If you have subscribed to my newsletter for more than a few months, you know that I have significant interests in physical therapy as well as finance. I have been hoping to come up with an official document for my website that will help those pursuing a career in physical therapy to avoid the financial pitfalls that burden this great profession. I am not a financial aid advisor, and I do not have a degree in finance or accounting. What I do have is 9, going on 10, years of experience and voraciously acquired financial knowledge, the bulk of which I acquired while attending undergrad and PT school. I also have a very strong desire to help others learn the path to financial independence.
I was raised by frugal and prudent parents who instilled in me many of the financial principles I outline in this document, however, I was the first person in my family to graduate from university with a sizeable amount of student loan debt. These were uncharted waters for me and I had to learn to sink or swim on my own. This will likely be the same for many who will read this, and I hope what you read will help you be better prepared to face these challenges. Some may disagree with my advice, and that’s just fine. I welcome the discussion and exploration of more effective solutions. These principles and applications have served me well and I hope to share them with you to get people thinking and searching for their own solutions.
With this being said, I graduated in December 2018 with only $32,000 in student loan debt at the conclusion of PT school by applying many of these principles, and we are on target to be completely debt free by June 2020. I am married with a baby and we are a one income household, so if we can do it, so can you! We determined that the aggressive repayment strategy (making double, triple, or quadruple payments each month) was the best decision for our family; but every situation is different, so please use the info down below to help you discover what is the best path for you. This student loan crisis has affected too many that I know and care about for me to stay silent any longer. If nothing else, this will open your eyes to look deeper into these issues and spark conversations about what we can do better in the future. Enough talk, the time has come, I give you The Physical Therapist Financial Manifesto.
PHYSICAL THERAPIST FINANCIAL MANIFESTO
- Avoid debt in all forms like the plague, live within your means, save the difference.
- Make financial decisions with the long run in mind. Every dollar saved today yields dollars multiplied later.
- Study all you can about money and finance. It will pay you tremendous dividends, pun intended =). There are thousands, of books on money and personal finance, but here some of the bedrocks of my financial library: “The Total Money Makeover” by Dave Ramsey; “The Simple Path to Wealth” by J.L. Collins; “Set for Life” by Scott Trench; “The Millionaire Next Door” by William Stanley and Robert Danko. You could look for these books at your public library. There are also many free resources available on the internet, but I have found that these books/audiobooks were worth the investment to study and pour over again and again.
- Minimize your undergraduate student loan debt as much as possible. Attend community college to obtain as much college credit as possible before beginning at a university. Community colleges are usually significantly cheaper than traditional university. Attend a public or state school in the state that you are a resident, not a private school or a school where you will be an out-of-state resident. Attending a public university in the state that you are a resident will minimize potential undergraduate student loans. There are always exceptions to this, but in general, public is usually cheaper than private. The average undergraduate student graduates with with an average of $37,000 in student loan debt from a traditional 4 year university.
- Within reason, complete your undergraduate degree as quickly as possible. Be like a burger, In n’ Out.
- Work while obtaining your undergraduate degree. Yes, that also means even during the school year. It’s good for you on so many levels, and above all will help you avoid having to take out loans for cost of living. For major cash opportunities look into a summer sales job. (A friend of mine made $85,000 selling alarms in Alaska in one summer! No guarantees obviously, but the opportunities are out there!) If you have a large financial windfall, it would be wise to save that money to help pay for PT school tuition.
- Live at home with your family while you attend school if you can, or live close to campus with some roommates to decrease housing costs. You do not need to live in the newest apartments filled to brim with amenities in order to get a degree. You need a safe place to sleep and store you food/belongings. Housing is the number one expense in most budgets, so minimize this expense as much as you can.
- Live close enough to campus so that you can walk or ride a bike/scooter to and from classes if you can! Avoid having to pay for a car as long as you possible. If you have to have a car, buy an inexpensive, reliable, used fuel efficient car in cash. Yes they do exist, I have purchased 3 (sold 1) of these types of vehicles, in cash, and I’m 27 years old. =) If you are smart, you will never purchase a brand new car. A car that is 3-5 years old with low mileage is a much better deal than something straight off the lot. You can buy new car smell air fresheners to soften the blow, and once you buy that car, maintain it well and drive it until the wheels fall off. Lather, rinse, repeat.
- Track all of your spending for 1 week and see how you spend your money. Then do it for a month and see if your money goes where you think it does. You may be surprised at what you find. Use this data to create a budget for yourself so you can use your money to responsibly maximize your happiness now and in the future.
