Speaker 1: Welcome to How to Money. I'm Joel and today we're
Speaker 1: talking student loan chaos. We're explaining it with Stanley Tait. Okay,
Speaker 1: So the whiplash that student loan borrowers have experienced over
Speaker 1: the past few years has been staggering payments paused forgiveness,
Speaker 1: promised forgiveness blocked, then repayment systems completely rewritten, and now
Speaker 1: for some is wage carnis back on the table. Well
Speaker 1: maybe we'll get to that today with Stanley. It's just
Speaker 1: no wonder though, that navigating student loans has become this
Speaker 1: specialized skill, and few people know the landscape better than
Speaker 1: Attorney Stanley Tate. He has helped hundreds of borrowers get
Speaker 1: out of default, qualify for forgiveness programs, secure affordable payments,
Speaker 1: and to go shape settlements. He's even helped people discharge
Speaker 1: student loans in bankruptcy. And he's helping people through his blog,
Speaker 1: his newsletter, his videos, just offering really helpful guidance to
Speaker 1: a bunch of folks out there. So with all the
Speaker 1: recent changes and confusion, knew we needed his insight on
Speaker 1: how to Money. So Stanley Tate, thank you for joining
Speaker 1: me on the show today.
Speaker 2: Thanks for having me.
Speaker 1: All right, first question out of the gate, what do
Speaker 1: you like to suplore John? What's your craft bear equivalent?
Speaker 1: I know you're doing smart stuff with your money, Stanley,
Speaker 1: for your future, but you got to have some spurts
Speaker 1: in the here and now. Right.
Speaker 2: The splurge more recently has been on cigars. I joined
Speaker 2: a cigar lounge a few months ago and I'm really
Speaker 2: enjoying kind of like that pastime and being able to
Speaker 2: bond and fellowship with other people in shaer bourbers while
Speaker 2: smoking a stick. It's very relaxing there you go.
Speaker 1: That sounds like a nice way to wind down after
Speaker 1: a tough day of helping helping people out with their
Speaker 1: student loan questions.
Speaker 2: Oh man, absolutely, Just just being able to zone out
Speaker 2: and not have to think deeply about other people and
Speaker 2: what's happening in the world and what's going on. That's perfect, Yeah,
Speaker 2: mechanism for me.
Speaker 1: Sometimes we got to check out. That sounds like a
Speaker 1: lovely way to spend your time and money. Let's talk
Speaker 1: student loans though. Can you lay the framework of what's
Speaker 1: happening right now for the average student loan borrower? Like
Speaker 1: I know this is kind of a big question. But
Speaker 1: where do things stand right now on the in the
Speaker 1: student loan space from a macro perspective?
Speaker 2: All right, So you know that that's a really good question,
Speaker 2: and I'm never quite sure how to enter it because
Speaker 2: what's happening really depends or what you perceive is happening,
Speaker 2: depends on kind of your station in life. So if
Speaker 2: you're a new borrower, like someone just graduating, entering the
Speaker 2: payment market, like nothing really feels like it's happened, because
Speaker 2: none of this stuff is applied to you, or at
Speaker 2: least it doesn't feel that way. And if you're someone
Speaker 2: who's had your loans for two plus decades and you
Speaker 2: watch rounds and rounds of people get loan forgiveness and
Speaker 2: get somehow you excluded, it feels like everything is happening,
Speaker 2: yet nothing has happened to you. And the way I
Speaker 2: look at it today is that we've had a lot
Speaker 2: of change since COVID March twenty twenty through today, and
Speaker 2: it's been very tumultuous. Where As you kind of kicked
Speaker 2: us off that things have been one way forgiveness promise
Speaker 2: forgiveness taken away, repayment plan promise repayment plan taken away,
Speaker 2: and it just feels very dynamic environment, and I think
Speaker 2: we're in a very static environment right now where the
Speaker 2: Education Department under the Trump administration has made their major
Speaker 2: policy change by effectively killing the saved plan and leaving
Speaker 2: us with income based repayment option, and this new plan
Speaker 2: coming down the pipeline is like your two primary options
Speaker 2: moving forward, and forgiveness programs day still exists, Public service
Speaker 2: loan forgiveness is still there, Twenty to twenty five year
Speaker 2: forgiveness is still there, and so nothing's really changed along
Speaker 2: those lines. Now there's some big changes happening with borrowing
Speaker 2: for future people, future generations, but that doesn't really have
Speaker 2: anything to do with your repayment if forgiveness options for
Speaker 2: federals to loans, those of all stayed the same. And
Speaker 2: so if I were looking at it, say, I'll just
Speaker 2: say there's been a lot of dynamic things, but actually
Speaker 2: much is the same for you moving forward, broadly speaking.
