This Nurse Made a 5 Figure Mistake - Ep. 3
In this episode, I'm joined by Travis Hornsby of Student Loan Planner. We break down my $180,000 student loan debt repayment and what I could have done differently. Not only could I have reduced my monthly payments by nearly half the amount, but I could have also saved a major chunk of change. I discover the unique advantages I had due to interesting marital laws in the State of California and Public Service Loan Forgiveness (PSLF). If you are struggling with student loan debt, you MUST listen to this episode.
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TRANSCRIPT:
Naseema McElroy: 03:46 Okay. I have the honor and pleasure of having Travis of the studentloanplanner.com with me and I am going to give Travis the opportunity to introduce himself because he is a master wizard at the student loan business and I just... And never by how much he knows about student loans. And I, every time I hear him on a podcast or I read one of his articles, I am floored by the knowledge that he has. So, I am so ecstatic to have him on the nurses on fire podcast. Welcome Travis.
Travis Hornsby: 04:28 Yes. Thank you so much for having me on, Naseema.
Naseema McElroy: 04:30 And, go ahead and give a little bit about your backstory and what you do.
Travis Hornsby: 04:35 Well, my mom was a labor and delivery nurse.
Naseema McElroy: 04:39 Yes! I didn't know that. I knew she was a nurse, but you just said, you just rocked my world. [laughs]
Travis Hornsby: 04:44 L & D. She'd break the ship like the... I don't know what they call it, but she'd always bring us up to the central kind of area. Like the command tower. Yeah. Like and she would bring us up there, it was me and my two brothers and she'd always bring us up and say, look at my boys, look at my boys, aren't they so grown up and aren't they so handsome and we're like, Oh mom, you know.
Naseema McElroy: 05:07 And all the nurses would just laugh to you, and give you a whole bunch of juice and crackers. Huh.
Travis Hornsby: 05:12 Exactly. And the funny thing is the exact same thing happened when we were seven and 27.
Naseema McElroy: 05:19 Right. Exactly. Well, I did that with my girls, too, and my daughter, my five-year-old actually thinks she is a nurse because I let her sit down at the nurses' station and she typed on the computer and she said, mommy, that was a really hard work. So, you know, I'm a nurse now. Right?
Travis Hornsby: 05:35 That's so funny. Yeah. You know, my mom actually just retired after, you know, kind of a on and off career about, you know, over a 40 year kind of timeframe. And, she finally had to give it up when she started, you know, kinda getting clumsy on her feet, rush in between patients and tripping over the cords. You know, they'd go to the manometers and she's like, I'm too old for this, you know. The women, there were a lot, you know, a lot lighter back when I started. I was like, well, yeah, I was like mom, maybe you're just, you know, you used to be a little stronger, you know. Yeah. So, you know, I grew up around nursing. It's, you know, a lot of other nurses in my family, extended family, too. It's an extremely important profession and one that, you know, I'm very passionate about helping because my mom kind of makes sure that I help her friends. Like whenever they have, you know, financial trouble, she's like, talk to my son. I'm like, mom, I'm not a, you know, a general financial advisor. She's like, I know, I don't care, help them, you know. But I actually can help people that have lots and lots of student loan debt who are nurses because that's what we do professionally. So, Student Loan Planner is a company that's advised for closing in on $600 million of student loan debt that we've made one-on-one plans for. Not, you know, that was going into an app or something, but like humans that we physically talked to to figure out how they should pay back their debt. So, that's the number one thing that we do. We also have various like refinancing cashback bonuses on the side for folks looking to pay back their debt that don't necessarily need that custom plan that are really confused about forgiveness options. So we've got a little bit of something for everybody. So we've helped to be about 2300 clients and you know, several hundred thousand readers that have gotten the stuff for free.
Naseema McElroy: 07:16 And, you also got into it because your father in law, before you got married to your wife, correct? Said that you needed to get a real job.
Travis Hornsby: 07:26 Yeah, I was hoping Naseema that you wouldn't embarrass me in front of your thousands of listeners. But, it's okay. But I'll spill the beans anyway. So, basically my father in law was like this FIRE thing where you're early retired. He's like, we have a term for that in Hong Kong where I grew up. He said, well you know, we call it when the wife makes money and the husband doesn't, we call that eaters of soft white rice is what he said because my wife's Asian-American and she's second generation. And so he's basically saying, you know, here's the story. He's like, you don't need my permission to get married. But as he said, if you do want my blessing then this is what you will do, you will go out and prove that you are still capable of earning an income just in case my daughter needs it.
