In partnership with Generational Financial – Nolan Pendleton, CFP, MBA and Ben Yin, MBA
Similar to the health and societal effects of the current pandemic, COVID-19 likely will continue to impact your finances for years. Whether you are an independent contractor physician or an employed clinician, keep these tips in mind as you navigate these turbulent times.
PPP Loan Forgiveness Updates (for IC Physicians)
For those who qualified for and obtained a Paycheck Protection Program (PPP) loan – this is great news! With the passing of the Paycheck Protection Program Flexibility Act of 2020 on June 5, 2020, several restrictions have eased:
The period in which the PPP funds must be spent increased from eight weeks to 24 weeks.
The percentage of PPP funds required to be utilized for payroll decreased from 75% to 60%. The remaining 40% can be used for qualifying expenses including rent, mortgage interest and utilities.
For those funds not forgiven, the payback period increased from two years to five years (at 1% interest).
Student Loan Relief Under the CARES Act
In March 2020, President Trump signed the Coronavirus Aid, Relief and Economic Security (CARES) Act into law which included temporary relief for qualifying federal student loan borrowers, among other relief programs.[1]
According to the Federal Trade Commission, qualifying federal student loans were automatically deemed as “administrative forbearance” by the Department of Education.[2] This means through September 30, 2020, no payments have to be made. If you choose to kept paying on qualifying student loans through the forbearance period, the interest rate is 0% which in return may help eliminate debt faster. Here are a few more student loan relief facts to note:
- Qualifying student loan payments automatically withdrawn from your bank account after March 13, 2020 might qualify for refund under administrative forbearance. Learn more here.
- Federal student loans in default are not accruing interest and the Department of Education is not making collection calls or sending billing statements and letters until September 30, 2020.
- To confirm if your student loans are federal loans, call the Federal Student Aid Information Center (FSAIC) at 1-800-433-3243. Also, you can view the complete list of Federal Loan servicers here.
Currently, the interest rates on student loans are at historic lows, so now is a great time to consider refinancing. Even if you recently refinanced, take time to review what options are available as there should not be any closing costs or prepayment penalties. Additionally, while there is often a substantial discount in the interest rate charged for a short-term loan versus a long-term loan (i.e. five year versus 20-year), the difference between the two rates is also at historically-low levels. Because of the very low “spread,” it may make sense to go with a slightly longer payback .
Lastly, Great Lakes, one of the largest student loan servicers, committed a coding error in May 2020 which impacted an estimated 4.8 million borrowers.[3] The coding error reported incorrect information to the credit reporting agencies, causing suspended payments to reflect as “deferred” rather than “on time.” This could negatively impact your credit score. If you have a loan serviced by Great Lakes, be sure to check your account and contact Great Lakes to see if you were impacted. You can check your credit score by contacting the credit reporting agencies directly.
Your IRA Under the CARES Act
- Required Minimum Distributions (RMDs) are not required for 2020.
- Early withdrawals before age 59 (1/2 of up to $100,000) are not subject to the standard 10% penalty.
- Withdrawals of up to $100,000 this year can be reported as income spread out over three years. You can also choose to repay these funds within three years of the withdrawal.
Stock Market Volatility
While the stock market constantly moves up and down, COVID-19 has significantly amplified those moves. For some context, per the Wall Street Journal, the S&P 500:
- Started 2020 at 3,244
- Peaked on February 19 at 3,393
- Bottomed on March 23 at 2,191 (a 35% decrease from February highs)
- As of June 19, it is back to 3,097 (a 41% increase from February lows)
While the S&P has moved more than 35% in each direction this year, as of June 19, 2020, it sits down only 4.5% from where it started at the beginning of the year.
How does one navigate these constantly changing waters? With a well thought out financial plan.
If you had acted on financial pundits’ commentary, you may have been in and out of this market numerous times. Having a written plan to reference allows you to act within context and not “react” to the markets. As the great philosopher Michael Gerard Tyson (aka Iron Mike) once said, “Everyone has a plan until they get punched in the mouth.” If the last four months isn’t a punch in the mouth, we don’t know what is. If you’ve never taken the time to develop a plan, NOW is the time.
What are you waiting for…a global pandemic?
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Nolan and Ben can be contacted at Nolan@GenerationMD.com | Ben@GenerationMD.com or via their website, GenerationMD.com, where they help physicians plan for today, plan for tomorrow, plan for GENERATIONS. Visit for great resources, including a free copy of the book, Myth of the Rich Doctor.
ApolloMD Disclaimer: The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of making individual financial decisions. Individuals are encouraged to seek advice from their own financial advisor, CPA and/or legal counsel.
[1] Congress.gov; H.R.748 – CARES Act
[2] Federal Trade Commission Consumer Information
[3] Politico; Emergency relief screw-up hits 5 million student loan borrowers
