John Collins – GL Advisor

John Collins is from GL Advisor, an advisory firm designed to help graduate students and young medical professionals fully understand their options, make better decisions, and implement solutions pertaining to student loan debts, as well as offering financial planning and professional investment advice. John spoke to us about the often hard to decipher student loan subject, and he made it clear and easy to understand. John helped us to better understand:

  • How to repay your student loan debt strategically
  • What Public Service Loan Forgiveness is and how you can take advantage of it
  • Gives a clear explanation of Income Based Repayment and Pay As You Earn
  • Reveals what happens with interest and how is that all deferring and accruing while you’re in the Pay As You Earn program
  • What changes he sees coming to Federal loan forgiveness programs and how that might affect those currently in IBR or Pay As You Earn

 

Josh Mettle: Hello and welcome to the Physician Financial Success Podcast. My name is Josh Mettle, and this is the podcast dedicated to advising physicians how to avoid financial landmines. Today, we’ll be talking with John Collins from GL Advisor, an advisory firm designed to help graduate students and young medical professionals fully understand their options, make better decisions, and implement solutions pertaining to student loan debts, as well as offering financial planning and professional investment advice. John, welcome to the show this morning. How are you today?

John Collins: I’m doing pretty good. We’ve got some snow coming down to the Boston area, but we’re hoping this is the last spill that winter has to give. How are you yourself, Josh?

Josh Mettle: Man, you guys just got hammered this year, didn’t you?

John Collins: Yeah. It’s actually been quite a winter. My wife is from Texas, and when we moved up here the first year, she was amazed by how cold and how snowy it could be, and this year has actually been one of the worst. She’s ready to head back down south, but we don’t have any plans in the short term.

Josh Mettle: I don’t blame her, man. I’m a California boy myself. I live in Utah now, but I struggle with our winters, and this one has been great. It’s 70 degrees and beautiful clear skies today. I’m thankful for what we have right now.

John Collins: Consider us jealous, but we’re hopeful that this is the last one.

Josh Mettle: Yeah, I wish that for you as well, my friend. Well hey, listen, I appreciate you spending some time this morning and being generous with us and our listeners. With your permission, I’m going to jump right into it here, so I’d like to know just a little bit about your background and maybe your history with GL Advisor and how you and GL Advisor all kind of got started moving down the path to serving medical professionals.

John Collins: I joined the company, let’s see back in 2010, so this was after much of the wonderful credit crisis of 2007 to 2008. I’d always wanted to be in financial services and had literally just finished school. I had looked for a unique opportunity, and GL jumped out at me for a number of reasons. Looking back at the company’s history, it started in 2003. It was a number of Harvard Business School guys got together and really looked at ‑ they were in a debt and capital finance programming and the professor was talking about debt and how it works and you know if you liken the term auto loan, how that increases the risk to the lender, and therefore how people have to pay a premium for that.

All of a sudden, our CEO and founder said, “Actually, that’s not true, student loan debt is this completely different beast in which you can do things that actually work in favor of borrowers.” He didn’t think much of it. He worked at other financial institutions prior to Harvard Business School and had kind of had familiarity with student loan debt, that is. A bunch of students came up to him afterwards and said, “Wow. This is really amazing, amazing stuff that you’re throwing out here. Can you do a session on this?”

You know a small session at Harvard Business School became a larger lecture, became a tour of lectures through the Ivy League Business School Program. Eventually, it really started to grow such that they were doing sessions across the country at all different types of graduate programs.

Josh Mettle: Wow.

John Collins: Ultimately, medical schools had a huge need and a huge thirst for information. “How can I best manage my student loan debts?” They were seeing tuition and cost of attendance grow by you know 10 percent a year, 20 percent a year in certain schools.

Josh Mettle: Right.

John Collins: The salaries that they were receiving on the other end really weren’t compensating them for that increasing cost, and so, what we were able to do then was help show how consolidation in the marketplace would allow for you know certain savings. Really after the credit crisis, after our business model, our original business model, which was lending and in the consolidation space after that was somewhat disabled by the fact that the programs had to change the capital when finance wasn’t really available.

