NerdWallet's Smart Money Podcast - SpaceX’s Biggest IPO in History and Funding a $117K Life Change

Episode Date: June 11, 2026

Learn what the AI IPO boom could do to reshape your index funds and how to fund years of grad school with no income. With SpaceX set to debut as the biggest IPO in history — and OpenAI and Anthropic filing to follow — what does this landmark moment in the markets actually mean for your portfolio? Senior news editor Rick VanderKnyff and investing writer Sam Taub join hosts Sean Pyles, CFP®, and Elizabeth Ayoola to break down the latest AI IPO news. They discuss what makes SpaceX's offering the largest public offering ever, what the historical track record of IPOs says about buying in at the opening price, and a quietly consequential change to index fund inclusion rules that could leave passive investors with a far bigger stake in mega-cap AI companies than they anticipated. They also explain what direct indexing is and how it could give you more control over what lands in your portfolio. How do you manage your money when you're leaving a career to spend up to three years in graduate school with no income? Sean and Elizabeth tackle a listener's detailed, multi-part question about funding a $117,000 occupational therapy doctorate. They explore whether a Roth IRA conversion could be a smart way to capitalize on low-tax years before graduation, what the new federal student loan borrowing caps under the One Big Beautiful Bill Act mean for graduate students' funding plans, how deferring an existing $17,000 in student debt could play out over time, and what to weigh before earning money on the side while in school. Subscribe to our podcast’s free email newsletter for bonus content and more from our hosts at https://smartmoney-nerdwallet.beehiiv.com/  Sign up for MoneyNerd, NerdWallet's free weekly newsletter, for tips on watching the 2026 World Cup for free: https://moneynerd-nerdwallet.beehiiv.com/  What Is the New Repayment Assistance Plan (RAP) for Student Loans? https://www.nerdwallet.com/student-loans/learn/what-is-the-new-repayment-assistance-plan-rap-for-student-loans  Direct Indexing: What It Is, How It Works https://www.nerdwallet.com/investing/learn/direct-indexing  Want us to review your budget? Fill out this form — completely anonymously if you want — and we might feature your budget in a future segment! https://docs.google.com/forms/d/e/1FAIpQLScK53yAufsc4v5UpghhVfxtk2MoyooHzlSIRBnRxUPl3hKBig/viewform?usp=header To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, Elizabeth, we have to talk about the newsletter. What newsletter are you talking about, Sean? You mean the new, free, smart money email newsletter? Yes, and I have to say it is so good. It really is. It has clips, episode roundups, and behind the scenes takes from me, you, and our producer, the stuff that makes you feel like you're really part of the show. And listeners, for the record, you actually are part of the show.

I'm going to be sharing personal stuff. You know, I love sharing my business, and I'm going to be sharing parenting tips from an eight-year-old. a single mom perspective. And I am loading up the newsletter with my favorite gardening tips and lots of cute photos from my garden, including my pets, just napping among my flower beds. It's kind of adorable. And the best part is that this newsletter is totally free. So head to nerdwollet.com slash podcast to sign up. For the record, that's nerdwollet.com slash podcast. Come hang out with us. What do SpaceX, OpenAI, and Anthropic all have in common? They're all looking to debut on the stock market this year. With SpaceX planning to go public on Friday, we're exploring what IPOs are

and how upcoming ones from tech giants could affect your portfolio. Welcome to Nerd Wallet's Smart Money podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. And I'm Elizabeth Ayola. Later this episode will be answering a question about managing money through a career transition. If that's you who's going to transition, listen up. But first, our weekly Money News Roundup, where we break down the latest in the world of finance to help you be smarter with your money. Our news colleague Rick Vander Canife is here, stepping in again while Anna is on sabbatical. Anna, if you can hear us, we miss you, but we like you too, Rick.

Hey, Rick. Hey, Elizabeth and Sean, it's good to be here, as always. We're here to talk about IPOs, but I want to give a quick nod to another big story this week, the World Cup, that giant global soccer tournament that's happening in cities across Mexico, Canada and the United States through mid-July. Tickets are astronomically expensive. So we've rounded up some of the best ways to watch for free in Friday's edition of Money Nerd, Nerd Wallet's weekly newsletter. Okay, we'll include a link in the show notes to how to sign up to that newsletter for folks who aren't already signed up.

