Dentistry Uncensored with Howard Farran

How to perform dentistry faster, easier, higher in quality and lower in cost. Subscribe to the podcast: https://podcasts.apple.com/us/podcast/dentistry-uncensored-with-howard-farran/id916907356

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Howard: It is just a huge honor for me today to be podcast interviewing Mark Johnson who's the founder of student loans RX.com and a wealth advisor with RBF wealth advisors in st. Louis Missouri home of Dr. Steven Matthews that's how I know that town. Mark has been in the financial services industry since 1991 he's a registered investment advisor and his insurance license in several states. Several years ago mark discovered that the financial advisory industry had pretty much ignored one of the largest financial planning issues of our day student loan repayment market his team were early pioneers in developing strategies to help emerging health care professionals create smart cost-effective financial plans to tackle their student loan debt in the context of their career aspirations family situation and personal financial goals. Mark speaks too hundreds of dental professionals each year by visiting dental schools, residency programs, dental conferences, interviews through social media platforms like today. Mark and his wife Lisa a nurse have five children in Chesterfield Missouri and so I just want to start off with why is it that everybody that speaks about financial advising they talk about everything but financial advising which is never get married you'll never pay for divorce never have any children you'll never have any college bills if you would just not getting married and not have any children we wouldn't even have to be talking about this today and how could you be a financial advisor when you're married with five children?

Mark: Well that's a great question and Howard, kind of an interesting introduction if we didn't if we didn't procreate there'd be nobody to take care of us in our old age I guess is the short answer.

 Howard: Alright

Mark: So I'm hoping that one of our five children will be willing to take me to the doctor's appointment in future years.

Howard: Well I am I have four boys so I'm sure that's not gonna happen or any of your five children girls?

Mark: Yes we have we have three girls.

Howard: Well then you'll get to go to your doctor's appointment maybe if you'll have extra time and extra girls they can swing by my house and take me to mine. So obviously student loans has massively changed in your lifetime I mean it's just it's just did you ever see this balloon getting this big back when you got into finances in 1991 did you ever think 2019 it looked like this?

Mark: Well I never had any idea I got my school paid for through the channels in the Air Force and never even thought anything about student loans and didn't think about it honestly for the first 20 years of my career Howard. I got the opportunity to do a lunch and learn here in St. Louis at the orthodontic residency program at St. Louis University and I went in and did a presentation on budgeting investments and insurance and I didn't mention the word student loan one time in the presentation this was five years ago and a few of them wanted to sit down with me and talk to me about investing and when I when they told me that they were somewhere between four hundred and seven hundred and fifty thousand dollars in student loan debt I was blown away I had no idea. So this came kind of late to me personally but it also is very very late for my industry if you think of the number of financial advisors there are in the country and I think it's roughly three hundred thousand or so most of them do retirement planning but I bet you I can count on two or three sets of hands how many financial advisors actually do student loan repayment planning so it's a it's a fairly new subspecialty and my team and I were one of the first groups I think that really got into this specifically in the dental space over the last few years.

Howard: You know if you go on dentaltown and you just do a type in just like dental student loans I mean it's just a gazillion conversations coming up because that back to you know my Howard's rule of financial planning is just don't get married and don't have any children and nothing to talk about but that's not what we do not only do they go to dental school they marry someone in there no school class so I know families that are 1 million in debt because both of them are dentists and then if I become a dentist but my wife goes onto ortho school now she's got three more years of college and I mean I mean I I see people I see married couples a million dollars in student loans. So what can you possibly do to do that I mean do you recommend that they just leave and go to Sydney Australia or are you thinking more Rio de Janeiro or where should they defect too?

Mark: I think we have agreements to bring people back from Australia country if they skip the country there's a short list of countries where we don't have repatriation agreements and I don't think people want to be going there there's no no so there's no I mean it's creating a financial plan it's we've got a number of strategies that we help clients tackle their student loan debt but the key the key that we think is really important is to do it in the overall context of a comprehensive financial plan based on your career aspirations, we've identified a few different tracks you know when somebody graduates dental school they really go down one of four tracks they either go to a residency they become an associate at a DSO they go into public health or they potentially buy a practice now I don't know what the numbers are but it's certainly less than 5% buy a practice right out of dental school so given one of those four tracks requires some unique planning and that's what we do is we help them build a plan around their career aspirations.

Howard: So what are the four only 5% buy go straight into a practice or buy?

Mark: I said less than 5% I'm guessing at that number I would think it's fairly accurate.

Howard: Okay so dental graduates 5% walk out purchase an office?

Mark: I would say less than less than that it's somewhere I wouldn't think it's more than that I think it's probably less than that I don't know exactly the exact number I'm sure the ADA has some numbers on that but.

