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Travis Hornsby: How To Get Rid of Student Loans

This episode is important, especially for those that have student loan debt themselves or someone in their family or know somebody.

The information that we're going to share is so powerful. There are many different options for minimizing, reducing or mitigating any student loan debt.

We talk about how to get rid of student loans. There are many different ways.

We talk about forgiveness programs, discharging and refinancing and which one could be right for you.

We also talk about why 25 is the new 65 and how our special guest, Travis Hornsby, was able to retire at 25 but came out of retirement when he was given an ultimatum by his future father-in-law.

We also talk about dormant skills that you may have right now that could be making you money.

With that said, let's get to it.

Dustin
Travis, you did what most people dream of. You retired at 25 and traveled the world, visiting nearly 40 countries. One day, your future father-in-law comes into the picture and gives you an ultimatum. How did you retire at 25, and what was that ultimatum?
Travis
It's because I was an idiot. It was funny because people would come up to my dad at church and be like, “I heard your son’s retired at 25.” My dad's like, “No, he's not retired. He's on a sabbatical.” Everybody was freaking out with the term, retired. I used to be a bond trader. I was sitting at my desk, I put in my two weeks’ notice and everybody from the mortgage bank security’s desk and the treasury's desk was coming over and saying, “Tell me what the bonuses are for the annuity bonds. I want to know what the bonuses are on your trading desk. How the heck did you pull that off?” The secret answer is there wasn't a giant secret. There were a couple of things that I did. I was able to come out of undergrad with no debt. Part of the reason for that was I’ve got a full tuition scholarship and I got paid to go to school because my dad was a teacher. We didn't have a ton of money. I figured that I needed to go somewhere that was affordable and in ended up stacking scholarships so that I got paid to go to school. That was a big part of it.
I came out with maybe mid five-figure net worth out of school. When I started making an income, I wasn't making insane level pay. I was making good pay. I lived in a semi-finished basement. I had four roommates. I had probably a 70%, 80% savings rate after taxes, probably 80%, 85% even. I was a weird kid. I put all my money in index funds and savings and had a low to mid six-figure net worth that I was able to use to stop working when I was 25. I figured that I could find something that I did for money that would be enjoyable too and I didn't have to worry about money at least for ten years. I was not fully financially independent when I quit. I was probably what you would call not even leanfire is the term they use, which is you can barely cover your living expenses with your investments. I was below that, but I figured that I wasn't feeling it in the corporate world. I didn't feel it was a fit for me. I thought, “What can I do when I’m in my mid-twenties that I can never do again?”
One of the answers that I came up with was to travel through a bunch of super sketchy countries by myself. I lived in Ukraine for a little bit. I almost got ran off the road by some weird Russian road rage incident. It was strange, some of the things that we did. I rode bike with these Mexican cowboys to this moonshine distillery in the hills in this part of Mexico. We saw some weird drug deal while we were riding bike. It wasn't all that. A lot of it was chill and fun. I also went to Scandinavia and paid $50 a night for a hostel or something. It was weird. It was this polar opposite of $5 to stay in a place in $50. It was so amazing. It sparked creativity. For the readers out there, in terms of how this applies to me, I would encourage somebody if you're not in love with what you're doing right now, the economy is on fire.
Could we have a recession? Sure. If you have enough savings, you're in the top 10% most talented people probably just by reading this. Most people don't take a lot of time and energy to think about creativity, personal finance or entrepreneurship. Use that asset to your advantage and do something you've always wanted to do because it's probably going to pay off. I was not expecting that when that veiled threat from the father-in-law came in.
Dustin
Did you grow up that way? How did you know? I think back to when I was in school. It was like, “I’m going to get this degree and I’m going to buy my own place,” and fall into that trap of, “I’m going to get in a car to reward myself.” Did you come across this information?
Travis
Yes. My granddad was my hero when I was growing up and he grew up during the Great Depression and saw the family get their house foreclosed upon. He was extremely frugal from a very young age and he also would love to go to the library and read about investing and investment books. He had put his pay from his Naval Reserve money into the stock market since the ‘40s. He was a millionaire next door type. He wasn't somebody that was a corporate executive making tons of money. He never made that much money, but he was a good saver. I modeled myself and my personal opinions towards money after him.