Well, as a Nigerian and a Brit, I am sorry to admit that I do not care about soccer. But I will be attending the World Cup. And for context, Nigerians and British people are crazy about soccer. They are to soccer, what Americans are to football. you know. Well, you'd call it football, right? It depends on who I'm talking to. Yes. Wait, so how are you attending the World Cup if you don't care about it? Because tickets, like Rick said, are so expensive.

Because my wonderful boyfriend wants to attend the World Cup, and I'm just his plus one. So I'm just tagging along. And don't ask me what game we're going to see because I have no clue. I'm just there for the vibes. What I want to know is how much he paid for these tickets. Oh, that's another conversation. He was not happy because he paid a pretty hefty price. and then at the last minute, they changed everyone's seats. So he didn't even get the seats that he thought he was going to, but that's a different conversation.

So he's not a happy camper. They're having games here in Seattle. I was kind of planning to go, and I'm not paying $1,000 to see a soccer game. So no thanks. Especially if you can watch it for free. Exactly. So anyway, back to Wall Street. We're about to witness one of the biggest IPO seasons in memories.

Starting it off is Elon Musk's SpaceX, which he combined with his AI Venture XAI earlier this year. That combined company is planning to go public this Friday, June 12th, and it looks like they will be followed into the stock market by two other big names in artificial intelligence. And Wall Street, as you might guess, is buzzing. To talk about what this all might mean to the average investor, I've invited investing writer Sam Taub. Thanks for being here, Sam.

Hey, Rick. Always happy to be on. Let's start with a quick basic definition. What is an IPO? An initial public offering is a company's debut on the stock exchange. It's when a company goes public and starts trading and people can buy their shares. Awesome. So I mentioned SpaceX. What other companies are expected to go public in the near future? So SpaceX is going public on Friday. And then OpenAI and Anthropic have both filed for initial public offering sometime later this year. We don't have as much detail about the exact date yet, but that's coming up.

Got it. So SpaceX, I know it's a big IPO, but just, just a, just a little. How big? Is it the biggest ever? It is the biggest ever. It is on track to dethrone Saudi Ramco, which was the previous title holder of biggest IPO ever. That one raised about $25 billion at a valuation of $1.7 trillion back in 2019. SpaceX is looking to raise $75 billion at a value of $1.75 trillion. So this is going to be the biggest ever. Wow.

I have a question about OpenAI and Anthropic. I know they're both moving toward IPOs. Aren't they nonprofits? One of them was a nonprofit. It's a good question because this is a confusing thing that involves a lot of legal gymnastics. OpenAI used to be a non-profit, but last year it restructured itself

into a public benefit corporation, or PBC, which is a type of for-profit company whose bylaws prioritize some kind of social responsibility alongside profit. In OpenAI's case, the development of a benevolent artificial general intelligence is that social responsibility aspect. And this transition involved some really complicated maneuvering because, as you can imagine, you're not really allowed to found a nonprofit and then just say, never mind, we want to make money and be a regular company. So what Open AI did is they basically created this new for-profit entity and then gave the old OpenAI.

AI nonprofit a big equity share of it. Anthropic has had a somewhat simpler journey to IPO because it's been a public benefit corporation since its inception. One thing that I think is worth kind of mentioning here is that the legal definition of a PBC is pretty squishy. You have to have some kind of social responsibility goal in your corporate charter, and that creates a fiduciary duty for executives to work toward that goal, and a lot of states have some requirement that PBCs have to file reports regularly that show how they're working toward their

social responsibility goal. But there aren't really laws that regulate, like, whether or not a particular goal is legitimate or what exactly it means to prioritize that goal over profits. So, from a regulatory perspective, you can make an argument that this PBC structure is not that different from a regular corporation, but it has better PR. Got it. Okay. So it sounds like several big opportunities to invest in the AI boom are coming up. How does an average investor get in on this? So the OpenAI and Anthropic IPOs are in the very early planning stages and they haven't been scheduled yet. So we don't have much detail on how or if retail investors can participate in those.