Howard: and then what were the other ones you said residency okay you said your residency?

Mark: Residency would be a track buying your own practice as a track becoming an associate at either a DSO or a private practice and then the final track is public health. So each of those four tracks requires some unique planning.

Howard: Okay

Mark: So for example if somebody wants to go if somebody wants to go into public health I mean we're out here in the Midwest I've got a number of clients that go to schools out here Dells schools in the Midwest and they want to go back maybe to their hometown and maybe they start out in a small rural community and they start they want to work at the public health clinic in town you know obviously if they sign up for public service loan forgiveness they're gonna get their student loans you know forgiven after 10 years of payments and so that particular planning track requires certain nuances we know that they have to recertify their income on an annual basis they have to make sure that their employers stays qualified for public service loan forgiveness so those are some some unique planning scenarios that we have to take into account for those individuals. If somebody tells me their goal is to buy a practice in three to five years out of school then that's a that's another set of planning objectives that we have to make sure we're covering.

Howard: So when they come out of school I've read them that they have about on average two hundred eighty four thousand our student loans and they're either gonna go to a residency five-person lesson and by practice are gonna go by an associate of DSO or private or public health so you're saying there's a lot of programs that if you're a public health dentist they have student loan deferment programs or...

Mark: Well the largest one is called public service loan forgiveness okay pslf public service loan forgiveness is a ten year plan so if you go to work at a qualified public health clinic maybe it's in an urban community or in a rural community even Native American reservations any of those types of clinics if you stay in that employment for ten years you essentially make an interest-only payment it's a little bit more than that but you make a you make a payment over ten years and at the end of that 10 years whatever's left is forgiven on a tax-free basis. So that's that's one program that's very popular there's also through the National Service Corps National Health Service Corps there's a number of scholarships there's a scholarship called the students to service scholarship and that awards a dental school graduate with up to a hundred and twenty thousand dollars of student loan forgiveness.

Howard: What's it called?

Mark: Students to service

Howard: Students to service

Mark: Yeah and that's through the National National Health Service Corps.

Howard: and you're seeing dentists using this?

Mark: Sure that's a great that's a hundred twenty thousand dollars of scholarships it's paid over usually three payments of forty thousand dollars the first three years out of dental school now you have to apply for that I think at the beginning of your senior year and it's a it's competitive and then a number of the states also have forgiveness programs. So there's a number of programs and those forgiveness programs again National Health Service Corps students the state programs those are all for students that are going to be going into a public health.

Howard: Okay and now a now in your experience you've been doing this forever what percent I mean how common is it for them to go into public health because of their student loans? You say no since five percent buy their own practice?

Martk: The folks that come to us that we work with I say one out of four.

Howard: So 25 percent

Mark: Probably again I don't know that this is a national average Howard I just know that probably one out of four maybe, maybe one out of five of our clients go into public health. We work in some of the private dental schools and you know I think that 284,000 average that you quoted that might be for public schools we see a lot of clients that are coming out of the private dental schools with anywhere from four to five hundred thousand dollars in student loan debt.

Howard: Yeah and yeah so the stat I was going by was the one from the American Dental Education Association says the average debt for graduating dental student dental school senior in 2017 was two hundred eighty seven thousand three hundred and thirty one the average cost and but the reason that's a bad numbers because well not a bad number but the details everything if your dad and mom are paying for your dental school class you're part of the average so there's one number to say of those who have student loans what is the number but when you just take the graduating class divided by the debt and it doesn't compensate for how many people had their dental school paid for.

Mark: Sure so we've got two dental schools here in st. Louis one's a private ones across the river in Illinois the one in Illinois is a state school and I see most of the graduates from the state school that are graduating with a hundred to 150,000 less versus the private school so that that's that's that's kind of what we see in our work you know we work with clients graduating dental school or residency program all over the country and it's you know obviously the schools on the East Coast and West Coast are a little more expensive than state schools in the Midwest but.

so you have two dental schools okay one is the ATSU Missouri School of Dentistry oral health is that that one in st. Louis your talking about?

Mark: Yes sir

Howard: and then what's the other one?

Mark: Southern Illinois University and that their dental schools in Alton Illinois.

Howard: Yeah southern Illinois School of Dentistry in Illinois and so you're saying that the southern Illinois dental school students have so much less than the ATSU?

Mark: On average and again I don't obviously get I don't get to visit with all of the students but just in the ones that we've that we visited with and worked with on an average I would say they come out of school maybe a hundred to one hundred fifty thousand dollars less and that's...

Howard: If they go to southern Illinois right?

Mark: Yeah that would be the case when you when you talk to any of graduates that are going to private schools or schools on each of the coasts those are more expensive than a than a state school in the Midwest.

