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Kousha Navidar: This is All Of It from WNYC. I am Kousha Navidar filling in for Alison Stewart, who is going to be back with us after Labor Day. Hey, thanks for spending part of your day with us. I am so grateful you are here. What's on today's show? Well, we will learn about how to go about finding a roommate with Evelyn Battaglia, a writer for Brick Underground. We'll also discuss the new web series, Command Z, with its creators, Kurt Andersen and Steven Soderbergh. We'll talk about Shakespeare, love that, with Farah Karim Cooper, the author of The Great White Bard: How to Love Shakespeare While Talking About Race. That's the plan, so let's get this started with student loans.

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Kousha Navidar: Student loans, they are big, they are scary. Hey, they need to be paid off. During the pandemic, federal student loan repayments were paused. Almost three years later, that pause, it's about to end. Borrowers are set to resume payments on their federal student loans, September 1st. Now, how large is the national student loan debt? According to one report in Forbes, try $1.75 trillion. That includes both federal and private loans.

How many students leave college with debt? More than half. Our next guests are financial planning experts. They're here to help you think through your next steps to hopefully deal with your student loans for good. Wouldn't we love that? I know I would. Joining us today is Travis Hornsby, the founder and CEO of Student Loan Planner, which is a group of consultants creating custom plans for borrowers. Travis, welcome to All Of It.

Travis Hornsby: Thanks for having us.

Kousha Navidar: Absolutely. Also joining us is Lauryn Williams, a consultant for Student Loan Planner. She's also the founder of the financial planning firm, Worth Winning, and host of the Worth Listening podcast. Also, side note, she's a four-time Olympian athlete. Hey, Lauryn, welcome to All Of It.

Lauryn Williams: I am so happy to be here. Let's talk all things debt.

Kousha Navidar: Let's do it. Listeners, we want to talk with you about that debt too because, hey, guess what? This conversation is for you. Tell us, do you have student loans? What kind? If you paid them all off, how the heck did you do it? If you're still working on it, what questions do you have for our student loan planning experts? We would love to hear questions. Give us a call or send us a text.

Here's the number, 212-433-9692. That's 212-433-WNYC or you can hit us up on Twitter or DM us on Instagram. It's @AllOfIt. All right, let's get into this. The federal payment pause on student loans is ending Friday, September 1st. Now, Lauryn, Travis, I'd love to know, is that when borrowers really have to resume payments or is it just when the interest starts accruing again or is it something different? What does that date, September 1st, represent?

Travis Hornsby: Yes, I think it's just the time when interest first starts growing on balances for the first time in over three and a half years. The first time people are actually going to have a payment debited from their accounts, probably October 1. Even though the interest starts hitting people's accounts again, that date, people do have a little bit more time to breathe in that.

Kousha Navidar: Got it, okay. What would be maybe the potential challenges that borrowers are going to see once the September 1st date rolls around? Lauryn, why don't we talk to you?

Lauryn Williams: I think the biggest challenge is whether or not they have set the money aside to be prepared for those payments. If you've not had to pay your loans in three years, you might have had that absorbed into your budget in some other way, and so finding, "How am I going to get this back into my budget? What is my payment going to be? What payment plan am I on?" because I've heard there's been a lot of changes to the student loan system. People are going to have to pull their head out of this sand and figure out what exactly is the best plan moving forward.

Kousha Navidar: Yes. You brought that up like, "What is the plan here?" You work with a lot of graduates with debt, Lauryn. What's the general vibe you're getting from folks as this date approaches? Is it a source of anxiety? You mentioned it was absorbed into the budget for some folks. Is there a newfound surprises that are really stressing people out? Tell me a little bit about that.

Lauryn Williams: Yes, I'd say the biggest surprise is the new payment plan called SAVE. There's Pay As You Earn income-based repayment. There used to be this one called Revised Pay As You Earn. If you were previously on that plan, you are not anymore. You are on a new program called SAVE and you need to understand the details of it. It's a pretty cool plan, but there's also the pay-as-you-earn plan that you may be eligible for. It's kind of important that you decide, "Do I want to be on the SAVE plan or the PAYE plan?" There's a deadline to that as well.