Speaker 1: And one of the things I feel like in the
Speaker 1: past couple of weeks that we've talked about on the
Speaker 1: show that seems like it's a big deal was the
Speaker 1: threat of wage garnishment notice is being sent out right
Speaker 1: and so this month people were supposed to receive letters
Speaker 1: in the mail saying, hey, guess what you are. You've
Speaker 1: been in default, like you haven't paid your loan two
Speaker 1: hundred and seventy plus days, and so we're going to
Speaker 1: start taking money from your paycheck, maybe even from probably
Speaker 1: from your tax refund as well. Why do you think
Speaker 1: the Education Department pulled back on that? And how nervous
Speaker 1: should borrowers who haven't paid their balance in paid on
Speaker 1: their loan in a long time, how nervous should they be?
Speaker 2: Well, a few questions insider are but one thing I
Speaker 2: want to make clear kind from the beginning is that
Speaker 2: Barrows and Default have had three plush years of opportunity
Speaker 2: to get out of default without consequence. And so if
Speaker 2: you're someone who's still worrying about this today, I think
Speaker 2: we have a larger problem about Okay, what does that
Speaker 2: mean for you to like, what will it take for
Speaker 2: you to get out of default? Finally, that's one part.
Speaker 2: Now there's a consequence part of it decide, But I
Speaker 2: think there's a core question of like what does that
Speaker 2: even mean? Which I think goes beyond the scope put
Speaker 2: its call. But it's just something that troubles me because
Speaker 2: We've had these different programs. Fresh Start program, we had
Speaker 2: the on ramp opportunity, they still gave Barros opportunity to
Speaker 2: get out of fault. Then we had another year after
Speaker 2: that for Bars to get out of the fault. And
Speaker 2: now finally, when wage garnishment notices go out, people start
Speaker 2: to freak out, like, oh my god, my wage's gonna
Speaker 2: be garnished. And yet the Department of Education pulled back.
Speaker 2: In your first question there is why did they do that?
Speaker 2: And I think this goes back to affordability. This administration
Speaker 2: is struggling with affordability kind of concerns, and so now
Speaker 2: you're going to take out the one kind of resource
Speaker 2: that people rely on to either catch themselves up on
Speaker 2: bills or to get ahead a little bit, or stock
Speaker 2: something away for a vacation or something else like that.
Speaker 2: And so I think that could be really poor, a
Speaker 2: really bad look, especially ahead of the midterms. The Department
Speaker 2: of Education collects something like sixty percent of its revenue
Speaker 2: for default and lungs through wage through tax refund offset.
Speaker 2: So I just don't think that would be a good look.
Speaker 2: But I don't think it has anything more with timing,
Speaker 2: because Bars have been given enough time notice ahead of time.
Speaker 1: So political calculation.
Speaker 2: I mean, I don't know what other explanation there would be, right,
Speaker 2: I don't have any insight into this, but you would
Speaker 2: say stopping it would be, oh, we need opportunity to
Speaker 2: get our systems up and running. But the Treasury offset
Speaker 2: program was always up and running unless Doge or some
Speaker 2: other actor went in there and cut it and kind
Speaker 2: of dismantled it and they found out later. That's also
Speaker 2: a possibility, but I think the more likely thing is
Speaker 2: this is not a good look for us from an
Speaker 2: affordability standpoint.
Speaker 1: So I'm going to read you a line that I
Speaker 1: found interesting in the press release when they said they
Speaker 1: were going to pause wage carsmen. They said that it
Speaker 1: will function more efficiently and fairly after the Trump administration
Speaker 1: implements significant improvements to our broken student loan system. What
Speaker 1: do you think they mean by that?
