If you have student loan debt and want to work either part time or not at all, this episode will blow your mind. Most people want to work less than they currently are, but they aren’t sure how they can afford to do so.
No matter your life situation, it can be confusing to know how you can make your payments while working less. The strategies I’ll share in this episode will help you know how to approach both federal and private student loan debt if you want to cut your work hours — and how to live your life the way you want to.
In today’s episode, you’ll find out:
- Is it possible to work only part time (or not at all)?
- Can you work less even if you have student loan debt?
- What are reasons you may want to work less?
- How to negotiate a part-time work schedule with employers
- Strategies for paying student loans and preparing for a “tax bomb” while working less
- How can you pay less on your federal student loans if you work less?
- How to work less if you’re single
- Ways to approach private student loans if you want to work part time
- Can you take a sabbatical if you don’t work in academia?
- How to approach student loan debt if you want to be a stay-at-home parent
- How to handle student loans while living abroad and traveling
- What’s the Foreign Earned Income Tax Exclusion?
- Can you work part time while going for Public Service Loan Forgiveness?
- How to start limiting your budget and tracking expenses
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Episode 14 Transcript
Travis Hornsby: [00:00:01]Hey, everyone. Welcome to the Student Loan Planner Podcast.
Travis: [00:00:03] Today we’re going to talk about something that I get a lot of questions about and that most people have no idea that is even possible: can you work part time or not at all?
Travis: [00:00:15] If you have over $100,000 dollars of student loan debt, this is a really, really interesting question that has some life changing implications for a lot of you out there that have young children or hobbies or things you’d rather do with your time.
Travis: [00:00:30] I’m really excited to share this knowledge with you today. I think you’re going to get a ton out of it. I think that your mind is going to be absolutely blown when you realize some of the math behind some of these strategies that we’ve kind of invented here at Student Loan Planner. These are some of the strategies that I’ve actually used with clients and shown people options that they had not even thought about in terms of how to live their best life, despite having the obstacle of six figures or even, you know, five figures of student loan debt.
Reasons you may want to work part time (or not at all)
Travis: [00:00:57] Now what are some different reasons why people work part time? You probably have your own reasons why you might want to work less. The interesting thing that I’ve found is when I ask people, “What would you do if you had $10 million dollars?”, almost everyone — and by that I mean, like, 80 to 90 percent of people — says that they would work less.
Travis: [00:01:22] Now that’s not to say that they would not work at all. Actually, most people when I ask that question to them say that they would still want to work and do something. But most people pretty much across the board are like, “Well, you know, I would like to probably work two or three days a week.” When you tell somebody that they’re financially independent, they can do anything they want. You have all the money in the world that you need. They still want to have purpose and work, but they just would like to do their job a little bit less. They have more time in the day for other things, right?
Travis: [00:01:50] One example of this: I had a co-worker at Vanguard, my former employer, who was really into fishing. He absolutely loved fishing. This guy would monitor the schools of fish, like their movements. He listened to all these niche weather forecasts as to when the best days were to go fish, everything. And he had a super flexible part-time arrangement with his employer because it was super important to him to go fishing, and that’s what he cared about. I mean, he cared about his job. He did his job, and he did a good job in everything. But at the end of the day, his number one thing was ‘I want to be able to be free when the fishing is good.’
Travis: [00:02:26] And that’s just an example of a hobby that, you know… A lot of us might wait until retirement to do something like that and to focus on something like that. But the cool thing is if you’re creative, and you don’t care about what other people think, and you’re willing to let the haters be haters, then you can do some pretty cool things and still have more time in your day for the hobbies that you can’t do because you’re chained to the desk. Or you’re chained, you know, to your your post at the hospital or the pharmacy or the law firm or whatever you’re sitting at this week now.
Travis: [00:03:01] Hobbies, you know, that’s certainly one thing that people would like to have more time for. And most people like you said they delay it until their 60s to to have more time for them. That kind of seems a little foolish right now.
Travis: [00:03:15] The other reasons for wanting to work part time or just work fewer hours is maybe you have kids. Maybe you already have kids now; maybe you have one on the way. Maybe you would love to have more days with your children rather than having to drop them off at daycare or having some nanny watch them, and maybe you don’t want that. And that’s totally ok.
Travis: [00:03:38] By the way, this is not at all saying that you should work part time or you shouldn’t work. That’s not at all what I’m saying. Please don’t hear that. If you want to work full time, if you enjoy your job, do that, and work your tail off. If you want to be a workaholic, be a workaholic. I just want to make sure that what you want is what you’re actually doing in your life and that the financial challenges of big student loans are not standing in the way of you living your best life.
Travis: [00:04:01] Say you have kids — one, two, three, four. One time somebody actually sent me an e-mail, said that they broke my calculator because they had nine kids, and I didn’t program the calculator for a family size of eleven. So maybe you have that many children or anything in between. Maybe you want to spend more time with them. That’s a perfectly good reason to work part time and have more time to spend with your children rather than your employer.