Kousha Navidar: Okay, so I'm sure some listeners are probably hearing that and thinking, "I know exactly what that means," and some people are like, "Income-based, what does that mean?" Let's unpack that a little bit. Travis, can you tell me, income-based repayment? Let's just start there. What does that mean?

Travis Hornsby: Yes, at the intro part, the only disagreement I would have with one of the things you said was that people need a plan to pay off their student loans because a lot of these changes with the Biden-Harris administration, a lot of people should not pay off their student loans. There's a massive thing going on right now called the IDR account adjustment.

What this means is if people consolidate their loans before the end of the year with the government on studentaid.gov, then they're going to give you credit on that new consolidation loan based off of whatever the loan that you have that's the oldest, that's been in repayment the longest. We think that probably about 10% to 15% of all student loan borrowers, people that have been in repayment for a long time, could actually get their entire balance wiped away if they only knew to consolidate.

This is a program that dates during the pandemic pause but does last through the end of this year. That's a really massive opportunity. People might've seen a press release that $39 billion was going to be forgiven for 800,000 borrowers, and it was recently. They actually are in the process of discharging that. The problem is probably more like five or six million people could actually qualify. A lot of people have to take action to get that benefit because those folks, a lot of them, have loans that were not paused during the pandemic.

It's loans called FFEL loans. This is really heavily affecting people that went to college in the '80s, '90s, 2000s, 2010s. Those folks really need to be aware of these expiring programs that are happening. That's one of the challenging things is with these income-based programs, Kousha, a lot of them are expiring. There's new ones being onboarded and it's just really chaotic, right? The PAYE and the SAVE plans, these are programs that are going to be around longer than some of these temporary programs that are coming out.

Just, in general, what those plans mean, the PAYE plan allows somebody to pay for 20 years to get forgiveness, 10% of their income even if you went to grad school. The SAVE plan allows you to pay for 10 years if you have a very small balance, 20 years if you have undergrad-only loans, and 25 years if you have graduate loans. There's also solutions for Parent PLUS borrowers as well that are complicated. The takeaway message to borrowers is you have far more options than you ever imagined.

Kousha Navidar: Yes, because I'm listening to you and I can tell you, I'm somebody who's very familiar with student loan repayments. Even listening, there's a lot of acronyms. There's a lot of dates. There's a lot of numbers and it is hard to sort through all of it. I think what would really help is like, what's changed? What's the same and how do you qualify? I think that's a key thing when we're talking about income-based repayment.

We just got a text from somebody and they said, "As a teacher, how do you go about being granted public service loan forgiveness?" This is something that I've heard a lot of people ask, "Qualify for what," first of all. Then teacher, I think I know we're talking about public service loan forgiveness. Lauryn, can you unpack that a little bit and maybe talk about what that qualification means, how you go about it?

Lauryn Williams: Absolutely. Public service loan forgiveness comes with four requirements. The first is that you have direct loans. The second is that you work at a qualifying employer. That's any 501(c)(3) nonprofit organization or government agency. Like you said, most teachers are going to qualify because they work for some sort of school district. It could be city. It could be state government. You could work for the federal government.

Those are lots of different options for public service. Then you need to be on an income-driven repayment plan. That's what Travis was just talking about. SAVE and PAYE are two of the options. Income-based repayment is an option, ICR. I bring those up too because they're not the best plans, but sometimes people are on those plans and they don't realize that there are other options. The thing we see most frequently is people come and they say, "Oh, I'm on an income-based plan."

It's actually called an income-driven plan that you're on and then income-based is one of those four different options. You really need to figure out which one is most appropriate based on your situation in order to maximize your public service loan forgiveness. Then the last thing is that you need to make 120 qualifying payments, which is the equivalent of 10 years. People always call it the 10-year plan, but I always like to drive home the point that you don't have to work at just one place.

If this teacher, for example, wants to teach at this school for three years, take a break for two years, those two years that she takes a break, she doesn't have to work, doesn't get any credit toward public service loan forgiveness, but then maybe jumps back in and starts to work again. She will pick up where she left off and continue out until she gets to 120 payments. Travis, you want to jump in?