We still saw that these people had a thirst for someone to help them after graduation. When they started residency, there was no financial advisor there, saying, “This is how you repay your debt strategically.” There was no one saying, “We can help you at this juncture.” Everyone was pretty much saying, “Hey. You should consider insurance and maybe look at renting or buying a house.” But in terms of actual financial advice, there wasn’t a ton there, and we just saw this huge need. Not only did they had a big consideration, they had a huge student loan debt obligations, but they also had other needs that could be addressed. Even a good savings plan while in residency can really pay off down the road.

We were able to use these channels through some of the student groups, through some of the universities, and even some of the hospitals that we worked at in the past on availing some of the inner workings of lending and actually translate that into channels for educating these young professionals on financial planning, financial planning with student loan debt. Since then, we’ve been able to grow the business tremendously to you know over 10,000 clients nationwide.

Josh Mettle: Wow. Well that brings me right into the next question then, which is, that you know, on your website, which is very interesting, by the way, you point out that most financial advisors focus their attention solely on the asset side of the balance sheet, which is absolutely true, and they pay very little, if any attention to the liability side. Walk us down that path. Tell me a little bit about how GL Advisor is different and about your approach to increased liquidity through payment relief.

John Collins: You know, we’ve always looked at finance as really an age-old industry. It might be the second oldest industry out there outside a few other things from biblical times. These old traditions, somewhat they die hard. Not everyone had that, debt wasn’t available to the mass marketplace. I don’t think it’s without reason that most firms have always focused on the asset side, but we’ve obviously recognized that there’s been huge changes over the past number of decades, especially in the past few decades of student loan debt, but we want to make sure that net worth is the key consideration here, right? You want to make sure that you were able to balance your balance sheet and also able to work towards having more, you know more in assets than you do in liabilities.

That should actually impact how you allocate your money, so instead of considering how much you have under management with an advisor, which many traditional financial advisors will be paid on the assets they actually manage, and therefore, their interest is to have you continue to put more money into the funds that they allocate you to.

Josh Mettle: Sure.

John Collins: We want to look at net worth, and especially for this group, these young folks, medical residents, young dentists, young veterinarians, young lawyers this had to be a key part of it, given that, again this huge obligation lies out there. Unique aspects of the Federal Student Loan marketplace that’s helped our cause because they allow for both cost reduction and liquidity management. For example, a resident starts at a salary, let’s say average right now across the country maybe $50,000 a year, and that’s in contrast to their $220,000 Federal Student Loan debt balance.

Josh Mettle: Right.

John Collins: Obviously, you can’t aggressively start paying that, but you can do things now to reduce their cost long-term like participating in certain subsidy programs, and those subsidy programs also often allow for liquidity. They allow for the borrower to limit their monthly payments. By doing this, we can actually reduce costs, reduce cash flow obligations, and then also look at some considerations on the asset level on the balance sheets, so not completely neglect the need for savings, and neglect the need for the home purchase decisions, neglect the need for retirement planning, but do that in concert with their debt obligation payments. There are unique aspects that allow us to do this.

Really our ultimate goal is we want all these guys to work, to utilize the appropriate repayment programs that are out there, whether it’s on the Private Student Loan marketplace, the Federal Student Loan student loan marketplace, with the focus on liquidity when they need liquidity, when they have liquidity pressures from low income relative to their debt, but also to ultimately yield the best outcome in terms of costs. They want to spend as little as they have to on their student loan debt or any debt obligation for that matter and be able to maximize the utility of each dollar they allocate, no matter where that goes, and so that ends up being, let’s optimize your net worth, let’s not optimize your assets under management.

Josh Mettle: I love it. I love the holistic approach and the way you explained. It was excellent. Great. Well, you talked about young medical professionals. In our mortgage practice, we work a lot with graduating med school students and incoming residents, and fellows, and newly attending. I find there’s a lot of confusion out there on the student loan forgiveness and repayment programs. I’m wondering if you can add some clarity there. Maybe just give us kind of a brief overview, some of the programs you’ve already mentioned such as the Income Based Repayment, pay as you earn, Public Service Loan Forgiveness , economic hardship deferment, and the federal loan consolidation, maybe just kind of you know 30,000-foot view of those programs and how they work together.

