. Some of them have decided that's not for them. But I think having that perspective really would have Helped me make that decision.
- [14:42]
Dr. Jim Dahle
Yeah, we want people who feel like they got conned into joining the military. They're not going to be happy while they're in there. They're not going to be given good care. They're going to make the rest of us miserable. So you might as well have people know what they're getting, go in with their eyes wide open. That's the way I look at it. And I think the stipend now is not insignificant. I think it's $2,300 a month or something now while you're in med school. I mean, it's significant money. You know, Katie and I, back then it was like 900 bucks. That's how old we are. But we, you know, we not only finished not owing any debt for medical school, we had cash in the bank. You know, we took money with us. We had a great trip to Italy off, you know, some of that money. And so there's something nice to be said for, you know, having an income during medical school, during dental school, for sure. And then typically, as a resident, you're making more, I mean, more, obviously more as a dentist, because most dentists are paying tuition during their residencies, but, you know, more than. More than medical residents are being paid. You're being paid maybe 50% more while you're a resident. So there are some significant upsides on the front end that the big downside is you just don't have control necessarily over your career. And of course, you generally get paid less than you would make as a civilian while you're on active duty. All right, what's your next financial goal? What's next for you?
- [16:03]
Steven
So I would like to keep working towards financial independence and not necessarily to retire early, but to make work optional and be able to maybe do more humanitarian work or, you know, mission work with dentistry as opposed to feeling like I have to practice to get paid.
- [16:27]
Dr. Jim Dahle
Yeah, yeah, it's pretty cool. What country did you go to in Africa when you went there?
- [16:31]
Steven
Ivory Coast.
- [16:32]
Dr. Jim Dahle
Ivory Coast. Very cool. Now, has there been anybody else along for the ride? Do you have any kids or significant other or a spouse or.
- [16:39]
Steven
Nope, it's just. Just in me.
- [16:42]
Dr. Jim Dahle
It makes it a little bit easier to look back on it. There's nobody else's regrets or expectations to deal with for sure. But certainly before signing up for this sort of thing, if there is somebody else in life, this is going to affect them as well. Right. In your case, it was a night. It was a nine year journey.
- [16:56]
Steven
Absolutely.
- [16:57]
Dr. Jim Dahle
In mine, I think it added up To a little bit more than that because I spent a little more time in residency and for some people it's an entire career. Now, how come you decided you were going to get out instead of sticking around for 20 years, get a pension, et cetera?
- [17:12]
Steven
With the new retirement system, the pension isn't as good as it used to be. So that played a factor. Honestly, being able to have more freedom over where I can live. And the army would require for general dentists, they require more training, whether that's a two year comprehensive dentistry residency or specializing. I'm quite happy as a general dentist. So I, I wasn't particularly interested in the extra training. I don't think that would help me reach my career goals. And then also I would really enjoy traveling and some of the restrictions with paperwork and other things that are involved in making trips overseas. Just the more freedom to kind of live my life as I would like it to be lived versus how I'm told it needs to be.
- [18:04]
Dr. Jim Dahle
Yeah, freedom isn't free. And the reason we all have freedom is because there's people like you who are willing to give up their freedom for a few years in order to protect it. So thank you very much for your service. Thanks for being willing to come on the podcast and share your experience with others and celebrate with us and help us inspire somebody else to figure out the best way for them to pay for their medical or dental education. And good luck with the rest of your career.
- [18:30]
Steven
Thank you.
- [18:32]
Dr. Jim Dahle
I hope you enjoyed that interview. It's always fun to do new milestones. And I'll tell you what, paying for med school or dental school, whether you paid cash or whether you paid time, is a pretty significant accomplishment. I remember how happy I was when I completed my military service and received my freedom back. In a lot of ways, it was pretty awesome and very much akin to how people feel making their last student loan payment and coming on this podcast and telling podcast and telling us all about it. Okay, I promised you at the top, we're going to talk a little bit about credit scores. And a few years ago I wrote a post about why your credit score is not your adult gpa. I think we reran it just a few months ago, but there's a lot of people that get confused about credit scores and they start almost worshiping at the altar of the FICO score, trying to do things to get their FICO score higher and always thinking about their credit score and letting it really drive a lot of their financial decisions. And that's probably a mistake most of the time. Okay, A credit score, for the most part, goes up when you have a lot of debt and you manage it in some reasonably responsible way, not paying it off, but making the payments on it. That's the key to having a high credit score. So having a high credit score in a lot of ways says, yeah, I borrow a whole bunch of money. So that aspect of it is not necessarily awesome. But the problem these days is that credit score gets used for a lot more than just credit decisions, right? It might be used by your utilities company, it might be used by your landlord to determine how responsible or reliable you are. It might be used by a potential employer. It matters when you're going to get a security clearance with the governor or the government, maybe the governor, but primarily with the federal government. And so it's important not to have a terrible credit score if any of that other stuff matters in your life, and it usually does. The good news is it does not take very much to have a great credit score. And there's a lot of little ways that you can kind of game the system to have a great credit score. But for the most part, the way you have an awesome credit score is you borrow some money and you pay it back as you agreed to do so. That's the main way you have a good credit score. You don't even have to do it yourself. You can bum it off your parents. My oldest came back from a mission. She hadn't had a paid job, she hadn't borrowed any money at all in the previous 18 months. I added her to