Travis: [00:04:24] Maybe you just want more time for yourself. You know, I think that, if you think about the opportunity to read and maybe work out more or do… You just feel like you can get more done around the house or prepare more meals and do meal planning. Or maybe, you know, there’s just a lot of different things.
Travis: [00:04:43] Maybe you just want to have more time to meditate or pray or read your Bible or go to community events or volunteer. Whatever it is, it’s important to you. Whatever it is that drives you.
Travis: [00:04:53] Maybe you just want more time for self care. That’s a big thing that we don’t talk about enough because some of the best remedies to feeling stress and mental health issues are making sure that you’ve got that time set aside for self care. And a lot of times when you’re working full time say 30 to 40 hours a week…
Travis: [00:05:12] But you know a lot of people that are working full time are really working like 50 to 60. Kind of like my wife. She’s a surgeon so she works a lot of hours, and you know, it’s interesting that we talk about the 40 hour workweek. That is really only a thing a lot of these labor protections really only apply for people who are making below a certain income level and are not salaried.
Travis: [00:05:31] So if you’re an hourly worker, a lot of times you have these labor protections that apply to you where a full time is a specific definition. But if you are a salaried worker, like a high-income professional that has a lot of student loan debt, then a lot of times full time can kind of mean a ton of hours, right?
Travis: [00:05:47] And a lot of times those hours really get in the way of family obligations that construct your marriage. Trust me, I know that how hard it is when you have a partner who works a lot of hours. It definitely doesn’t leave as much time available for your marriage as you might like — or your relationship.
Travis: [00:06:05] Maybe one of the reasons you want to work less is maybe you’re a little burned out. Maybe you like what you do, you really enjoy 90 percent of it, but that 10 percent of the paperwork, the administration, the pointless meetings, the people harping on you or criticizing you, or the people who are not grateful, or just the bureaucracy of things has really weighed on you. And you would like to take a little bit of time away to just recover mentally from what you’ve been through so that you do not have to risk having any kind of a breakdown, right?
Travis: [00:06:38] And there’s actually a ton of really great blogs out there that focus on burnout. There’s CrispyDoc.com. There’s PhysicianOnFIRE.com. There’s FinancialWellnessDVM.com, and The Vet Space. There’s TheDentist.com. There’s all these different sites out there that that really try to talk about preventing burnout and mental health and taking care of yourself in different fields. So certainly encourage you to check some of those resources out. We’ll try to link to those in the show notes. But if you’re burned out, you want time to recover.
Travis: [00:07:11] So I have a personal story to share with you. I was a bond trader as many of you know for two, three years. And I was in corporate America. I’m… I was really burned out of corporate America. I was doing PowerPoint, so I didn’t have much of a point in some cases to be going to meetings. We didn’t have much of a point, and or at least, meetings that I wasn’t super engaged in, right. Maybe there is a point to them, I just, you know. Well, it wasn’t my thing. And there’s nothing wrong with admitting that.
Travis: [00:07:41] And for some people that really appreciate structure and having to wake up at a certain time every day and being done at a certain time or days, that’s a wonderful thing to have that kind of structure in your life. For me, I just felt like I wasn’t able to achieve the kind of things that that I want to achieve. And it wasn’t getting fulfilled. And the fact that I didn’t have that and the fact that I had all the bureaucratic stuff to deal with — and the hierarchies and the promotion process was very structured and everything — just all that stuff made me a little burned out, and I didn’t enjoy waking up in the morning going to work.
Travis: [00:08:10] I tolerated it. I, like many, many Americans, probably 30 to 70 percent of Americans, I don’t know what the range is, but the people who say that they’re not happy in their workplace is, like, a lot of people out there. You just kind of suck it up, and you just go do your job.
Travis: [00:08:24] That’s kind of like what people tell us to do as adults: just suck it up, and just do it. Work. Stop complaining. The thing is, is you have to be able to look yourself in the mirror and eventually and say that you had a good life, and you had the life that you wanted because of that.
Strategies for paying student loans while working less
Travis: [00:08:40] I want to talk about some of these strategies that you can use if any of the following that I just described is a reason why you would love to work less. You want more time for your hobbies. You want more time for kids or maybe your partner or spouse. You want more time for yourself for self care, or you’re all burned out. You just need some time.
Travis: [00:08:57] So we’ll talk first about the part-time aspect of this, because part time work is actually sustainable, believe it or not. And then we’ll talk about not working at all for an extended period of time and different reasons why it might not work at all for a while. And then we’ll also talk about some different kind of odd arrangements, about maybe living abroad or being a digital nomad. And we’ll talk about different kind of flexible work schedules. We’ll discuss a little bit about Public Service Loan Forgiveness in terms of different issues that causes when you do want to work full time. And then we’ll sum everything up.