Howard: and do you think do you think those those private schools are gonna start drifting their tuition down or do you see any yeah or do you see any of that or the price just still so inelastic that raising the price has no elastic effect on demand so they won't do it I mean what how are you seeing that?

Mark: So I'm kind of I'm getting out of my area of expertise now I mean I'm not in the education higher education industry I'm in the wealth planning industry but as long as there's virtually an unlimited amount of student loan debt are student loans available whether it's dental school private schools I think the cost of education is going to continue to go up that's just that's just economics 101 if you provide an unlimited amount of money in any endeavor you're gonna get more of it that's just the price is going to go up you know I'm gonna charge us as much as I can you're gonna charge as much as you can if there's an unlimited amount of money chasing a limited supply of goods that's just gonna drive the price up that's just the way it works.

Howard: So who are your clients I mean um I love your website that's why I asked you to be on the show you are it's www.studentloansRX.com I love the website so to differentiate your student loans you put rx knowing that you want to focus on doctors with write prescriptions?

Mark: Yes so we focused primarily on healthcare professionals and probably 80% of the folks we work with are coming out of dental school or residency down residency programs all over the country and you know we like working with dental professionals because like us they're entrepreneurial you know I run my own business and a lot of dentists want to eventually own their own practices and their great wealth management clients because they're entrepreneurial and there's a number of things that we can do to help them not only with their personal finances but with their business finances as well as they as they mature and grow into their careers and we identified that there was a the wealth management industry had pretty much ignored student loan planning there was there's a lot of there's a lot of people out there that graduate from school they're looking for some assistance how do I pay back you mention these couples that have a million dollars of student loan debt between them you know and they're in their early 30s let's say graduating residency or late 20s getting out of dental school you know they're entering their working careers with 500,000 plus and individual student loan debt and frankly we we didn't think that there was a whole lot of good advice being given out there and based on the dental schools that we visit we still see that. I'm going to a new dental school next we are actually this this week Friday I'm speaking at a new dental school that we've never been in before and it's just the hunger for students to learn how do I repay this student loan debt in the most cost-effective manner and is there any way to save some money on interest and that's really kind of our secret sauce if you will is to really help them identify a repayment plan that's not charging them six and a half percent because the average dental student today Howard is graduating with about six and a half percent interest rate on their loans so if somebody's got four hundred thousand in student loan debt just at six percent that's two thousand dollars a month just in interest. So let's say a dentist graduates from dental school this made this past May or June and their first year they're probably signing a contract to make somewhere between 125 and 150 thousand dollars that just that's I think a good ballpark.

Howard: As an associate

Mark: As an associate sure and so you know they're relocating to a new city probably most of the time when they're graduating dental school they're setting up a new residence getting plugged into their career $400,000 student loan debt and if you were to amortize that over ten years you're looking at a $5,000 a month payment. So most students aren't willing to bite that off right out of dental school and so we help them identify the appropriate repayment strategy which oftentimes leads us to helping them get plugged in or enrolled in what's called an income driven repayment plan through the through the Department of Education and there is a...

Howard: Income driven repayment plan from the DOE?

Mark: Yes

Howard: Okay

Mark: So the students get their loans through well the financial aid office at the school helps facilitate the loans and they pick a loan servicer at a time that they take out the loans and once they get ready to to graduate enter their careers or go on to residency that's when they have the opportunity to start repaying their student loans an income-driven repayment plan caps your monthly payment at 10 percent of your discretionary income. So let's say you you sign a contract and you're going to be making $120,000 as a first year dentist you would expect that your monthly payment on that is going to be something just less of a thousand dollars a month so 10 percent of your discretionary income. Now on a alone of 400 on balance of $400,000 if it's accruing interest at 6% your interest is accruing at $2,000 a month so your payment of $1,000 doesn't even cover the interest and so one of the strategies that we've identified that can be really helpful to especially dentists and residents coming out in that first year or two out of school is that there's there are four different types of income driven repayment plans I won't go into all of them right now but the repayment method that we find that works really well for dental professionals is called the revised pay-as-you-earn revised pay-as-you-earn the acronym is REPAYE and that income driven repayment plan provides up to a 50% subsidy on their interest rate. So now the folks that are traditionally supposed to be helping graduates figure out their repayment schedule there's a slight conflict of interest in my view and they don't really promote this revised pay-as-you-earn and so we find a lot of dental professionals that have graduated they might be out of school for a year or two and when they first called their loan servicer to get put on an income-driven repayment plan or to explore their options of repayment REPAYE wasn't the first option that was that was presented to them and I just wrote an article saying that REPAYE revise pay as you earn should be the first option graduates look at when they're considering repayment and it's all wrapped around this 50% interest subsidy. So the way it works Howard so let me ask you a question: how much does a dental student make their last year in school?