We know more about the SpaceX IPO because it's coming up in just a few days. IPO shares will be available directly to retail investors on June 12th at the opening price of $135 per share via five specific brokerages, Schwab, Fidelity, E-Trade, SoFi, and Robin Hood. Okay, so maybe this is a bigger question. Should an ordinary investor get in on this? That's a very good and complicated question. IPOs are heavily marketed and the ones we're talking about have a ton of of word of mouth hype. And that does often generate a short-term pop in the first day or two of trading, which gives traders an opportunity, in theory, to make a quick buck by snapping

up shares and then quickly reselling them to another very excited trader. But for exactly this reason, IPOs generally aren't such a good way to buy into a stock at a low price. A few years ago, NASDAQ did an analysis of IPOs between 2010 and 2020 and found that two-thirds of them were underperforming the market at their third year of trading, because that initial pop kind of raises the bar as to how well the stock has to do to have long-term positive returns. Having said all that, if you have a long time horizon, like you're really planning to hold the stock for at least five years and you really believe in the company's long-term potential, the fact that IPOs give you a not-so-great entry price may not matter.

Every stock has to start somewhere, and if you're willing to hold long enough to let the stock recover from a potential post-IPO sell-off, it may not bother you to buy at a relative high. So how likely is it that the average investor will end up owning some of these companies, whether they want to or not? I'm glad you asked, because we very well might end up heavily invested in SpaceX

and later OpenAI and Anthropic, if those IPOs go through, whether or not we want to be. And to explain why, I'm first going to go on a quick tangent here. We talk a lot at NerdWallet about passive investing or index fund investing. Financial advisors have long recommended buying and holding index funds rather than actively trading stocks, because historically, that approach tends to outperform stock pickers. And in theory, it provides really thorough diversification very easily. But recently, this has been called into question because big tech names like NVIDI,

Nvidia, nowadays make up an enormous share of the indexes by weight. We wrote about this last year in the nerdy investor newsletter. Now, these big IPOs could make the concentration problem even worse because in the last few weeks, some of the companies that manage the indexes, specifically NASDAQ and FTSC Russell, have announced that they are changing their rules for index inclusion to make sure that these big IPOs like SpaceX and presumably down the line OpenAI and Anthropic get included right away. Usually there are rules where companies have to trade for a few quarters and maintain a certain level of profitability consistently in order to be included in the indexes.

But FTSC Russell and NASDAQ are basically kind of letting these large IPOs like SpaceX skip the line and presumably they might do the same. for Open AI and Anthropic. S&P Dow Jones, which maintains the S&P 500 and Dow Jones Industrial Average indexes, was going to do this, but then they decided not to at the last minute. So the consequence of this is that investors who are passively holding NASDAQ index funds or Russell 3000 index funds might end up to an oversized allocation to these mega cap tech stocks. S&P 500 and Dow Jones Industrial Average investors are safe for now, as far as we know. Got it. So I know there's some anti-AI sentiment out there as well as worries about a bubble.

How can an average investor avoid adding SpaceX, for instance, to their portfolio, let's say if they have an index fund? So there's a technique called direct indexing, where you basically recreate an index fund by buying fractional shares of all the stocks that make it up in their respective weights. Direct indexing started out as a tax optimization strategy, but another potential application of it is that you could use it to build a portfolio that tracks, say, the NASDAQ, or the Russell 3,000, sans SpaceX, or another big, hypey stock that you want to avoid. My colleague Bella Avila recently updated a really thorough article that explains how direct indexing works and how you could use it to exclude a specific stock from an index investment.