It ended up being very fortuitous that I was modeling myself after somebody who had survived the Great Depression instead of somebody who'd survived the ‘80s and the ‘90s because it's a different standard of living. For me, a $5,000 car was the best thing ever because it has wheels and it runs and it works. Living in a place with four of the guys was cool because there was always something going on and I can always have a buddy to go out with if I was bored. It was a mindset thing, why I was frugal when I left school. We certainly got a little bit of help like $10,000 and a 529 thing for help going to school. It wasn't like we’ve got this massive sum of money. It was the lessons that he gave me that were the most valuable of all.
Dustin
What was that ultimatum?
Travis
My wife's Asian-American. In their culture, there's no such thing as the fire movement. Financial independence, retiring at 30 or 25, that's not a thing. Pretend that you have a daughter for a moment that's marrying somebody. The guy says, “I’m early retired in my twenties.” I would probably even say, “BS, go get a job.” I know the math about all this stuff. It was a little bit of that. He was saying, “I just want you to show that you're not a deadbeat.” She's a physician and they'll marry people like that to have a stable living so they can play video games all day. That was what he was concerned about. I said, “Your daughter has a negative six-figure net worth. I have a positive six-figure net worth. Who's gold-digging who?”
It was a little bit of a joke, but he didn't take it that way. He's like, “You can get married. There's no reason that you can't. You're both grown people. If you want my blessing, you'll show that you care about her by making some effort to make an income.” I thought, “I enjoy not being nomadic anymore. It was a function of do I want to have a relationship with this person or not?” I decided I did. That's what made me be in a static and stable location versus traveling anymore because medicine, at least her specialty, is not something you travel around a bunch for. I had to figure out, “What do I do?” I enjoyed Excel modeling. That's one thing that I had fun with because of my bond trader years. I had built that skill up, dormant skills. That's another thing for readers is, what are your skills? What are the things that you've become good at and enjoy that could be used either now or in the future to help people solve problems?
The problem was student loans are complicated in America. You can refinance them, you can use them for forgiveness and all these things. I first helped my then girlfriend, now my wife, make a plan for her debt. I started helping friends, people that had $400,000 from vet school, $300,000 from dental school. I would make a model with all their different options and everything that they needed to know. My girlfriend at some point was like, “Shouldn't you charge for that?” The kick in the pants from the father-in-law helped me put two and two together and I put it into overdrive. I decided, “I don't want to go work at one of the local big businesses where I live. I’m going to go all-in on this and see what happens.” I did and now we have about five consultants besides me. We've got half a dozen writers, a bunch of people helping with PR, social media and stuff like that.
Now, it's a real business and we've helped about 3,000 borrowers, about $800 million of student loans. For your readers, the best thing you can do is get threatened by your father-in-law in terms of being successful. Wish that. The second thing is you should take a risk on yourself. One of the things that I love talking about is, are you able to take risks? I was able to take a risk because I had no bad debt and you can structure student debt where it's not going to hold you back from taking an entrepreneurial risk. You have to have no bad debt and then you have to have enough assets that you can survive for at least two or three years while you're figuring out which way is up in your business.
If you have those two things, at least that's my philosophy, then you should take a risk because I would have never dreamed that I'd be making multiples of what I was making as a bond trader being an entrepreneur. It wasn't something that crossed my mind that would ever happen, but it did. It happened almost because I wasn't trying to make it happen. It happened because I was trying to solve a problem. That's what I would tell people. Go out and try to solve a problem in society versus trying to make $200,000 a year and you'll have a lot of success.
Dustin
That's a great philosophy. I want to talk about the debt that your wife had, which is understandable for people pursuing medical to have $120,000 in medical school debt. When you had this opportunity, you went through school and you scholarshipped up, so you exited not having debt. For me, if I were in that same situation, tackling $120,000 debt seems daunting. How did you first go about and say, “We've got this debt, now I’m going to figure out what are all the different ways?”
Travis
The straightforward way is saying, "You’ve got $120,000 and if you paid $1,200 a month, you'll be done in ten years. If you pay a little over $2,000 a month, you'll be done in five years.” That was the ten-minute Excel model I was thinking I was going to need to build. The problem was I realized that you could go for something called public service loan forgiveness. This is a program where you pay a payment based on your income for ten total years while you're working at a not for profit or government employer. At the end of those ten total years, the debt's forgiven tax-free. The catch is, I met my girlfriend when she was in her last year of training. She had already been in training for seven years for her medical career after med school when we met.