John Collins: Sure. I’m happy to. You can think of Income Based Repayment and Pay As You Earn as opportunities to, you know align your debt repayment or your monthly payments with your actual income, with your discretionary income. Income Based Repayment limits your monthly repayments to 15 percent of what’s considered your discretionary income, which was a function of your salary and taxes. Pay-as-you-earn is slightly more beneficial. It limits your monthly obligation to 10 percent of your discretionary income. They function almost exactly the same. It’s just a difference in really your eligibility.

Josh Mettle: Right.

John Collins: First of all, be eligible for Income Based Repayment. Newer borrowers, newer graduates will be eligible for Pay As You Earn. I should mention, and this has actually happened since you and I first talked, but it was a couple of weeks ago when the Obama administration came out with their latest budget proposal. There is a proposal in that budget for Pay As You Earn to be applicable to all borrowers regardless of when they graduated. And so, that can be helpful to the cost of debt, we’re hopeful that at least that part of the budget proposal will be brought through and approved by the legislature. That will be great. It will actually make it easier on the whole system and would reduce the number of options people have but actually give them the best option available.

Josh Mettle: Sure.

John Collins: We’re keeping an eye on it, of course. Public Service Loan Forgiveness works in conjunction with those two programs, so again you’re limiting your monthly payment to what you can actually afford. Public Service Loan Forgiveness steps in and says, “Anybody who is working for a government agency or a 501(c)(3) nonprofit,” which in your case, out west, a lot of hospitals will be 501(c)(3) organizations. These are nonprofit entities. They often you know raise a lot of funds for very good research, for very good support of the community, and they’re also doing great works for the community through great healthcare. But so, what essentially has been said is if an individual through residency, and as an attending works in the nonprofit sector for 10 or more years, if they’re making these Income-Based payments, once they’ve made 120 of those payments, their remaining Federal Student Loan debt balance is forgiven. And it’s forgiven tax free.

Depending on where you lie when you graduate or your loan balance is, you can see savings in the hundreds of thousands of dollars, really with the government coming in and saying, “We will clear that off your plate.” Nowhere else in finance right now, even certainly not in mortgages can you walk in and say, “I know that this will be wiped off my balance sheet and enable me to be debt-free or student-loan debt-free after a certain point in time.”

This should be a key consideration for anyone out there who’s starting residency or even finishing residency, whether you’re working for a for-profit or a nonprofit. It can have huge economic implications on you because of this program. I think the key thing to take away is you should be able to utilize these programs to limit your monthly payment and also, potentially longer term have a huge component of that debt forgiven by the Federal Government.

The other programs you had mentioned, Josh, I think were economic hardship deferment. I want to say that to that, this was a program that was actually available before these loan repayment programs – it was always meant to say, “If you’re in residency, if you’re immediately a recent graduate, let’s say, and you don’t have the income to start paying, you can defer payment based on your lack of income.

Josh Mettle: Right, ability to pay there.

John Collins: Right. It was looking at poverty line guidelines and really, how do you ‑ if you’re earning less than 150 percent of the poverty line guideline, you can, for your family size, that is, if you are earning less than that, you can beg to defer your payments. However, that still comes with a cost. You’re not making any real headway in your debt at all, a certain part of your interest is subsidized. We would recommend Income Based Repayment, Pay As You Earn if you can afford those minimum payments.

The other thing you had mentioned was consolidation, and as I started off discussing graduate leverage, how we started, the consolidation marketplace has changed over the years. Essentially, right now the main driver or need for consolidation is to make sure you’re eligible for some of these programs. Pay As You Earn requires that your federal student loan debt obligations are direct loans, which means they’re directly funded by the federal government.

Josh Mettle: Right.

John Collins: If they were before 2009, your loans may be non-direct I should say, to make it simple, so you may need to consolidate. Similarly for public service loan forgiveness, your loans need to be direct. The federal loan consolidation marketplace allows for that.

