[00:00:00] Speaker A: Hello. My name is Brenton Harrison of New Money New Problems and your host for the New Money New Problems podcast. Uh, we are doing another crossover episode this week. You all are aware that I am the host of another podcast which is unaffiliated with my work as a financial advisor. That podcast is Escape student loan debt. And when we have episodes about student loan debt, we typically do crossover episodes where we just release a recording of what we've done on that other platform. This is one of those those weeks, because in our most recent episode on Escape Student Loan Debt, we covered some end of the year tips that you need to take advantage of when it comes to your federal student loans. So what we're going to do is we are going to switch over, play some of those tips so that you can have them before the start of 2024, because we think that would be helpful for you and anyone else you know who is suffering from this disease of federal student loans. So, next voice that you hear will be my voice still. But here are some end of the year tips to help with your federal student loans.
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The biggest one, just in terms of the magnitude of the opportunity, but also the deadline itself, is the expiration of the income driven repayment plan waiver, and, in a back end way, the public Service loan forgiveness waiver on December 31 of this year. I cannot overstate this. This is a hopefully once in a lifetime opportunity. I say hopefully because if it happens again, there's probably been another pandemic. But this is a hopefully once in a lifetime opportunity to allow people who have payments that would have never counted towards student loan forgiveness in the past, loan, uh, types that would have never counted towards forgiveness in the past, whatever the case may be, payment plans, all of those things can be counted towards the 20 or 25 years of forgiveness, or I should say payments that you need to have your loans forgiven under income driven repayment plans. But in order to make sure that you are eligible, you have to have an eligible loan before December 31, 2023. Now, technically, an eligible loan means that you have a direct loan, or you could have what's called an FFEL loan that is owned and managed by the federal government. If you've been listening to this podcast for a long time, you know that it's possible to have a federal student loan that's not actually owned and serviced by the federal government. It's owned by a private entity and guaranteed by the federal government. So that distinction is really important. And when you log into Studentaid. Gov, which regardless of your loan servicer, is the website that we recommend you use to go to for all of your student loan information. When you go to that site, you're going to be able to look at the loan dashboard for your student loans. Matter of fact, if you're following along with us on screen, you'll be able to look at a screenshot of someone's loans breakdown. And when you look at this screenshot, when you see the breakdown of your loans, the easiest way to figure out if your loan is owned and managed by the federal government is to look at the section that says loans serviced by on screen, there's a loan right at the top. This person owes just under $280,000, and it says loans serviced by Department of Education Aidvantage. Now, aid vantage is the private entity that services the loan, and this is the place where this person may log in to make a payment, so on and so forth. But that Department of Ed lets you know who is the actual owner of the loan. And in this case, they have eligible loans under the Department of Education. Now, if this was an FFEL loan, now that we've verified it's with the Department of Education, technically, they would be eligible for the income driven repayment Plan waiver alone. But I would recommend in almost all instances, there are some exceptions, but in almost all instances, I would recommend that if you have an FFEL loan to still, especially if you're in public service, consolidate it into a direct consolidation loan. There are several reasons why we've gone over them ad nauseam in the past, but the big one, I'll say, especially for those who work in public service, is the public Service loan forgiveness waiver technically expired last Halloween, not Halloween 2023. Halloween 2022. But essentially, they're allowing you to follow the rules of the Income driven repayment plan waiver, and on a back end basis, have those rules applied to the Public Service loan forgiveness waiver through the end of the year. The problem with that is the one part of the Public Service Loan forgiveness rules that are not relevant to income driven repayment is the requirement that you have direct loans. If you're having your loans forgiven under public service loan forgiveness, you could do everything right. You could have the right employer, you could have the right loan payment plan. But if for some reason you have an FFEL loan and not a direct loan, you are not meeting the requirement. And if you want to participate in that public service loan forgiveness waiver, where ineligible payments that wouldn't have counted in the past will now count. Where loan types that didn't count in the past will now count. The way that you can make that ineligible loan type still have those credits applied is by consolidating it into a direct loan before the deadline. And if you miss that deadline, you have missed the opportunity for those past credits. The only thing that you would be able to have adjusted is how you receive future credits going M into 2024. So the first thing I want you to do is literally just make sure that you've done everything you need to do, which for most people is nothing. For most people, for income driven repayment, you don't have to do anything because you already have the right type of loan. But if you have the wrong type of loan, you need to be aware that that needs to be corrected by December 31 of this year. Now, you don't have to have this for public service loan forgiveness, necessarily if you already have the right loan type, but I would recommend that if you are pursuing public service loan forgiveness with the right loan type to still