So how much are these companies looking to raise overall? Open AI is looking to raise at least $60 billion at a valuation of more than $850 billion, according to recent reports. We don't know how much Anthropic is looking to raise, but their last round of private fundraising gave them a valuation north of $900 billion. So both of these AI companies, in terms of their total market cap, are getting near the trillion dollar line. Those IPOs aren't expected until later in the year at the earliest, and a lot could change. change between now and then. We'll probably find out more details over the next few months. SpaceX is looking to raise $75 billion in this IPO, which would put its total valuation or its total market cap at about $1.75 trillion. Now, you might think that this valuation reflects

SpaceX's worldwide dominance in the space launch business, but according to their recent prospectus, you would be wrong. As you mentioned at the open, SpaceX is now the parent company of X-A-I, which is Elon Musk's AI company. It developed the Grock chatbot, which is a chat GPT and Claude competitor. And according to SpaceX's most recent S1 filing, the company is actually expecting to make most of its money on AI and software stuff. Investment prospectuses for a company usually lists the company's total addressable market, or TAM, which is the sum of all demand for the products they sell.

Or in other words, it's kind of the maximum theoretical amounts of revenue the company could make. SpaceX's prospectus shows a tam of $28.5 trillion. But only two trillion of that is space stuff like rocket launches or Starlink Internet services. The vast majority of their projected tam, the other $26.5 trillion, is AI and apps. So obviously there's a ton of hype around these stocks. I've seen a big range of Wall Street opinion about the value of these companies. Is there any kind of consensus? I wouldn't say there's a strong consensus.

Last year for a nerdy investor issue, we asked more than a dozen economists if they thought AI was a bubble, and the vast majority of them said that they thought it was. The argument in favor of the bubble theory is almost kind of self-explanatory to most people who are paying attention. There's a lot of utopian rhetoric about what AI is going to do to the economy and our way of life. There's companies that are kind of shoehorning AI into every product, even when it doesn't make a ton of sense. You've got these huge numbers for valuations of AI companies, often in the trillions of dollars, etc. There are some parallels here with like the dot-com boom in the late 1990s. But I do think it's worth mentioning the arguments against the AI bubble theory.

The big publicly traded AI companies that people like to worry about, your Nvidia, your Google, your Microsoft, your meta, and so on, they actually generally don't have such crazy price to earnings ratios. The earnings and revenue from AI stuff is very real, and often it's actually growing faster than the share prices of these companies are. It's not just theoretical hype. But this is not true in every case. example, as of its most recent prospectus, SpaceX actually isn't turning a profit yet. They have a loss per share as of their most recent results. So it varies. There isn't necessarily a consensus on the AI bubble theory. Well, Friday, I think, should be pretty interesting. Thanks for walking us through that, Sam. It definitely will be interesting. And thanks for having me on.

And thank you, Rick. My biggest takeaway is that I may or may not need to look into direct indexing later on today. Up next, we're going to talk about how you can manage your money through a career transition. But before we get into that, a reminder to send us your money question. Maybe you are thinking about how to divvy up your portfolio so that it aligns with your values, or maybe you're thinking about whether you should invest in the next big stock. Whatever your money question is, please leave us a voicemail or text us on the nerd hotline at 901-730-63. That's 901-730. N-E-R-D. You can also email us at podcast at nerdwallot.com

or drop a comment on Spotify or YouTube. We're back in a moment. Stay with us. Today's episode, it's sponsored by Rula. Finding a therapist is hard enough, but finding one who actually takes your insurance? That's where most people find online therapy platforms fall short.

Many don't work with insurance at all, which means you're stuck paying the full cost out of pocket or paying for an expensive monthly subscription. Rula does things differently. They partner with over 100 insurance plans making the average co-pay just $15 per session. That's real therapy from licensed professionals at a price that actually makes sense. Think about it. You use your insurance benefits to maintain your physical health, so why wouldn't you do the same for your mental

health? Rula isn't just affordable. The experience is tailored around you. Other online therapy platforms might match you with the first available provider, whether or not they're the right fit. Rula considers your goals, preferences, and background to provide you with a curated list of licensed in-network therapists who are actually aligned with what you need because they know that finding the right therapist can make all the difference. No wait lists, no frustrating back and forth. Rula makes it easy to find a mental health provider who is accepting new patients and appointments are available as soon as tomorrow. Plus, Rula sticks with you throughout your journey, checking in to make sure your care is helping you move forward. Go to Rula.com slash smart money to get started today. That's R-U-L-A dot com slash smart money for quality therapy that's covered by insurance.