Travis Hornsby: 08:09 You know, because of having some sort of, you know, problem in life. And, it makes sense. So he doesn't read FIRE blogs and like Mr. Money Mustache and stuff. Like he's super, you know, educated like engineer, stable large company. Right? So like that's what makes sense to him. And so he sees this person trying to marry his only daughter and he's super defensive and you know, that's just like only natural. Right? And so he kind of was like put up or shut up. And so I thought, well shoot, you know, we're living in the city because of her job, 'cause she wants to be a, you know, an academia with her medical degree. And so I can work at this big company in this big company or this big company. You know, neither. None of those are, which are that interesting to me. But I'm a blogger, I've never really focused on making money because I retired from being a bond trader in my twenties. Not like a hundred percent FI, like throwing money around. No, not that kind of bond trader. The kind of bond trader that makes like a modest amount working for like, you know, a mutual fund company like [inaudible]
Naseema McElroy: 09:08 Only the biggest, only the biggest mutual fund company, you know? Yeah.
Travis Hornsby: 09:14 But they make sure not to attract the kind of people that want to make, you know, millions of dollars a year taken. Huge risky bets. Like that's not the case. Yeah. But I had, you know, a decent amount saved up. And so I decided like, okay, I'm gonna try this early retirement thing. So I traveled 40 different countries over the course of a year and a half while I was dating my wife. And you know, she had a lot of student loan debt and she was trying to figure out this public service loan forgiveness thing. She had just been signed up for the income based program just cause that's the only one that she could afford as a resident. And she kept doing it and fellowship, but she didn't really know, you know, if she should use it or not. And then we found out at the course of, after the course of doing a lot of research that she actually did not really qualify that well for it because she had some of these older loans that didn't qualify from before 2010 which you actually had too, Naseema.
Travis Hornsby: 10:09 So basically we made that decision like, do we pay it off or do we go for forgiveness? And for me to feel like I can make that decision adequately, I felt like I had to make a model. And so I made an Excel model with the bond trader skills and then... Oh yeah, of course. Right. And then she told her girlfriends like, Hey, Hey, my boyfriend knows how to solve these student loan problems that I was having. And then they all wanted to talk to me and she's like, well like don't you all think that you should, you know, like pay him to sit down with you for an hour, like a financial person and come up with a plan. They're like, yeah, yeah, sure let's do that. And I was like, I don't know. I should, I feel like I should just do it. And they're like, no, no, this is really serious. We need help. So, I did that. And then those friends of hers told a whole bunch of their friends. And then I had a couple articles 'cause I had been blogging for a year and a half, just not really going anywhere because it was more generic. And then I started writing just at studentloanplanner.com about, you know, specific kind of occupational things that people were going through, you know, different, different professions with big debt. And those articles just started going viral. And that's kind of when I realized that I actually had something that was the business. And so I just made that my full time focus after my father in law made that threat. And I'm glad he did. I honestly, I send them Outback steakhouse gift cards as much as I can.
Naseema McElroy: 11:28 Is that where they like to eat?
Travis Hornsby: 11:30 Exactly. I have no idea why. Yeah, I have no idea why. But that's, I mean, you know to them at mine as well be like, you know, I dunno the Four Seasons version of restaurants or something like, but you know, it's like every, every time like I only needed to do two things to impress them. Just keep sending them Outback steakhouse, gift cards, and you know, remember they're like birthdays and anniversary and stuff.
Naseema McElroy: 11:51 That is so cool. So I have a question in a nutshell that is how Student Loan Planner was born. I'm interested like what path did you guys end up taking as far as paying off her student loans?
Travis Hornsby: 12:04 Well we did it ended up paying it back and...
Naseema McElroy: 12:06 You just paid it off like me.
Travis Hornsby: 12:08 Yep. Well, so we had a little, we had less and so we had, you know, about $124,000. A little less, I mean not a ton less, but we also had loans that when we tried to certify with FedLoan servicing, they gave us credit on three years of payments for half of it. And then the other half they gave us no credit for. So, we were struggling to wonder, you know, okay, like is that worth it? And I ran the numbers and for her situation, like I knew that this revised pay as you earn program wasn't going to help her. And then I knew that also like in terms of income based repayment, her payments were going to get capped and there would be an amount leftover, you know, but it was only going to be about $20,000 or so based on my calculations. So precisely. So we just ran the numbers and thought is, you know, about seven years to, you know, frankly even as much as 10 years, but at least seven years worth of pain and frustration. Is that worth that struggle compared to paying it off really rapidly? And you know, the difference was pretty small when you compare, you know, a five year, you know, variable rate that we could pay back in a year and a half. And that's what we ended up doing.
Naseema McElroy: 13:28 So it took you guys a year and a half to pay off 120 something thousand dollars.
