Don’t pay off your student loans early [PODCAST]

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“In 2010, a landmark study from Princeton was published “proving” that money just doesn’t buy happiness. Study participants were asked to compare their emotional well-being from yesterday to today, and it appeared that making more than $75,000 a year didn’t lead to concurrent increases in well-being. Since then, Americans have been flooded with the psychological opium of mindfulness, yoga, and leaning out, urging contentment instead with the status quo. In this column, I’d like to humbly suggest some rather radical concepts: Perhaps paying off your student loans early isn’t in your best interests, and neither is dumping all your disposable income into multiple 4xx(x) tax-deferred vehicles. This article is all about using the physician’s higher-than-average income to buy something that truly leads to happiness: early financial independence.”

Khaled A. Dajani is a pediatric anesthesiologist.

He shares his story and discusses his KevinMD article, “Don’t pay off your student loans early.”

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Hosted by Kevin Pho, MD, The Podcast by KevinMD shares the stories of the many who intersect with our health care system but are rarely heard from.

Transcript

Kevin Pho: Hi, and welcome to the show, where we share the stories of the many who intersect with our health care system but are rarely heard from. My name is Kevin Pho, founder and editor of KevinMD. Today on the show, we have Khaled Dajani. He is a pediatric anesthesiologist, and he wrote the KevinMD article “Don’t pay off your student loans early.” Welcome to the show.

Khaled A. Dajani: Thank you for having me, Kevin. I really appreciate it.

Kevin Pho: So we’ll get into your article in a little bit, but first off, can you share your story and your journey to where you are today?

Khaled A. Dajani: Sure. There are so many ways, at this point in my life, I’m 41 years old, to talk about my journey, so you’ll forgive me for rambling a bit. But I suppose I was born and raised here in the U.S., in Minnesota, which is why I haven’t lived in a cold-weather climate in 9 years. In Arabic culture, being a doctor or lawyer is highly prized. From an early age, I was interested in many things, but my dad’s a doctor, my aunts are doctors, and there are just doctors all around. I certainly enjoyed it growing up, in school and in undergrad, and so I pursued a career in medicine, and I was lucky to get in.

I considered many different specialties. I started off wanting to do family practice like my dad, but about 2 days in clinic dissuaded me from that. It just wasn’t for me, although it’s certainly an incredible service that primary care physicians provide. My first love was orthopedics, and I was just about to start that process of applying, and then I ran into anesthesia, and I just love being on the other side of the drape. So I ended up taking a year off and doing research at Mayo Clinic to sort of investigate whether I really wanted to switch careers, and I did.

While I was at the medical center doing my primary anesthesia residency, I’ve always loved kids, and I fell in love with pediatric anesthesia. So I ended up becoming a pediatric anesthesiologist, and that’s what I do now, full-time clinical, plus, obviously, lots of pajama time. Obviously, I like to write, and I’m so appreciative and shocked that I had an opportunity to be on KevinMD, because obviously I’ve read the articles and been around it for years. So thank you for that.

Kevin Pho: So let’s talk about that article that you wrote on KevinMD. It’s titled “Don’t pay off your student loans early.” Now, for those who didn’t get a chance to read your article, can you just walk my audience through it and share the story of why you decided to write it?

Khaled A. Dajani: Sure. I think we’re all, to varying degrees, observers of human nature, and I think as we all grow, we become more insightful into ourselves, what we want, and the world around us. I think that’s just the process of growing up. As I just went about my workday in New Orleans, at my first job at the Harvard of the South, Ochsner Medical Center in New Orleans, I noticed that my older colleagues in their 50s, 60s, and 70s were just miserable, griping every day about call. They just did not look happy.

I really started looking into what I wanted for my future. Did I just want to sort of blindly follow the academic path, publish as much as I can, and grind it out until I’m 65 or 70? Or was there more to life than just working in a hospital? Plus, the longer I was in practice, the more I realized, and there are tons of articles on KevinMD and many other platforms about this, how the physician’s voice, physician-led care, and the direction of health care are being betrayed by profit motive and incentive.

So I started reading about financial independence, real estate, and things like that, just online. Then I was chatting with one of my office mates, who was in my office for 6 years, about that, and he said, “Oh, I know somebody in real estate,” blah, blah, blah. Next thing you know, I’m chatting with that person. Next thing you know, I’m diving into real financial independence via real estate, as full force as I did getting into med school and training.