That seven years was working at a not for profit hospital. That $120,000 of debt, she should have had seven of the ten years stacked away for this forgiveness program. If you talk about paying for three years at $1,200 a month, which is what you're paying the maximum on these loan forgiveness plans is what you're supposed to pay, that's about $36,000. What's better to pay $124,000 with refinancing it to a 2% rate or paying $36,000? That was my light bulb. I was like, “We could save a year-and-a-half of your resident fellow salary or more than that. Two years’ worth of your salary could be saved by optimizing this.” The crazy thing is a lot of the people reading, if you have any medical people in your life, you're like, “I want to punch this guy in the face because $120,000 is nothing.”
It's nothing compared to a lot of the balances out there. The reason that happened is because her parents, being first generation, helped her as much as they possibly could to minimize her total debt load that she was going to borrow. They sacrificed a ton to keep her in that minimal amount of debt. They didn't have wealth, they're immigrants. That was a typical American story. Here it is, not only was their sacrifice totally unnecessary because it was set up to be forgiven anyway, but she could get all this money forgiven. I helped her set it up to apply for forgiveness. They came back to us and they were like, “Not only do you have not seven years of credit, you have three years of credit on half of it and then one month of credit on the other half of it.”
Dustin
Can you break that down?
Travis
They lost a lot of the payments. Going back and looking at her data, it looked like they lost track of 3 or 4 years’ worth of repayments. When the loans transferred over to the company that managed this loan forgiveness program, they lost the records. From what I know now, I would have challenged that. I would have gotten our senator's office involved with the constituent services group that's available with every politician that is a representative or senator. They would have intervened with that group on our behalf and they would have gotten that fixed or at least they would've gotten some of it fixed. At the time, it seems like this opportunity is out of our hands now. What we ended up doing is we talked about it and decided we're going to pay it off because if we only have one month of credit, then you're going to pay the loan off anyway.
We ended up going in and doing the refinancing. From what I know now, having worked with 3,000 people, I probably would have fought it a little harder. The thing is at least we're done with the debt now. That experience was so annoying, painful and frustrating. I thought, “Here you've got a family that delayed their retirement for five years trying to help their kid through medical school and they didn't have to. Now you've got that same kid that's trying to serve in an academic institution to do research to find the next big medical breakthrough instead of making a big buck in private practice.” She got lousy advice and some $10 or $15 an hour customer service rep who told her the wrong thing and it cost her two years’ worth of salary. I thought, “How stupid is that? How ridiculous is that?” Find a problem and try to solve it.
The reason I felt I could help solve it is because of that analytical background. I could use Excel. I could build the models. I could show people what the problems were with their loan plan. There's a lot of them because of how complex this stuff is. I then found out that there's more forgiveness beyond that program. For example, we had a veterinarian friend and one problem with the veterinarian world is there's not a lot of government and not for profit jobs out there. Almost all of them are private practice. They weren't able to qualify for this loan forgiveness program, yet your typical veterinarian might have $200,000 to $400,000 of student loans and only $80,000 of income. They're in worse straits than the physicians are without the generous forgiveness programs. I realized if you don't go for the ten-year program, you can go for a twenty-year program.
You can pay based on your income for twenty years instead of ten and there's a tax hit at the end because you have to pay taxes on the forgiven balance. That's how it works when you have debt forgiven. Unless it's explicitly forgiven tax-free, you have to pay income tax on the forgiven debt. The cool part is with that analytical background, I was able to translate that into saying, you can save a few hundred dollars a month in Vanguard account and cover that future tax hit. What you do is you translate all of that into this as the amount of money, worst-case scenario, that you're going to have to dedicate to your student loans and you can turn your student loans from debt into tax. That's the revolutionary idea.
Dustin
Before we get into all the different strategies, I want to give people an awareness of the student loan epidemic and pick your brain. Do you feel this is getting worse? Is it the same and will always be the same? Is it getting better? What does the world look like? You're in this every day.
Travis
It's getting worse because there was not a lot of thought put into the program when it was designed. Think about student loans like a sandwich. The government created the student loan rules in 1960s. Before the 1960s, you had to have some GI benefit or have a wealthy family or go to your local bank and convince your banker to give you money for college. That was good because costs were low, but it was also bad because it has limited access to people that didn't have the social wealth to go to college. That was the idea behind the government getting involved in the first place. With Sputnik happening and all these things, the government's like, “We need to get involved in this and help more people go to college.” They did that.