go through the process before the end of the year of getting your employment verified by your previous employers or your current employer that were eligible or are eligible for public service loan forgiveness. The reason I say that is we've discussed on the podcast that it's going to be an extended period of time for some people before the Department of Education gets to their account to actually amend and revise the credit that they've received both towards income driven repayment and public service loan forgiveness. But the department has also shared that there are some things that can bump you up the list in terms of the priority with which they look at your account. One of those things is simply being in repayment long enough where you're likely to have them forgiven. So if they're saying you only have to pay for 20 or 25 years and you've already been paying for 27, clearly they're going to look at your loans first because there's a good chance that you're going to have them forgiven. But the second thing that would give you high priority is having an employer verified through the Public Service Loan Forgiveness Database. We will put a link to that public service loan forgiveness help tool, but you're going to need the employment identification number for that employer, which you can find on an old tax return or an old pay stub from that company. Or you can just call them and ask. You're going to need the dates that you worked there, and you're going to need either the address, uh, and contact information for a person who can sign and verify that employment, or you're going to need their email address because using that tool, you can actually get a digital signature from that person. And if you have even one employer verified in that system, it is putting you on the high priority list to have your credits adjusted before people who are either not in repayment long enough or don't have any employers verified in that system. The next end of the year tip is to do some back of the napkin math or get on Studentaid Dot gov and use their loan simulator to do some calculations for what your payments would be under different income driven repayment plans. The reason for the initial recommendation is we have covered that under the Income driven Repayment Plan umbrella. There are several different options. There's income contingent repayment. There's old and new income based repayment. There's the SAvE plan, which is a new plan. And for now, there is the pay as you earn plan or the pay plan. I say for now because starting in July 2024, you will not be allowed to sign up for that pay plan, whether you were eligible or not. Previously, you had to have made your decision to switch to that plan or stay on that plan by July of 2024. Otherwise, it will be phased out completely. And it's important that you do some calculations for what your payment may be under these plans so you can compare the pay plan to what you would have under another plan to decide whether or not pay is right for you before that window closes. And I would say that the more that you owe and the higher your income rises, there is a larger possibility that the pay plan may be the right option for you, whereas the lower your income may be, the less attractive that pay plan may be. And most of that has to do with the gap in monthly payments between the other options at your disposal. For example, if you're following along with us on screen, even if you're not, I'll describe it to you. We're looking at loan calculations for, in the first group, a family of four that has an adjusted gross income of $100,000. So if we do the pay plan, we take their $100,000 adjusted gross income and we're going to subtract 150% of the federal poverty level. That's how much they allow you to take off the table under the pay plan before calculating your discretionary income. That leaves you with a discretionary income of $55,000. And if you're paying 10% of that per year, your monthly payment would be $458. Conversely, let's look at the Save plan. We have the same family of four, same $100,000 adjusted gross income. But now, instead of 150% of the federal poverty level, they get to remove 225% of the federal poverty level. As is the rule under the Save plan, that takes their discretionary income from 55,000 under pay to 32,500 under save, and it takes their monthly payment from 458 under pay to $270 under the, um, Save Plan. So that's a pretty significant difference, almost $200 a month. And even though $100,000 is a lot of income, it's not so much income that an extra $200 a month wouldn't be valuable to this family. Now, here's the thing. If you're earning more, even though it may be the same $200 or $100 difference, the fact of the matter is, there are other things that come into that equation that might eclipse the value of $200. $200 is $200. But the fact of the matter is, if you're earning $300,000, it means a little less to you than if you're earning $100,000. So if we take that same family and bump that adjusted gross income up to 300,000, now, under the pay plan, they're paying $2,125 a month. Tremendous amount of money. Under the Save plan, they're paying $1,937 a month. So it's still almost a $200 gap. But now we're talking about a difference of 1900 a month or 2100 a month. It's going to be a tremendous amount of money in either circumstance. But if these borrowers have graduate school loans under the Save plan, they have to pay for 25 years until those loans are forgiven. Under the pay plan, it's only 20. So if you're paying either $1,900 a month or $2,100 a month towards an ungodly amount of student loans, I would argue that you would probably want to pay, if you're going to pay that much for 20 years, as opposed to 25, even if that meant paying an extra couple of $100. So one of the first reasons I recommend that you go through some student loan calculations and what your payment would be under the different repayment plans is because this pay plan is being phased out. And for high income borrowers with high student loan balances, it may be the right thing for you so that you can save five years on that repayment schedule. After the break, we'll bring it home with a couple more tips and send you on your way. This is the Escape Student Loan Debt.