- Save up a small emergency fund, enough to cover at least one to three months’ worth of expenses. This will help cover unexpected expenses like car repairs, medical expenses, etc. I would recommend setting up a savings account with an online bank such as, Ally Bank, they offer significantly higher interest rates (2.1% on 7/31/19) to help your money work for you.
- Not all PT schools are expensive. Pro tip: many of the least expensive PT programs are located in the Midwest and the South, which also happen to be places that are typically low cost of living…go figure. Again attending public/state schools in the state that you are a resident may likely be much cheaper than attending a private school. This will not always be the case, but is a good rule of thumb. Look in every nook and cranny to find the least expensive PT school in the country that has a high first time pass rate on the licensure examination (NPTE). PT school exists for one purpose, to allow you to pass the licensure examination. So go wherever you have the highest chances of passing the test at the lowest cost.
- Where you attend PT school makes no difference on your starting salary. Attend an accredited PT school with the lowest cost of tuition, that is of a shorter duration, and is located in a low cost of living city. This way you can begin earning money sooner to pay down your loans and your loans will not accrue as much interest. In an article written by the American Physical Therapy Association in 2017 it states that most PT school graduates, on average, graduate with $83,000 in student loan debt from PT school alone, $96,000 including credit card and other loans such as a car loan. Another article written by Travis Hornsby from a student loan debt advisement company, Student Loan Planner, states that he feels that this is a poor estimate of total PT student loan debt with the actual number hovering around $130,000-$150,000 if you include student loan debt from undergrad and all the interest that your unsubsidized graduate school loans accrue while you are in school. If you attend a private university for PT school your totals are looking to be at or north of $200,000! That is insane! That’s a mortgage with a daily compounding interest rate!
- Attend a PT program that allows you to establish in-state-residency after attending for a year if you are accepted as an out-of-state resident. The rules and regulations regarding this vary widely from school to school, and from state to state. You likely will not qualify if your parents still claim you on as a dependent on their tax return; however, if you are not claimed as a dependent by your parents, or you are married, you should absolutely speak to your programs financial aid department about establishing in state residency as soon as you are offered a position at that school. Tens of thousands of dollars can be saved by looking into establishing in-state-residency.
- If you are married, having your spouse work to at least cover living expenses will save you tens of thousands of dollars Any extra money should go towards paying down your loans while you are in school. If you make payments on loans within 120 days of their disbursement do no accrue any interest and are basically considered a refund to the Feds!
- Work part time to cover living expenses while in PT school. Become a personal trainer, become a tutor, look into childcare or teaching English online with VIPkid, become a teaching assistant while at PT school. If you are an athletic trainer you can always work sporting events on the weekends as well. This is a very short list, but there are so many part time jobs available if you keep your eyes open and are resourceful. I would stay away from doing Lyft or Uber.
- Coming straight out of school, the average PT with a DPT degree is making $60,000-$70,000 per year with some states being as low as $50,000. That will vary depending on the state and the setting that you practice in, but as a rule of thumb that is a solid ballpark estimate for most states. Please click here for research regarding PT salary by state if you would like more information.
- When you accept your first job, choose to work and live in a state that has higher pay and lower cost of living (i.e. Nevada). This way you can maximize your income without having to fork it all over to taxes and cost of living. This extra money can be used to pay down your debt aggressively like my wife and I have.
- Many new grads resort to working part time for home health agencies, skilled nursing facilities, or hospitals on the weekends to help pay down debt aggressively. I commend these people for their efforts, however just know that you likely will suffer from burn out if you have to keep this up for several years. Another work option that is lucrative and offers you some opportunities is to work as a travel physical therapist. These individuals contract to fill in at different clinics for varying amounts of time and are paid very well for their services compared to normal 9 to 5 salaried workers.
- Do you due diligence and calculate different scenarios regarding repayment plans: Aggressive Repayment (follow this link to calculate aggressive repayment) vs 10 year standard vs Income Based Repayment (IBR) vs Pay As You Earn (PAYE) vs Revised Pay As You Earn (REPAYE) to explore. Check out Student Loan Planner’s Repayment Calculator to crunch your own numbers! Here are additional videos that provide effective explanations of these plans as well as “student loan forgiveness” programs.