Travis Hornsby: Yes, the other thing I was going to say is, a lot of times, what we see with borrowers that are asking those types of questions that aren't heavily invested and already knowing about these programs also have a lot of other things going on with their accounts. Maybe this teacher was in forbearance or deferment a whole lot. Maybe she was in and out of repayment. Maybe she was even in a default at one point or another.

Then what the IDR account adjustment that I talked about does is that allows you to consolidate all those loans together. Then go to studentaid.gov/PSLF to apply fully for all employment credit you have since 2007, and then that could result in this teacher possibly qualifying for forgiveness immediately instead of having to pay for additional years. Because during this period of this adjustment, you could really call this as the window of getting extra credit.

The window of getting extra credit expires at the end of this year. That teacher, if she's not already aware of PSLF and very familiar with the requirements, there's a good chance. There's a lot of this forbearance and deferment and different amounts of credit on different loans that she's got that she could save potentially thousands or even tens of thousands of dollars if she knew to consolidate first with the government and then apply for the PSLF program.

Kousha Navidar: That's wonderful. We're hearing from a lot of listeners right now and I want to get to calls. If you're listening right now, we're talking with Travis Hornsby and Lauryn Williams about the September 1st repayment cliff that we're about to approach. By cliff, I mean just repayments are about to start up again. If you want to join the conversation, please do give us a call. If you have student loans, if you have questions for our experts, the number is 212-433-9692, 212-433-WNYC, or you can hit us up on social @AllOfItWNYC. I'd love to go to a caller. We've got Natalie in Carmel. Natalie, hi. Welcome to the show.

Natalie: Hi, thanks for taking my call. How are you?

Kousha Navidar: Good. Thanks. What's your story?

Natalie: All right, so I am a special education public school teacher. I'm going into my 15th year teaching, right? I teach in high-needs populations. I did get the PSLF or the public service forgiveness for the remainder of my direct loans that I had right before Trump took office or before he made any changes under the wire, which was really helpful. I took out these federally-backed education loans from the bank. I was the first person in my family to go away for college. There were a lot of added expenses with the dorms and everything like that.

Because I was the first person to go away, we didn't really save for college. I wasn't expecting that my parents were going to pay for it. I ended up with upwards of $75,000 worth of student loans, did everything right, paid, consolidated with Sallie Mae before I graduated, started paying every single month, did it, never missed a payment, got my cosigner released. Like I said, it's been 15 years. I'm now staring down the barrel of 40, making financial decisions about buying houses and cars and stuff with my husband.

I have two kids and I still have over $50,000 worth of loans with Navient, aka, the old Sallie Mae. I'm wondering if any of these changes will have a positive effect as far as the negation of some of these loans, especially being in public service. I have a graduate degree. I paid for that out of pocket because I refused to take out more loans. I became part of a fellowship program and it was subsidized. I want to go back to school and maybe do more with my career, but I can't stomach adding to that debt load.

Kousha Navidar: Yes. Natalie, that's a wonderful question. What I'm hearing you say, and maybe, Travis, you could start us off here, are any of the changes that we're seeing helping out folks that have had so much already in the barrel that they've put into these payment plans?

Travis Hornsby: Unfortunately, for this caller, there's not a lot that can be done. The one way to double-check though is to go to studentaid.gov. If you log into studentaid.gov, if you do have a balance showing up there, then it is a balance that could benefit from all these federal programs. The other catch and this doesn't apply to this caller that's a teacher, but if you're a nurse or physician or a dentist, we often see loans from the Department of Health that don't show up on the student aid website that actually can be consolidated and added into federal loans and qualify for things like PSLF and forgiveness.

The only thing that I would say in this case that might be able to be done if this borrower or this caller was very distressed economically, I might recommend a consult with a student loan attorney. If she's not, if she did want to go back to school, this is a little bit of a hack and maybe a little controversial to say this, but you could also go back and load up on more federal direct loans if this caller is continuing to work, borrow for tuition and living expenses, and possibly because money is fungible, you could essentially possibly get PSLF a second time on loans that you're taking out to cover things that you need to advance your education and also cover living expenses, transferring that debt indirectly. There's creative options. Sometimes the options aren't what we want though.