We are back in answering your money questions to help you make smarter financial decisions. This episode's question comes from Jen, who is going through a career transition and has questions about how to budget for it. That's a good question to ask Jen. All right. So Jen's question was pretty long. So we're going to summarize it and we'll get into the nitty gritty as we answer the question. Jen is making a huge leap. She's leaving her career to pursue a doctorate in occupational therapy, which runs about $117,000

and recommend students don't work during the program. She's got a year to save before she starts, $17,000 in existing student debt, a three-month emergency fund, and a lot of questions about how to make it all work. Now, the main things that Jen wants to know are, should she prioritize a high-yield saves account, or use a Roth IRA conversion strategy while her income is low. Question number two, how do student loans actually work for living expenses? Question three, what are other grad students doing to get creative with their income? And then last, she wants to know what happens to her existing loans when she's in school.

Okay, lots and lots of questions. Jen, thank you for all of those details. We love getting super technical, savvy questions like this. But of course, because it was so long, we had to summarize it. So hope you didn't mind that. Elizabeth and I are tackling Jen's multi-part question ourselves. So let's dive in, Elizabeth. Jen is considering doing something that I found pretty savvy with her IRA.

She's thinking about contributing to a traditional IRA now that she's still working. And then when she stops working, she wants to convert those funds into a Roth IRA while her income is low so that she can take advantage of that low tax window. Now, her question is, is that strategy actually worth it? or should she just focus on building up her high-yield savings account? Before we get into whether Jen should do this, let's just set the groundwork a little bit for this and talk about what a Roth conversion is. So for those who may not know, a Roth IRA conversion is when you take money that's in a pre-tax retirement account. This could be a 401k or a traditional IRA in Jen's case, and then you just convert it into a Roth IRA account.

You're basically just transferring money from one type of account to the other, but there are tax implications, and that's really key here. And that's part of why Jen's strategy could be really smart. Exactly. And then for those who are wondering, well, why would I want to do a Roth conversion? There are two main benefits. One, if you are a high earner and you do not qualify for a Roth, that's one way that you can benefit from a Roth account because you can roll funds from a traditional IRA into a Roth IRA.

And also for people like me who would rather not pay many taxes during retirement, a Roth conversion can be helpful because you can save more of your retirement dollars into a Roth and then you get more post-tax dollars, which is to me amazing. Yeah, and here's the key to why Gen strategy could be really smart. So say they are making minimal income next year, their tax rate's going to be much lower. So when they do a conversion from a traditional IRA or a 401k into the Roth, they will pay income tax based on their income bracket for that year. But because their income is going to be much lower next year, they'll actually have a much lower tax rate on whatever they convert. And that's just a really savvy way of timing how to do conversions. Exactly. And my guesses are, Jen, I'm putting this in the universe for you that once you graduate, you're going to be earning some big bucks. So these might be the lowest tax years that you're going to have, I don't know, for your foreseeable work future, hopefully. I would sure hope so if she's taking out $117,000 for a program. I mean, they better be making a lot of money after that. Exactly. Now, I think something that is helpful with Jen Strategy 2 is that there aren't limits on how much you can convert in a rough conversion in a year, right, Sean? Yeah, this is something that a lot of folks may not know because there are limits and how much you can put into an IRA, traditional or Roth, and that limit is 7,500 for those under 50 and 8,000 for those 50 and older in 2026.

But this same limit does not apply to conversions. You can convert really as much as you want, which is pretty phenomenal. Yeah, and yes, it's legal. If you guys are loyal listeners to the show, you may remember an episode where someone was saying their colleagues were doing conversions every single week, right? So, well, every time they got paid, not every week. So you can do it as frequently as you want. And yes, it's legal. All right.

So one more thing as well in case you're out there thinking of doing a Roth conversion and maybe you're close to retirement, you have to do that conversion at least five years before retirement so that you can get those tax benefits. Yeah. And that rule only applies if you are a 59.5 or younger. So another little caveat there, too. So we can move along to Jen's next part of the question. Do we think this is ideal for Jen's situation?