Travis Hornsby: 13:34 Yeah. That said, I even wish that we had gotten slower with her loans. You know, because there's this NIH loan repayment program for people that are heavily involved in research and she actually could have gotten a chunk of that $124,000 paid off with that program I think if we had known about that, you know, but we identified, you know, it was about four years ago when I started learning about this stuff for the first time.
Naseema McElroy: 14:00 And this is like the more, you know, like if I would've known you for it when I started paying off, I would have made some different choices. And that's the whole reason why I brought you on the podcast is because I want to kind of get raw and naked with my finances with, well, at least my student loan payments, my student loan debt with everyone and kind of see like, did I make the right choices when it came to paying off my student loans because I just kinda like hammered them out. So I came from a background of following Dave Ramsey and that's how I even started realizing that this student loan debt was holding me back financially and that I needed to get rid of them. And it took me a long time to make the decision to actually get rid of them. And then when I just finally did, I was just like, I mean when I finally made that decision, like I was like all hands on deck, like every single penny went to going up to paying off the student loans and I don't regret it. But oftentimes when I hear you talk to other people on podcast and I hear you break down different scenarios, I feel like I could have optimized it better. And so I want to look over those numbers with you right now, as painful as it's going to be for me. But I want to kind of explore that with you and see if I could have done a better job in my finances as far as optimizing because during this time, I was not investing in my retirement accounts and I was just focusing on paying off these loans.
Travis Hornsby: 15:34 Are you scared?
Naseema McElroy: 15:35 I'm really nervous.
Travis Hornsby: 15:39 It's okay. This is not nearly as bad as some of the mistakes that I see. So that's the good news.
Naseema McElroy: 15:46 Okay. Whew, sigh.
Travis Hornsby: 15:49 That said, it looks like it's still at least a five figure mistake.
Naseema McElroy: 15:53 Oh, Travis. No. Okay, let's dive in.
Travis Hornsby: 15:58 All right, so did it go to kind of like tell the listeners kind of what you told me. Right? So you want to just kind of set the stage like what was going on in your life right then like when you made this decision?
Naseema McElroy: 16:09 Yeah. So, when I made the decision, initially, it was just me and my daughter. I was a single mom and then I just felt so overwhelmed by just knowing that I wasn't in a good financial position. I made a good salary, I made six figures, but I didn't have anything say for my daughter. I didn't have anything put away. And I was just like, I needed to do better with my finances. And I just knew like the student loan debt, which was like $180 plus all the interest that I paid, it was over 200,000 but I just had this hanging over my head and so I knew I wanted to do better. And so I just started following Dave Ramsey and realizing that I had to aggressively pay this debt down. And also during that time, you know, I went from, you know, being a single mom to also getting married, getting in divorce in that same year, so it's a little bit of a complicated story, but that whole time I just felt really dragged by the burden of this debt hanging over my head. And I also had my payments and because I was using a Dave Ramsey method, I wasn't investing and I had the opportunity to participate in both my 403B and I had a 457 at my job, which I could have maximized.
Travis Hornsby: 17:29 Did you have a HSA as well?
Naseema McElroy: 17:31 No HSA.
Travis Hornsby: 17:31 But could you've got one or was it just not on the table at all?
Naseema McElroy: 17:34 I don't think it was on the table. No, it's not an option. I'm thinking about the different jobs that I've had. No. You know, working for healthcare organizations because typically the insurance covers their providers. I haven't had an option to participate in an HSA actually, until I had the option at this very short term job that I had in Nevada. But that was the first time I ever had access to an HSA.
Travis Hornsby: 18:02 Hmm. That's really weird. But yeah, so, but you definitely were at a qualifying employer, right? Like you were at a not for profit hospital working full time.
Naseema McElroy: 18:11 Yes. And I actually was on the public student loan forgiveness program and was doing all the things that I needed to do, like submitting once a year, my income taxes and submitting the verification for my employer. I had been doing that for I think about two and a half years before I started aggressively paying down my debt.
Travis Hornsby: 18:31 So you're set up for your loans tells me a couple things. So first off, you're at $1,900 a month payment. That's pretty much right at the maximum cap for the IBR plan. So had you hit the IBR cap yet, had they' told you that you no longer qualified at pay based on your income yet?
Naseema McElroy: 18:48 No.
Travis Hornsby: 18:49 Okay. So you were very close to it. So I think that the cap would have come for you at about $2,000 a month and that would have freaked you out on another level. Because what would have happened is they would have said, you're no longer qualified to pay based on your income. Well that sounds pretty scary, right? So then they probably would have had you call in and they would have had you switched to, you know, maybe the revised pay as you earn plan. In your case that would have worked out okay.
