Donald Trump Cost My Family $1.1 Million

Welcome to Scholastic Alchemy! I’m James and I write mostly about education. I find it fascinating and at the same time maddening. Scholastic Alchemy is my attempt to make sense of and explain the perpetual oddities around education, as well as to share my thoughts on related topics. On Wednesdays I post a long-ish dive into a topic of my choosing. On Fridays I post some links I’ve encountered that week and some commentary about what I’m sharing. Scholastic Alchemy will remain free for the foreseeable future but if you like my work and want to support me, please consider a paid subscription. If you have objections to Substack as a platform, I maintain a parallel version using BeeHiiv and you can subscribe there.

I’m deep into newborn-induced sleeplessness and it feels far more disruptive to me this time around. My writing schedule is non-existent at the moment and all I feel like doing is ranting. This week’s post is about how changes to PSLF are going to have a direct cost to my wife but also how, if we had somehow known the future, she’d have made choices that would have made us much richer.

The PSLF Deal

Public Service Loan Forgiveness was a program established by Congress in 2007 and signed into law by George W Bush. The idea is that careers that serve the public generally pay less than careers in the private sector. Because public service is important, Congress felt that some work could be done to incentivize young people to go to college and prepare for public service careers. They landed on PSLF. The program would require 1) qualifying, full-time employment at a local, state, or federal government institution or a non-profit; 2) 120 monthly payments on a qualifying payment plan made by the borrower while #1 was true. The PSLF was also purposefully structured to support physicians going into teaching hospitals and especially supportive of primary care specialties which are also the lowest paid.

At the urging of my dad, I convinced Lisa to take that deal. She wanted to work in a primary care specialty, obstetrics and gynecology, and also wanted to work with medical students and residents and do research. These are things you do at a teaching hospital connected with a major medical college, not as a part of private practice so it made sense to participate in PSLF to offset some of the lost potential income. Put another way, Lisa traded a higher income for a chance to practice medicine in a way that gave back to the medical profession and supported America’s medical education and medical research. In return, she made a deal to pay her debts for ten years, after which the remaining debt would be forgiven. It’s kind of a consolation prize for going something good for society.

She began her journey on PSLF in July of 2016. I made sure that we filed two forms every year. The first was the form requesting the Department of Education certify that Lisa’s employer was a qualifying employer. Every year of residency and every year of practice at her current employer (so far) have been marked as certified, qualifying employment. The other form is a income recertification. Because we are on an income-driven repayment plan, we keep our income updated annually to make sure she is paying the correct amount. Lisa’s made every payment since 2016 on time and they’ve all been counted as qualifying payments by the Department of Education and by her loan servicers (servicers changed a few times over the years so we always made sure they had accurate counts on the payments). NOTE: Even though payments were frozen for a large part of 2020-2022, and for SAVE enrollees are only now resuming (not us, we didn’t go on SAVE), we made payments the entire time so that our forgiveness date didn’t get pushed back. That’s right. Lisa paid back her loans even when she didn’t have to.

All of that is now at risk of going away because of the president’s recent executive order. When we recertify Lisa’s employment this year, there’s a strong chance that her employer will no longer be a qualifying employer. In fact, it seems likely that almost no major hospital or medical college will count toward PSLF. The gist of the order is that any organization that acts in a way that is contrary to the president’s ideological agenda, such as supporting LGBTQ patients or conducting medical research about women or minorities or the poor. And, I won’t link it here directly because it would kind of be doxing my wife, but Lisa’s employer has been recognized as an “LGBTQ+ Healthcare Equity Leader” by the Human Rights Campaign Foundation for 12 years in a row. Lisa herself just finished a paper on racial differences in the use of anesthesia during cesarian births. This is the kind of work she signed up to be a part of, to find out whether patients are being treated unfairly. Seems like the hospital and like Lisa won’t be on the right side of dear leader’s PSLF litmus test.

The Numbers

Lisa’s family is not rich. I’m not even sure they were above the median national income for most of her adult life. They could not afford to pay her medical school tuition and she was not offered much financial aid. So, in order to become a doctor, Lisa borrowed $280,000 from the United States of America. That’s her principle. Right now, because of the high interest on the loans, her debt to the United States of America stands just a hair over $300,000. On the standard repayment plan, she would have been paying back more than four thousand dollars a month. That’s over $48,000 a year. As a resident from 2016-2020, Lisa earned about $55,000 a year. Paying back her debt would have cost her about 87% of her annual income so Lisa did what all new doctors with medical school debt do, she went on an income driven repayment plan. This meant that as a resident her payments would be low but once she graduated and became a fully practicing attending physician she would see her monthly payment go up in accordance with her higher income. The down side of an income driven repayment plan was that the payments she made during residency were less than the interest she accrued on the debt. Despite making qualifying payments for four years, Lisa ended up owing more money than when she started making those payments. So there’s the first number to keep in mind: $300,000 of debt.