- Student loan forgiveness programs can be amazing and often sound too good to be true, because they usually are! Really do your homework before you sign up for these programs so that you know exactly what you are getting in to. Federal student loan forgiveness does provide a substantial subsidy to education, but there are still financial repercussions attached to it in the form of additional income tax after the period of forgiveness is reached (See above videos for more details). Employers who offer student loan payment assistance can provide incredible opportunities, but are only as good as the employer who signs the agreement. A friend of mine took her first job out of PT school due to being enticed to a position promising student loan repayment assistance. The company filed for bankruptcy and as a result my friend received no repayment assistance whatsoever. There are many student loan forgiveness programs that exist and that you should look to take advantage of them if it makes sense for you financially and professionally. Government policies regarding future student loan forgiveness programs are uncertain and regularly are being revised for reform. I would not leave my financial future in the hands of uncertain policies. Do all that you can to control your own financial destiny and not depend solely on others to help you carve a path to getting control of your finances.
- Every 28 seconds someone defaults on their student loans, meaning that a borrower cannot keep make their loan payments. Default rates are around 20-25% for the over 44 million student loan borrowers in the United States. Student loans are the only form of debt that cannot be discharged by filing bankruptcy…yep ‘til repayment or death do you part. Those who default on their loans are subject to substantial late and collection fees which can be as high as 25% of the outstanding loan balance…yikes. Those who default can also have their wages “garnished” from each and every pay check. Yep, the government get dibs on your money before you do, oh and you of course you are still paying taxes…yikes. You also can have your social security wages withheld from you to pay back you loans if you are in default and reach social security age without the loan being repaid…and yikes. All in all it is bad, bad, bad. Not to mention it will wreck your credit score for the rest of your life. So please don’t default, talk to your student loan advisor well before you enter this delinquent status! Above all, be smart and minimize your loans anywhere you can. Take full responsibility for all financial agreements you enter into. Check out the video below for more details regarding repercussions for defaulting on student loans.
- Remember that emergency fund we talked about earlier? I would recommend you expand your savings to include 3-6 months of your monthly expenses including your minimum student loan payments. Once you knock out student loans I would further expand your emergency fund to 6-12 months’ worth of expenses. This will give you peace of mind that you have money tucked away and readily available to help out in case of an emergency.
- If it makes the most financial sense for you to pay down your student loan debt aggressively, pay off your loans in full before adding significantly to retirement funds. The exception I would give would be to take advantage of any employer sponsored 401K match program. Contribute at least up to the match to take advantage of this free money. Also take advantage of any employer sponsored Health Saving Accounts (HSAs) as these have significant tax and potential investment advantages. Those who determine alternative repayment programs are better options for them should budget appropriate to take advantage of these retirement programs when they begin working.
- Tax advantaged retirement vehicles you should be aware of and look into: 401K, Health Savings Account (HSA), Roth IRAs (Individual Retirement Account), and real estate. For all investments accounts (401K, HSA, IRA) look to invest in Index funds like the S&P 500 Index or Total Stock Market Index. The only investment company I trust my money with is Vanguard; I highly recommend them as their founder John Bogle was the creator of index funds. Now you may be asking, what is an index fund? Index funds contain multiple stocks or bonds from a given market. So the Total Stock Market Index Fund has stocks from every company in the U.S. economy. Over the last century, the U.S. stock market index has averaged a return of 10%. Investing index funds is the simplest and most efficient way to invest your money for the average investor. Your money is much more passively managed (.14-.5% expense ratios) than it would be in a mutual fund that is overseen by a fund manager (1.5-3% expense ratios). These actively managed funds carry heavy expense ratios that can bleed you for tens, if not hundreds of thousands of dollars and have been found to rarely outperform index funds. If you have more questions about index funds, please go learn from the master himself J.L. Collins who gave me my first lessons in index funds. Remember, I’m not a financial planner or accountant, so consult a certified financial planner or fiduciary financial advisor if you have further or more specific questions about where to park your money. I’m just sharing what I have learned from all the very smart people who are financial planners, fiduciaries, and Wall Street hawks that have shared their knowledge with others.
- This document will be regularly updated to reflect current changes and views about navigating the financial woes of becoming a physical therapist. As I always say, please do your own research to see what will work best for you. Use this information as a starting point to help springboard you to study these issues out and confidently make your own decisions. One of my favorite sayings is, “Advice is free, and that’s what it’s worth.” Be inquisitive as well as skeptical and search these topics out for yourself. I am always skeptical when people tell me where to park my money, but if I do my own research and what they say makes solid financial sense I will usually be willing to learn more from them.
Last updated July 31st, 2019