Travis: [00:09:32] So let’s talk a little bit about some real life examples here. Let’s assume that we have an attorney making about $65,000 dollars a year. This attorney’s wife makes $40,000 a year just doing a corporate job. No student loan debt. And the attorney has $200,000 student debt. Now if this lawyer, if he paid back his loans on the PAYE plan, he’d pay about $180,000 over 20 years, assuming a very steady rate of growth. And that tax bomb at the end with a 40 percent tax rate would be about $120,000. And if you did a little bit of math that you don’t have to worry about — I did it for you — the cost in today’s dollars would be about $157,000.
Travis: [00:10:19] Now the cost of this person’s loans every month on the PAYE plan would be about $561 a month. This guy would have to save about $350 a month for the tax bomb. So with coming up with $7,000 a year for his student loan debt and having to come up with money for the tax bomb and maybe the mortgage and cars and daycare and all these expenses, say that one of those things applied to this fellow, and he really would like to work less. And he wants to spend more time with his kids, but he just can’t figure out how.
Travis: [00:10:53] So here’s what you could do. Let’s say that this lawyer works less. Let’s say that he drops his income from $60,000 to $35,000 a year because he decides that he’s going to work part time. Believe it or not, employers are generally willing to accommodate part-time arrangements if you ask. If you don’t ask, they’re not going to. And if you ask from a position of weakness or being afraid of what’s gonna happen, then you know, then yeah, you might have some issues. But because the labor market right now has a historically low unemployment rate and because the labor market is extremely tight right now, that is something that you need to be aware of — that you have a lot of negotiating power in many cases.
Travis: [00:11:46] And another thing too with the various protections, labor force protections that exist because of children and just trying to make the labor force a fair and equitable place. Men, you should feel comfortable to asking for things that, you know, historically, if you follow traditional gender roles, that your parents might not have asked for. So it’s OK to want to spend more time to your kids. It’s OK to be a stay-at-home dad if you want that, if you want more time with your kids. Or maybe you want to have that-that the guy who fished a lot. Maybe you want to hunt more or something like that.
Travis: [00:12:21] You can ask for part-time work. You could lose your job or you could just…what’s most likely is they would just say, “Well, we don’t have an opportunity like that.” And then you have to challenge them a little bit and say, “Well, can you create an opportunity like that?” You know? And if you’re, if you’re creative, you can talk about it from a position of mutual gain rather than just something that you want. You can talk about how you’d be more effective. You get, the employer would get a lot more value per dollar spent. A lot of situations for big employers, they will probably be open to this, especially at income levels that are not super super high.
Travis: [00:13:00] This should be a lot easier to accomplish if you’re making $100,000 or below than if you’re making over $400,000 or something like that. This is just anecdotal guess, but this is kind of what I’ve what I’ve heard of at least. So say you dropped that income to $35,000 from $65,000. This lawyer dropped his income a lot and instead of filing jointly for income taxes, we’re going to have to file separately for income taxes because now his income is very similar to his wife’s income. So the tax penalty for filing taxes separately was probably going to probably be negligible. And if you do that, that drops the payment from $561 a month to $32 dollars a month. That is a big drop. You’re saving over $6,000 a year by lowering your income and filing taxes separately.
Travis: [00:13:47] Now if you sum that up over 20 years, those payments come out to about $10,000, a little over $10,000 over 20 years. Now is this going to happen, or this person is going to work part time for 20 years? Possibly not. Probably not. But the point is is that you could cut the expense of your student loans by about $6,000 annually and cut it down to only $32 a month on $200,000 of debt at a 7% interest rate.
Travis: [00:14:16] Now you might say, “Well, this is really terrible because this person is going to be ballooning their interest, and you know they’re going to have a bigger tax bomb to pay and that’s going to be, you know, it’s going to be even worse.” The debt is going to be even worse. Well, I’d say to that, the person was already on an income-driven forgiveness strategy. We’re just making it more extreme here so that $10,000 of payments over 20 years would result in a bigger tax bomb. It would. So instead of $120,000 tax bomb for this $200K debt for the $65K lawyer with a $40K earning spouse, this tax bomb would now be about $187,000 previously.
Travis: [00:14:56] If he was going to open an account, you know, at a Vanguard kind of place, he’d have to put in $350 dollars a month. And long term, if he wanted to do the lower-income strategy and pay very little on his loans over 20 years, then he probably would need to save maybe $450 or $500 a month in the tax bomb account at Vanguard, for example.
Travis: [00:15:18] But the cash flow out of pocket over 20 years with PAYE, with the higher income, was $180,000, and the income-driven payments on PAYE over 20 years with a lower income is only $10,000. So basically he’s paying almost nothing by going part time and working less. The cost on that for his student loans is vastly vastly cheaper, folks. So he’s probably saving close to a $100,000 by doing this part time strategy in today’s dollars. You eliminated a $7,000, $6,000 to $7,000 expense by reducing income and filing separately here.
Travis: [00:15:58] So you’re taking income from $65,000 to $35,000, so that’s a $30,000 drop in income. But let’s assume that this lawyer is in a medium tax state like North Carolina. You know, somewhere where housing costs are not small, but they’re not terrible. And we’ll say that, you know, he’s saving on Social Security tax, Medicare tax, state and federal income tax. He’s also saving the student loans obviously, but. But we’ll say that the difference between his income is $30,000 before taxes, but after taxes it’s only $20,000.
