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The Dark Side of Student Loans
Issue #528, June 25, 2018

The Cost of Out-sourcing Convenience
Issue #527, June 18, 2018

Social Security: 66 or 70?
Issue #526, June 11, 2018

Student Loans: There’s (Unfortunately) a Lot More!
Issue #525, June 04, 2018

Co-signing a Note
Issue #524A, May 31, 2018

The Knight Frank Luxury Index and Collectables
Issue #524, May 28, 2018

The Importance of Diversification: The Myth of Diversification
Issue #523, May 21, 2018

How to Save Thousands on Your Food Bill
Issue #522, May 14, 2018

MoviePass and Other Things
Issue #521A, May 10, 2018

Degree Inflation, Long Training Periods, and “Certification”  Part III
Issue #521, May 07, 2018

Degree Inflation, Long Training Periods, and Certification” Part II of III
Issue #520, April 30, 2018

Follow-up on Several Things
Issue #519A, April 25, 2018

Degree Inflation, Long Training Periods, and “Certification”: Part I of II
Issue #519, April 23, 2018

The Kids Birthday Party Hustle
Issue #518A, April 18, 2018

A Pension Question: Part II of II
Issue #518, April 16, 2018

A Physician is an Executive
Issue #517A, April 11, 2018

A Pension Question: Part I of II
Issue #517, April 09, 2018

Is the Correction Over?
Issue #516A, April 05, 2018

Used Car Dealers, Student Loans, the Chinese, and Uncle George’s Rule
Issue #516, April 02, 2018

Starter Homes
Issue #515, March 26, 2018

Redecorating: Beware!
Issue #514, March 19, 2018

NASDAQ Closes at Record High
Issue #513, March 12, 2018

A 40% Chance
Issue #512, March 05, 2018

Several Things
Issue #511, February 27, 2018

Human Capital, Education and Wealth
Issue #510, February 19, 2018

Another Stock Market Update
Issue #509A, February 18, 2018

Some Thoughts on Savings
Issue #509, February 12, 2018

A Stock Market Upfate
Issue #508S, February 10, 2018

Who Can You Trust? Part II of II
Issue #508, February 05, 2018

The Christmas Decoration Pre-worn Jeans Hustle
Issue #Interim Bulletin #507A, February 03, 2018

2018 Outlook for Financial Markets
Issue #507, January 29, 2018

Who Can You Trust? Part I of II
Issue #506, January 22, 2018

Life Insurance Settlements
Issue #505, January 15, 2018

Commodities and Buying the Breakout
Issue #504, January 08, 2018

Buffett Wins His Bet
Issue #503A, January 04, 2018

Practice Real Estate and Free Agency
Issue #503, January 01, 2018

Outlook for 2018: Part III: Stocks and Bonds
Issue #502, December 25, 2017

My Outlook for 2018: Part Ii: Precious Metals
Issue #501A, December 21, 2017

Outlook for 2018: Hard Assets: Part I of III
Issue #501, December 18, 2017

More Thoughts on Bitcoin
Issue #500A, December 14, 2017

Fees and Good Relations with Bankers
Issue #500, December 11, 2017

Salvator Mundi
Issue #499A, December 07, 2017

Should You Rent or Own a Home?
Issue #499, December 04, 2017

A Gift Subscription
Issue #Interim Bulletin #498A, December 02, 2017

Stocks vs Real Estate: Asset Allocation: Part II of II
Issue #498, November 27, 2017

When Good Enough is Fine
Issue #497A, November 22, 2017

Stocks vs Real Estate: Asset Allocation. Part I of II
Issue #497, November 20, 2017

The Saudi Arrests and the Perils of Foreign Investing
Issue #496, November 13, 2017