Howard: None

Mark: Zero so they so they graduate let's say they start graduating the 15th of May through the end of June probably 90% of dental schools graduate the 15th of May through the end of June and so then they take a few weeks off well-deserved vacation and they start working most of them our clients start working the 15th through June through the end of July. So there's about a six to eight week period of time where they've graduated from dental school and they have no income and that is really the sweet spot so that's our busiest time of the year that's six to eight week period of time we're helping our clients we're an income driven repayment plan is appropriate if they've got significant student loan debt we're getting them enrolled in an income-driven repayment plan the REPAYE option while they have no income in that first year they qualify for up to a 50% subsidy as long as we can get them on the plan before they start earning an income.

Howard: So most of dental students graduate between what you say between May 15th and June...

Mark: May 15th and the end of June

Howard: to June 31 and that's six weeks of no work yeah I graduated May of 1987 and my ex still hasn't worked so it can go on a long time pretty oh yeah I see that that's my student loan financial planning so I'm but I I hate to derail this interview but I on dentaltown today you know what they're actually you know what they're talking about on student loans and I hear this all the time it's there's there was an article published in the National Review said an idea for student loans get rid of them and and now we have an election coming up and all that crap and there's literally a lot of dental students thinking well why should I try to start aggressively paying back my student loans because you know they're just gonna erase them the government's gonna pay them off anyway what would you I'm and I mean don't shoot the messenger don't get mad at me I mean this is what kids are saying out there what would you say to that kid?

Mark: I would say good luck that's what I would say that that is that would first of all all we're talking about 1.6 trillion dollars of student loan debt and do they really think that these presidential contenders are talking about health care professionals with the ability to earn 500,000 to a million dollars of annual income I don't think so I think what they're talking about are people in what we might consider minority communities however you want to define that term that have gone on to receive a higher education and have not been able to land a good job and are being overwhelmed by student loans okay. I don't believe if you if you nailed any one of these presidential contenders and got them in a room and said are you talking about people that are going to be making between 500,000 and potentially a million dollars a year are those the people you're talking about forgiving student loans I don't think that that's who they're referring to. So I'm not I'm not an advocate my goal for clients is to help them pay off student loans put together a plan to pay off their student loans in seven to ten years after graduation but that's consistent with their career aspirations. So this is my first time on your show Howard and so let's say you're a young dentist graduating and you've got three to five-year goal of buying a practice okay now I would never recommend in that situation someone has four or five hundred thousand and student loan debt I would never recommend that they start paying that off four or five thousand dollars a month okay what we want to do is we want to put them in a position to get a loan in three to five years perhaps from Bank of America right now what is Bank of America or any other lender going to look at in terms of financial footing to give this young dentist a loan to buy a practice what are the what are the ingredients that they're going to be looking at there are the criteria, number one they're gonna want to know that this dental practice that this young dentist is looking to to purchase the practice cash flows that's gonna be the number one thing the bankers gonna be looking at number two they're gonna want to look at the dentist personal finance and what their monthly payments are so if they've if they adopt did let's say they pulled their loans out of the federal program and they've done a private refinance there's several companies there's about ten or twelve big companies that just hammer dental students and grant dental rests and graduates on refinancing with a private lender they're getting emails all the time so let's say they pull their four or five hundred thousand dollars out of the federal program and they set up a 15 year plan and their payments thirty five hundred to let's say forty five hundred dollars a month with the banker rather give a loan to someone that has a $1,500 a month student loan payment or someone that has a thirty five to forty five hundred dollar a month student loan payment what do you think?

Howard: Yeah cash flows King they may want small pay...

Mark: So if somebody's got a goal if somebody's got a goal to buy a practice in three to five years out of school we generally recommend they get on an income driven repayment plan we keep their payment low in the first couple of years they're gonna qualify in many cases for some level of interest subsidy so they're really not accruing interest at six and a half percent if they if they get on the plan right out of school when they have no income we essentially can cut their interest rate in half that first year out of school now even if their interest rate was six and a half percent if we can get a subsidy let's say a fifty percent their loans are still accruing interest at three and a quarter and on five hundred thousand dollars that's real money so we encourage them to do is to set aside a savings account to where they're saving that interest that's accruing over the next twelve months and then once a year they if we can get access to capital at three and a quarter percent in those first couple of years while this dentist is getting situated in their profession and they're saving some money towards maybe the payment on a practice that's going to be a lot better situation for the bank to consider than somebody that says well I haven't been able to save any money in three years but I did pay down one hundred and fifty thousand in my student loan the bank could care less about that.