The more I do this, the more I realize that the usual mantra, pay your loans off early, grind away money into your 401(k), 457, and 403(b), and work toward that 65, was really a disservice to physicians and physicians’ financial independence. So I put together the article based on my own personal experiences in real estate and investing, with the hopes of being another voice, because obviously there are big, big physician-written platforms about using real estate and other investing ways toward greater financial independence for physicians.

I just wanted to add my voice to that, and I thought that the title “Don’t pay your student loans off early” was a great catchphrase, or catch title, because that’s the tenet that’s just sort of driven into you: Just grind it out, pay off your loans early. I don’t know if that’s such a great idea, you know? So that’s how I ended up writing the article, piecing it together.

Kevin Pho: You mentioned when you were in New Orleans that you saw your colleagues looking miserable and grimacing about how much call they have to take. I often hear that financial independence is the way out of burnout. Why is that?

Khaled A. Dajani: 100 percent, Kevin. I just very briefly teased into that aspect of real estate leading to financial independence, and physician financial independence, in my article, but I didn’t elaborate too, too much on it. I think one of the principal reasons for burnout is a loss of control: a loss of control in terms of how patients should be taken care of, a loss of control over your own schedule, your work-life balance, and the inability to say no.

When you come to work and you don’t need your job, you can go back to your roots. Why did you go into medicine? Taking care of patients and feeling good about that. Everything else you can ignore. If you think that your administrators, or your chairman or chairwoman, don’t know your personal finances, they do. They know the ones who have bought a $2 million house and need that week-to-week or month-to-month paycheck. They know the people that they can’t screw with, because ultimately, they can just walk away. They tend not to mess with those people, and you tend to be able to say no to administrators, no to extra workload, no to extra call. So it gives you the freedom to practice the way you want, the hours that you want.

Kevin Pho: So you said that administrators know about your lifestyle and how much you spend on your house and car. Is that really true?

Khaled A. Dajani: The wily and clever administrators, to a greater or lesser degree, know the degree of golden handcuffs that each individual physician in their practice has bought into. I do. My dad shared that with me years and years ago, and I’ve noticed it to be true. I’ve noticed, in New York City, where I trained, and in Houston, that the staff I knew who were financially independent, A, tended to be the happiest, B, tended to say whatever they wanted, and C, didn’t get fired. They tended to stick around because the administrators knew they were untouchable.

And vice versa. I know colleagues who bought planes and boats, have multiple homes, and are just drowning in debt, and they’re so unhappy because they know they have no options. The administrators beat down on them more and ask more of them because they know that they have few options. They need to be in that city. They have no other job options. They need that week-to-week paycheck.

Kevin Pho: So the thrust of your article was “Don’t pay off your student loans early.” What should physicians do instead?

Khaled A. Dajani: Like the article said, they should do a very careful analysis, a very thoughtful analysis, as to what their student loan interest rates are, how much in student loans they have, and what that extra money could be doing for them that would be more financially positive for them. If you have student loans that are at 10 percent and they’re all private, then maybe you should pay off your student loans early, because it’s pretty tough to gain a 10, 15, or 20 percent return, whether you’re doing real estate or stock investing or syndication or whatever.

But if my interest rates are at 3-something percent, I ignore them, essentially. I pay the monthly amount that I’m required to pay, and it barely touches me because it’s all consolidated and it’s a low amount. I don’t try to dump a bunch of extra money in to try to get rid of that debt. I use that money to get a greater return. For me, it’s a combination of, obviously, maximizing my 401(k), but I really don’t put anything into other deferred IRA vehicles, because I don’t think that. Part of my article is: What else could you be doing with that money that does more work for you? For me, it’s real estate investing, and some stocks and options work on the side.

Kevin Pho: When you say real estate investing, there are so many different ways that physicians can invest in real estate. There’s, of course, direct ownership, there are syndications, there’s crowdfunding, and the list goes on. Now, when you say real estate investing, what exactly do you mean by that?

Khaled A. Dajani: I personally am a strong advocate of direct investing. The reason is that syndications, crowdfunding, et cetera, are really mostly designed, A, to make a lot of money for the syndicators, and B, to give you a sort of decent return on your money. With most syndications or crowdfunded real estate sites, the syndicators and the founders make money off of fees, et cetera, and liquidity events. You make your 8, 10, 12 percent, which is very good, but again, you’re really just back into another way of having a long-term, diversified, decent-earning portfolio of investments for the long haul.