Travis Hornsby: 19:14 But I've seen some situations where people could have gotten their payment capped instead of having it based off of, you know, no cap payment and then that would actually cause somebody to get a lot of loans forgiven. I want to give an example of this. So let's pretend for a moment that you had $70,000 of loans and let's say you had, you know, three, four years of credit 'cause you worked in a low paying state and you moved to California and suddenly got this huge income bump, right? So what you can do in that case is if you're on an IBR or pay as you earn program, those two plans have caps. They can never be more than the 10 year monthly payment. So in other words, like if you take, I'll give you a rule of thumb, if you take it out 1% of your loan balance, that's what your monthly cap is.
Travis Hornsby: 19:58 Okay. If you have $180,000, the monthly cap should be around $1800 now. It's a little bit higher. You know, probably that's just a rule of thumb to get like a general idea. So if you owe $50,000 your cap would be about $500 a month and that's under pay an IBR. But under repay, your payment is just 10% of your income after a deduction, no matter how much that is. Right, you were under IBR and in your case you had a deduction for your family size for one, and if you're putting seven or $8,000 a month towards your student loans, that's money that's not going into investing. Right? So I wanted to talk about that a little bit. Okay. So if you're doing public service loan forgiveness, the one thing that I would tell somebody is you probably want to have more than $30,000 of debt. If you don't have more than $30,000 of debt, you probably have better uses of your time than studying these roles and hiring a professional, you know, that knows the stuff. You should probably just try to, you know, look up like the nursing, the nurse Corps reprogram if you haven't already be in a job that qualifies or you should look at Perkins loan cancellation or something like that. And then just try to pay back the rest of it and just work, you know, maybe some extra chefs to get rid of it, you know? But if you have a lot more than that, let's say if you have more than $50,000 you're probably outside of the kind of in between zone about whether or not you should pay it off. So in your case specifically, I think let's, let's put some numbers to it. So you had three years of credit towards the 10 that you needed, is that right? [Naseema agrees] So you had about a, let's say you had about $230,000 of a of income, right? Something like that, right?
Naseema McElroy: 21:37 Yup. That's about right.
Travis Hornsby: 21:39 So in your case, you had a unique opportunity to contribute to a 403B plan or slash you know, 401k plan plus access to a 457B plan, right? [Naseema Agrees] So you had access to a 457 B plan, right? [Naseema agrees] Plus you get $19,000 of tax sheltered contributions and your 457. Now, on the IBR plan, you're pretty much at your cap with that income and that debt that you had.
Naseema McElroy: 22:07 Right. Oh, you know what, one thing I forgot to mention, and this is super duper important, is that when I was going through my divorce and my tax filing status changed, I had to pay $30,000 in income tax because I wasn't tax optimized. So yeah, that was a big hit. And if I would have been investing more wisely as well, the course that we're going down, I wouldn't have to pay that. Like I wouldn't have owed that. So, yeah, just keep rolling. [laughs]
Travis Hornsby: 22:38 Yeah. Well it's okay. I mean, you know, the good news is people look back on and you know, money they could've saved, you know, if they'd taken a different path, paying back their debt. But I've yet to find somebody who's furious about it. So, I mean, I'll say that, you know, there's definitely a lot of emotional satisfaction to the path that you did, but if you think about what your options could have been, right? So IBR is 15% of your income. Pay and repay are 10% of your income. In your case, you're only qualified for the revised pay as you were in because you took out loans before 2007 right? So your only options at that point when you had to make that decision was revised pay as you earn or income based repayment. So in other words, 10% of your income or 15%. In your case, your income is the really important thing.
Travis Hornsby: 23:31 It's not what you make, it's what you show in your tax return that counts. So instead of 230, what I would have told you to do instead is if you put away $19,000 into your 403B plus $19,000 into your 457, you would have dropped your income from 230 to 192. Now, the reason why that's so important is this. So on a $192,000 AGI, your monthly payment on your student loans instead of $1900 would have been about $1400. So that's a big difference. Right? And then the other thing is instead of making 70 something thousand dollars a month payments, you're putting that into retirement and a hopefully a brokerage account like Wealthfront or Betterment or Vanguard kind of place, right? You're hopefully putting all that money into investments you know, and while you're also paying your loans. Now, in your case, there's actually not a big risk of hitting that cap, the $2,000 a month payment.
Travis Hornsby: 24:31 So the revised pay is, you are in a, your case would have worked out really well. And in terms of the total cost on public service loan forgiveness. So over seven additional years of payments, I also looked at your, your loan setup and it actually had direct consolidation loans. So you'd already consolidated. It was already set up in an easy to maintain, you know, status like it's very difficult to deal with 20 different loans with these places. But once you consolidate it's a lot easier. So you'd already done that [Naseema says "was that a requirement for me to..."] In your case it was because you had those loans from an earlier era. Nowadays, it's not a requirement but it just, in my experience it makes it way easier to handle these loan servicers when you only have two loans instead of 20.