If Jen goes this route, I want them to really make sure they have enough money to cover the tax bill. Yes, it might be pretty low when they do this next year when they're not earning a lot, but play with a tax calculator and or consult a CPA and just have an understanding of how much they might actually be on the hook for because surprise tax bills are never fun and could kind of suck all the joy out of this really clever idea. I'm hoping that Jen wanted to use this strategy to save more money for retirement, but I know some people out there actually do use Roth's savings accounts, which sounds a little bit complicated, but I'm hoping that Jen isn't doing that

and hopes to keep the money inside the Roth because otherwise, the other strategy that she mentioned, bulking up that high-old savings account may be a better route. Yeah, here's the thing with using Roths as a savings account is that you can take out the money you put in, your contributions at any time without penalty. It's a different story for earnings and conversions and whatnot, but I don't really like that idea because, you know,

you're intermingling the purpose of a savings account and a Roth. Savings should be in savings for emergencies and other day-to-day expenses, and your Roth should be, hopefully, just for your retirement savings. Now, if there's a big crisis and you don't have anything in your emergency fund, this can be an okay route to go, but it's just not my favorite overall. Same, same, same. Before we move along, Sean, I want to know if you know what the term for a strategy of capitalizing on different tax rates to reduce the total.

amount of taxes you pay is. Do you know what that term is? This is one of the more jargony terms. It is tax arbitrage. Ding, things. I'm so impressed by you. Always impressed by you. I am a CFP, Elizabeth, of course. Just a little nerdy term there. Okay, well, let's move on to the high-old savings account option because Jen is also thinking about moving all of the funds into an emergency fund instead of bulking up the Roth. So, Elizabeth, give me your thoughts here. Well, so my thoughts are I appreciate the zeal and the savviness. I do think it's a very thoughtful and can be helpful strategy that Jen is trying to do. But there's alarm bells going off in my mind, Sean. Okay. Go on. Thank you. List these alarm bells. Yeah, I want to hear what they sound like.

They sound like that three-month emergency fund is not enough when she might be out of work for like three years. Well, actually, you know, I kind of disagree with you on this point because one thing that we didn't get in the summary is that Jen is living with a partner and the partner owns the house they live in. And if you are in a two income or somewhat more financially resilient household because you have two folks living in it and you're not really paying a lot in rent, three months could be enough. For three years? I mean, possibly, especially if they have the support of their partner. Now, I don't think they're married, but that said, because they have the support of not having to pay rent or paying minimal in housing, I think that they actually might be okay,

given the other financial priorities. And that's kind of the key here, is that Jen has a lot of other demands on their money right now. But our disagreement here points out how it's such a personal decision. Others might be a lot more comfortable with six months, but it can be very time-consuming and expensive to get to that point. Yeah, the way my anxiousness is set up three months, even if living with a partner for three years being potentially out of work would not make me feel settled. And of course, I wish the best for Jen and their partner, but you just never know what happens. Don't want to be too financially dependent on someone. No, yes. I would personally try to buck that up, but you're right. You know, if you have a dependable partner, you're not paying much of the big bills,

then three months might be okay. Might. Yes. So if they don't go this route, what other options does Jen have? Well, Jen could save the money that she's planning to invest and bulk up that emergency savings more close to six months. And the good news is if she's able to do that quickly, because she lives with her partner and doesn't have to pay many bills right now, then she can redirect the rest of those funds towards that retirement savings. So I guess I'm saying Jen could potentially do both. Okay. I mean, I always love making progress on multiple goals simultaneously.

So that actually might be what I would do in this situation. I personally would do that too because I will not lie. As much as I like the idea of having a bigger emergency fund, this tax arbitrage strategy she's doing, Chef's Kiss. Because again, these may be the lowest earning years that she's going to have. And it feels like a crime to miss out on that opportunity. Totally. And just work on that relationship, too,

and make sure everything is stable in that regard so that you don't end up having to move out in the middle of this program. That's right. All right, let's move on to Jen's second question. Jen is not sure how much money she'll be eligible for with the student loans since there have been changes to the graduate plus loans program. And she's starting the program after those loans are phased out. Jen also wants to know what expenses her loan will cover

and how to potentially make extra bucks while studying. My kind of person. I love a side hustle. So let's start by talking through some of these changes that Jen referenced to graduate plus loans. Because some folks might not be aware of this, but the changes are pretty significant. And due to the one big, beautiful Bill Act, graduate plus loans will actually sunset. The program is going to sunset in July 1st of 2026. And borrowing limits for direct plus loans in general are changing.