Gambling and Las Vegas
Issue #495, November 06, 2017

Some Tips on Auto Insurance
Issue #494, October 31, 2017

Bitcoin and the Digital (Crypto) Currencies
Issue #493, October 23, 2017

The Coming Bear Market: Part II How to Prepare
Issue #492, October 16, 2017

Some Observations on Cemeteries
Issue #Interim Bulletin #491A, October 12, 2017

The Coming Bear Market: Part I: The Myth of Buy and Hold Forever
Issue #491, October 09, 2017

The Market makes New Highs
Issue #490, October 02, 2017

The Importance of a New High
Issue #489, September 25, 2017

A Little Insurance: Wealth, War and Wisdom
Issue #488, September 18, 2017

Some Observations
Issue #487, September 11, 2017

How to be Successful in Your Career
Issue #486A, September 07, 2017

How NOT to Buy a Home
Issue #486, September 04, 2017

This Week in the Market
Issue #485, August 28, 2017

Is the “Trump Bump” Running Out of Gas?
Issue #484, August 21, 2017

Gold is on the Move
Issue #483, August 14, 2017

The Importance of Estimation
Issue #482, August 07, 2017

Buying Art and Collecting: Part II of II
Issue #481, July 31, 2017

Buying Art and Collecting in General, Part I of II
Issue #480, July 24, 2017

Physicians need to be More Forceful: Follow-up
Issue #479, July 17, 2017

Physicians need to be More Forceful
Issue #478, July 10, 2017

Your First “Real” Investment
Issue #477, July 03, 2017

Leasing a Watch: Don’t
Issue #476, June 26, 2017

The Importance of Your Children having a Job
Issue #475, June 16, 2017

The Problem with Medical Student Debt is—the Med Schools
Issue #474, June 12, 2017

Critters and Varmints in your Home and Yard
Issue #473A, June 07, 2017

Leveraged ETFs
Issue #472, May 29, 2017

Leasing a Vehicle: Don’t!
Issue #471, May 22, 2017

Issue #470, May 15, 2017

More on Buying Jewelry
Issue #469, May 08, 2017

Buying Jewelry: Gold, Diamonds and Pearls
Issue #468, April 30, 2017

Thomas Sowell: Part III of III
Issue #467, April 24, 2017

Thomas Sowell: Pat II of III
Issue #466, April 17, 2017

Live Close to Where You Work
Issue #465, April 10, 2017

Medtronic in Hospital Management
Issue #Interim Bulletin #464A, April 07, 2017

Thomas Sowell: Part I of II
Issue #464, April 03, 2017

A Political Contribution a an Investment: Part II of II
Issue #463, March 27, 2017

A Political Contribution as an Investment: Part I of II
Issue #462, March 20, 2017

Buffett Selling Vacation Home
Issue #461, March 13, 2017

Advanced Placement (AP) ourses
Issue #460, March 06, 2017

The Importance of a Credit History
Issue #459A, March 02, 2017

A Credit Card Scam
Issue #459, February 27, 2017

The Electronic Health Reord
Issue #458, February 20, 2017

Issue #457, February 13, 2017

Platinum and Palladium
Issue #456, February 06, 2017

Economic Outlook for 2017: Part II of II
Issue #455A, February 02, 2017

Economic Outlook for 2017: Part I of II
Issue #455, January 30, 2017

A Story From Vegas
Issue #454A, January 25, 2017

Land Donation Deals and the IRS
Issue #454, January 23, 2017

The Theory of Gambler’s Ruin
Issue #453, January 16, 2017

Student Loans: But Wait, There’s More!
Issue #452, January 13, 2017

A Second Home
Issue #Interim Bulletin #451A, January 04, 2017

The Consumer Confidence Index
Issue #451, January 02, 2017


By Robert M. Doroghazi, M.D., F.A.C.C.

Student Loans: But Wait, There’s More!