Kousha Navidar: Got it. We're talking with Travis Hornsby and Lauryn Williams about student loans. We'll be right back after this.

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Kousha Navidar: This is All Of It with WNYC. I am Kousha Navidar and we are joined by Travis Hornsby and Lauryn Williams, who are certified financial planners that are talking to us about student loan repayments. I want to dive right in with a text we're receiving. Now, everyone listening, we are taking your calls and your texts, your questions about student loan repayments that are starting up on September 1st. If you'd like to call and talk to us, please do. That number is 212-433-9692. That's 212-433-WNYC.

During the break, we saw a lot of texts come in that were all asking around the same question. I'm going to choose one. "Is there a website where this information is consolidated and explained?" It's a bit of alphabet soup. We were talking before the break, how tough it can be to really sort yourself through this. Is there a place you can go online to find out the lexicon of information there? Travis, I see you pointing yourself. Go for it.

Travis Hornsby: Well, I will say, the federal website, studentaid.gov, is the official source of information. Our website, studentloanplanner.com, has a lot of stuff that I think more succinctly and simply explains a lot of these things. We have a lot of calculators. For example, studentloanplanner.com/calculator is one resource people could use to model all kinds of stuff like refinancing the SAVE plan, the standard plans, what your effective interest rate will be based on your income.

It's a lot more involved than the federal options. We have the Student Loan Planner podcast as well that we explain a lot of these programs, what it all means. I would just say, there's lots of good options out there. We would just say, make sure the source seems like they're really going into the technical details just to make sure that the information is deep enough that it can be credible. Studentaid.gov and studentloanplanner.com.

Kousha Navidar: Perfect. I was just about to actually ask you what the studentaid.gov website was. Something else that struck a chord with me with our last caller, Natalie, was when she talked about her husband and she trying to figure out these milestones in her life. That's something that I have personal experience with. Listeners, a little bit about me. I'm getting married next May.

My fiancé and I have had to have long talks about whether getting legally married was the right move given our student debt. Because we were worried if we got married and filed jointly, our taxes would actually end up being pretty expensive. Honestly, we decided just get married anyway and we really not need to talk to an accountant, yada yada, but the question is still on our minds. Lauryn, have you had similar people come up to you with that dilemma? Does it seem like people are really putting off certain milestones in that way?

Lauryn Williams: Absolutely. This is a big reason people are booking student loan consultations. They're like, "I am terrified. I love this person, but I'm not sure if I want to get married to them because of the amount of student loan debt that they have." One thing I'll say is that the student loan debt does not become yours when you get married. That's one key piece of the puzzle when you have federal student loan debt. It is not your debt now and you are now going to be responsible for it in some way, short form, or fashion.

The one thing that is relevant though to your point, married filing jointly, married filing separately, that is going to affect your student loan payment. A lot of people are deciding to keep their finances separate in general for various reasons. They're like, "I don't want to talk about my spouse's income. I don't want to talk about any of that. I just want you to help me with my student loans." It's incredibly relevant what your family size is and whether or not you're going to do married filing jointly and how much your spouse earns so that we can make a proper student loan strategy for you.

Kousha Navidar: Got you. Travis, did you have something to add?

Travis Hornsby: Yes, I just wanted to give an example just to challenge people's assumptions about who needs to pay back their debt under this new SAVE plan. An example would be, let's just hypothetically say, Kousha, that each of you made $100,000 a year, right? A $200,000 income couple, and let's just pretend one spouse actually had $30,000 of debt from undergrad.

A whole lot of people would look at that scenario and say, "Oh wow, there's no way that I'm going to qualify for forgiveness or that we're going to qualify for forgiveness. We've got to pay this off." Under this new SAVE plan, let's say that you had a couple of kids. Let's also say that you filed taxes as married filing separately. Instead of counting $200,000 of income, they're only going to count $100,000. Now, let's say that you max out a 401(k) because I know New York City income taxes are pretty high.

A lot of times, people might want to save in their 401(k) to save on some federal and state and city income taxes, right? If you save the max, instead of taking $100,000, now they're only going to take $100,000 less $22,500. Then also, based off of the family size calculation, they'd also give you another deduction of $55,000 just because of your family size. In other words, you'd only end up with payments based on 5% of what's called your discretionary income under this new plan of about $90 a month.