Every time they come out with a new loan program, instead of replacing the old stuff, they added on top of the old stuff. That's how you have about a dozen different repayment strategies now when there used to be only a couple. It's gotten super complicated so the complexity of managing it has gotten worse. The other thing that's made it worse is they couldn't agree on the amount of money that a degree should cost. You might have a dental degree that might cost $200,000 or $300,000, but then you have another degree that costs $50,000. What do you do? What's the fair price to set? The government said, “We're going to say you can borrow as much as you want.” If you're going to grad school, you can borrow as much as you want that the school says the cost of attendance is in your own name.
At 22 years old, you can go borrow $700,000 to go to dental school, for example. Because you can pay based on your income, the schools know that people are not sensitive to the price as long as the job market is good. That's how the problem got so bad. For parents, the thing that we see going on there is you can't take an unlimited sum if you're eighteen. At least the government caps that. You can't take more than about $50,000 as a student in undergrad. The parents are not subject to that rule. Parents can borrow an unlimited sum for their kids' education for multiple kids under the Parent PLUS Loan program.
The last point here, you've got two student loan crises in America. One is the people who borrow $10,000 to go to a for-profit trade school, they don't graduate. They work at Starbucks and they have $10,000 that they can't pay back. The other side of the problem is the parent who had three kids. They went to private Catholic university somewhere that borrowed $400,000 for their three kids to go to school and that person doesn't know how to retire. Also, the dentist that had $400,000 for dental school doesn't know how they're going to make ends meet. Those are the two problems that exist in the student loan system. They're not getting any better and they’re getting much worse every year.
Dustin
I’ve got kids and I’m not ready for that conversation yet. You'd mentioned the Parent PLUS, which is a brand-new thing to me. In terms of getting that loan. Is that going to the kid's name? Is that going to the parent's name? Is it a joint thing? What does that look like?
Travis
It's only in the parent's name. A lot of parents have a huge misconception about that. There are all these discussions of, “We had an agreement.” That's a bad way to look at things because if you had an agreement, it doesn't matter what the agreement was. What matters is what's on the legal documents. I’ve even had some parents that have sued their kids to try to get them to make payments and they find out that the kids have absolutely no legal obligation whatsoever to pay that back at all. That's a pretty awkward Thanksgiving. If you're a parent and you take out Parent PLUS Loans, that belongs to you alone. The kid can take it over, but you have to get an agreement of both parties. The kid has to refinance it with one of the companies that allows people to take over Parent PLUS Loans in the kid's name. There's a couple of companies out there that do that.
There's this weird loophole that a Parent PLUS borrower could get all of the kids’ loans that they borrowed for onto an income-driven program. If all you're living off of is Social Security, which has a whole bunch of people out there, then your payments can be pretty close to $0 a month. You can do that for 25 years and then you can consolidate it again if you're not dead yet. You keep those almost $0 payments going for another 25 years. When you die, the debt's forgiven tax-free and it's not due from your estate or heirs. There's probably the dirty little secret in America that the loan rules are so messed up that a typical middle-class person could send their kid for free to any school in the country. They could send their entire family to any school in the country and borrow as much as they want and pay almost nothing of it.
Dustin
I find it fascinating that you know all the rules. You are the guy in the land of the blind. You know all these things. I had seen it was $500 million in debt. You said $800 million or up and you’ve thrown some numbers out. What's the largest student loan debt that you have seen or come across?
Travis
It’s probably $1.1 million. As I said, unlimited borrowing. The way you get there is you take out a whole bunch of debt for undergrad and then you probably go to a one-year Master's degree program to get into a better school. You can take out $100,000 from that and then you go to one of the most expensive dental schools in the country and take out another $600,000 or $700,000. Meanwhile, all the interest is growing on this stuff. In dentistry, there are these residency programs where you have to borrow to be a resident. You don't get paid in medicine. You have to pay for tuition. You take out another $300,000 for that and before you know it, you're at $1 million of debt. There are a lot of people that are borrowing and starting undergrad that under the current rules that exist with student loans, they're going to graduate and become orthodontists with $1.5 million of student loan debts.
