Travel Therapy: Paying Off Student Debt… or Not?

Written by Jared Casazza, PT, DPT

How and Why I Got Started with Travel Therapy

I first decided that travel therapy was the direction I wanted to go just after finishing my first year of physical therapy school. I had spent a significant amount of time researching average PT salaries for my hometown and wasn’t happy with the numbers I was finding, especially when factoring in the amount of debt I knew I would have after graduating.

With this low salary to high student debt dilemma in the forefront of my mind, I was looking for a solution to help bridge the gap. Coincidentally, soon after I started looking into ways to increase my salary, in my first clinical after that first year of school I met a travel DPT who told me how much he was making and I was shocked! What really stuck out to me was that he was working the same job as all the other permanent PTs at the facility, but making almost twice as much as they were! Before that, I didn’t how anything about travel PT, but after meeting him and learning more, I was certain that would be the path I would take, at least for a few years to pay off my debt.

What I Chose to Do About My Student Loans

Fast forward two years and I was just finishing up my last clinical and two weeks away from graduation. I had already made contact with several travel therapy recruiters and was looking for Travel PT jobs to start as soon as possible after graduation. In the meantime, I decided that I should use a conservative estimate of what my travel income would likely be to start planning out a budget and a goal to completely repay my student loans.

I determined that in just two years of traveling and living frugally, I could easily repay my full $100,000 in debt!

Compare that to the standard 10 year repayment, or perhaps around 5 years working hard to pay it down aggressively while working a permanent job! My plan was that after that two years of paying off my loans aggressively while traveling, I would divert all the money that had previously been going toward my loans into investing in retirement accounts and brokerage accounts for the future.

But wait. That’s not the end of the story.

I started to wonder what I would be passing up in investment returns if I paid off my student debt quickly instead of putting that money into investment accounts right away. I figured out that for my scenario, it actually wouldn’t make sense for me to aggressively pay off my debt when instead I could invest the money and yield a higher average return. So instead, I decided to utilize the tax benefits of being a traveler to enroll in an income-driven repayment plan, while choosing to invest the majority of my savings early in my career rather than pay down all my debt early. I eventually wrote several blog posts about this decision and all the factors I took into account to come to that conclusion (check them out here, here, here and here!).

Whether or not to pay off your student loans quickly, invest, or do a combination of the two is a very individual decision and one that you should spend some time considering. However, one thing is for certain, working as a travel therapist can set you up to have a lot more financial choices and opportunities compared to working a permanent position.

I’m going to highlight below the benefits that travelers have when it comes to student debt!

Higher Income

This one is a no-brainer and something that every traveler, or prospective traveler, is aware of. Travel therapists make more money than permanent therapists, and in some cases the difference can be huge. Making more money makes it much easier to pay down large amounts of student debt, which is one major reason people decide to pursue travel therapy in the first place.

There are undoubtedly some “cons” that go along with the financial “pros” (check out the top 5 pros and cons of travel therapy here) of being a travel therapist, and everyone’s situation is different, but overall it’s a good situation for most therapists. For travelers who are dead-set on getting rid of their student debt as quickly as possible by making big payments each month, travel therapy is hard to beat!

Tax Advantages

The tax advantages that come with taking travel assignments outside the area of your tax home are a big reason for the increased pay that travelers receive. Getting tax free stipends for meals, housing, and incidentals is what ultimately leads to the much higher net pay that travelers enjoy… provided that they are eligible. The tax free stipends combined with a slightly lower taxable hourly pay rate means that less money goes to federal, state, and FICA taxes. This is especially the case when considering federal taxes which are marginal in nature, meaning that having the lower taxable pay makes a big difference in the total effective tax rate paid.

Income Driven Repayment Plans

As I mentioned above for my own situation, a big advantage for travelers as far as student loans go is the increased likelihood of eligibility for income driven repayment (IDR) plans, and more specifically, REPAYE. Since the income driven repayment plans are based on adjusted gross income (AGI), this will benefit travelers because AGI is lower due to the lower taxable income mentioned above. Therefore, most travelers will have a very low monthly student loan payment on an IDR, sometimes even $0/month depending on how many weeks per year the traveler works. The reason that REPAYE is particularly advantageous in this scenario is due to the fact that under this plan, half of the accumulated interest (due to the monthly payment not covering the interest accruing each month) is subsidized. For someone with a $0/month payment, this means that their effective interest rate is cut in half while on the REPAYE plan! This is something that simply wouldn’t be an option for almost all permanent full time employees due to having a higher taxable income, with a subsequent higher income driven monthly payment, which negates most of the benefit of having the accumulated interest subsidized under REPAYE. As a traveler, having your interest rate significantly reduced in this manner can easily tilt the decision to pay down debt or invest in favor of investing and keeping the debt. This was a big factor in my decision to keep my student loan debt and invest all of my savings instead.

If you’re someone that is ultra conservative with your finances, is very debt adverse, or doesn’t trust yourself to actually invest the money that would have been used to pay down your debt, then this is probably not the best choice for you. On the other hand, if you’re a natural saver, like me, and want to optimize your money, then this is an option that shouldn’t be overlooked while traveling.

Conclusion

There are a few financial advantages that travel therapists have over permanent full time employees when it comes to repaying student debt. Of most importance to everyone is making a significantly higher after-tax income each year due to the tax advantages of traveling. Additionally, there is also a big opportunity to be had in the form of income driven repayment plans, especially REPAYE, which offer a lower monthly payment for those travelers that can trust themselves to invest their extra income instead of paying down their student debt quickly.

Whether you plan to pay your student debt off as quickly as possible or plan to pay the minimum and eventually shoot for loan forgiveness while investing heavily for your future, travel therapy is a great way to reach your goal!

What is your plan for your student loans? Are you planning to pay them off as quickly as possible or invest your extra money instead? Let us know in the comments below! If you’re interested in getting started with travel therapy and would like assistance then reach out to us and we’d be happy to help!

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