Speaker 2: No clue, what does that even mean? Because like the
Speaker 2: collections for offset are done by the Department of Treasury,
Speaker 2: it just flagged through there. So it literally is just
Speaker 2: clicking a button and taking a flag on or off
Speaker 2: to keep that money or to do this. So fixing
Speaker 2: a broken student losses when you're saying that did we
Speaker 2: miss like identify borros for default. I haven't seen that either,
Speaker 2: so I'm not sure what that means other than another
Speaker 2: dig at past administrations. And to be fair to this administration,
Speaker 2: the system is broken. It has been broken for years,
Speaker 2: and we built a very complex product that is needed
Speaker 2: tweaks in kind of revision and is cracked under its
Speaker 2: own weight.
Speaker 1: I mean, I think that's so true. And then every
Speaker 1: time we try to get it back on track, like,
Speaker 1: we do it in half measures.
Speaker 2: I don't even know what the right full measure is,
Speaker 2: right like, and sorry to go aside here, but I
Speaker 2: always tell people, like, the reality is an educated population
Speaker 2: is good for the entire economy of the United States
Speaker 2: and global economy, and so it is equivalent to a
Speaker 2: public utility. And yet we don't treat it like a
Speaker 2: public utility where we subsidize the cost directly. Instead, we
Speaker 2: pass it onto the backs of bars and taxpayers. And
Speaker 2: then we create these different programs that shield the Department
Speaker 2: of Educations books from these offsets for kind of like
Speaker 2: the subsidies for years until the bill becomes due down
Speaker 2: the line, and will deal with it there. And is
Speaker 2: it possible that we actually just need to consider that
Speaker 2: higher education, at least at certain institutions, should be free,
Speaker 2: and we may have to pay a higher tax rate
Speaker 2: to get that done.
Speaker 1: But that aside, No, no, I appreciate that. What would
Speaker 1: you say to somebody who is in default. They've seen
Speaker 1: those headlines and maybe they haven't even recognized or realized that,
Speaker 1: oh wait, they're not going to start garnishing my wages.
Speaker 1: Should how should they start preparing?
Speaker 2: I think the very first thing I would do is
Speaker 2: actually confront a head on. But I am a confronted
Speaker 2: head on person by nature, but I can understand kind
Speaker 2: of emotional psychologically, it could be a lot to think
Speaker 2: about this debt and like the impossibility of it all
Speaker 2: because oftentimes the people I meet they defaulted because they
Speaker 2: felt like there weren't any other payment options. But they
Speaker 2: defaulted so long ago. The rules have changed so much
Speaker 2: that to just stay stuck and believe that there are
Speaker 2: no options today, I think it is a wrong approach.
Speaker 2: So I would say, if I were doing this, the
Speaker 2: very first thing I'll do is contact Default Resolution Group
Speaker 2: or student a dot Gov and look at your loans
Speaker 2: and then identify what will my payment options be? If
Speaker 2: I were to get out of default using one of
Speaker 2: the programs that the Education Department offers, and then the
Speaker 2: next question is can I afford that payment? And the
Speaker 2: answer is yes, cool, I think that's a very strong
Speaker 2: vote in favor in getting out of the fault. If
Speaker 2: you say no, I can't, then you need to run
Speaker 2: a math on what is it going to cost you
Speaker 2: if you were being garnished in offset to say can
Speaker 2: I afford that? If I can't afford that, then even
Speaker 2: if I really can't afford to get out of default,
Speaker 2: that's probably the better mathematical option for me, even if
Speaker 2: it sucks for several months while I kind of dig
Speaker 2: myself out this thing. And then kind of the last
Speaker 2: thing from there is like, if you run all the
Speaker 2: analysis and you can't get out of default, you can't
Speaker 2: afford the garnishment, then it's a tougher conversation about, well,
Speaker 2: how does bankruptcy work here to help me with this thing?
Speaker 2: Is that actually a workable solution?
Speaker 1: I want to talk about that, And maybe now is
Speaker 1: the best time to talk about that, because it does
Speaker 1: seem like for the longest time, discharging your student loans
Speaker 1: and bankruptcy was almost impossible, and the Biden administration did
Speaker 1: make some changes that might be one of the most
Speaker 1: the longest lasting or or biggest changes that could help
Speaker 1: people who really really can't afford to pay their student loans.
Speaker 1: What's happening on the bankruptcy front and discharging loans via
Speaker 1: bankruptcy in twenty twenty six.