Issue #452, January 13, 2017

    I love the 30 second infomercials. You think the basic product seems reasonably priced at $29.95, but you actually receive 5 to 10 more things along with it. Now you’re really happy. You think the commercial is about to end when they say “But wait, there’s more! If you call within the next 10 minutes, you also receive these 3 dozen widgets which sell for $9.99 each. A $390 value, and all yours for the one low price of $29.95. This offer is not found in stores. Call now, operators are standing by”.
    I have probably written more on student loans than any other subject. I had a Commentary in the January, 2016 issue of The American Journal of Medicine on “Negative Secular Trends in Medicine: Student Debt”. (Your hospital or med school librarian should be able to retrieve the article for you. If not, I can send you a reprint).
    Now, just when you thought you’ve heard it all about student loans, I say “But wait. There’s more”.
    1) Student loans in the US now total about $1.3T, and are rising at about $100B per year. Student loans now total more than auto loans or credit card debt.
    2) As noted in a recent newsletter, the government has withheld more than $1B in Social Security payments from people behind on their student loans. These are mostly people on SS Disability.
    Americans age 50 and older owe about $205B in federal guaranteed student loans. Even more important and startling (scary, depressing, or whatever adjective you prefer) is that about 1 in 3 were in default (How about pathetic: 1/3 are dead beats).
    3) Student loans have traditionally had such a high default rate that many years ago Congress made it nearly impossible to discharge a student loan in bankruptcy. Within the last year, however, bankruptcy courts have accepted new, novel arguments that take advantage of the vague wording of the definition of a loan for “educational benefit”. Ex: a judge accepted the argument that a loan taken to study for the bar examination is a type of consumer debt, not a student loan. Note that this point so far applies only to private student loans, not to those insured by the federal government.
    4) Student loan forgiveness, also called income-driven repayment programs. Borrower’s monthly payments are capped at 10% of their discretionary income—defined as adjusted gross income minus 150% of the poverty level—and then forgive any balance after 10, 20 or 25 years, depending on several variables (just having a student loan for longer than 10 years makes no sense. The interest is crushing, and you have this gun to your head that you must send your master a check every month).
    RMD comment: this will be a disaster!
    A) Up to $150B could be forgiven over the next 10 years. So who does the forgiving? Because these are federally-insured loans, that’s you and me.
    B) Loans are forgiven based on private sector vs. public sector employment. Ex: a nurse working at a University, County or non-profit hospital can receive far more forgiveness than one working in a physician’s office or a for-profit hospital.
    C) Those with graduate degrees usually have the most debt. Ex: the average MD graduates with about $178K of debt. Those with graduate degrees, such as MD, DDS, JD and MBA are also the highest wage earners. The ones who make the most will realize the greatest amount of forgiveness. This is a spectacular example of the unintended consequences of government intervention. A program established to help the little guy ends up helping the big boys the most.
    D) Because these loans are guaranteed by the government, they have become politicized. I believe one of the biggest reasons the Socialist Bernie Sanders was so popular with the young crowd is that he wanted to make education free, an entitlement. A person will get a lot of votes if they push to forgive student loans.
    E) I believe the greatest problem is moral hazard. As signified by the astronomical default rate, people somehow have come to think that student loans are different than other loans. Well, in my opinion at least, they aren’t. You were lent money in good faith, it needs to be paid back. Everything the government is doing encourages this “don’t have to pay your bills” mindset, because it makes people dependent on the government. The people who paid off their debt have every right to be upset with the slouch next door who pays less, or not at all. The result is that many will say “why should I pay if they don’t pay”? 
    My advice if you have student loans: although it is clear I really dislike where this whole question is headed, and hope they do away with loan forgiveness and income-driven repayment, you must do what is best for you. As the old Hungarian saying goes “When somebody wants to give you something, take it”.   
    The rest of the saying is “When they want to hit you, run”. I know it in English, Hungarian, French, German and Swiss”.
    On Thursday, the NASDAQ broke to a new high. This is bullish.
    Netflix (NFLX) had a double top in July and December, 2015. It then backed off, touched the old high again 2 months ago, and this week broke to a new high. This is bullish: NFLX was in a base or consolidation period for a year and a half, and now goes to a new high. Now it needs to follow through on the breakout.