Quite often, we also look at it, to just help folks bring all their debt into one house essentially, one servicer, one single payment each month that can simplify things. If you’re one of those folks who isn’t great at organizing, it’s often a good thing to do, look at consolidation as a way to bring everything together, make it easier to manage over the long haul.

Josh Mettle: A couple of quick questions, and I took a bunch of notes here. This is great information. In regards to the federal loan consolidation, so let’s say that someone had, you know a couple of state loans, maybe a couple of loans from undergrad that were pre-2009, and are you saying that those loans, obviously the state, the non-federal are not eligible for IBR and Pay As You Earn. But are you saying that you can consolidate them through the Federal Loan Consolidation Program and then roll them all into Pay As You Earn or an IBR, is that right?

John Collins: Anything that is not lent as a federal loan, and a federal loan would include Stafford Loans, would include Graduate PLUS Loans, Parent PLUS Loans for those who have children that they are looking at these programs. It would also include Perkins Loans, long-term or I want say health professional student loans. There’s a few others that are kind of on the periphery, but they’re all federally funded. All those loans can be eligible for these programs. Any state loan or school specific loan, institution loan that’s outside the federal government, those cannot be consolidated into consolidation marketplace.

Josh Mettle: Got it.

John Collins: So those will be outside the periphery or out of reach of these programs.

Josh Mettle: Okay, cool. I got that. In regards to IBR and Pay As You Earn, I’m this graduating resident, a graduating med student going into residency on a $50,000 a year salary, and I have $220,000 in student loans, which you know is really par for the course, we see that all the time. I’m rolling these loans into a Pay As You Earn, let’s say, and I’m only paying 10 percent of what I have left over for income after that calculation based on family size. What is happening to my interest rate and where? It’s possible because I’ve seen several IBR and Pay As You Earn payments that are zero, right? If you’ve got four kids‑

John Collins: Right.

Josh Mettle: and a spouse that’s not working, pretty much your guaranteed a zero payment, so what’s going on with the interest and how is that all deferring and accruing while you’re going through that program?

John Collins: That’s a great question. For 2014 graduates, if you look at their medical school student loan debt, they borrowed for two years, they had access to subsidized Stafford Loans, and for the remaining two years, all of their debt was essentially unsubsidized. What we mean by that, during any deferment period, their interest on subsidized loans is subsidized by the Federal Government. They’re taking the hit on the interest that they would otherwise be able to charge you for.

And so, similarly for IBR, Pay As You Earn, let’s say in your example Pay As You Earn,  you’re paying zero dollars a month, your loan balance, your principal balance isn’t increasing, but you are accruing interest over that period of time. That interest was accruing based on the loans, specific loans in the portfolio, if all of them are unsubsidized, there is interest being charged to every single one of your loans, and that’s accruing each month. It is not capitalizing, and is therefore, it’s not compounding.

There is – if you will compare this to credit cards or to most commercial or consumer debt obligations, most interest will compound or capitalize regularly, usually at least on a monthly basis. Federal Student Loans give you a benefit in that they don’t do that while you are in Pay As You Earn, actually at all until you reach a certain income level. I guess to that point, I mean you’ll have a certain – Josh, in this case, this person would most likely have a certain portion of their interest cost subsidized in the ballpark of maybe $1,000 a year for their few first years of residency. But for a vast majority of folks, they would still be accruing interest on the lion’s share of their portfolio, and that would be to cost maybe $12,000 to $15,000 a year, depending on the size of their loan portfolio.

The key things there to remember is that it is interest that does not capitalize on top of their principal balance until at some point, their income is in line with their total debt balance, and at which point, the Federal Government say this interest can now capitalize. Now you’ll see the effects of compounding interest. The reason that’s important is that while you are putting off some of the cost potentially, you are still reducing it relative to other opportunities you would have including forbearance or deferment, you’re reducing your cost. And then, additionally for utilizing these loan forgiveness programs we’ve walked through before, Public Service Loan Forgiveness, as an example, that interest cost is actually still going to be captured by the forgiveness programs if you take advantage of them.