Howard: Right and I think the kids don't understand they might not understand the rule of 72 I I always thought that was so great the the rule of 72 when he's talking about this interest rate is 6% and this one is you know cut the industry in half the rule of 72 says that to find the number of years required to double your money at a given interest rate you just divide the interest rate into 72 for example if you want to know how long it will take to double your money at 8 percent divide 8 into 72 and get nine years. Ao I mean Albert Einstein said compound interest was the greatest force in the universe how many of these kids do you think understand compound interest and the cost of the that money how much it fluctuates on interest rate? I can tell you examples that I see my own backyard they'll be looking at two houses to buy and they're looking at two different houses to buy and they're all fixated on the price and they don't even know what the interest rate of the loans gonna be.

Mark: Right well obviously I'm not aware of any dental school or residency program that requires a finance class to be taken to graduate. So I have not in you know we visit many schools and residency programs each year and I don't know of any that require a personal finance class so I think the answer to your question Howard is there's not that many people graduating from dental school or any other higher education school unless they're a finance major that's required to take these. I guess in one way that gives me you know...

Howard: Job security

Mark: That gives me job security but what we try to teach them is basic financial planning principles you know you want to try it you want to start saving as early as possible towards retirement and other goals you want to really take advantage of any opportunities in that first couple years out of school to get some interest subsidy and that revised pay-as-you-earn plan is a really good first place to look and you want to do this in the context of an overall financial plan and you know you're gonna have insurance that disability insurance and you're gonna need some life insurance and you're gonna want to start funding your Roth IRAs in the first year or two out of school once once their income gets above ninety thousand as a single person or a hundred and ninety thousand as a married couple they're no longer able to fund a Roth IRA directly you can always do a backdoor Roth IRA in the first few years but we want to get them putting money another statistic I read from the ADA is that only 4% of dentists graduate or retire only 4% of dentists retire and are able to maintain the same lifestyle as they had when they were practicing now why is that?

Howard: Divorced and children but continue.

Mark: Divorce children not understanding how money works thinking that you know investing in things that maybe sound like a great investment but haven't made any money yet an example I use is 20 years ago satellite radio sirius satellite and XM satellite radio do you remember that Howard?

Howard: Oh yeah

Mark: Okay so that was going to be a fantastic investment opportunity and and what what the and everybody I thought it was going to be a great opportunity and both of those stocks went through the roof initially and as it turns out the American consumer is more than willing to pay for on demand you know television and so we had HBO and Direct TV and all of those competitors but as it turned out the American public doesn't want to pay for radio not in their car and now we've got these little things you picked one up just a minute here's mine now it doesn't cost me anything to have on demand through Pandora and other streaming music services so you know that was a great idea it seemed that maybe it was going to be have some promise but it ended up turning out to be a really really poor investment so that's we're taking some personal finance classes or but perhaps working with a professional that's got some experience can really help these younger professionals and I don't refer to them as kids anymore because I got children their age and they tell me that referring to them as kids doesn't work very well anymore so they're young adults and they've got a great future ahead of them but they need to understand some basic principles about finance and that's what we try to help them to do.

Howard: My gosh it's such a huge section on dental town somebody just posted this morning on under dental student loans what's under personal finance dentaltown has 50 categories one is finance and it says what is the most efficient way to pay off my student loans five hundred and fifteen thousand dollars a 6.5 percent interest rate while saving for retirement family I am 28 years old just graduated last week with no wife kids mortgage investments and parents can't help out. You know it's just amazing there's just so many kids out here and and I'm so proud of them because they're on the boards and they're being transparent with their problems you know he's saying the amount of money the interest rate his age all that stuff like that and that's the first rule of success that your that your ego that your humble that you can raise your hand and ask a question and I just love it I've been on dentaltown since 99 and the kids who get on there and say what's advice on buying a new practice well that you didn't tell me anything and then the kid with high self esteem and humble will say there's two practices I can buy and here they both are here's their location here's our price and I just love dentists so much to get on there and they share but the student loans questions on dentaltown are intense what are the questions they're always asking is just right here what about dentists who are a few years out of school and is it when is it too late to consider their repayment strategy?

Mark: Well I say that if you didn't have a professional just if you didn't have a professional review your strategies at the very beginning it's not a bad idea to we offer a free 30-minute consultation so we can give them some ideas. We actually did a reef we did a a new plan this was on a medical doctor recently but she'd been out of school for ten years and she's been on the wrong plan the entire time she she's been out of school so I know oh they're doing that here's the thing Howard you know they're crunched for time there's they're studying for boards they might have a thesis to do they're interviewing out of town they're relocating and setting up a new residence oftentimes and they've got six months to delay making a decision on their student loans so everybody that graduates gets a six month grace period and so you know there's a lot of resources online out there articles and what-have-you but a lot of people they just they call up their loan servicer I think they get a lot of bad advice and they get on a plan and they just don't know any better so I would say you know if they haven't had a professional who specializes in this this area review their plan they can be out of school for several years and we probably can still help a number of them but you know the sweet spot is obviously leaving dental school entering your career or residency especially in those first you know two to four years that's when we can really help out a lot because their income is still fairly low even where it can be in the future and they still might qualify for some subsidies and then if their goal is to buy a practice you know they can really do some good work in those first three to five years out of school to put them in the best position to buy a practice.