Travis: [00:16:33] After you eliminate the difference in the loan payments and subtract out the higher tax bond payments, then that’s about a $5,000 difference with lower income basically from the savings, basically. So the student loan savings, if you want to think about it in terms of the lower payment, you’re saving $5,000, you’re getting kind of like a $5,000 raise by having a lower income. So that difference in income after taxes is $20,000.
Travis: [00:17:01] Factor in the student loans. Now it’s like $15,000. So he reduced his hours probably by around 50 percent or so, but instead of only having a $30,000 drop in income, it’s really $15,000 after taxes and after adjusting for the student loans.
Travis: [00:17:20] Now what are some ways that you could get $15,000 in take-home pay back into the budget so that you don’t have to worry about that drop in income? Let’s say that that $15,000 is a little bit over, what is that, $1,100 a month or $1,200 a month, something like that? One of the most popular vehicles in America is an F-150. Another one of the most popular vehicles in America is a brand new sedan or something like that. Or a minivan or something along those lines. So let’s say that these folks go to church, and they have a buddy at church that works at a car dealership. And they don’t have an emergency fund, so they go down, and they finance a brand new car. Nothing wrong with that. I mean in terms of, that’s a legitimate way to make money, right? It just might not be the smartest thing to do as a consumer though, to make that expense and spend it on that money because, say you do the typical thing. A lot of Americans do, and you buy two brand new cars. Well, that’s about $600 a month. And multiply that by two for two people, and add in insurance and extra expenses from driving a new vehicle. Now you’re basically at that $15,000 difference in incomes from going to part time.
Travis: [00:18:32] If you could buy paid off cars, like a, like my $5,000 2012 Nissan Altima that’s got like hundred and some thousand miles on it. You know, if you could have a car like that, that you buy from savings. And as long as you get it checked out by a mechanic, you feel good about the vehicle. You might have a couple one-off expenses but it’s gonna be a heck of a lot cheaper than paying three, four, or five, six hundred dollars a month for a, for a vehicle. Then you basically have just fixed your problem with that income difference right there.
Travis: [00:19:05] Maybe you are with the kids two or three days a week instead of no days a week during the work week, and you were able to cut your daycare expense by 50 percent. Well, if you have a couple of kids you’ve kind of fixed it right there. That income difference.
Travis: [00:19:20] So I just wanted to show you that example, this is for somebody who makes a lower income and has a spouse or partner. Maybe they wanted to spend more time with their kids. So this is, this is one strategy for this how this person could work part time and not wreck their student loan situation because the payment is based off of his income. He’s able to pay less if he makes less. And then the loan forgiveness costs actually goes way down when you do this.
Part-time work when you’re single
Travis: [00:19:46] Let’s talk about it a little bit different situation. We’re going to talk about a dentist who is single. And she wants to be single; she prefers that, she’s not planning on kids, but she wants more time to herself. And she wants more time for hobbies, and she wants to travel. And she just likes the idea of having more of a part-time lifestyle in terms of what she has to do to work. She’s got $400,000 of student loan debt, which if you are a dentist or know one, you know that that’s a very typical amount of student loan debt in today’s world unfortunately. And we’ll assume that she’s not eligible for PAYE because you took out a loan back in the day in undergrad, and so that means she is probably going to use Revised Pay As You Earn.
Travis: [00:20:28] And if she works making $150K, and let’s say that also, let’s say that this dentist has read all my stuff about corporate dentistry, how it’s not the best thing for you. You want to own and be an owner to maximize your results financially. Let’s say she’s like, “Yeah, you know what? That’s fine. Owning is just not for me. I just don’t want to be a practice owner. I don’t want to partner with anybody else. I just want to be an associate. Even though that’s not in my best interest financially, I’m cool with that.”
Travis: [00:20:55] And so let’s say that that our dentist, she makes about that $150,000, she says so she’s going to have to pay about eleven hundred dollars a month on PAYE. Sorry, REPAYE, and that’s going to amount to $480,000 of payments over 25 years. And furthermore, she’s going to have a $200,000 dollar tax bomb to boot. So to prepare for that, she’d have to save about $375 a month in a Vanguard account again, like a 5 percent return or something like that.
Travis: [00:21:24] Let’s say that she’s working five days a week, and she’s a little burned out. And she’s in a place where she’d love to have more time outdoors. Or she’d love to, like I said, just have more time to just read. Or you know what? It’s OK to watch Netflix and relax like enjoy life. We’re only on this life for, in this life on Earth for a limited time frame. And I feel very passionate that you should seek your calling and go for that and seek what you want to do. What you think is the best use of your time. And do that now. For a lot of people, they think that they need to work full time, and they like working full time. And that’s great. For other people, they’re like, “Wow, this is really, doesn’t feel right.” So I think that this should be a judgment-free zone here.