my oldest credit card as an authorized user. I didn't even tell her the name of the credit card, much less the number. And I didn't give her a copy of it. I just added her as an authorized user, and two months later, she had some high 700 credit score, right? It doesn't take much. It's a goofy little system, but that's the way it works. And now she's got a credit score good enough to go get, you know, whatever credit card or, you know, probably even buy a house. You know, the truth is it doesn't take much to have a good enough credit score, a good enough credit report to get a mortgage, right? If you just get one credit card and you put your gasoline on it, nothing else, just your gasoline on it for the next year, you probably have, just from that, a good enough credit score to buy whatever house you need to buy. And most of us have more debt than that earlier in our careers, right? We've got some student loans, we've got a car loan, we've got a couple of credit cards. You don't have to go looking for more debt here. It takes a very minimal amount in order to have a decent credit score. But that's just not your most important financial number. Right? If we're going to rank financial numbers, we ought to be talking about things like your gross income, your fixed expenses, your savings rate, your net worth. Those are the numbers that matter. If there's an adult GPA out there, that's what it is. It's not your FICO score, so keep that in mind. So what goes into a credit score? Well, there's a few things. Most important one is an on time payment history, meaning you paid as agreed, not that you paid it off, but that you made the minimum payments every month on time. That's it. That's like a huge percentage of the credit score. The next thing on that list is the credit to utilization ratio. Okay, so this is the idea that you have a $20,000 credit limit and you only borrowed $200. Right. That's a very low credit to utilization ratio and that increases your credit score as opposed to if you borrowed $19,000 of the $20,000 available to you. The length of your credit history matters, although as I mentioned, that can be borrowed from your parents. The mix of your credit, right. How much is mortgage, how much is student loans, how much is credit cards and consumer debt, et cetera. That has a small effect on it. And any recent hard credit inquiries, right? There's hard inquiries and there's soft inquiries. Only the hard ones count. If you just applied for like seven different credit cards, that lowers your credit score for a few months. But that doesn't have a huge effect and it goes away relatively quickly. Mostly they want to know that you paid as agreed on the money you borrowed. That's what's going into a credit score. That's what causes you to have a higher credit score. Don't go crazy about it though, right? Once you get to whatever the number is, 740, 760, a higher number doesn't help you. Right. Being 770 is no better than 760 and being 820 is no better than being 760. So trying to gamify this and get getting your credit score up from 806 to 820 is not helping you. There's no benefit there. This doesn't mean more wealth for you. So there's nothing else that you got to do with that. As I look over our credit score Recently I saw that it went anywhere from 8002000 to 815 and I don't really care when it goes up or goes down. That's just from paying our bills. All our credit cards are an automatic payment and well, that's all the debt we have. And even that is only until the next payment comes due. We don't have a mortgage, we don't have student loans. We haven't had that stuff for years. No auto loans. And yet we still have an 800 plus credit score. So you don't have to have all kinds of different types of credit in order to have a high credit score. You can just buy gas with your credit card and it's going to be fine. Okay. A few things to keep in mind about credit. You should review your credit report once a year. Ish. It's probably fine. It's free to do that. I think the website's annualcreditreports.com maybe let me double check that. Yeah. Annualcreditreport.com and you can get your credit score or your credit report from three agencies. Sometimes they don't give you the score unless you pay a little bit extra. But frankly, as long as there's nothing inaccurate on there and you don't have some terrible credit report, your score is going to be fine. You might consider freezing your credit. You know, if you're worried about fraud, you can freeze it and then before you apply for any new credit, you've got to go in and unfreeze it. Some people even freeze their kids credit. You know, they've got a two year old and they've frozen their credit and they're going to leave it frozen for decades. I don't know that we ever bothered to do that. But it would be, you know, the most protected way to protect your kid from some financial scam while they're a teenager or whatever and maybe worth doing. All right. I hope that's helpful. Yes, pay a little bit of attention to your credit score. Yes, it can help you a little bit in your life. It's probably a pain to try to buy a mortgage. You can do it. You can do manual underwriting with some mortgage companies if you don't ever borrow any money whatsoever. But that's a little bit of a pain. It's just way easier to buy your gasoline on a credit card at the pump. It's more convenient anyway. And just have a credit score and a reasonable credit history that allow you to do everything you need to do with both credit and a credit score during your life. Okay, full disclosure. What I'm about to say is a sponsored promotion for locumstory.com, but the weird thing here is there's nothing they're trying to sell you. Locumstory.com is simply a free, unbiased educational resource about Locum Tenens. It's not an agency, they simply exist to answer your questions about the how to's of Locums on their website, podcast, webinars, videos, and they even have a Locums 101 crash course. Learn about Locums and get insights from real life physicians, PAs and NPs@locumstory.com all right, I hope you enjoyed the podcast. You can come on this podcast. Apply@WhiteConeInvestor.com Milestones. We'd love to highlight what you've done and use it to inspire others to do the same. Thanks for everything you guys are doing out there. It really does matter. And if you've had a hard day and nobody said thank you, let me be the first. Thanks for what you're doing. We'll see you next time on the Milestones to Millionaire podcast. The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your entertainment and information only.
- [27:29]
Steven
It should not be considered professional or personalized financial advice.
- [27:32]
Dr. Jim Dahle
You should consult the appropriate professional for specific advice relating to your situation.