Howard: So you know a big thing when they graduate they start getting all these emails and calls and social media targeted marketing to refinance all that government debt into a private sector and then they're reading the newspaper where you know just the guide just a couple days ago published California to pay off ten point five million dollars in student debt giving poor patients greater access to dentist and then you had that was when we talked about earlier. So when you see these things maybe it's not is that kind of a negative to refinance your student loans to a private sender that if there are any changes in some of these government programs you'd miss that advantage.

Mark: Right so I would say eighty percent of the time or better doing a private refinance immediately upon graduation from dental school or residency is a bad idea.

Howard: Eighty percent of the time I'd probably say higher but my experience in the folks that we deal with that are coming out of school with maybe four to five hundred thousand dollars I just we just picked up a client an endodontist from California with a cool 1 million dollars in student loan debt to do a private refinance they're the most they're gonna extend that payment out is over 15 years so that's a pretty aggressive repayment right out of school I don't know what the national stats are in terms of the number of times an associate changes jobs within the first say three to four years of graduation but I'll bet you it's you know one out of every you know five or six probably changed jobs just in the first twelve months out of and so we typically don't recommend a private refinance until they are either a settled in their career they found a place they like their liked and they're gonna stay there for a while maybe their income is you know pushing two hundred thousand and then they can find an attractive interest rate. Now I will tell you that the private lenders do offer interest rates lower than what most graduates are graduating today if you've got someone graduating with four to five hundred thousand in student loan debt they've got a good credit pretty decent credit score I mean at this point in their life you know hopefully they haven't filed bankruptcy or run up a bunch of credit card debt but let's say they just have student loans they sign an employment agreement maybe for 125 to 150 thousand dollars they're going to get approved from a private lender and given today's rates they'll probably get a loan maybe around four and a half percent let's say okay. So obviously that's pretty attractive given that their interest rate on their federal loans right now is north of six percent but in the first couple of years out of school they may qualify for this up to fifty percent Interest subsidy on their federal loans. So in that first year or two out of school it just really doesn't make sense given where interest rates are right now especially if they qualify for an interest subsidy to take all that money out of the federal program move it to a private lender where they have no deferment options. So let's say two or three let's say a couple of years out of school this dentist decides they're gonna buy a practice okay and they need to come up with some money to do that maybe they want to do some improvements to the practice maybe buy some new equipment etc if they've got a student loan payment that their life then at $4,000 a month as opposed to twelve or fifteen hundred dollars a month that cash flow moving to a private lender especially if you've got a sizable student loan debt can really put a crimp on cash flow in those first couple of years.

Howard: and when they so refinancing them is I mean you're saying it's eighty percent of time it's a bad idea.

Mark: Okay so here's when it's a good idea because I don't want to you know 80% is a big number but that's just been my experience in working with the with the folks that have come to us okay. So it's a good idea to refinance when you've got a good household income they have a good household income and you can stomach that payment which is going to be amortized over 15 years so if you if you can swallow a thirty five hundred to five thousand dollar a month payment because you've got maybe two two household incomes maybe your income is north of two hundred thousand or so okay fine international students that decide to stay in the US and they're gonna seek permanent residency here so they may have some private loans that are through discover, Sallie Mae, maybe they've got some international loans and maybe their loans are accruing interest I've seen it as high as nine percent so then that would make sense to do a private refinance. Some companies will only refinance up to a hundred thousand dollars though for an international student who's seeking to stay in the u.s. The third way that it might make sense to refinance and pull your loans out of the federal program is if your student loan debt is not very high but you quoted a number earlier at the beginning of the program Howard where the average dental student is graduating with two hundred eighty seven thousand now I see that the folks that come to us it's usually north of that number I think our average client is about 400,000 or so. So in that case I'm working with somebody right now and she's single she signed a contract for a hundred and fifty thousand her living expenses are pretty low she lives in the Midwest and she has three hundred thousand of student loan debt and what we're looking to do is maybe refinancing maybe a hundred a hundred and fifty thousand of that and getting that locked in for a fifteen year payment at maybe four percent I think we can get four percent in that situation and she's gonna take advantage of the interest subsidy on the remaining balance and just create a little bit of some flexibility she doesn't know exactly what she's gonna do in the next two to three years if she's gonna buy a practice or stay she's working right now for a DSO she doesn't really know that yet so we're creating a plan that provides a little bit more flexibility as opposed to just taking the entire amount of money out and then setting her up on a payment over fifteen years on that $300,000 student loan debt we may only do half of that now. So one of the things that I encourage people to do is when they're creating a plan to kind of build in some flexibility in the plan because nobody has a crystal ball. Now I will go on record to say you know that I don't believe any dental professional is going to have their student loans debt forgiven by an act of Congress in the next you know few years I mean I just think that that's that's foolish talking you know if they want to get more votes what they really should do is for guys like us that still have a mortgage on our home they should offer to forgive our home mortgages they'd get a lot more votes that way than paying off student loan debt I think it's foolish talk I do think that there needs to be some changes to financing of higher education but forgiving loans is gonna be that's just foolishness in my opinion.