Speaker 2: Well, the law itself hasn't changed all that much. So
Speaker 2: the law basically says that you can file bankruptcy and
Speaker 2: get rid of all your other debts for the most part,
Speaker 2: except for student loans, and only way to get rid
Speaker 2: of those is if you can show that repaying them
Speaker 2: are undue hardship. And that's been the law going back
Speaker 2: to like two thousand and four nineteen ninety seven as well,
Speaker 2: but kind of evolved. The last time it really changed
Speaker 2: to two thousand and five, the bid administration implemented a
Speaker 2: law that was actually kind of brought up by Republicans
Speaker 2: through George Bush administration. Second that says, Okay, we're not
Speaker 2: going to set aside the law here, but we're going
Speaker 2: to create a different policy. Ultimately, Department of Education, we
Speaker 2: own our loans. Maybe we could work out a policy
Speaker 2: about how we will analyze these and do a recommendation
Speaker 2: to the bankruptcy court about how this case should be handled.
Speaker 2: Changing the law, We're just changing how we view this
Speaker 2: particular situation. And so they created this process called the
Speaker 2: attestation process, which is basically just a sworn statement that
Speaker 2: you work out. After you file the bankruptcy to discharge
Speaker 2: of student loans, you fill out this attestation form that
Speaker 2: discloses your assets, your living expenses, the history of your loans, education, etc.
Speaker 2: And you give that over to the Department of Justice
Speaker 2: who represents the Department of Education. That DOJ attorney reviews
Speaker 2: your file and makes a recommendation to the Department of
Speaker 2: Education that yeah, we should get rid of all of it,
Speaker 2: we should get rid of some of it, or we
Speaker 2: shouldn't get rid of any of it, and then based
Speaker 2: on the recommendation, your case moves forward. Now there's a
Speaker 2: big kind of a report in the New York Times
Speaker 2: recently where they said, like eighty seven percent of ours
Speaker 2: who went through this process were able to get some relief,
Speaker 2: either partial discharge or full of discharge. And so, yeah,
Speaker 2: it has become theoretically easier, at least with federal student
Speaker 2: loans owned by the Department of Education to file bankruptcy
Speaker 2: on them. Now, does that mean everyone needs to rush
Speaker 2: out and go file bankruptcy. Absolutely not. And does that
Speaker 2: mean that if you file bankerancy you have an eighty
Speaker 2: seven percent chance of success. No, it's just saying that
Speaker 2: based off of this category, bars will file. They had
Speaker 2: a really high success rate. Now, there are some things
Speaker 2: that make people, you know, more ideal candidate for those
Speaker 2: than others. But that's really what happened. There's not a
Speaker 2: change in law, just a change in policy, and it
Speaker 2: has worked out really well for those bars who fit
Speaker 2: kind of some qualifications.
Speaker 1: And you say not forevery like if someone out there
Speaker 1: listening has a solid job and can afford their student
Speaker 1: loan payment reasonably, well, they're probably not going to be
Speaker 1: a candidate for getting their student loans discharge and bankas well. Yeah.
Speaker 2: I don't know. That's hard because there are some of
Speaker 2: your listeners who are quote unquote high earners, but they're
Speaker 2: single and they live in a high cost of living
Speaker 2: city and it feels very impossible to make their rental
Speaker 2: payment or a mortgage payment and pay their student loans
Speaker 2: and pay or other bills. So I wouldn't define it
Speaker 2: like in terms of Okay, categorically, you don't make it
Speaker 2: because you have a quote unquote good job. The way
Speaker 2: I think about it is a little bit more nuanced.
Speaker 2: But let me give you an extreme example. There's this
Speaker 2: case out of Ohio where this young man graduates college
Speaker 2: and then files bankruptcy a year later. And this just
Speaker 2: happened like a few months ago. He files bankrucy and
Speaker 2: tries to discharge his stude loans and the Department of
Speaker 2: Education departments just like, get out of here. You haven't
Speaker 2: made a good faith to repay your loans. So no
Speaker 2: matter what his hardship was, it was only short lasting.
Speaker 2: He just graduated. That's not a good candidate. Someone who
Speaker 2: is a good candidate. Maybe at the other extreme, you
Speaker 2: are in your late sixties and you've had your loans
Speaker 2: for twenty years and your income is fixed and there's
Speaker 2: no possible way you could ever pay these loans off.
Speaker 2: That's a good example. And then there's a middle ground.