Travis: [00:22:08] Certainly that is the case for our Student Loan Planner Podcast. Like, I’m going to do my absolute best to never judge somebody for their decisions. I’ll tell you, what I try to do is I try to figure out what’s important to you, and I try to figure out what your goals are. What makes you tick, what you want to achieve in life. And then I want to be super opinionated about what you need to do to fix it, but if somebody says, “You know, I want to work part time. And I don’t want to own,” and all those things, like, that’s fine. That’s your decision, not my decision. I just wanna make sure that you know all your options.
Travis: [00:22:39] So let’s say that this person drops her income from $150,000 for five days a week down to $90,000 working three days a week. Is this responsible with $400,000 of student loan debt? Or is that crazy and something that could wreck someone’s life by doing that?
Travis: [00:22:58] Here’s how this would work: If you drop your income from $150,000 to $90,000, then you could drop your payment from eleven hundred a month to six hundred a month approximately. Instead of paying $480,000 over 25 years, she’d pay $261,000 over 25 years. The tax bond would go up, but it’d only go up from about $200,000 to $250,000. And your tax bomb savings every month, you’d have that go up from about three seventy five a month to about 450 a month. And recall that the REPAYE plan covers a lot of the interest subsidies. So when you work less, you’re subsidized even more. So that’s why your tax bomb is not nearly as high.
Travis: [00:23:40] And if you look at the cost of this strategy in today’s dollars, if you basically do a little math formula and you say what is the cost of this path on REPAYE for this dentist if she had to write a check today? Under the full-time approach, she’d have to be making about $324,000 in that check. In other words she’d have to pay about $324,000 all at once, and that’s what the cost would be in today’s dollars: $324,000. If she went part time instead, and the cost in today’s dollars would be about $216,000. And so that’s savings of over $100,000. That means by working part time, she basically cuts her payment in half, slightly increases her tax bomb savings amount. And let me ask you a question. Can you live on $90,000 a year? Most dentists are going to be spending more money than that.
Travis: [00:24:38] But here’s something that’s kind of interesting. If you make $90,000 per year, that puts you in the top one-third of all households in America.
Travis: [00:24:47] So if you’re going to make that much money, and you are making more than two-thirds of people who, a lot of these people are families with children and if you’re single, then there’s absolutely no reason why you couldn’t afford to easily live comfortably on this amount. So on the lower-income spectrum, a lot of the expenses like daycare, cars, a lot of these unforced errors really can add up. And you can fix some of those, and you can work less and that’s OK. It’s a reasonable decision, and your payment might almost be nothing.
Travis: [00:25:20] And the high-income spectrum, if you’re making a very high income, then if you can negotiate a part-time arrangement. Then you have to look at what your income is relative to the rest of America, and instead of looking at it, what it is compared to your peers, because if you’re working part-time hours but making almost six figures, that’s a heck of a good salary. Most people don’t ever make that in their lives. So that means that you have more flexibility than you ever dreamed of to work fewer hours, and because you have federal student loan debt, you can make this work and take advantage of this loophole that people are not talking about.
What if you have private student loans?
Travis: [00:25:56] Now what if you have private student loans? Can you do this for those? Obviously the answer is no. So if you have private student loans, and you really like this approach, then the thing that you need to do is to try to cut your expense as much as you possibly can by getting rid of those private student loan debts.
Travis: [00:26:14] So private student loans, they have a big monthly payment that’s required of you. That means that you want to go to StudentLoanplanner.com/Refi, r-e-f-i, and get a cashback bonus if you can refinance that private loan. You can refinance only the private loans, and you don’t have to pay down the federal loans if you have those.
Travis: [00:26:34] Like I had a case recently where somebody had a lot of private loans and a lot of federal loans. So if that person wanted to work less and be part time, she should probably pay off all of her private loans with refinancing. And if she can’t, she can’t qualify to refinance, try to pay it down until she can, then refinance and get rid of that private debt. So that’s pretty much the only kind of a student loan that’ll stand in the way of you going part time.
If your student loan debt is less than $50,000
Travis: [00:26:57] I guess the other option would be, too, if you had less than $50,000 of student loan debt. In that case, your payment is probably not going to change all that much if you are cutting your hours because it’s already pretty pretty modest amount of debt as it is. So you’re you’re probably not benefiting a ton from income-driven repayment, but that’s why Student Loan Planner is honestly focused on people who owe $50,000 to $1,000,000 dollars of student loan debt because of the, just the bizarre, weird, interesting math that happens when you have a lot of this debt. And you can take advantage of a lot of these loopholes and a lot of these strategies. Like I haven’t really, I didn’t really think of them until I had done over a thousand plans. I mean, some of these things I came up with after I’d done 100. But some weird approaches, like the community property regulator loophole and some of this stuff with like Parent PLUS Loans and Social Security and this part time loophole, but where you can cut your hours and still handle your debt, these are things I didn’t really think about until many, many, many student loan consults. And I realized this based off of just this, the cool creative strategies that you can use.