Howard: You know in the paper last month dental student loan repayment program signed into law by the Florida Governor Ron DeSantos law HB 843 the the one thing they all have in common is it's there how the states are passing programs to help dentists if they're working in low-income Medicaid areas.

Mark: Exactly

Howrad: and it says there's only five states that don't have a program like that so you're are you saying that that's a big thing that everyone should be focusing on?

Mark: well I think it's it's something that they should consider so one of the services that we offer our clients is if they engage us before they graduate we kind of help them think through that with respect to the different job offers that they're they're looking at so I'll give you an example we had a couple years ago this is we have several examples like this but just one off the top of my head we had a young lady graduate from a Midwestern school and she had about four hundred thousand in student loan debt and she had an offer from a DSO for a hundred and thirty thousand starting pay and she had an offer in a public health clinic for the same amount of money and so her question was I really don't know where I want to go yet with my career I'd like to get my student loans paid off in ten years what are some options or what does each one of these options look like and so in her situation she was going to be making a payment starting out of around $900 a month towards her student loans on an income driven repayment plan if she went the public health route at the end of ten years with interest accumulation they were gonna repay about four hundred thousand dollars was going to get forgiven tax-free Howard. So over a 10-year period of time one could argue that she was getting about $40,000 of income tax free so when we crunched the numbers that starting job in a public health facility making a hundred and thirty thousand really was more like a two hundred thousand dollar a year job for her starting out.

Howard: So I want to switch gears completely I just want to leave the whole student loan program because I don't have much time with you left one or the other I'm on dentaltown under finance looking at all these two long questions and another one that just always comes up is when do I start saving for retirement. I mean obviously if I come in a school with three hundred thousand student loans it's is that really the time to start a 401k especially if I'm gonna be trying to buy a dental office in four or five years and you're a wealth advisor for RBF Advisors and is that still are you like 80% student loans with student loans rx and 20 percent wealth advisor with RBF or where's your time spent these days?

Mark: So I'm a Wealth Advisor who focuses on student loan planning and financial planning for emerging dental professionals so 90 percent of my time is working with dental professionals who are recent graduates or will be graduating from either dental school or residency so five years ago I had totally changed my business 90% of my time is spent working with young emerging dental professionals helping them create financial plans to answer your question we get them started saving something towards retirement immediately, immediately. So that's the thing you have multiple you have multiple financial planning objectives you need to make sure you have adequate insurance you need to make sure you're saving something towards retirement you need to establish that discipline early in your career because as you know our marriages and children start commenting and if you haven't established that savings discipline you're gonna be one of those statistics that says that 4% of only 4% of dentists retire and are able to maintain their lifestyle yes divorce has had an impact in that but I would argue poor saving and investing disciplines was also a contributing factor so we get we get our clients or we encourage them we help them build a financial plan that includes a budget and they start saving towards retirement immediately most of our clients coming right out of school or residency are gonna fund their Roth IRAs right away in that first year we also if they have I just visited with a young man this morning who's practicing in Texas and he just started his job he becomes eligible for the 401k plan 60 days after employment and they've got a match matching contribution why would you leave any money on the table if the company is willing to in this particular case it wasn't a significant match but they would match up to one percent so if he put in four percent they would put in one percent so one percent of pay on a hundred fifty thousand dollars okay that's fifteen hundred dollars pre-tax into a retirement account why would you leave that money on the table so we believe in creating a balanced financial plan and setting financial planning goals in all of those areas retirement planning insurance planning buying your first practice and paying off student loan debt they can do all of those things if they're smart about it. Now do we encourage them to go out and buy a brand new Jaguar as soon as they graduate no we do not do we encourage them to buy a home right out of school it depends, it depends on their situation obviously the banks are more than willing to give a starting dentist you know a hundred percent loan to go buy a house which is kind of crazy in my mind but there's a lot of banks out there that will do that because they know their income their earning potential over the years is going to be pretty good so we just believe in comprehensive financial planning and obviously the student loan planning piece is a big chunk of their financial plan starting out but there's more pieces to the financial puzzle and we want to help them put those all together into a sensible plan.