Speaker 2: There's someone who may be earning ninety thousand dollars a year,
Speaker 2: but they're divorced, they're paying child support to their ex,
Speaker 2: and their monthly bill is still fifteen hundred dollars a month.
Speaker 2: Hundred student loans and they're like, I cannot do this
Speaker 2: while upholding all my other obligations. That may be someone
Speaker 2: who is worth having a conversation about. Even though they
Speaker 2: have a good job and they're not really broke, they
Speaker 2: just can't keep up and if something does happen, life happens,
Speaker 2: everything falls apart. That's someone to have a good conversation with.
Speaker 1: Is and is that a dili process? Lets someone let's
Speaker 1: say someone's identifies themselves in a position like you're describing,
Speaker 1: and they're like, yeah, no, like it's it's become almost
Speaker 1: impossible for me to pay and I don't see a
Speaker 1: way that I'll ever be able to do. They need
Speaker 1: to hire a professional, a lawyer who specializes in this,
Speaker 1: or is this something that they can like they can
Speaker 1: take on the system themselves.
Speaker 2: All right, so let me ask this by way of example.
Speaker 2: I don't think anyone should ever perform surgery on it.
Speaker 2: It makes no sense. But could you theoretically represent yourself
Speaker 2: in this thing? Yeah? And I remember, I've got quotes
Speaker 2: to build a fence in my backyard, a nice modern verticence,
Speaker 2: and the quotes I thought were outrageous. They wanted like
Speaker 2: twelve thousand dollars doing I was like, you know what,
Speaker 2: this is like three thousand dollars worth of kind of
Speaker 2: materials and maybe two days of labor, and I'll handle
Speaker 2: it myself. And I'm doing this in Saint Louis. It's
Speaker 2: one hundred and five degrees outside, and I'm mixing twenty
Speaker 2: five bags of fifty pound bags of concrete by hand
Speaker 2: because my dumb self didn't realize to get rent a mixer.
Speaker 2: And I was like, this was a terrible idea. But
Speaker 2: along the way, I get the fence in and the
Speaker 2: fence looks great, and I'm so proud of myself. Two
Speaker 2: weeks later when came by and knocked that thing the
Speaker 2: hell over it because I didn't dig the post love enough.
Speaker 2: So did I need a professional that standpoint to get
Speaker 2: a fence up? No? Is it beneficial to kind of
Speaker 2: plan for things that you don't consider things like that? Absolutely?
Speaker 1: Yeah, Okay, I appreciate that. I want to talk about
Speaker 1: income driven repayment plans. Take a quick break and we'll
Speaker 1: talk about the changing system there. In just a second,
Speaker 1: we're back still talking with Stanley Tate, talking about the
Speaker 1: student loans and kind of what's happening right now in
Speaker 1: the space, and one of the big changes Stanley is
Speaker 1: two income driven repayment plans. They keep changing. The SAFE
Speaker 1: plan gets rolled out and people are like, ooh, thrilled.
Speaker 1: You know, for a lot of people, it's going to
Speaker 1: mean their their payment is non existent or close to it.
Speaker 1: And now that's that's not gonna be around much longer.
Speaker 1: I CA it's in the process of being dismantled. What
Speaker 1: how should borrowers decide which plan is best for them now?
Speaker 1: Especially with RAP coming down the pike.
Speaker 2: Yeah, so the RAP plan is not yet available, but
Speaker 2: that's the newer payment Assistance plan now is created by
Speaker 2: the Trump administration that also ties payments based off of
Speaker 2: your income and family size. That'll likely be available sometime
Speaker 2: this summer. But if you're someone who's in saved and
Speaker 2: you've been stuck in for bands and you're trying to
Speaker 2: figure out where to go next, I think everything starts
Speaker 2: with the numbers. So you start by just running the
Speaker 2: number saying what will my payment be under? The remaining
Speaker 2: plans for the vast majority of people is going to
Speaker 2: be income based repayment or pay as you earn are
Speaker 2: going to be their two primary options there, at least
Speaker 2: for income based options. And if you look at those
Speaker 2: numbers and you're like, cool, I can swing this, then
Speaker 2: you'd likely want to enroll in one of those plans.