Travis: [00:28:05] This is one of the things that makes me super excited as I kind of view student loans like playing a game of Risk or Monopoly. I love board games. If you want to know a little bit about me, I love playing them so much. And I actually have to play them like on the iPad and online sometimes because, like, my wife and my friends are like, Travis is a little weird, you know? Like, why are you playing Risk on the iPad? But I love thinking of strategic things and different strategies to accomplish something.
Travis: [00:28:32] And so in that light, like, if you kind of want to put your board game player hat on and think of these student loans as a game… I mean, it’s kind of weird to say that. It’s a very complicated, messed up joke of a game that was created by all the different stakeholders out there that had interests at play, and they made this thing, for better or worse, that’s allowing people to take out, you know, $200,000 for a degree that pays $50,000, you know, and we have the system that we have. We haven’t changed yet. Hopefully we will at some point. Then I guess I’ll just go do something else.
Sabbaticals in the private sector
Travis: [00:29:03] But you know that’s the hand we’re dealt right now. So you can’t say, I wish we had a different situation. We have to deal in reality right. So we talked a lot about the part-time aspect. If you’re not working full time, you’re doing part-time work. But what if you just didn’t want to work? And I’m, again, judgment-free zone here. There could be some really legitimate reasons that you do not want to work right now. Maybe you need a mental health break. Certainly if you’re depressed, and you’re just really not in a good place. And you think that stopping your work and traveling a little bit or taking some time away or just recharging your batteries or doing something like that could help, then you should do that. Maybe you just needed a little sabbatical. I think that in academia they offer these, and they’re fantastic because the idea behind a sabbatical is you go off, and you kind of detach a little bit. You go read. You do some more research. You work on issues that are interesting to you. You take some time off from teaching. And we should have this more in the private sector.
Travis: [00:30:07] The only reason why we don’t is I think that a lot of people are paycheck to paycheck with their expenses, and so they can’t afford to do a sabbatical unless they had someone that was going to pay them for it. And so in academia, a lot of people will get paid to do sabbaticals, and you know, in certain kind of prestigious kind of roles. And in a private sector job or when you’re just on your own, you can do a sabbatical. It’s called quitting your job and getting another one down the line. I did that. I mean I could have gone back to work if I really wanted to. I’m glad I started this and hopefully you are too.
Travis: [00:30:41] But I have friends that try to do early retirement. Or they went on a sabbatical, and they did it for a year or two and they kind of got bored of it. Or they financially had to go back to work, and then they did. They went and got another job. And if it had been in a recession, they probably would have had to taken a worse job than they would have, maybe that they had quit from. But that’s probably our risk aversion talking.
Travis: [00:31:02] So if you went to graduate school, and you’ve got a good degree, and you’re a smart person, and you are somebody that is pleasant to talk to, and can ethically sell something that people want to buy right then, you are in the top quarter of all people that can get a good job. That can pay the bills. Like you don’t have to stress out like a lot of people do that are the most vulnerable among us, that you know, might be struggling with something, you know, severe depression or severe mental health issues or maybe they they were not blessed with a stable home life or they didn’t get the kind of education that you got. They dealt with, you know, structural inequalities and things. And then I’m just saying that even if you do take a sabbatical, you shouldn’t be so stressed out about it because you will get another job if you hustle and you have faith in yourself. So that’s another reason why you might not want to work right now.
Travis: [00:31:50] Maybe you have some medical issues. Maybe you’re going through some problem. One of my best buddies had cancer, and he fought cancer for a year. And during that time, it was really stressful. He’s in and out of the hospital all the time. Working would have been real big challenge. And he just didn’t need to deal with that. He needed to fight cancer and win. So he didn’t work for a year and beat cancer. I’m happy to say and he went got a master’s degree, and that he’s now working.
Travis: [00:32:19] Finally another, probably the most popular reason why somebody would not work for an extended period of time is if they want to be a stay-at-home dad or stay-at-home mom. That is a very common profession. I think of it as a profession because it’s really, it’s a calling. It’s really a deep amount of work that you’re doing if you’re a stay-at-home parent. If you want to be a stay-at-home dad or a stay-at-home mom, and you have a lot of loan debt, you might feel like you can’t. You might feel guilty because you’re not bringing in an income, but then you have to make payments on your student loans.
Travis: [00:32:48] There’s a few different ways to deal with this if you are a very low-earning spouse, and you have a lot of student loan debt. So let’s say that you’re making, you know, $30,000 to $40,000 a year working full time, and somehow you have $200,000 in student loans, and you’re married to somebody that makes, you know, $300,000 to $400,000 a year. Then you might need to have some conversations about that person cosigning for you so you can refinance your loans and pay it off.
Travis: [00:33:09] If you’re in a situation where your partner makes a very more modest income, then what you could do is simply to file married filing jointly and just have that partner’s income be counted in your student loan payment, and you can still cut your expenses that way.