But you don’t own it. You don’t control when the liquidity event happens, and a liquidity event means when they decide to sell off those interests. You don’t get any fees or kickback. So you’re missing out on a lot of the benefits of owning real estate yourself, which is cash flow right away. With some syndications in real estate, you can do some tax deductions and depreciation, but you get more when you own the properties yourself. And there’s appreciation of that property over a long period of time. So I personally like control of my own portfolio, because there are so many more things that I can do with that, and the returns are potentially so much greater than just being a totally passive investor in syndications or crowdfunding or whatever.

Kevin Pho: So give us a sense of the average return for direct ownership of real estate versus, say, the 10 percent, or the 5 to 10 percent, you get in the stock market.

Khaled A. Dajani: Well, I’ll give you, obviously, the disclaimer at the bottom of every investing thing, which is that past returns are not indicative of future possible returns. But for example, one of my earliest investments was just a simple duplex in New Orleans. I bought it for 180. It’s a duplex, so there are two sides to it. It’s a 3-1, if I remember correctly, in New Orleans, and I put about 20,000 into it to fix it up, and obviously there are property management fees, et cetera, et cetera. So beyond the cash flows that come every month from it, the property value is now $400,000, and I bought it in ’17. So if you do the math, the return is over 100 percent, essentially, or approximately, overall, and you divide that over several years, it’s 20, 30 percent a year.

Now, obviously, the real estate market is going to have ups and downs, but essentially, those ups and downs are not relevant to you as a direct investor, unless you’re trying to sell or flip the property, which is a completely different style of real estate investing, which you also can do very well in. But as physicians, active real estate investing is impossible. If you have a full-time job, you have to have a partner that can oversee the projects and stuff. So I have a property management company that manages all of my units, and it doesn’t matter to me whether the market is going up, down, or sideways, because I’m in it for the long haul.

I try never to sell my properties unless they’re very bad decisions that I made, which there are a few of, but most of them are not, because I’ve learned those lessons early on. They just sit there, and the tenants pay off my mortgage. The property, over the long term, appreciates, if you pick right in terms of location and you do a good job taking care of your tenants and maintaining the property. People are always going to need places to live. So you’re pretty shielded from the market in that respect.

Kevin Pho: Those physicians with significant student loans tend to be early in their careers. They’ve spent most of their time pretty much in residency and fellowship, just learning the ropes of medicine. Where can they go to learn about real estate, and how can they find the time to do that?

Khaled A. Dajani: One of the questions that you sent me, about things to think about, is: What do I wish I would have known now? Obviously, there are so many things in my life I wish I would have known. But if we just focus on investing in real estate, I would have started investing, or learning about it, even if I had no money, way early on. So I think that message should go to med students and such, but some people say, “Oh, it’s impractical to go to med school and also read about other things.” So I’m going to even skip that. I’m going to talk about the early-career physicians who just graduated.

The reality is, you have a lot more free time than you think. Now I have to be extremely careful with my time because I have two young children, a wife, and a full-time job. I try to do some research. I’m involved in academics and administration, and I do real estate. So yeah, when I’m on the toilet, I’m catching up on things. But early on, if you’re single, or you’re married and you have no kids, and you just graduated and you started your job, let’s be honest, you have a lot of free time, unless you happen to take a job that’s 100 hours a week. There are tons of hours that you kill watching Netflix, sports, etc.

So there’s time. I never really buy that excuse, because I lived it, and I had plenty of time when I was an early-career physician. So time-wise, there’s plenty of time when you graduate and start that first job, unless you happen to put yourself in a situation where you’re taking a job where you’re working a million hours a week, which is not a great idea, but that’s another conversation.

Nowadays, with the internet, it’s so easy. White Coat Investor, the WCI network, is a tremendous resource. It’s almost overwhelming. Passive Income MD is actually an anesthesiologist who has succeeded in the path that I’m taking, to varying degrees. Physician on FIRE is another good site. BiggerPockets.com, or the BiggerPockets network, is everything real estate. They have a huge following, but it’s also a bit overwhelming. So there are tons of resources.

Honestly, though, the best thing is to find someone and use them as a mentor, you know? If somebody wanted to become a huge blogger online and be well respected, then they would reach out to you, Kevin, and email you and be like, “Hey, I would love it if you would.” You might say, “I have no time,” but you might refer them to somebody else. It just shocks me how few people actually reach out. Find somebody who is where you want to be, and talk to them.