Speaker 2: The only I say likely because the only kind of
Speaker 2: factor that changes is if safe, what's cheap enough for
Speaker 2: you where you could realize the benefit of loan forgiveness
Speaker 2: over time, then it makes sense for you to stay
Speaker 2: in that plan that working towards loan forgiveness. But it
Speaker 2: is possible that you flip over the pay as you
Speaker 2: learn or IBr that you may not realize the benefit
Speaker 2: of forgiveness or may not have as great as value
Speaker 2: to you, and you may need to switch over to
Speaker 2: a repayment plan not based on your income but actually
Speaker 2: based on paying it off. And so that's where it
Speaker 2: gets a little tricky. I think the direct answer for
Speaker 2: most people is are is that you go look at
Speaker 2: income based repayment or pay as you earn if you're eligible,
Speaker 2: and just say can I afford the payments? And if
Speaker 2: you can today, then you probably make that switch. And
Speaker 2: if you look at it and say, well, I'm probably
Speaker 2: not going to get a lot of forgiveness over here,
Speaker 2: I'd rather just pay it off. Then you need to
Speaker 2: look at other plans like extend the graduated your standard
Speaker 2: that amthortize a debt that paid the loan off over time,
Speaker 2: rather than relying on forgiveness that you may no longer
Speaker 2: believe in because of what's happened with strough loans.
Speaker 1: If you're in forbearance on the safe plan and you
Speaker 1: know at some point you're going to need to move,
Speaker 1: you're gonna be forced essentially to get onto another plan.
Speaker 1: Does it make sense to stay put for the time
Speaker 1: being or does it make sense to start assessing your
Speaker 1: options and particilarly moving beforehand.
Speaker 2: For the vast majority of people, it just comes down
Speaker 2: to affordability. Like, once they lock in on what are
Speaker 2: my plan options, the next question is should I move
Speaker 2: today or not? And that just is an affordability question.
Speaker 2: And so if you're someone who can afford it easily today,
Speaker 2: then I'm not sure what you're waiting around for. But
Speaker 2: if you're someone who needs to kind of cut things,
Speaker 2: pay other things off, et cetera, or it's going to
Speaker 2: be really really tight for you when to move happens,
Speaker 2: you'd rather delay that pain, then it makes sense to delay,
Speaker 2: So there's no wrong or right answer. You should do
Speaker 2: this or it shouldn't do that. It's really kind of
Speaker 2: like just starting with can I afford this new payment
Speaker 2: that's had it my way? Yes? Can I do it easily? Cool?
Speaker 2: I think you should move today. But if you're someone's
Speaker 2: like this really sucks, it's gonna be hard for I
Speaker 2: need to do other things? Can you hold off as
Speaker 2: long as you can? Okay?
Speaker 1: What about tell me more about the rap plan that's
Speaker 1: coming around in July?
Speaker 2: Is that right? Yeah? So, well, we we think July.
Speaker 2: We're not sure legally it's supposed to be by July,
Speaker 2: but who knows. But this rap plan is like IBr.
Speaker 2: Like SAVE, it offers payments based off of your income
Speaker 2: and your family size. It also promises loan forgiveness after
Speaker 2: X number of years of pain on it Now. Like SAVE,
Speaker 2: it also offers an interest waiver, so any unpaid interest
Speaker 2: is waived on a monthly basis. But unlike any other
Speaker 2: program that's ever existed, it does one other thing. It
Speaker 2: makes a payment of up to fifty dollars towards your
Speaker 2: principal balance, So not only is your balance not growing,
Speaker 2: but could also decrease over time. Just by application of
Speaker 2: the program not as great, but there's a trade off.
Speaker 2: The trade off is unlike any other program, it is
Speaker 2: much longer in terms of loan forgiveness. So we're save
Speaker 2: offered long forgiveness as early as ten years, pay as
Speaker 2: you earned, offered long forgiveness after twenty years, and IBr
Speaker 2: after twenty to twenty five years. RAP offers it at
Speaker 2: thirty years. So now you have to wait five extra
Speaker 2: years for this thing, and that five extra years could
Speaker 2: be really costly to you. It could also not just financially,
Speaker 2: but also emotionally and kind of mentally just the load
Speaker 2: of carrying it. So that is the trade off, but
Speaker 2: it does have a lot of ups to it, upsides
Speaker 2: to it.
Speaker 1: Yeah, it's kind of insane to think about people having
Speaker 1: their student loans as long as they have a mortgage.