Travis: [00:33:25] Obviously if you want to be a stay-at-home mom or stay-at-home dad, and you are a single parent, that’s probably not going to work. You have to have some source of income. But if you have a partner who makes that paycheck hit the family bank account every two weeks and you can afford to be a stay-at-home parent, then the only thing that you have to be okay with is being able to, either one of two things: file separately for taxes and pay the tax penalty and have a tax penalty be the cost, your student loan payment in that case would be zero. Or file jointly if it’s more advantageous to file jointly, and then you can pay 10 percent of the discretionary income for the family.
Travis: [00:34:00] So either way it’s okay to not work. And what strategy you use needs to be dependent upon what your long term plans are. So if you want to eventually go back and make a lot of money and pay back your loans, then maybe you could do something like REPAYE where you’re getting interest subsidies, where the effective interest rate of your loans is very small because of those subsidies. And maybe you’re keeping the balance kind of at bay while you’re a stay-at-home parent for a few years. And then you’re gonna go back to work. And then you’re going to pay it off and do a refinancing.
Travis: [00:34:29] If you can’t have your spouse co-sign for you, maybe you are going for long-term loan forgiveness. Maybe it makes sense to file separately for taxes and do PAYE or IBR or something like that. And then in that case, maybe you need to do those zero dollar payments because you’re trying to go for loan forgiveness. OK. So then in that case, maybe you do PAYE or you do IBR, so you can file separately, so you can go for loan forgiveness. And maybe that’s the way to justify not working that way.
Travis: [00:34:57] Perhaps you are doing a temporary time away because of a sabbatical. Or you’re doing that mental health break or are having medical issues. Do not go into forbearance because you have an alternative. Instead of doing forbearance, you can call up your loan servicer and simply tell them the truth, which is, “I no longer have a taxable income. Can you recalculate my payment?” You’re allowed to do this at any time. You don’t have to wait until you recertify your loans.
Travis: [00:35:22] So if you have one of these situations where it’s going to be a temporary one or two year thing, what I would suggest is, you probably are already on one of these income-driven plans if you are not refinanced already, and you can call up and say, “Hey, I want to get my payment recalculated so that it’s zero dollars a month. Or you know, at least I want my payment recalculated so that it reflects my zero dollar a month income.” So this is a way that you can work not at all if you have a lot of student loan debt. You just have to figure out the budget part of things.
Handling student loans while living abroad
Travis: [00:35:48] Now what about living abroad and traveling? There’s something called the Foreign Earned Income Tax Exclusion, the FEIE. And this allows you to exclude $100,000 of income that you earn abroad on your U.S. tax return.
Travis: [00:36:01] If you do that, say you’re doing, I don’t know, travel nursing abroad and making money that way. Or maybe you’re doing dentistry in the Middle East like one of our podcast episodes we have. Maybe you thought you found some sort of special gig through your corporate employment that’s sending you overseas. It could be a number of things. Maybe you’re doing consulting income. Maybe you’re a digital nomad. You’re doing freelance work while living in Australia or Europe or something like that. Then you should be able to present a zero dollar Adjusted Gross Income or very close to it to your loan servicer and pay zero dollars a month or close to it. And you’re still qualifying for loan forgiveness and accruing the loan interest instead of compounding it. That kind of stuff. So if you want to have one of these alternative lifestyles, it’s very very possible.
Working less while going for PSLF
Travis: [00:36:48] Now what about if you’re going for Public Service Loan Forgiveness (PSLF)? You obviously have to have full-time employment, which is 30 hours a week or your employer’s definition of full time, whichever is greater. And then you have the option of doing two part-time jobs and qualifying that way. So if you, say you work one job that’s 20 hours a week, another job you work 12 hours a week, and both of them are qualifying employers, you can qualify for PSLF that way.
Travis: [00:37:11] I’ve got a story from a listener who wrote in. And you can do that too, by the way, if you want to leave a comment or have a question: email@example.com. And he was telling me that his wife was, it was 0.75 FTE. So a lot of big hospital systems, they’ll delegates somebody, as you know, 1.0 FTE or 0.75 FTE, something like that. And the hospital considered his wife full time for benefits, but because of that 0.75 FTE allocation, they refused to sign the PSLF paperwork. So this person was not technically working part time because she was working the 30 hours a week, which is the minimum, but they wouldn’t sign the paperwork because he said it’s not our employer’s definition of full time.
Travis: [00:37:54] So that’s just kind of a grey area. My opinion: that’s silly. Any employer out there needs to be signing your paperwork if you’re getting benefits because the definition of full-time employment is really pretty arbitrary with our labor laws in America. So that means that if you’re getting full-time benefits and employer match and you’re 401(k), your health insurance, all those things, then you really should be able to get credit for PSLF.
Temporarily working less
Travis: [00:38:16] Now most of the people who stop working or go part time or reduce their hours or stop doing their hours completely because they’re a stay-at-home parent, they do it temporarily.