Dustin
I had friends and I always remember they were using some of their student loans to pay living expenses and no one was looking, I felt. Do I have that? Is my memory serving me correctly? Just because you get a student loan doesn't mean it has to go towards books, tuition, those kinds of things. Some of these programs, you have the ability to buy anything.
Travis
I’m a little scared to say this, but one of my clients took out a bunch of extra money, the maximum they could let him take out, and he put it all in Bitcoin back when it was $600 a Bitcoin. Now he's got $2 million in Bitcoin. That's one of the weirdest cases I’ve heard. They publish a cost of attendance and a certain percentage of that money got to go to the school. That leftover amount, you can spend however you want to spend. If you want to buy a nice fancy apartment, you can do that. If you want that money to go to investments, if you're going to live in a more frugal place, you can do that, if you want to buy a car with it, you probably could do that. There's not a whole lot of restrictions on what you can do as long as your borrowing amount is limited to whatever the cost of attendance is. That's almost an artificial number. It's whatever the school says it is.
Dustin
I was very fortunate to go to Florida State. I was lucky to exit without any student loans. My wife had student loans. Is the big benefit student loan getting a very long repayment plan at a very low rate?
Travis
It used to be that way, but not anymore. Back in the day, the early to mid-2000s, interest rates for student loans were insanely low as 2% or something like that. You could get a fair amount of student loans in an ultra-low interest rate and put it on a 30-year plan. You can say that was probably even a better way to do things because at least you had to pay it back, but you could take forever to pay it back. With such low-interest rates, it’s almost below inflation, so it's not that painful. In around the mid-2000s, they changed the formula to make it a certain percent above whatever the government borrows at. That's how interest rates went from 2% or 3% to 6% or 7% because they changed the formula on how they set the interest rate.
If you're planning on paying it back, student loans are not cheap at all. I would discourage somebody from taking any debt out. Going to Florida State or University of Florida, either one is a great way to keep your costs very low and probably come out with almost no debt. Where I went, they were still offering the Bright Future Scholarship. There's the Hope Scholarship in Georgia and a couple of other states that do this that gives super cheap in-state tuition. They will even pay a part of that tuition if you get a minimum SAT score for everybody in the state. That's one of the best ways to leave school with not a lot of debt. If you're going into professional school though, some professional degree program, you need to try to go for in-state school for that degree program or you're probably going to leave with so much debt that you will not be able to pay it back unless you use an income-driven repayment plan.
Dustin
Let's talk about that. You've already hinted at some of these programs that we have available. Let's say I’ve got $50,000 in student loans or maybe my spouse does. You talked about forgiveness programs, discharge, refinance and paying it back like yourself. Are there any other things that I’m missing there?
Travis
Forgiveness and refinancing is the meat and potatoes of handling student loan debt. Because the government is going to charge you a higher interest rate than you should be charged if you are a good credit risk. If you're going to pay the debt back instead of paying it back at 5% or 6% right now, you might as well refinance it to a lower rate, lock that in and get more of your money going to principal. What I would say to that $50,000 borrower is, “Are you earning more than $50,000? Do you work in the private sector? Do you have an emergency fund without any big credit card debt?” If you are in good shape financially, then why not refinance that, get a lower rate and get a lower interest cost? It's going to allow you to get out of debt sooner. If that person that's got $50,000 is a teacher, then what you could do instead is try to put as much money into retirement. Try to get your taxable income super low. Maybe look at filing your taxes separately from your spouse and maybe get a monthly payment that's as low as $200 a month. Pay that for ten years and get the remaining $30,000 to $40,000, depending on the interest growth, forgiven tax-free. Either one of those plans, one, you're saving the equivalent of a brand-new car and on the other, you're saving the equivalent of maybe a brand new moped or something.
Dustin
To me, this seems like The Matrix and information is power. It's why this show exists. You're making a comment about filing your taxes separately. That's not even something that was on my radar. If someone's got student loan debt, I can't imagine people having access to this information. What I’m hearing is it depends on your situation, your income, your story because there could be multiple paths or there could be one path, it's just you don't know that path.
Travis
Here's an easy case. If you work in the private sector and you owe five figures and you're making a good income, your finances are in a wreck. You don't need to overthink student loans. Go refinance them somewhere. Get rid of them and pay them down. Use all that traditional advice that you hear on every podcast that's anti-debt. If it's anything more complicated than that, if you work at a not-for-profit government employer, if you have a six-figure amount of debt. Here's another weird one. If you live in a community property state, there are weird rules that apply to people in California, Texas and a couple other states about the distribution of income.