Most graduate students in these non-professional. programs are called will be capped at $20,500 annually and can only get $100,000 for lifetime federal borrowing, which, as we saw, is less than Jen needs for this program. And that's not including day-to-day expenses. That's just the program tuition itself. That's right. So Jen is at an advantage because she does live with her partner and she doesn't have to pay any big bills right now. But as you said, this might not cover the total amount that she needs to borrow. So this is a genuine concern. Now, whether the program will be fully funded really does depend on how much federal aid she's already used because there's now with the changes of lifetime limit of

$100,000. Since her doctorate program, I think based on what I looked at, will not be considered professional, as the administration says, Jen will be eligible for the lower borrowing limits and may not have enough money. And on top of this, you know, Jen is now thinking that they might have to go into the private loan market. And there was a lot of conversation after this bill and this facet of it was unrolled that actually this might be what the goal was anyway is to push people into the private market. But the private market is more expensive and there are fewer protections. So I would be really wary of this too. If I was in Jen's position, I would do everything I can to minimize the amount of private loans I get. But for a lot of people, it's going to be inevitable.

That's right. And a good place for Jen to start. I can see that you love to do your own research, Jen. We do have an article on the best private student loans that can help with comparison shopping. And we also have one on the best grad school loans that can help you during your decision-making process. And we will link those in the show description. But before you jump to those articles, I did a little bit of digging. And there are some things that you can consider like scholarships and grants. If you haven't already seen it, Jen, I saw the American Occupational Therapy Foundation has scholarships and also National AMB. UCs offer scholarships for doctoral students.

And we know that navigating student loans is really confusing. So if Jen hasn't already, I would implore them to reach out to their program's financial aid office directly and just get a really clear understanding on what the federal borrowing limits will be and how it may apply or not to their doctoral program. And then Jen, if you do end up having to use a private loan, some factors to look out for include fixed versus variable APRs. You want to know how much you're paying over the lifetime of the loan. You want to look at cosigner requirements.

And hey, a co-signer can also, in some instances, bag you better rate. So that's something to look at. You want to look at repayment, flexibility, grace periods, and also the rules around deferment. And Jen was also wondering what they can use the funds for. So these student loans can be used for tuition fees, room and board, tech equipment, transportation, book supplies, and some other personal expenses. Which I think that's what Jen was really curious about is can they maybe buy groceries with these funds? Yeah, groceries. And also they wanted to know this that their car might give out in a couple of years. It's pretty old. So they wanted to know whether it could cover maybe car expenses and also dental work. And I'm going to guess that student loans are not designed to cover dental work or car loans. I personally don't think so. And I don't think Jen was saying she wanted to take out a car loan, but I just wanted to point that out because I wouldn't buy a car with it. And I also probably wouldn't get any dental work personally with my student loans.

So in the lengthy question we got from Jen, they also asked about side hustles and ways to make money while in school. So, Elizabeth, what do you think Jen should look into here? Yeah, and I do remember Jen being concerned that they would have to create a formal business. And I just want to say, Jen, most of the time you do not have to be a formal business to do a side hustle. The most important thing the IRS cares about is those taxes. So you do not necessarily have to incorporate your business, but you do have to report your income most times. You could just be self-employed when I started out as a freelancer. just self-employed and I was reporting my income and paying taxes on whatever amounts that I earned.

And Jen, if you are deciding to go this route, quarterly taxes, we always recommend doing that on this show. And if it exceeds the amount that needs to be reported, which is $400 or more, then you definitely need to let the IRS know that you're making extra money. Yeah. As always, when you have more income streams, you have more problems. But hey, if it lets you afford your life and get into less debt, it could be a really good option for Jen. Yeah, and Jen, something else I want you to think about is beware of any insurances that you might need for this side business, especially because you mentioned when you wrote us having people come into your home. You don't want to face any lawsuits.