Naseema McElroy: 25:13 Okay. So like the Dave Ramsey approach would have been like just keep them as they are, right?
Travis Hornsby: 25:23 Yeah 'cause of the debt snowball, right. 'Cause Then you're able to pay down the smallest ones first. Right? So, I'll give you the punchline here. So the total payments over seven years would have been $128,201.
Naseema McElroy: 25:46 I'm known as a debt player because of the $200,000 in student loans. I paid in two and a half years. I hated those loans and dealing with the loan servicers. I was head down and focus and wanting to get rid of the debt as soon as possible. Knocking out these loans and seeing a zero loan balance with one of the most liberating feelings I have ever felt. But recently I learned that by not optimizing my student loan payoff strategy, I lost money. I'm talking about big money' y'all. I could have saved $80,000 if I had a customized student loan plan by the team at student loan planner. Please don't make the same mistake as me. If you have student loan debt, especially in the six figures, head over to studentloanplanner.com/financiallyintentional to get your customized student loan plan today.
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Speaker 3: 28:22 So, because some of that would have been, you know you have a little bit of higher interest, you know the payments wouldn't have all been going to principal. You actually still would have owed $131,000 at the end of the seven years that would have been forgiven tax free. So the total amount that you actually would have paid over seven years is $128,000 and then with the strategy of paying it back over two years, I estimate probably should've cost you around $187,000 if you just had 180 straight up that you were paying half for the refinancing. So you know, and that and that you pay that over two years instead of seven years. So you have to kind of adjust that for cost in today's dollars. So if I just do like a little math formula to see like what's that worth in today's money? The difference, the PSLF advantage if you will, would have been about $70,000.
Naseema McElroy: 29:16 Oh. Plus let's not forget that in those two and a half years I would have had a multiple six figure growth in my, in retirement accounts, especially because this was during like the bull markets. So, I was paying this off from what years was the 2006 two I mean, so that was 2016 through 2000 no, 2015 through 2017 so those were really good years in the market to be investing. It'd be like awesome years. Yeah.
Travis Hornsby: 29:50 It could have been bad years too, right?
Naseema McElroy: 29:53 Yeah, right. But it wasn't.
Travis Hornsby: 29:54 Right. But you would have learned a lot about how to invest and you would have maxed out all these retirement accounts, have like a hundred K on those and then you would have...
Naseema McElroy: 30:02 And even in bad years though, I still would've owned all those shares of those stocks. And then they...
Travis Hornsby: 30:07 Yeah. Even in a bad year, you just went and bought more shares as long as you didn't abandon the plan. And that's the real concern is that somebody who's not a nerd, like that's not nerding out like all you know, these financial podcasts, they probably would have made some of those mistakes, you know, and, and so it's interesting there is that $70,000 of savings, you know, that actually probably would have been more if you are the in your family and you only had, you're the only one with student loan debt. This is where it gets even more complicated. So let's say for example that you were you, but you maybe like have loans that were pay eligible. Right? And let's just pretend like you have a San Francisco nurse who is married to somebody that you know, doesn't make a very high income.
Naseema McElroy: 30:48 But that was me. That was me during that time.
Travis Hornsby: 30:51 Yeah. So say you were pay eligible. So if your spouse doesn't have any student loan debt, you can do this on IBR too. It's just not as effective. But with a pay plan, you can file separately. For taxes. And in California, California is a community property state. So in California you have to equally distribute income on tax returns if you file separately. So if you're making 230 and your spouse is making 70 just to make the math real easy. So combined income is 300 if you file jointly you pay on 300 but if you file separately in California and you're doing the pay plan, then you only pay on 150 instead of two 30
Naseema McElroy: 31:28 Wow, okay. That just blew my mind 'cause I've heard you talk about people filing separately, but I didn't know the math behind it. So the income is distributed separately when you do equally, but separately, I did not know that.
Travis Hornsby: 31:41 Only in nine States and nine States. You can blame and this gets weirder Naseema, you can blame the Mexican American war in the 1840s. I'm not making this up because like these nine States just basically had like, you know, Spanish law and then we took it over. We're like, Oh, all these, you know, law books and all these, you know, marriages at the courthouse are all in Spanish law, so we're just going to keep it, you know? And so those, yeah, I know. And somehow, you know, that affects student loan rolls in 2019 right? Like a butterfly flaps its wings, you know. But that's, but we kind of noticed this because the student loan servicers will go off of your tax returns and pay an income based repayment. Those two plans, they allow you to exclude your spouse's income. Those are two older plants in the revised pay as you earn is a newer plan. That newer plan requires you to include your spouse. So you've got these other plans alleged you exclude your spouse and the new one that forces you to include your spouse. I think was just these, you know, really interesting loopholes that you can utilize to, to save money.