If you think about a $30,000 debt, $90 a month, that's about $1,000 a year. $1,000 over 20 years is $20,000 and you've got $30,000 of debt. What this is illustrating is a lot of people might hear this SAVE plan and assume, "We make too much money for that to help me." That's very much not the case. It's also not the case that only public servants can benefit from this. It's far broader than that. Anybody might be able to benefit from this unless you're extremely high-income relative to your debt.

Kousha Navidar: Got you. Let's go to Sarah in Ridgewood, Queens. Sarah, hi. Welcome.

Sarah: Hi, thank you. My question is I consolidated my loans last year as part of the temporary public service loan forgiveness programs and my payments were recalculated recently through the new servicer. I went from having 120 remaining payments to 32 payments because I had the wrong kind of loans. That was fantastic and I'm so glad I did that. My question is about whether there is any forthcoming recalculation related to zero-dollar payments that were basically what my responsibility was through income-driven repayment.

I'm asking because as far as I understand it, some of those zero-dollar payments that I made in the past when my income was so low that I wasn't required to make any payments, they ended up being categorized in the past as either my loans being in deferment or in forbearance. All of that had a huge impact on what happened with the interest and what happened ultimately with the balance of my loans.

Even though I'm so much closer to being able to reach that forgiveness with only 32 payments remaining, I still have a huge balance. This, of course, impacts things like credit score and mortgages and so many of those big life decisions that you were just speaking about. My question is whether I can look ahead to those zero-dollar payments in the past being recalculated in some way with regard to the total balance of what I owe.

Kousha Navidar: Got you. Thank you so much, Sarah. I really appreciate that. I think that's an important question. Travis, do you think you could take that one, zero-dollar payments? What do we do with them? Do they still make a difference?

Travis Hornsby: Well, like that IDR account adjustment that I was talking about, if you have 12 months of consecutive forbearance, 36 months of total forbearance over the lifetime of paying back your loans, then you would get credit for that forbearance. If you have deferment, if it was an economic hardship deferment, then you would get credit for that deferment if you get it certified. The key thing we're telling everybody to do is for most people. Not everybody, but for most people, can make sure your loans are consolidated like this caller at studentaid.gov.

Then also make sure that you've applied and got all your employment credits signed off on since 2007. That's sort of the start date for this public service program. The only caveat to these zero-dollar payments not qualifying would be if this caller was in an in-school deferment. If she was in an in-school deferment during this period, maybe she was working full-time or part-time but also enrolled in a program, that can't be credited. That's the only caveat to that not getting added.

Kousha Navidar: Got you. You mentioned what counts as credit. What we're seeing right now from a lot of callers is a lot about tax deductions. I'm just going to pick out. I'm just going to paraphrase from one caller here. Tony in Bergenfield, New Jersey, thank you so much for calling. I'm going to paraphrase what you've got here. He says, "I'd like to know if student loan forgiveness constitutes as tax deductible and if you're going to get taxed on the amount forgiven." Now, Lauryn, do you think you might be able to chime in there?

Lauryn Williams: Yes, so it depends sort of answer. Federally, it is not going to be taxed up until 2025. Going forward, we're not sure what exactly is going to happen with forgiveness. Public service loan forgiveness specifically is not taxed federally. Now, there is a little issue with some of the states related to this 2025 rule I just mentioned. A lot of people, as per that IDR adjustment that Travis was just talking about, are going to get forgiveness in the short term. They're wondering like, "Oh, my goodness, am I going to have to pay taxes on this?" The answer is no, except for if you live in-- I think it's about nine states, Travis, is that right, that are still like--

Travis Hornsby: We think it's probably just going to be three once the dust settles. I think it's Mississippi and a couple of other random ones.

Kousha Navidar: Got it. Again, I just want to say, Tony, thank you so much for calling. I'm sorry that we couldn't get to that. Just so many different questions about tax deduction. I wanted to bring them all into one, but I would also like to talk about Parent PLUS loans a little bit. We have a caller, Eileen from Brooklyn. Hi, Eileen.