You don't want to make yourself liable for anything. And you also don't want any creeps in your house since you may potentially be inviting outside people into your personal home. And think about licenses as well and permits which vary by state. Okay. Well, let's look into the last part of Jen's question, which is about the student loans that they already have, that $17,000 balance. They're wondering how this is going to be handled when they are in school again and taking on more loans. So Elizabeth, is Jen going to have to continue making payments on these other loans while in school? Well, the long answer is no, but maybe Jen might want to. It depends. I know we all hate that answer. If that's the long

answer, I want the even shorter answer because that was pretty short. Oh, my God. So for federal loans, in school deferment is a thing. it's possible as long as you meet two requirements. You have to at least be in a part-time at school somewhere and attending somewhere eligible for federal aid. I think Jen meets those requirements. Now, if you want to go the deferment route, just make sure that your loans are actually deferred. Your school's registrar automatically notifies the national student loan data system, and your servicer usually will pause your bills. However, I always recommend that you manually check your portal once you start classes to ensure that it says deferred, and you know that those

are being paused. Yeah, and deferring can be the best option to have a little bit more room in your budget on a month-to-month basis when you're in a program like this. But there's a catch, and that's that you will be accruing interest on your loan balance during deferral. So that's not as great, but, hey, at least it frees up money to help you address the more immediate needs of just covering your living expenses and getting through your program. We don't know what kind of loan that you have, Jen, but if it is partially subsidized,

then the government will pay the interest while you're in school. So that's something to check out too. It's a very key point, yeah. Now, the thing is, if your loan is unsubsidized, you actually may want to consider paying just the interest while you are in deferral so that your loan balance doesn't accrue. It won't be as big as your regular monthly payment. It might be nice just to make a little bit of progress

or at least prevent your debt from ballooning while you're in this program anyway. Exactly. Now, one other thing Jen can look into is loan consolidation post-graduation. starting July 1st this year, 26, a new repayment plan called the repayment assistance plan, rap, I do like that acronym, is replacing many of the old income-driven repayment plans. And once Jen graduates from her doctorate, she could consider bundling her loans into this plan. But Jen, only do that if it makes financial sense, because the downsize of rap is it could hit restart on your student loan forgiveness. and it could also lead to highly monthly payments. Yeah.

And I want to clarify that this kind of consolidation is very different from consolidating through making a federal loan, a private loan. Some financial people on the internet recommend you do this. And it's a huge mistake in most cases because, again, when you have federal student loans, you just have more protections and payment options

than with private student loans. So please hold on to your federal loans if you have them. If you want to learn more about RAP, We have written all about it on nerd wallet.com, and we will link to it in the episode description. And I think that's a wrap on Jen's question. I like that. I love a corny joke. Elizabeth, any final thoughts you want to leave Jen and our listeners with?

So my final thoughts are if you are going back to school and you are planning to focus fully on your studies and want to know how to budget for it, my first step would be to prioritize that emergency fund, especially if you plan to be out of work for the next year or three, like Jen. Reduce the likelihood of yourself getting into debt by keeping your income and budget low. If you have existing student loans, I would at least pay the interest on those loans if they are unsubsidized. And then I would prioritize retirement maybe last. But also, you have an opportunity to be super savvy with your retirement savings and convert some of your traditional money into Roth, and I think that is just super smart. But again, make sure

you have money to cover any potential tax bill. That's all, folks. It's a wrap. All right. That's a wrap. Remember, folks, we're here to answer your money questions. So send them to us. You can head us up on the nerd hotline by calling us or texting us at 901-730-6373. That's 901-730 Nerd. You can also send us an email to podcast atnervolvellat.com or drop us a comment on Spotify or YouTube. And we love you guys. Please come hang out with us next time. And we're going to be talking about umbrella insurance. Make it rain.

Who's corny joke about that? Make it rain in liability coverage. Follow smart money on your favorite podcast app. Those haven't changed. That may be Spotify, Apple Podcast, and IHeartRadio to automatically download new episodes. And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

This episode was produced by The Dream Team. That includes Tess Vigling, Hillary Georgie, help with editing. Eve Krogman edits our audio and video. And a big thank you to NerdWallet's editors for all their help. And with that said, until next time, turn to the nerds.