It’s something to be mindful of, to keep track of for anyone who’s not going to, who doesn’t have a high likelihood they think of pursuing work in the public sector or nonprofit sector I think is going to be extremely mindful of the ways you can reduce the costs over time once you have greater liquidity. But the program does have safeguards in place to mitigate or reduce the cost as much as possible during residency, even though you’re making very small payments and not really cutting down on the interest costs during that time period.

Josh Mettle: Got it. Great explanation, just one last question in regards to the debt forgiveness. What do you think the chances are or what are your fears pertaining to some sort of policy, like that changing in the future we’re in a place where the Federal Government’s obviously off the charts as far as the amount of debt that we have outstanding. It would stand to reason that at some point, that’s going to come back in check. When that happens, I wonder what’s off the table and what’s on the table. It is a gamble in my mind to some extent that if you’re going to play that game of, “Hey, I’m going to let this interest kind of just grow out there. I’m going to try and keep income low through whatever means possible and make minimum payments, and then just hope that this debt falls off at some point.” What do you think are the chances are that something changes policy wise that could have a negative effect?

John Collins: I think there’s two parts to that. There’s definitely a risk, and I think it’s likely that there will be changes to the program going forward. Actually, in this recent budget proposal from the administration, much to a lot of people’s surprise, there’s also a mention of capping, you know limiting the benefit that Public Service Loan Forgiveness could provide. They said, “The maximum it should be able to provide in terms of savings is $57,500.” They got that number out what the maximum amount an independent undergraduate can borrow for their undergraduate studies. As you’ve already mentioned, most of the people that you’re working with that are coming out of medical school and most graduate programs are going to have more than $57,500 in student loan debts.

Josh Mettle: Yes.

John Collins: It really doesn’t help graduate students, and so this change is definitely just a proposal right now. It doesn’t have a ton of support and has a lot of financial aid offices, a lot of student loan services, a lot of professional organizations saying, “Hold on a second. You’re actually totally missing the point. When you look at the student loan debt marketplace, a vast majority of the debt out there is actually borrowed by graduate students who make up a very small minority of the total borrowers in terms of count.”

And so, they said, “This has a disproportionally bad effect on graduate students.” When you’re looking especially in the medical student and medical residents’ case, there’s a lot of folks actually planning, relying on this program in their plans.

I was just at Indiana University’s Medical School Program on Friday for their Match Day ceremony, and the financial aid officer conveyed to me that many people had come to him since they were freshmen saying, “I really want to make sure I can utilize this program since this is actually the only way I can really afford to do this. I wouldn’t be borrowing otherwise, but I realize there’s a light at the end of the tunnel, and so I’ll do this. I’ve always wanted to be in medicine. This program is essentially enabling my dreams,” which is a great story, and it would be so sad to see that change.

There’s a few things I guess I should clarify. One is the proposal is to make changes going forward, and everyone that’s borrowed to date has signed a contract. Your master promissory note when you borrow one have the details about all these programs. It doesn’t walk all through the financial calculations for Public Service Loan Forgiveness, but there is implied through there. If you borrowed today because you know there is a program called Public Service Loan Forgiveness out there, and there’existing tenets to that program, you are essentially saying, “I understand this, and I am willing to do this based on the fact that these programs are out there to help me pay back this debt.”

Josh Mettle: Got it.

John Collins: In order to change that, you actually need to get acknowledgment from the borrower, and as much as there is distrust of the government, I still feel like we’re a fairly law-abiding country, and I want to have faith in that. There’s very little faith that the legislators, the president, the administration will say, “We can’t just make a widespread change across a ton of people that will affect a ton of people without getting their acknowledgement and changing these contract terms again with their acknowledgment.”

I don’t see it affecting people today. I do think that the program will change. It will change for future borrowers. When we look at the class of 2018 and class of 2019, I can see the program looking a bit different for them.

Josh Mettle: Yeah.

John Collins: We’re advocating for the basic tenets of Public Service Loan Forgiveness to stay the same. Really when you look at where the government should be investing to continue to drive our economy and to allow for things like let’s say the Affordable Care Act or anything that’s really improving healthcare in this country to have a chance, it has to start with good healthcare. That good healthcare is provided by medical doctors, and we have to make it attractive for them to want to come into the field. With salaries compressing, you know, you can’t also lump on cost. You can’t increase costs with an individual. I don’t think there’s a major risk of it being totally taken away or changed in such a way that it’s not attractive at all, but there will be changes inevitably. I think it will mainly affect folks who have not even considered medical school or haven’t started medical school yet today.