Eileen: Hi there.

Kousha Navidar: How are you doing?

Eileen: I have a question about Parent PLUS.

Kousha Navidar: Yes, please.

Eileen: Do you want me to just chime in?

Kousha Navidar: Go right in.

Eileen: Good. Okay, so I'm a public service employee. I work for the city of New York. My husband's retiring next month. He doesn't work for the city. I'm hoping to retire in 2025. We have Parent PLUS loans in the amount of about $80,000. We've been in forbearance and then we have the COVID forbearance. We have to get back in the saddle here and figure this out. I did go to studentaid.gov. A little confusing and I know the new carrier that's got the loans is Nelnet. I guess my question is, as a public service employee, I think previously, if I were to try for forgiveness, I don't think I was eligible because of the timing. Do you know if that's changed at all?

Kousha Navidar: Thank you so much, Eileen. I really appreciate that. Has that changed at all? Lauryn, why don't you start?

Lauryn Williams: Key pieces of the puzzle here is that she said her loans are at Nelnet. MOHELA Is the official servicer of public service loan forgiveness. While she's sure that she works at a qualified employer, she's not ever signed up for the program. Another key piece of the puzzle for this borrower is whether or not she's done any consolidations yet. Traditionally, Parent PLUS loans were not going to qualify for public service loan forgiveness on their own.

They needed to be consolidated first and then you would get on a program called ICR, but the big but here is there's a thing called the double consolidation loophole, where you consolidate some of your Parent PLUS loans, a group of them, another group of them together. Then one last time, you squish all of those loans together. It unlocks all the programs we've been talking about today.

SAVE, PAYE, all the different things there besides the ICR plan, which is the highest program or the highest cost program on a monthly basis. You don't want to be on ICR if possible. There's a way to get away from that. This borrower needs to look into the double consolidation and also needs to sign up for public service loan forgiveness. We need to know how long she worked there as well because she might already be qualified for forgiveness. Travis?

Kousha Navidar: No. Actually, what I would love to do is actually put that all together just because we have a couple of minutes here. You two have been so helpful and there's so much more we could talk about, but I'm looking at the clock. I think what a lot of listeners would love is a takeaway. We're coming up on September 1st. From each of you, I want to hear maybe just 30 seconds each. What's the one piece of advice you'd give folks as we look towards September 1st? Travis, I'd love to start with you. The one piece of advice, 30 seconds, go.

Travis Hornsby: Don't trust your uncle's student loan advice. Yes, back in the day, paying off your student loans was the right thing to do, but there's way more programs that have come out since then. Debt has continued to grow much faster than the rate of inflation. With all these programs, a lot of which are very, very complicated, make sure that you could not qualify for any of these programs before you actually take action and divert resources from other goals in your life that you'd like to achieve just to pay down your student loans because maybe you don't have to.

Kousha Navidar: Got it. Lauryn?

Lauryn Williams: Sticking your head in the sand is not a student loan strategy. That might be what you were doing pre-COVID. You got a three-year break from it, but this is the time now more than ever to get your head out of the sand. There are a lot of programs that are really awesome for borrowers. There's a lot that can work in your favor and so get a plan in place so that you can actually move forward in a positive way for your overall financial picture.

Kousha Navidar: I feel that personally too right before we drop off. Travis, you had mentioned your website. Could you repeat that one more time, please, just so we make sure that we have it all out there?

Travis Hornsby: Sure. Studentloanplanner.com and our team of planners does flat-fee plans for people for a few hundred bucks. That's our business model in addition to all the free content that the majority of people that interact with us use like the studentloanplanner.com/calculator to model your payments after the pause ends.

Kousha Navidar: Got you. Listeners, there was a lot of acronyms and numbers thrown out here, so here's what I'm going to offer you. You can go back. Listen to this segment. We have it in our archives, wnyc.org. We also have a transcript of this so you can read it through. If you have tips, send them to us. You can hit us up on social @AllOfItWNYC. I've been speaking with Travis Hornsby and Lauryn Williams about student loan repayments starting up on September 1st. Thank you both so much for taking the time. I'm sure our listeners really appreciated it.

Lauryn Williams: Thank you for having us.

 

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