You can do some weird things. One rule we talked about being a loophole we invented is this breadwinner loophole, where you pay on half of your household income instead of all of your household income for income-based forgiveness programs. That doubles the amount forgiven. There are some complexities that anybody with a large balance needs to be aware of. Luckily, if you're a $30,000 student loan borrower, it's fairly safe for that person to pay it off.
Dustin
Is that the magic number or are there still a little bit of caveats and nuances to that?
Travis
There are caveats for certain people. You can do some complicated stuff that I’m a little scared to mention because I don't want to lose the reader here. You can do a lot of weird things. As an example, you're done with student loans, you don't want to think about it anymore and you meet a gorgeous, beautiful, handsome Australian person, whatever. You want to move to Australia. Here's a little fun one. If you have federal student loans, there's something called the foreign earned income exclusion. Meaning that if you earn up to $100,000 abroad, you can write that off on your US taxes and have a $0 income in the United States. Your student loans are based on your US taxable income if they're federal. If you're making under $100,000 abroad and you file on the US and you get a $0 adjusted gross income on your tax return, you can take that to your loan company and say, “I have a $0 income.” They'll put you on a payment plan of $0 a month on something revised pay as you earn.
They'll give you a 50% interest subsidy in all of your interests. It grows at a rate of simple interest instead of compounded interest. Talk about amazing. I read this article in CNBC talking about how these people flipped out about their student loans. They decided they would default and move to India and live in the jungle. They took a picture of him loving life, eating mangoes and riding elephants. I’m like, “You have an internet connection. I know you do because you sent your photo to this reporter. Sign up for this simple payment plan. Don't trash your credit. Get a $0 monthly payment and get all of your interest subsidized instead of adding compounded fees and collections and all that stuff, so that when you turn 40 years old and your grandma gets sick and you want to see her one last time, you don't have to worry if anybody's waiting for you at the airport.”
There are all these caveats, all these things. I want to calm people down if they owe $30,000. You can't destroy your life if you mess something up there. There's a lot of people that screw a whole bunch of stuff up with their student loans that they owe a lot or have a complicated situation. We see people sometimes not get married or choose to not have kids. I had this one case where these people took a job two hours away from their spouse because they thought that they needed the loan forgiveness. I showed them that they can get their loans forgiven on an existing program that doesn't require them to work anywhere in specific. Going to that job driving two hours a day each way is a total waste of time. Their mind exploded because they'd already done it a year-and-a-half.
 
Dustin
It's funny you had mentioned the Australians. A friend of a friend had racked up so much student loan debt, they ended up fleeing the country like you talked about. They live there. I think, “What if they had learned this information?” They're in Australia now.
Travis
We have a whole community of expats that have read our articles. We have an article on our site about this detailing the strategy. It's brought some people back from the edge. A lot of people go abroad and some of them want to come back and they're like, “I don't think I can.” Not only can you come back, but you can do so without having wrecked your finances. It's so exciting. The good news about your student loans is it's not the thing that wrecks people, believe it or not. It's the savings rate that wrecks people. The student loans confuse people and freak them out. What happens is they don't take risks. They don't start their business. They don't live their dream. They don't do what they wanted to do anyway. They get stuck and they let themselves fall prey to hopelessness and anxiety. The good news is the best disinfectant ever for anxiety is math.
Dustin
One of the things with reducing anxiety, I found it interesting in the research that you don't have to wait to rack up the student loan and then find Travis and Student Loan Planner to mitigate it. You have developed a program where it's a pre-debt program. I thought that was genius. Will you talk a little bit about that?
Travis
The URL for that is StudentLoanPlanner.com/predebt, and it's a newer thing we're doing. We thought people talk to people when they're in deep distress.” Nobody is showing up to the cardiologist with, “I enjoy fatty foods. How can I reduce my risk for the next twenty years and not show up at 50 with coronary artery disease?” That doesn't happen. They show up when they need bypass surgery. We probably do one pre-debt consult for every ten post-debt consults that we do. For the people who do think ahead, we explain how we think they should borrow. We tell them how much their institution will cost. That's a big one. A lot of these costs of attendance don't include tuition inflation, loan fees and accrued interest, which is the biggest one of all.