[00:11:59] Speaker B: Podcast, a show for established professionals whose student loan payments or loan balances are impacting their marriage, their business, their credit, or their dream of achieving home ownership.
[00:12:10] Speaker A: We'll be right back.
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[00:12:42] Speaker B: You'Re listening to the EscapeStudent Loan, um, debt podcast.
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[00:12:49] Speaker B: Welcome back.
[00:12:51] Speaker A: All right, we're back from the break, and I told you before the break that there were two reasons that I think that you should take the last month of the year and do some student loan calculations to figure out what your payment would be under certain plans. The second reason is that many student loan servicers are butchering your loan payments right now. There's no rhyme or reason to how they're calculating them. They're using a Ah, tax return from the wrong year in terms of what you're entitled to. Because the fact of the matter is the Department of Education said that for six months after the repayments that started in October, no borrower should have to recertify their income. But what happened in many situations is student loan servicers asked borrowers to give them permission to automatically pull their tax returns from the IRS databasE, and you should have been able to give that permission without them still recalculating your payment before you were eligible to do so. But many student loan servicers went ahead and updated the payment based on their borrowers 2022 tax returns. You have other student loan services who are just calculating it wrong because they don't understand the rules that are associated with the new plans, like the Save plan. They literally just have as little an understanding as you may feel you have, and as a result, they are calculating payments inaccurately. Now, what does that mean? It means that if you can find that you know better than them, and it may seem like that's impossible, but trust me, it is highly possible that you could know more about what's going on with federal student loans than the person who's on the other end of the phone working for that servicer who might be getting caught up to speed in a faster period of time than how long you've been listening to this podcast. So if you're doing your calculations and you know that your payment's wrong, the Department of Education has given you a refuge so that you can go to your servicer and you can request an administrative forbearance. And the administrative forbearance is essentially saying that it's the servicer's fault, and until they can get their you know what together, they need to stop making you have payments for your student loans. So you can essentially have another payment pause until they get it figured out. But not only that, if you're looking on screen, you can see we're reading from the actual announcement from the Department of Education, and I'm reading when certain type of errors are detected, the department directs servicers to place affected borrowers into a short administrative forbearance. While the errors are resolved in certain circumstances where a borrower's progress towards loan forgiveness may be harmed by potential servicer errors, the department has directed servicers to count those periods in administrative forbearance towards Public Service Loan Service loan forgiveness and income driven repayment forgiveness, and adjust accrued interest to zero. They are essentially saying that not only do you get a payment pause, but you get an interest rate freeze and those non payments will still count as month credit towards income driven forgiveness and public service loan forgiveness. So you have a real incentive to at least try to do these calculations on your own, because if you find that your service is wrong, you can have your loans put into forbearance and you won't have any negative impacts on your progress towards forgiveness under any of these waivers. And the last thing that I would do in advance of whenever you should have to recertify your student loans is do some back of the napkin math to figure out if there are some things that you can do before the end of the year that would lower your adjusted gross income. Now, the fact of the matter is, there's going to be a lag when it comes to when they look at your tax return and use it to adjust your student loan payment. So they may be looking in 2025 at your 2023 tax return, or in 2024 it's your 2022 tax return, so on and so forth, depending on when you filed your taxes, when your recertification date may be. But the fact of the matter is, if you're on an income driven repayment plan, lowering your adjusted gross income lowers your discretionary income and thus lowers your student loan payment. So if there are things that you can do in other areas of your finances that benefit you in those areas and also have a positive impact on your taxes and your student loan payment. Putting a little extra cash in those areas before the end of the year can have positive impacts for the loans, even if it's a few years or a year down the line. That's it. A couple end of the year tips to help you with your student loans. We're not done for the year. We'll be back with a couple more episodes, but these are things that I thought would be helpful as we get a little closer to December 31. Look for us in two weeks with a little more value for your student loans, and I hope to see you then.
From escape student Loan debt this was the Escape Student Loan Debt Podcast, a show for established professionals whose student loan payments or loan balances are impacting their marriage, their business, their credit, or their dream of achieving homeownership.