Naseema McElroy: 32:44 So then, so you're saying that if I would have included my husband and, and we would have filed separately, which I think one year we did file married filing jointly, but if I would've did it filing separately, and I think you're kind of right on when our household income was about $300,000 so then my adjusted gross income would have been 150.
Travis Hornsby: 33:07 Yeah. And so your payment would have been more like a thousand a month instead of $1900. Pain. Right?
Naseema McElroy: 33:13 Oh my God, I'm cringing. But it's okay.
Travis Hornsby: 33:21 But here's what's interesting. So I've been thinking a lot about this, about, you know, kind of famous financial personalities. So you know, when you're giving kind of one size fits all advice to people and you're not going one-on-one and talking to them and finding out about their unique situation, like you kind of have to have a brand that you're known for. You know, if you don't have a brand, then you're kind of, you're not going to be an expert to millions of people. So, you know, if Susie Orman said, Hey, it's okay to live on 40,000 a year, like people's brains would explode. Right? And then, you know, if Dave Ramsey said it's okay to carry some debt, if it's rational from an ROI perspective, again, people's brains would explode. 'Cause It's almost like you talk about those rules like your religion. And I think that religion is best reserved for faith, not finances.
Naseema McElroy: 34:09 Hallelujah. Say it again.
Travis Hornsby: 34:12 So, you know, just 'cause you gotta go based on what the math says and you know, but the problem is is I will acknowledge that we are creatures of emotion. You know, the debt free stuff where people scream like I'm free. You know, I mean that kind of stuff just is, creates these visceral emotions and you, you know, relieves anxiety and just accomplishment. It makes you feel so good. Right. But as my Methodist pastor said, you know, not everything that feels good is good for you internally. You know, but like in all seriousness, like the one thing that's genius about the anti debt kind of crusade is, is very, very few people would have taken that extra three or $4,000 or five, six, you know, even $6,000 a month and put it into investments. We kind of need a community of people that's helping kind of make that as easy as possible for people to understand. And that's why I'm so excited that you're doing this podcast because you know, when people don't have that money going to debt, it gets spent. That's just kind of the truth. Or it just best case scenario, it just ends up in a bank account, you know, earning 2% interest if you're lucky.
Naseema McElroy: 35:21 Right. And that's not what typically happens. What typically happens is it gets, it goes to Target.
Travis Hornsby: 35:27 Right. Exactly. Yeah. I mean those luxury bath towels are not going to buy themselves. I mean, come on, you know, but so every time we go to Target with my wife, I want to buy their stock, you know? But what's interesting is if you run the math, if you look at it from a math perspective and you asked the question like when can you hit financial independence with huge student loans? So what's interesting is you paying off all of your debt compared to doing a refinance actually probably only sets you back on your financial independence journey by at most about a year.
Naseema McElroy: 36:03 Oh, okay. That's good news. Thanks Travis.
Travis Hornsby: 36:06 Yes. So, in fact, if you want to kind of look at having a very high savings rate, if you just kind of look at that scenario and actually maybe only set you back about six months. Oh wow. Because what happened is, is that after I was used to pay like six and $7,000 payments to my student loans, I've just started putting six and $7,000 into brokerage accounts and 529 for my daughter. So, you know, that's how that transition. But I would have never gotten used to that if, you know, I wasn't paying back my student loans at that rate. So that's a little bit of good news. A little bit of light.
Travis Hornsby: 36:43 It is. It is, yeah. Let's say that you can live on $80,000 a year just hypothetically. Right? So if you, yeah, if you had like a typical life of somebody paying back their student loans, you would have paid maybe you know, your 10% of your loans and you know, maybe 5% in retirement. Right? So, assuming you manage it really well, you would have had to work for 27 years to get to the point where work would be optional. So, I put the numbers into my calculator that I use just to see, you know, what that number would be, right. So about almost 30 years. Right. So what's so fascinating is if you jack that number up to what you're doing and put it like this 15% savings rate, your number of years that you would have to work is actually cut down to 13.
Naseema McElroy: 37:27 Yes. Yes. And even in my calculation was like if I was to do like a lean FIRE kind of situation where I was just covering like my basic expenses I had calculated, but my calculation is probably, I, ours aren't as great as yours, but I calculated it like about three years of just like chugging and I was actually gonna put more money into it, but just like throw in, not at 15%, it was more at 50% of my income. Yeah. I calculated like three years and I could like live pretty comfortably. Yeah,
Travis Hornsby: 38:01 Totally agree with that. Especially if you would be willing to leave San Francisco.
Naseema McElroy: 38:05 Yeah. And which I did, I was in Nevada for a little while.