Josh Mettle: Yeah. Great explanation, and I think that was perfect. So let’s move on a little bit then from the debt side of things, and let’s talk a little bit about the integrated financial plan, which I read a little bit about on your website. Can you tell our listeners about the integrated financial plan and what that includes?

John Collins: Yeah. I mean so we want to start with education debt of course, but everyone’s financial picture encapsulates much more than that. For residents, if you ever get a chance to go out to a program, you’ll often see a number of different financial institutions during lunch and learn sessions there that include coverage on, you know, how to ‑ insurance for example, or whether they should open a savings account or who they should invest with. We want to make sure we cover that and really look at the optimal allocation of all finances.

So, you have discretionary income. You have funds that you can put places outside of your mortgage payment and your insurance, your home insurance, your basic utilities, things like that, so where should that go? We do map out, really across the balance sheet how much should we be contributing to savings at any point in time. What if anything can we contribute towards our retirement plan at any point in time, and also how does insurance coverage support any of this, whether it’s disability, term life for residents, and what is the impact on liquidity?

I would say when you look at how we work with clients, the very first few months are mainly focused on getting this huge, you know the thousand-pound gorilla in the room, the student loan debt, let’s get that off our shoulders so they get on a steady track and then how we bring in marginal concerns across . And so, it’s been extremely successful for us to make sure that our clients really understand what’s going on in these other areas, especially as they continue to grow in their career, they really become even more important, and there will be more and more people coming to talk to them about these options.

If we can just educate them on that, we can allow them to properly make decisions, make decisions that don’t cause harm in the future, which we found in both medical, dental, and veterinary fields are quite common because there’s just such a lack of education overall provided to these individuals in school and through other training programs. That’s our focus, and really we have a core focus on net worth. We have individuals within the firm that can help out in specific areas as needed, but our advisors are definitely comprehensively focused across the board.

Josh Mettle: You know, I think this can all be overwhelming. I can imagine myself being a young man going through graduate school and then into residency and trying to figure out employment contracts and relocating my young family and insurance and investments and cash flow management through these different repayment plans. Regular listeners to our podcast will know that I harp on this idea that regardless of how little capital you have to start allocating towards retirement or the point is not how much.

Literally $50 I think is a start, but the point is, is getting pointed in the right direction and starting your financial literacy quest. I like that you handled the gorilla in the room first, and I think that’s obviously the biggest mark mover for them because they’ve got this $200,000 liability, and they have probably a very little amount going into a retirement. But I like that you don’t neglect that, especially early because I think the lessons that can be learned in finances can sometimes really only be learned through watching the markets for a long period of time, watching what your emotions feel like when things go up and your accounts go down, and you gain a little bit of wisdom, and understanding, and competence, and calmness once you’ve been exposed to that experience with your own money regardless of how little it is.

Anyways, my advice is always even if it’s a trivial amount, start participating, especially if there’s you know 401k or some sort of a program where you got some company match and some tax advantage and start watching those, start reading and studying and beginning your journey to financial literacy. I’m glad that you guys do that with the integrated financial plan.

John Collins: Yeah, Josh, and I want to piggyback on that, I think we’ve found a lot of clients who’ve come on board to be frustrated prior to working with us and feeling as if they’re not included in this whole financial planning and financial advising world because ‑

Josh Mettle: Right.

John Collins: a lot of groups don’t go after them, but two, they feel paralyzed. It’s like you’ve got Income Based Repayment where a lot of these folks will run to this paralysis, this income-based paralysis when they feel like they don’t have the money, right?

Josh Mettle: Right.

John Collins: “I would love to do this 401k but I’m only making $50,000. I’ve got this debt. I’m just not going to do anything with it.” They probably go spend it somewhere else.

Josh Mettle: Exactly.