It’s really important for me to stress here that Lisa didn’t have much of a choice! If she wanted to be a doctor, she had to pay tuition. If she wanted to be a doctor, she had to go through residency. Residency pays poorly! There’s no negotiating or fighting for a higher salary. You get what the system gives. That’s why, despite medicine being a highly paid profession overall, it’s still something of a public service. Doctors choices are heavily circumscribed by the residency and match systems. There’s no way around it. So, while Lisa could have been, I dunno, a butcher or banker or candle stick maker and avoided medical school debt, that just wasn’t in the cards for her. Medicine was her dream.

And, part of that dream was to give back in ways beyond providing good patient care. She wanted to teach future doctors. She wanted to teach medical students. She wanted to do research and work on improving the quality of patient care throughout obstetric/gynecological medicine. Lisa wanted to work for a teaching hospital and a major medical school that was involved in medical research. When she eventually qualified for PSLF, six years after completing residency, she would see that $300k vanish from her debts. That was the exchange for earning less money. How much less? About $190k less per year. In fact, Lisa was recruited for a job that paid $400,000 a year but turned it down. The carrot that helped her make this choice was PSLF debt forgiveness. When she started at her current academic medical center she was making $210k. So, over the course of the next six years, Lisa would have earned an additional $1.14 million dollars ($190,000 x 6 = 1,140,000) if she’d gone straight into the private practice that had recruited her. $1.14 million. That’s your second number.

Obviously, that’s not perfect math because her salary at the academic medical center went up ($270k now!), but then again her earnings at this other job would have grown, too. She also would have paid away a lot of that income as taxes: roughly $80k per year (so ~$480k of the $1.14m) if you take into account federal, state, local taxes and estimate the standard deductions, pre-tax retirement accounts, dependents, etc. The point isn’t to make exact calculation of her incomes under both circumstances. It’s to talk about how Lisa chose to make certain financial tradeoffs in order to do something she felt was more valuable than mere income. PSLF wasn’t supposed to make up the difference, but it was supposed to make the choice to go into medicine as a service a but more palatable when her peers were leaving residency and earning nearly double what she was making.

If we had known then that president Trump was going to do everything in his power to end PSLF and that we would be 9 years into the 10-year process realizing Lisa owed more than she borrowed and that we’d be paying it all back, then we would have made a different choice. Instead of working on postpartum quality, perinatal mental health, racialized anesthesia administration patterns, teaching residents, precepting medical students, sitting on the institution’s IRB, contributing to national committees, and still being a full OB/GYN seeing patients and practicing medicine, Lisa would have been making money. She would have been making an additional $1.14 million dollars instead of giving back. She also would have paid off her debts on a more aggressive repayment plan because she’d have the added income to do so.

Finally, and I won’t spend time fully calculating this what-if, but another thing Lisa would have done with that money is invest some portion of it for retirement, for a down payment on a future home, and for our children’s future college education. If she had invested $1,000 in an ETF that tracked the S&P 500 in August of 2020, then it would be worth about $1,855 today. That’s an 85% rate of return. So, anything Lisa invested from that foregone additional income of the job she was recruited for but refused to take would be worth more today. The annualized return on the S&P since 2020 is about 13% so each paycheck’s investment would have grown over the last five years, too. And I’m not even going to count that! Just wanted to make sure that additional point registered. It’s not just the foregone income, it’s what we could have done with that income over that period of time. It’s about opportunity costs and how PSLF was, at the very least, a small remittance against opportunity costs.

Negative Returns

What’s that all adding up to? Well, Lisa is likely going to pay back her loans in full so that’s a minus $300,000 and she was persuaded by the now-lost PFLS to pursue academic medicine so that’s a loss of $1.14 million in income. That puts the total we’ve lost due to Donald Trump at $1.44 million. We neither get forgiveness nor the higher income. Are these real losses? No, not exactly. It’s more about how we made decisions based on programs our government created that were intended to support well-meaning people to forego some income so that they could work on behalf of the public. It was a deal that she made and she complied with for 9 years. And now the terms of the deal are changing and it’s causing Lisa and I to look back and say, what if she never bothered with all this service stuff? What if she said fuck medical education, fuck future residents, fuck research and quality and all the other jobs she does now. What if she just said, fuck it make money? More than a million bucks. That’s what if.

You can play Lisa and I a very small violin. Her salary, even though small by physician standards, is plenty. We can still make the full payments when we have to switch back to the full repayment plan. We’re not in the same boat as so many others who are going to face financial ruin when they’re switched back to full repayment. My point in writing all this is not to generate sympathy for Lisa or my family. It’s to point out that many people made choices based on a deal proposed by our elected leaders. A win-win whereby talented young people were incentivized to go into lower paying fields that served the public. Now that deal seems to be going away and it’s worth considering what the opportunity cost has been.

Thanks for reading!