Travis Hornsby: 38:10 Yeah. Yeah. So I think that's really, it's really interesting to think about it that way. So that's what I tell people is, you know, if you make a huge mistake with your student loans, I don't want to say it's unavoidable because I like to think that anybody that talks to us avoids it. But I mean, you know, in all seriousness, like say you make those bad mistakes, what I've found is that your savings rate is anywhere from five to 10 times as impactful as getting the right loan strategy for your payback for your loans.
Naseema McElroy: 38:38 Exactly. Exactly. Savings rate is super important, but I think that this is like a good transition to talk about your services and what you can do particularly for nurses as far as helping them with their student loans.
Travis Hornsby: 38:54 Sure. So for most nurses, I'm hoping that they will have less than $200,000 of debt.
Naseema McElroy: 39:00 Well, most nurses I know have about the same. Some have like $300,000 from my experience actually. Yeah.
Travis Hornsby: 39:09 Yeah. You might be like a nurse practitioner, like a certified nurse midwife that have, you know, even more than that, you know like the 200. I mean we've seen people, I think in the 350 kind of range with like advanced specializations and various things. So in general, like what kind of, how it works is you can go to studentloanplanner.com/help and read about whether or not the services for you. I mentioned those debt loads because we have different segments kind of roughly based off of, you know, trying to pair the, the complicated aspect of their loans to the best deal for them. So for example, Lauren and Justin, two CFPS, they work with our clients that have 50 to 200,000 in student loan debt. And that's 295 it's like right, right around 300 bucks and then... Not terrible compared to getting, you know, variable annuity sold to you in the break room. Right?
Naseema McElroy: 40:03 Oh my God. And that's how it goes down. And how did you know that, Travis?
Travis Hornsby: 40:04 It does. I've been hanging out with my mom a lot at the nurse lounge, you know? Yes. But is there a free pizza? The free pizza is the most expensive slice of pizza you've ever eaten. You don't even realize it. So then the other kind of higher debt segment, the 200 to 400K, that they'd worked with Rob. So, Rob's a CFA and a CFP. This is about 450 approximately. And so that's, you know, again, it's like a one time fee covers email followup questions if you have any to make sure the plan is implemented successfully. And then if you have more than 400K you know, those folks these days work with me. I try to do a little bit less client work since I'm running the business.
Naseema McElroy: 40:45 I'm super proud of you for a stepping away for it.
Travis Hornsby: 40:50 I love it. Right? I mean, the simple truth is like I was thinking about it the other day, like I could just do consults just by myself at a really high price and have a good life. But what's going to happen if I do that as there's going to be a nurse out there with 120,000 of loans that would pay 295 but not 595 and she's not going to get a plan. If she doesn't get a plan, she's going to pay $40,000 more than she should. And I think that enough people will get the plans of the 295 versus the 595 that will have a bigger impact. So at this kind of phase of my life, my main goal in life is having a big impact. Right? You know, to do that, part of it is I need to get out of my own way so that I can bring other people on and train them in the system and help them help others. So right now, we tend to be working with a lot of financial advisors who are, you know, going independent and building their own practices, but still have a lot of time left over. They can spend on other things. So I think that's how we were able to get some really talented people. And so yeah, I mean the, each one of them though has done hundreds of plans individually. I've probably done over a thousand at this point. We have some people that want to work with me even for the higher rate sometimes, but I tell him like, you should just work it and get the little better price. Like it's the same system. It's just the same system. So that's the thing is, you know, for people who are unsure if they're working in a 501c3 hospital, they're not-for-profit government hospital, you definitely need this service to make sure that you're not messing anything up. And if you're at a private practice and have less than a hundred thousand dollars I would say you can probably do this yourself. I would just get, you know, a cashback bonus for refinancing instead of nothing. So, you know, you could check out. We have a lot of true, we try to get the best cashback deals we can for folks instead of keeping all the commissions ourselves like most places do.
Naseema McElroy: 42:38 But I would say that Travis, you have some extraordinary resources on your website. As a matter of fact, anytime I am stuck on like a student loan question, I go to your website and the answer is always there in such plain English that I can understand and it's just fantastic information. My biggest regret is that you weren't around or I didn't know about you in 2015 when I was paying off my student loans cause I would've just thrown you $300 easily to fix my loans. So you guys that me not having that information was at the best, like a $70,000 mistake. But it ultimately was a multiple six figure mistake because a lot of money could've gone into my investments had I known better.
Travis Hornsby: 43:30 Can I say that it would have been an $80,000 mistake if you had access to an HSA?
Naseema McElroy: 43:36 Yes.