John Collins: Which is fine, but they don’t feel like they should even be part of the discussion, that they’re ready to be part of the discussion. That’s what we try to do first and foremost like getting the debt out of the way and making sure that we’ve got them on a solid track. You can now say, “Okay. Let’s relax. Let’s take it easy. Let’s look with perspective on this and say, “Now that we know that your monthly payment on this is $50 a year, and you’ve got a long-term plan, now we can put $50 or $100 or whatever it is a month towards even savings.” I mean it’s amazing how many folks would come in and they’re going to be very wealthy doctors someday, but they don’t have any money to their name, they don’t have anything ready to eventually put down for a down payment, and every little bit that you can start with helps.

I think you know, it is, definitely encourage people to just get started somehow and know that there are options out there. You should feel like you’re part of this marketplace because you are even to whatever little degree you can be. It definitely is going to be something you need to be abreast of and that can help you, even in the very short term with just letting you experience what’s going on.

Like you said, seeing your $50 investment in Bank of America, I remember that was the first stock I ever bought. It was a terrible, terrible trade. I felt like I had no tangible attachment to the marketplace, and I think other folks should make sure that they get that, too, and not feel like they need to be on the sidelines until they make the big gun.

Josh Mettle: I’m going to leave this point, and I think you nailed it. I’m going to leave this point with this last comment which is, “The longest journey starts with the first step.” The mistake that I see some medical professionals make and – this isn’t the majority of doctors and dentist out there – but I’ve seen it and it’s tragic is that they never get started, and their expenses rise.

They haven’t got in a habit of savings, and the next thing you know the Toyota turns into a Lexus, turns into a BMW, turns into a Porsche, and you kind of look back a decade or two into a career, and you go, “Man, I never got set up right in the beginning. I never got started down the right path.” That $50 invested is trivial to what your net worth is going to be when you are at the end of this game, at the conclusion of your journey. But the knowledge gained and the fact that you’re now moving in the right direction around the board game will have a direct impact on where you end up at the end of your journey. We could harp on that all day. I think we’ve made our point, but I’m glad to see that you guys bring that into your plan.

John Collins: Yeah. That’s great. I think it was a good point.

Josh Mettle: Okay, so let’s go to the last question, buddy, and this one is super cool. You know I’ve made a lot of bad decisions in my life, so I wish I would have found you earlier, but you guys have this service called decision support. On your website, you talk about such things as advising clients on buying versus renting a home, comparing different employment offers. I love that. I love that you guys have got a wide perspective which you can share with clients, so tell us just a little bit about what decision support service entails.

John Collins: Yes. I think a lot of people, I mean there’s this huge new concept that’s not new but I feel like it gets a lot of buzz – it’s data-driven decisions. A bunch of MIT guys a couple of years ago wrote a huge hundreds of page report, and so everybody is now trying to get that in business, but often people let emotions take over their finances as well and they don’t really think through, “Should I be buying a house or how will I actually be impacted by this?” I think again I’ve alluded to a credit crisis. There might have been emotions driving housing prices up. I’m willing to wager, and so we found, especially with young doctors, you graduate and you become a doctor and that’s awesome. You’ve got your white coat and you feel really pumped up about it, and you also see other doctors who have big houses, and like you said, the Lexus, and the BMW, and the Mercedes, so there’s an immediate pressure to not make data-driven decisions and purely act on what is being said out there in our culture. I think we immediately, as part of our plan, we need to be there to provide analysis, even if they don’t take it, we’re going to provide analysis.

Taxes is an example that is actually very common. What we are going through right now is, if you file joint or you file separate as a married couple, it definitely has an impact on how much your tax liability is to the federal government and to your state or local tax offices, but it also has an impact on your student loan repayment plan.

Without thinking that through, you may make a decision that actually harms you in the short term economically and especially in the long-term. And so, we provide color on that to make sure that when you go to your CPA or you’re working on Turbo Tax, you can look at those numbers and understand what an increase in $500 in your tax liability means to your student loan debt repayment plan.