Kevin Pho: Two of those people that you mentioned, Peter Kim over at Passive Income MD, and Physician on FIRE, are also anesthesiologists. You’re an anesthesiologist. What is it about the field that links anesthesiology to financial independence?

Khaled A. Dajani: That’s a great question. I don’t know the answer to that. I really don’t. The perception in anesthesiology is that you’re sitting around the OR surfing the web, the patient’s on cruise control, or your CRNAs or residents are doing the work and you’re in your office. The reality, unfortunately, is much different, and we don’t need to go into that too much.

I really don’t know. I think, in general, people are down on this generation of physicians and people: “Oh, millennials,” blah, blah. I think the reality is they’re seeing that the old model of “Be loyal to a company, and they’ll take care of you” is dead. Not just dead, it’s rigor mortis. I mean, PE buyouts, physician burnout. So I think it’s not our generation. Kevin, I don’t know how old you are. I’m 41, so it’s not our generation. It’s the next generation that has seen that the old ways are dead and that there are other ways of doing it. So I think it’s just physicians in general, more and more, coming out and being like, “I love medicine, but I don’t want to be a widget that the 23-year-old MBA is telling what to do.”

But as far as why anesthesia, I have no idea. That’s a great question. I don’t know. I would love to hear from some of my anesthesiologist colleagues on those sites what their thoughts are. When you’re an orthopedic surgeon or an allergist or whatever, and my sister’s a dermatologist, the private practice, own-your-own-business model, those fields, those specialties lend themselves very well to that. It’s not easy, but it’s a very straightforward path to say, “Forget the hospital. I’m going to go out and open my own practice,” blah, blah.

In anesthesia, that’s very difficult, unless you’re a pain physician. Many of my residents and fellows went out to pick pain specifically because they wanted to be their own bosses in their own clinics. If you pick pediatric anesthesia, for example, I can’t just go and start a pediatric anesthesiology office. So I think anesthesiologists tend to have to think outside the box, because within their own specialty, it’s very difficult to become a business owner.

Kevin Pho: We’re talking to Khaled Dajani. He is a pediatric anesthesiologist, and he wrote the KevinMD article “Don’t pay off your student loans early.” Khaled, what are some of the take-home messages that you want to leave with the KevinMD audience?

Khaled A. Dajani: Thanks for that opportunity. I think, number one, and this is from peer to peer, I’m certainly not omniscient or omnipotent or whatever, but just looking around, I see so many people who are doing what they think they’re supposed to be doing, or doing what other people are doing. I don’t know what the road to happiness is, but I can tell you that is definitely the road to dissatisfaction and burnout.

I think the whole crux of the article, the underlying theme of the article, and of your website and other people’s, is: Think. Really sit down, turn off the Netflix, turn off Fox Sports, and sit down and think about what you really want. If you want to live on a boat and sail the Mediterranean, then that should be your goal: How can I move my family onto a boat, get a boat, and just sail the Mediterranean? Focus on what you want to do in your life, and how the higher income of a physician can bring you to that happiness. How can you squeeze the most happiness you can out of being a physician, and how can you use that higher W-2 income as a physician to get you to your goals and ignore everything else? That would be number one.

Number two: In order to succeed in that path, you have to ignore what everyone else is saying. I have enormous respect for you, Kevin. I have enormous respect for people like Steve Jobs and Bill Gates and Jeff Bezos, these people, and Elon Musk. They literally had nothing but naysayers around them, and you have to ignore all of that. Nobody knows better. If you want X, then ignore anyone who tells you that you shouldn’t want X, or that you can’t do X, because you’re going to get a constant stream of that, and nobody knows any better.

In fact, Jeff Bezos tweeted a picture from, I think, 1999 or 2000, from Business Insider, BusinessWeek, showing his caricature picture and saying how, basically, this idiot was like, “Oh, Jeff Bezos is going nowhere. Nobody needs a middleman. The future is business-to-business direct.” Obviously, that guy was featured on the Business Insider cover, and he was dead wrong. So those would be my two messages.

Kevin Pho: Khaled, thank you so much for sharing your time and insight, and thanks again for being on the show.

Khaled A. Dajani: Thank you for having me, Kevin. It’s a pleasure.

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