Speaker 2: But why is that insane? Sure, I understand because like globally,
Speaker 2: this isn't like out of control like in the UK.
Speaker 2: That's what they do. You pay on it for up
Speaker 2: to thirty years and then it retires at a certain point.
Speaker 2: The same thing with Australia, so we're not out of
Speaker 2: step like and I can criticize this administration on a
Speaker 2: lot of things, but this plan isn't out of step
Speaker 2: with that. But I do agree that, wow, this education
Speaker 2: that I got, I'm caring it for as long as
Speaker 2: a mortgage. But also, you don't have to choose these programs, right,
Speaker 2: You could choose to do something else.
Speaker 1: Well, And I think that's one of the things we
Speaker 1: talk about regularly on the show is what degree are
Speaker 1: you getting, how much are you paying to get the degree?
Speaker 1: What is the value in return for going to school?
Speaker 1: And clearly the a lot of American people have lost
Speaker 1: faith in the value of a college education. They don't
Speaker 1: see it as valuable as it used to be. And
Speaker 1: I think a large part of that isn't because the
Speaker 1: education has degraded so much. That might be a little
Speaker 1: bit of it. I think it's because the costs have
Speaker 1: risen so much, and so that degree that I could
Speaker 1: have gotten for thirty grand, well that seems reasonable. If
Speaker 1: that same degree costs one hundred and twenty, then it
Speaker 1: feels far less enticing. And you have to really run
Speaker 1: the numbers as a high school student and parent of
Speaker 1: a high school student before you decide to lack yourself
Speaker 1: to student loans of that magnitude.
Speaker 2: Yeah, I really wish people actually did that more, because
Speaker 2: I talk with a lot of bars and they are
Speaker 2: aware of the financial cost of things, but the emotions
Speaker 2: went out, especially if they have like an older child
Speaker 2: that they already paid and made a mistake with, they
Speaker 2: feel like now somehow they're depriving the second and third
Speaker 2: kid of the similar opportunity. So they're making an emotion
Speaker 2: decision no matter what the math says. And then there
Speaker 2: also there's other times when the thing they're solving for
Speaker 2: is not what makes the most financial sense. It's the
Speaker 2: thing that makes me feel good about myself. Well, my
Speaker 2: kid got into this school, so I'm gonna find every
Speaker 2: way I can to pay for it, even though it's
Speaker 2: going to wrecking financial or make things really difficult for me.
Speaker 2: And so that's always the hard part is I find
Speaker 2: that people aren't really making dollars and cents decisions, They're
Speaker 2: really making emotional decisions that are guiding the way there.
Speaker 1: One hundred percent, I think you're right. I think there's
Speaker 1: a lot of that and uh, and yet you pay
Speaker 1: the price for it, if that's if that's if you
Speaker 1: let the motions be there, you.
Speaker 2: Pay the price. Tax Payers pray the price at August
Speaker 2: kind of who price is paid to cost for? Do you?
Speaker 1: So when somebody listeners are out there thinking about which
Speaker 1: repayment plan makes the most sense for them, is the
Speaker 1: lowest payment typically the best thing to prioritize, or who
Speaker 1: out there should be focused on paying off their loans faster?
Speaker 2: Yeah, So the rough kind of back of the envelope
Speaker 2: math I do is if you're you're someone who has
Speaker 2: a reasonable shot of paying off your loans if your
Speaker 2: income to st loan debt ratio is like one point
Speaker 2: twenty five to one. So for example, if you all
Speaker 2: one hundred and twenty five thousand dollars in still loans
Speaker 2: and you ma one hundred thousand dollars student loans, I'm
Speaker 2: sorry an income, you have a reasonable shot at paying
Speaker 2: back the debt. And if you're one to one, that's
Speaker 2: a greater shot. And if you're like, you know, zero
Speaker 2: point five to one, even greater shot. You're not really
Speaker 2: on a forgiveness path. But anytime you start creeping up
Speaker 2: past at one point twenty five to one, then forgiveness
Speaker 2: becomes more the laying you have to operate on just
Speaker 2: by way of math, unless you have other people subsidizing
Speaker 2: your cost of living for an extended period of time,
Speaker 2: because there's just no other way to make it work.
Speaker 2: The amortization schedule is going to eat you alive.