Similarly, with renting versus buying a home, a lot of these residency programs are three years. If somebody from Utah may come out to Boston to do their residency with no plan of staying in Boston, but the idea of buying a home is just so alluring and you know the marketplace might be down just a little bit still, but in Boston to buy a house, it’s really expensive real estate out there. In order to break even on that, you need to be here for a number of years. Before people do that, we just want them to look at, “Hey, this is what you’re actually going to need to put in here, look at your decisions before you do, so you don’t get caught in an area where in three years, you want to move back to wherever you’re from and you’re now saddled with, “Okay. How do I get this house off my hands?” And also understand before you rent, if you’re renting instead of buying, what are the costs there? Are you going to rent in downtown Boston, pay $3,000 a month for a place that really shouldn’t cost that much and is also going to put you deep in the hole where you could have been contributing to your retirement and these other things.

Then, the final thing, I think is career decisions for these individuals, especially with these loan repayment programs out there. It’s amazing how many people are aware of cost of living differences, so Salt Lake compared to D.C., there’s probably a difference, San Francisco compared to Sacramento or further north in California, there’s probably a difference, but public service or nonprofit versus for-profit, people don’t factor that in right now, even though they know these programs are out there.

So, we’ve found for many individuals the salary equivalent adjustment due to Public Service Loan Forgiveness can be in the tens of thousands, even hundreds of thousands of dollars on an annualized basis pretax. Just at least given that color there before you go work for this big group or you become a star surgeon at this for-profit group, recognize that there is some additional salary equivalent benefit to these other programs out there. If you don’t utilize them, just rule out the opportunity cost.

Again, the need to inform and educate individuals, I think has always been a core part of what we do. There’s always asymmetric information out there that’s almost always not in favor of the consumer. And so, just providing color on these different decision points to at least allow better-informed decisions I think can go a long way. It definitely goes a long way, even if you don’t have anything to offer as a product or a solution. It still goes to a long way to engender trust I think with our clients and so, and I think it also makes that much easier for them to make a decision and not have any remorse going back.

Josh Mettle: I love it, and where I think people make mistakes with purchases is when it gets emotional, you know that feeling of going into a car dealership and sitting in a new car and you feel that emotional high.

John Collins: I had it this weekend.

Josh Mettle: Yeah right, and you know if you were with your wife, then it’s over.

John Collins: Yeah, it’s worse. Yeah, yeah.

Josh Mettle: But what’s cool about this decision support is that it’s going to force you if you commit to it, to at least take a time out and get out of that really nice leather and walk away from it and kind of think through those implications and what that looks like long term. Then, if you come back and say, “You know what, I’m good with that. I’m okay with the long-term effect.” Then I think you’re going to just the fact that you took a timeout and you just let that emotional high kind of dissipate a little bit long enough to think through it, I think you’ll make better decisions, so great. I love the decision support.

John, I want to thank you for your time. You’ve been incredibly generous. You’re very well spoken. You make this kind of complicated overwhelming stuff very easy to digest and to understand. Thanks for your generosity, and I am sure that our listeners are going to want to contact you for information and questions, so how can they do that? How do they best reach you?

John Collins: Yeah, and I appreciate the time and opportunity, but if anyone is interested in what we offer specifically, they can go to gladvisor, that G-L-A-D-V-I-S-O-R, .com. You can go to that on your computer or mobile device. We have a tremendous amount of written and even video content. I think one of the things you had mentioned is you like, through this podcast and through other forms, you want to make sure people have the educational material out there.

We are very much the same, so there’s different video presentations on this new budget proposal, on the tenets of some of these loan repayment programs for graduate professions across the board. Take a look there. If folks are interested in really speaking to somebody, they can actually register for a complimentary consultation and assessment of their options. Anyone of our analysts here in Boston will be able to get in touch with them pretty quickly and make sure that the sacred cows and the other tenets of these old longstanding programs are kind of demystified and hopefully educate any individual out there enough that they can either go and do this on their own or they can work with us, but I think most importantly make sure that you’re educated on these things. Like you said, you can go into it with a full understanding of what you’re getting into and not look back with any buyer’s remorse.

Josh Mettle: Well said. Thank you, buddy. I appreciate you, and we’ll certainly send our young clients that need help along these lines your way. Thanks again for your generosity and for being with us today.

John Collins: Josh, thank you guys and God bless.