    My Uncle Dave Nagy passed away at age 90 on New Year’s Eve. My mother’s father John Kish (Kiss in Hungarian: “ss” is pronounced like “sh”) passed away in January, 1925, when mom was 5. Grandma Nagy was forced to put her into an orphanage for about 4 months while she got her life together. Gma Nagy remarried later that year, and Uncle Dave was born in 1926. He enlisted in the Navy at age 17 in 1943. He then spent 30+ years in the Reserves, where he made the rank of Full (Bird) Colonel. He told me that when he retired he was the highest ranking man in the Reserves with only a high school education.
    Our WW II vets are dying at the rate of 10,000 per day.
    Considering points and rebounds, who was the greatest NBA player? There are about 2 points for every 1 rebound, making rebounds more difficult to acquire. Thus I have provided a statistic where rebounds are multiplied by 1.5.
      Player           Year         Points   Rebounds   Rebounds x 1.5     Total (x1.5)
    Elgin Baylor   1960-61       34.8         19.8             29.7           54.6 (64.2)
                    1961-62       38.3         18.6             27.9           56.9 (66.2)
                    1962-63       34.0         14.3             21.4           48.3 (54.4)
    Bob Pettit       1960-61       27.9         20.3             31.4           48.2 (59.3)
                    1961-62       31.1         18.7             27.5           49.8 (58.6)
    Elvin Hayes     1968-69       28.4       17.1             25.6           45.5 (54.0)
                    1969-70       27.5         16.9             25.5           44.4 (53.0)
    Moses Malone 1989-90       31.0         11.1           11.1           41.1 (48.6)
    KA Jabbar       1970-71       31.7         16.0             24.0           48.7 (55.7)
                    1971-72       34.8         16.6             24.9           51.4 (59.7)
                    1972-73       30.2         16.1             24.2           48.3 (54.4)
    O. Robertson   1961-62       30.8         12.5             18.7           43.3 (49.5)
    Note that Robertson averaged a “Triple double: 10 points, 10 rebounds, and 10 assists,
    for his first 5 seasons in the NBA.
    Michael Jordan 1986-87       37.1         5.2             7.8           42.3 (44.9)
    Bob McAdoo   1974-75       34.5         14.5             21.8           49.0 (56.3)
    Kobe Bryant     2005-06       35.4         5.3             8.0           40.7 (43.4)
    Bill Russell     1959-60       18.2         24.0             36.0           42.2 (54.2)
    Julius Erving     1971-72       27.3       15.7             23.6           43.0 (50.9)
    Larry Bird       1984-85       28.7       10.5             15.8           39.2 (44.5)
    Now let’s look at Wilt Chamberlain
                      1959-60       37.6       27.0             40.5           64.6 (78.1)
                      1960-61       38.4       27.2             40.8           65.6 (79.2)
                      1961-62       50.4       25.7             38.5           76.1 (88.9)
                      1962-63       44.8       24.3             36.5           69.1 (81.3)
                      1963-64       36.9       22.3             33.5           59.2 (70.4)
                      1964-65       34.7       22.9             34.4           57.6 (69.1)
                      !965-66       33.5       24.6             36.8           58.1 (70.3)
    In 1960, many of the NFL running backs were under 200 lbs., and the lineman were 230-250 lbs. Say Wilt played tight end: 270 lbs., the strongest guy on the field. If you’re anywhere within the 10 yd. line, just run Wilt into the end zone and throw the ball 11 ft. in the air. Or blocking extra points. Or on long field goals, he could stand at the goal post and knock away anything up to 12 ft. in the air.
    I believe that if Wilt were white, he would be considered the greatest US professional athlete of the 20th century, right up there with Babe Ruth.                                       

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