Howard: I want to ask you on your own personal experience I'm a lot of people say that on physicians dentists and lawyers are notoriously live above their means fair rap or bad rap?

Mark: I think it's a fair rap.

Howard: and since they live in this bubble and the end humans I think that the number one skill of all humans is that they can just rationalize anything can you talk to that little fella in a bubble and explain to him how you see him living above his means.

Mark: Well sure and and I don't want to just talk about doctors because obviously there's lots of people that have fall into this category but I think that the idea is is that they understand that they've got this huge earning potential over their lifetime but I think what they don't recognize and you talked about it early on 50% of marriages end in divorce today and so you don't plan for that but what happens is is you know you know we live in a very materialistic culture you know you can get brand-new cars brand-new homes almost no money down and so what happens is people people go to these lending institutions and I think that they feel well if the banker didn't think I was good for the money they wouldn't give me the loan okay and so in what happens is they kind of feel that that their materialistic desires are being endorsed by the lenders and so we know that that's a huge problem in our country with credit card debt and obviously all kinds of debt automobiles and you know starting out if you take a look at the size of a home today in terms of square footage for a young couple getting married it's twice as big as what the square footage on homes were just 25 years ago on a new couple. So that's just that the culture we live in and so you know we just try to advise people you can you can have everything you need and most of what you want with good planning but it's gonna take some time to get there and these young folks that have been in school so if they think about their high school buddies they graduated with that maybe didn't go on and get a graduate degree didn't go on to dental school didn't go on to residency they've been in the work force maybe for four to eight years before and they have a house and they might have a fishing boat and they might have so I think there's a little bit of a pent up demand for those coming out of medical and dental school kind of some pent-up consumer demand and they feel they can feel the urge to kind of catch up a little bit to maybe some of their high school contemporaries and my counsel to them always is you know what give it three to five years make some good wise financial decisions now and you're gonna be so much farther ahead than the young professional that feels they have to be driving the fancy new car and spending all of this money you can drive a great car but you don't have to do it all I'm on credit so that's my counsel to them.

Howard: and when you go out on a date and they don't even they when the bill comes they don't even pretend to pay for it dude that's the trade you're a physician you're a dentist you're a lawyer and you're with this amazing person and that's the trade that preys on dentists physicians and lawyers like they're you know they're a beauty queen and you're gonna pay through the nose work and and that has nothing to do with love relationships whatever so when you're with someone and they want to spend money and but they want to spend your money I mean how many red flags do you need and then in my group in in Phoenix I mean I can't tell you over 30 years how many times that everybody tried to tell some idiot dude look you're just gonna be taken to the cleaners she just wants to not work and live high on the hog and dentist everyone sees it but a dentist's a physician or lawyer so live below your means live below your means and ask yourself this this is what I ask the dentist I said me me one category you live below your means I mean it's time to vacation normal people just go to the lake and camp out you went you flew all the way to Disneyworld, Christmas every Christmas you fly your whole family back home I mean your clothes your watches your cars your house I mean just name one area into having two kids yeah I had four you had five I mean instead of some of the kids to the local public state school they said on a private school I'm like doc can you name one single area where you live below your means and they can't and that's a disease live below your means and you know but seriously thank you so much for coming on the show today Mark this is amazing I wish you I you know on dentaltown if you would under finance and and went to the student loans you could be answering these questions all day long I'm and where you post them in fact why don't you answer a question and then would I'll do is where you answered that question is we're all post this video on dentaltown so they can see you, you know they can see your words but then they can see how you think.

Mark: Well we appreciate any any any emerging dental professionals that need some help with student loan planning or they've got any questions Howard they just need to go to our website studentloansRX.com they click on up on the top right hand corner of our website it says gets started they click on that they fill out it takes two minutes on average to fill out our needs assessment just get a little bit of information and one of either myself or one of my team members will give them a 30 minute free consultation.

Howard: That is a beautiful thing I'm on your website now.

Mark: So you go in the top right-hand corner you can see get started right get started button they just click on that it takes them to our needs assessment they feel it takes we actually measure the time it takes on average about two minutes to fill out that they click the submit button and one of our team members will reach out to them to do a free 30-minute consultation no obligation we're here to help people we know this is a really really important topic. I think it's the number one financial topic that young dentists and residents are concerned about with respect to finance, they know how much money they're going to make they know the upside that's why they went to dental school but getting they're getting their head around the optimal way to repay student loan debt is really really important there's a lot of mistakes that get made and we're just here to help.

Howard: Alright and again thank you so much for coming on the show I really enjoyed having you come on the show today, thank you so much.

Mark: My pleasure Howard have a great day

Howard: Alright you too buddy