Travis Hornsby: 43:38 You know, not to rub it in, but just so people understand, right? Like you would think that $200,000 in the Bay area like that sounds like so much money, but that's really middle-class in the Bay area as privileged as that is to say, right? All right, so you know, so if you're single and you make over $157,000 about, that you're in the 32% federal income tax bracket. So that's the marginal bracket, which is the next dollar of earnings you make is taxed at, you know, 32% and then in California, I think it's 9.3 if you're above like 50 something thousand. And it's really a low income level, so you're going to be at about 41% for your taxes just just from those federal and state taxes. And then on top of that you have a student loan tax of 10% on your income that you're paying under repay. Right? So every dollar that you put into pretax retirement accounts would actually have saved you 51% on taxes. [Naseema Says "Right."] Yeah, I know, but I wanted to spell it out that way just to like that people can think about that because you know, unfortunately you can't go back in time and fill up your old retirement space that you didn't use. So, you know. But yeah, I think the good news is the fact that if you think about the pros and the cons, like the fact that you've got into Dave Ramsey show and you know, got motivated to have a high savings rate, like the secret sauce. And the reason why he totally changed your life for the better was because he convinced you that having a high savings rate was possible and desirable. And that's the number one battle, honestly.
Naseema McElroy: 45:22 Right. So I don't want people to hesitate if they have student loans over $30,000, especially as being a nurse and we have the income potential to that is basically limitless. We need to reach out to the Student Loan Planner, to Travis and his team to make sure that we're optimizing our student loan repayment. So Travis, any closing words or thoughts that you have for our community?
Travis Hornsby: 45:50 I would just say too, don't beat yourself up about your debt. You know, your debt is really kind of a minor problem compared to if you can learn how to budget, if you can make the right decisions with knowing how to put money away into retirement. I tell people start with 10% in retirement, $100 a month into non-retirement brokerage accounts.
Naseema McElroy: 46:10 That's excellent advice.
Travis Hornsby: 46:12 Do those two things. And the reason for that is, imagine you're listening to your favorite song on the radio, right? And it comes on or you know, maybe Spotify, this is a terrible analogy, I don't know, but you know, pretend is on your car radio cause you're, you know, you're driving like a 2007 Honda civic or something like, you know, like we did back in the day. So you're, you're reaching for the dial, but you don't know where the dial is to turn up the volume of your favorite song. Right? And that jam that you're feeling and the volumes at max is what you're going to feel when you're financially independent.
Naseema McElroy: 46:43 Yes.
Travis Hornsby: 46:44 But if you don't know where the dial is and how to turn it, then you're never going to be able to get to that point where you're jamming out.
Naseema McElroy: 46:53 Love it. Love it.
Travis Hornsby: 46:55 So that's the thing about you got it. That's why this stuff is important. Like 401 what? Like I don't want to hear about that stuff. Like it's boring, right? But the reason why it matters is that's the dial. Like if it was something else, I'd tell you to find that something else. But that dial, that savings rate, knowing where to put the investments, like paying attention to this stuff, that's the dial that turns up the volume and gives you that point where you're jamming out to your financial life and the sooner you find out where that dial is and how to turn it, the sooner you're going to hit that point. You're jamming out life.
Naseema McElroy: 47:25 I love it. I love that analogy, Travis.
Travis Hornsby: 47:28 Yeah. I tried to come up with some,
Naseema McElroy: 47:32 As painful as all this was, I really feel like it's powerful because with this information I can share so much. And even if I'd hadn't made those mistakes, where would Financially Intentional be, you know, I wouldn't have this podcast is share, you know? So even though I've made a lot of mistakes, those mistakes I share with you guys, so you don't have to make those mistakes. And so you can do better financially overall because financial independence is what you deserve. You deserve it for yourself and you deserve it for your family. And so I just want you to know that it's possible and this is just another mechanism to get there. So, Travis, thank you so much for sharing with us. Thank you for bringing me all the way down, but also bringing me back up and I definitely appreciate just any moment as high that you have to spend with us because you know, time is everything and you're just rocking it out here. And I'm a big fan, so I'm super honored to have you on the Nurses on Fire Podcast.
Travis Hornsby: 48:41 Thank you so much, y'all. Hope to see you at studentplanner.com you know. We'll help you out. And then like Naseema said, just go to our blog and just type in nurses and just get all the free stuff if you just can't afford that right now.
Naseema McElroy: 48:52 There it is. The studentloanplanner.com, type in nurses or any other questions that you have. Like if you even like something as simple as what's the difference between a long forbearance versus what is forbearance versus what does it call, why did I go blank? [Travis Says "deferment."] Yes, thank you. Even if it's just something as simple as a forbearance versus deferment, like those things are all answered on his website, but I'll also encourage you to do a consultation with his team to get your finances right. Again. Thank you, Travis. And there it is.