As a general rule, if the readers thinking about going to a program, add an extra 25% on top of what the cost of attendance was because that's what you're going to leave with in debt. A lot of people don't realize that, but that's something that we do. We also show people what the repayment options would be based on the incomes that are coming out of those programs after they graduate. We'll tell somebody, “You're going to be dependent on these 25-year government programs based on your income and you're not going to have much of a path to pay it back.” Some people choose to go anyway. The reason why that's an okay decision is that with loan rules, the worst-case scenario is your debt is a tax. You're paying a percentage of your income.
That's a good idea if you would have made $40,000 with no student loan debt, but you're going to get a degree where you lose about 10% to 20% of your income because of your income-based programs. If you're making $100,000 and you're losing 20% of it and your net is $80,000, then trading that $40,000 income for an $80,000 income, even though you have all this debt. That was a great decision. The cool part is I wouldn't necessarily recommend somebody go out and proactively do that, but for somebody who's already made the decision, that's life-changing to find out that your whole future is not wrecked.
Dustin
I’m curious at some of the results in some of the things that you've done for clients that you're able to speak of.
Travis
One of these cases, there was a physician married to a lawyer. The lawyer was in default and the physician was in one of these income-based programs. They were filing their taxes separately. They were generating $10,000 a year in tax penalties. They were paying an extra $10,000 a year more than what it would've cost if they had filed jointly. It had both of them and repayment instead of one of them. Not only that, the lawyer wasn't aware that he qualified for public service loan forgiveness. Their cashflow savings was $20,000 per year and the projected savings on his forgiven loans is in the neighborhood of $250,000. That's one example.
A lifestyle change example, this dentist was going to take over a high-cost practice and get a high income because she thought the only path forward was paying your loans back. She wasn't happy. She's working all the time. She had a lot of big dreams and goals of relocating somewhere like a cabin in the woods style. She didn't think that was possible. I showed her she could think about her debt as a tax rather than debt. She told the person that she was going to take over the practice for that. She had changed her mind. The person started throwing stuff at her and she realized her life would have been miserable if she had done that. She sent me a message that she finally built a cabin in the woods and she's living in some Native American reservation getting tons of loan forgiveness and she's never been happier. Here's an awkward one that's important. One thing that we found with our work is some borrowers have suicidal ideation because of their student loans.
We all have somebody in our lives or know somebody that's struggled with mental health issues and student loans can aggravate that. We've helped connect people with some mental health resources that I believe maybe even saved a life. Sometimes people are in crisis and they'll send us an email. We're not trying to sign that person up for a consult. We'll try to give them access to resources, connect them with the suicide hotline, and try to alleviate their fear that they're trapped. One of my more popular articles is Ten Reasons Why Your Student Loans Make You Trapped. It's exciting to know that you have options. The point of what we do is get people to financial freedom faster. Show them their student loans are not an obstacle in what they need to do and help them live their best lives and eliminate student loans as a source of anxiety. The cool part is you can prove that's possible by using math and explaining it to people.
Dustin
I don't have student loans myself. My wife had student loans. We've paid them off. I wish that I had access to this information. I think of all the people out there that have it. As you said, that one person was driving for a year and a half, two hours each way to work. It's crazy. There’s no one out there until now, at least, in my journey and experience, you’re communicating this. Kudos to you, Travis, for making things a lot better for all of us. Back before Student Loan Planner, you wrote two books. Most people don't even write a book in their lifetime, but you did two books in your 20s. One of them was called 25 is the New 65. People usually trade down and they say 40 is the new 30 or 50 is the new 40. You say 25 is the new 65. How did you come up with that?
Travis
It was a little bit tongue in cheek. It was when I was feeling very rebellious against the corporate world and wanting to make a statement that you could do something stupid and it was okay. The idea is that 65 is when everybody says you're supposed to retire. A lot of people don't even retire at that point. My joke was tongue in cheek that you could retire at 25 years old if you did a bunch of rather extreme things. One of those is when you go out to a nice bar, tip the bartender and get a glass of water and have them put a lime in it and they got the same tip as if you'd bought a vodka soda, but you're out a $1 instead of $10 plus tax and tip. There are all kinds of weird things like that in that book and it's one that I’m sure it will embarrass me long-term.