Travis: [00:38:27] So I want to use my mom as an example. My mom’s a nurse. She spent about 10 years out of the workforce as a stay-at-home mom and took care of me and my brothers. She luckily had no student loans because she got a special deal where the employer kind of helped to pay for it. And back in her day, you know, student loans were kind of a joke. I mean, it was super cheap to go to school, and she didn’t really have to worry about getting her her nursing degree because it was just real cheap. But what if she had had a job change? What if she had switched careers and done one of these expensive private programs, and she came out on a whole bunch of loans? And what if she basically decided that she wanted to go become a nurse, and she took out more than a hundred thousand of student loans, and she wanted to be a stay-at-home mom, what would it would’ve happened in that case? Could she have done that?
Travis: [00:39:15] My dad was a teacher, so he didn’t make a ton of money. What she could have done is basically used a little bit of forbearance. I mean, that’s certainly a decent time to use it, when you’re not getting qualifying employment towards PSLF. But if you’re going to eventually go back to work full time, as most nurses do, at a full time, not-for-profit hospital, which is qualifying employment for PSLF, what you should keep in mind is you only need 10 years of cumulative credit. You don’t need 10 years of consecutive credit.
Travis: [00:39:44] So my mom she had about a five or six year period of working before having kids and deciding to go part time. And so she could have built up five or six years of credit, and then done her 10 years out of the labor force or fewer. And then she could go back to work, and she could have paid zero dollars a month on one of these income-driven plans. Or she could’ve filed jointly for taxes, if that was the right thing to do, and paid, you know, $200 a month or something like that. And if you’re really budget minded, and you’re really frugal, and you’re real intentional with your money, then she could have gotten PSLF over her staggered career with these life changes that happened.
Travis: [00:40:23] So this is why I think this is so cool is, I want to pretend that my mom had a lot of student loan debt and that could be somebody today. You know, I want to pretend that the buddy that I had that was a co-worker that loved going fishing is somebody today. Now take that person, take that human being and then add a bunch of student loan debt that freaks them out, thinks, “Oh my goodness, what am I going to do?” And now that person can live their best life and live their life the way that they would without student loan debt, which is totally life changing.
Design the life you want
Travis: [00:40:52] So my takeaways for this episode are that you should design the life that you want. You should figure out how to best plan for your debt. And obviously StudentLoanPlanner.com/help if you want us to help you and do that and get a paid custom plan that kind of does this kind of thinking and incorporates that kind of thinking into your life.
Travis: [00:41:12] But if you want to figure it out yourself, you need to fix your budget. You need to get your spending tracked at Mint.com or YNAB — You Need a Budget dot com — and limit expenses on things not important to you. So that car expense, the housing expense, the going out to eat, whatever is not as important to you as having the schedule that you want in your life needs to go so that you can get the schedule that you want with your life.
Travis: [00:41:37] If you’re struggling with how you would cut your spending, I can’t suggest it enough, this budget consult that my colleague Rob does. You can reach out to us, like I said, firstname.lastname@example.org, if you’d like info on that. But he does a spending audit, and he tells you what he thinks that you need to cut out of your budget based off of a consultative approach talking to you about what’s most important. And he’ll track everything. He’ll organize everything from like, Mint.com, and he’ll explain the steps to take to cut your spending by a certain target level that you need it to be cut by. So that expense for that is only $29; it’s actually cheaper than his student loan consult rate. And this is something that we’re trying to do more of, just to see if it’s something that’s scalable or not. Takes a lot of work, but he really likes doing it.
Travis: [00:42:23] That’s basically the the summary of everything that we do at Student Loan Planner, is do we like doing it? Does it help a lot of people? Can we do it for a reasonable cost, and can we do thousands of them? And if that’s the case, then we try to offer that. You can also just reach out to Rob directly — Rob’s emails is email@example.com — and ask him about doing that budget consult, if this is something that you’re really interested in. Reducing your hours. Trying to figure out your spending.
Travis: [00:42:46] Obviously the student loan consult is a little bit of a different product, and that’s if you have a lot of student loan debt that you haven’t gotten a plan for yet, I would encourage you to do that first. Get the plan for the student loans, and then see if you still need that budget consult.
Travis: [00:42:58] Now if you want to work part time or not at all, you can do that. Do not let the peanut gallery decide what you are going to do in your life. Make that decision for yourself, and make that decision that’s best for you and your family.
Travis: [00:43:12] So thanks so much for listening. Really appreciate the fact that you’re still here, you’re listening to this episode, you’re taking into account all these different things. I hope you enjoy it. Podcasting can be a little spooky at times. I want to hear back from you, so comment. Reach out to us. Tell us what you think of the show. Tell us what you want to hear more of. And thank you so much for being part of the Student Loan Planner podcast community. Thanks for listening to today’s show.
Travis: [00:43:37] If you wanted to learn more about getting a custom student loan plan, visit studentloanplanner.com/help. Show notes are available at studentloanplanner.com forward slash the number of today’s episode.
Travis: [00:43:48] And finally, if you like the Student Loan Planner podcast, leave us review or share it with someone who owes more than you. Keep calm and build wealth, y’all.