The other one was more general like Mastering Money in Your 20s and 30s book. I tried to put a ton of knowledge in there. To be honest, for people reading, that book was a total failure in terms of signups, attention, and book sales. You have to go out and be willing to fail before you're going to be successful. The student loan part of things, I was a blogger for a year and a half and got absolutely no work. It’s total crickets. Because I had developed those blogging skills, by the time I finally had figured out the student loan thing and I was willing to narrow it down to something I was passionate about, that people needed to know about, that's when it took off because I had already developed those blogging skills. The writing skills, I was able to pump out a lot of content because I'd gotten used to writing so much. Don't ever feel what you're doing is useless because it’s not. You're going to learn something that you can spend into something even better later probably.
Dustin
I like how you turned it. You called it dormant skills earlier on. That's an interesting way because you might not realize how powerful they are and often, many people don't think they are. There is a market, there are people with problems and as you said, “Go out and solve it.” That was powerful. You had mentioned earlier in our talk that entrepreneurs can do something along these lines. You'd made a comment about that. Do you remember what that was?
Travis
Entrepreneurs should take risks and use their skills to see what you can make of it. Try to solve a societal problem with your unique skills. Don't necessarily feel you have to create the next Facebook. There are probably $1 million companies out there that people could create. The big companies are never going to go after some of these opportunities because they're small. Honestly, most big banks do not want to do what I do. They don't want to have several thousand clients and making several hundred dollars one-time fees from making student loan plans. That's not appealing to them. They want to sell $500,000 mortgages to a million people or something that.
Get out there and create something and solve a problem and don't feel bad about specializing and niching it down and using your specific skills to help people. You got to be authentic and use what you feel you're good at to fix a problem. Another tip is to charge way less than you think it's worth initially. That's going to give you feedback as to whether or not your offering is legit. When you find out that it is, you're going to get a lot of demand. People are going to try to book up your calendar. They're going to sign up for way more than you have the capacity to give. That's a tip that you can raise your prices. That feedback loop was critical in growing our business and I would suggest it for other people too.
Dustin
Travis, I think you're incredibly smart. You're a savvy guy and I have to imagine you've developed these programs, you're on the hunt for any program that's out there to help people reduce that debt. What are you working on these days? What are you most excited about heading into the future with Student Loan Planner and all the things that you're working on?
Travis
I’m excited about trying to help people learn more about how to invest when they have student loans because the math suggests that the savings rate and knowing how to do that is even more important than getting the Student Loan Planner right. We've started putting together courses about investing when you have more than $100,000 of student loans. That has been unexpectedly successful. I’m excited about continuing to develop even better refinancing deals for people. That's a random thing. One time I got quoted in this magazine, “Travis and Student Loan Planner help borrowers who have lost all control of their debt and have no financial hope for their future.” I’m like, “That's not what we do at all.” We do help those people. On the other side of things, we have the best refinancing deals on the internet.
We've done that because we take lower commissions and throw that into sign-up bonuses, cash bonuses. We have those two. I’m excited to see how those grow. It's already become a very large part of our business, in addition to the consulting piece. That means we can help people no matter where they're at. If you're struggling and in tons of distress, we can help you. If you're doing great, but you think you probably need to go for forgiveness plan, we can help you. If you need to get a lower interest rate in your student loans, we can help you. I’m glad and excited that we've got this package of stuff that can help anybody with debt now and not just the doctors, lawyers, physicians that we used to be able to help back in the day.
Dustin
StudentLoanPlanner.com is where I want to encourage people to go look up. Travis, do you recommend anyone with student debt to give you a call? Are there some people that shouldn't call or reach out to you?
Travis
Anybody with less than $50,000 doesn't need to book a consult with us. Go online and read our stuff and try to figure that out. If you owe more than that, you probably do need to. StudentLoanPlanner.com/help is the place that you can figure out if it's for you or not. We try to be transparent with who we think needs to work with us and get that paid one-on-one custom plan versus somebody that needs to go and apply to refinance or something. We don't want to charge somebody for that. It's all in the borrower's best interest. If you do that, then you're going to do well. That’s my philosophy.
Dustin
I truly appreciate what you're doing in the world because you are truly serving a problem. My wish for you is that you get out there as much as you can and get the message out. Many people need to have this awareness that it's even possible and these programs exist out there. You can refinance and how to do it the right way. Kudos to you and thank you big time for being here.
Travis
Thanks so much for having me, Dustin.

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