Speaker 1: How so I read about the new student loan lifetime
Speaker 1: borrowing cap. How impactful is that going to be for
Speaker 1: people moving forward? Because before and in some ways like
Speaker 1: it was pretty bad because you could borrow as much
Speaker 1: as you wanted and that created a problem too. It
Speaker 1: seems like, so is this going to be helpful in
Speaker 1: preventing people from borrowing more than they would otherwise be
Speaker 1: able to pay back?
Speaker 2: Well, I don't know if it's going to prevent come
Speaker 2: from borrowing more than it otherwise would be able to
Speaker 2: pay back, but it's going to mitigate how much taxpayers
Speaker 2: are kind of carrying this burden of individual borrows. And like,
Speaker 2: this was a time when it was uncapped limit on
Speaker 2: borrowing and now there's a cap, and so it just
Speaker 2: mitigates how much you can borrow, but it doesn't guarantee
Speaker 2: a return on investment for that person. And so I
Speaker 2: think there's going to be a very messy middle of
Speaker 2: borrows who were caught in between because there was no
Speaker 2: real off ramp for people that are have already started
Speaker 2: a process of borrowing, there is some. But if you
Speaker 2: are someone who has, for example, parent plus loans today
Speaker 2: for a kid in year one, your repayment options go away.
Speaker 2: If you borrow alone after June thirtieth this year, you
Speaker 2: can only there's no longer income based options. It's you
Speaker 2: have to pay it back. Well, how does that work
Speaker 2: out for someone who was already planning on income based
Speaker 2: and that was their game plan for it. There's no
Speaker 2: longer option, So does it will there's work long term?
Speaker 2: Likely yes, until some other problem presents itself and then
Speaker 2: it no longer works and we need to adjust. Will
Speaker 2: there be people that are absolutely crushed along the way
Speaker 2: one thousand, because that's just the nature of changes. Will
Speaker 2: this be better for us overall? I hope because right
Speaker 2: now we have to admit it's kind of ridiculous that
Speaker 2: you will spend one hundred thousand dollars a year on
Speaker 2: an undergraduate education. That makes no sense. Yeah, there's no
Speaker 2: degree that's going to pay that back over four years.
Speaker 2: There's no job where that works out.
Speaker 1: Do you think there's going to be more potential need
Speaker 1: for private student loans? Like, for a minute, there it
Speaker 1: seemed like private student loans where nobody needed them, Like
Speaker 1: the rates were incredibly low at the federal.
Speaker 2: Private student loan lobbyists got their money over the last
Speaker 2: couple of years.
Speaker 1: What do parents need to know about private study?
Speaker 2: Yeah, private school loans, they're going to have a resurgence
Speaker 2: just because by nature of barrows, the visions aren't going
Speaker 2: to change in terms of the schools that they want
Speaker 2: to go, but they're going to leverage themselves even further
Speaker 2: by taking out these private stodol loans. And there's gonna
Speaker 2: be a rush over years one and two by these
Speaker 2: lenders to snatch up all the prime borrows they can.
Speaker 2: And then in years three, four or five, we're gonna
Speaker 2: move on to subprimes and the rates are gonna be
Speaker 2: upward to fifteen, sixteen, seventeen percent, and then we're gonna
Speaker 2: have a cliff in year six, seven eight, where like
Speaker 2: there's nothing left in people aren't able to afford it,
Speaker 2: and they thought they were gonna be able to pay
Speaker 2: it back and they weren't. And the economy's gonna change
Speaker 2: on us. But for right now twenty twenty six, twenty seven,
Speaker 2: twenty twenty eight, Yeah, I think private lending is going
Speaker 2: to be awesome.
Speaker 1: Wouldn't you say awesome? What do you mean?
Speaker 2: That means there's gonna be a lot of transactions being
Speaker 2: made to people borrowing private student loans, because that's just
Speaker 2: the nature of But I don't think it's the I
Speaker 2: don't know if it's necessarily the right decision for people,
Speaker 2: because by awesome for the lender, maybe not awesome for
Speaker 2: the borrow but they're getting what they want and what
Speaker 2: they contracted for, which is this money to pay for school,
Speaker 2: and then they're going to have this opportunity to kick
Speaker 2: the can down the road while their kid is in school,
Speaker 2: and then when they exit, the problem is going to
Speaker 2: hit and they're not going to know what to do.
Speaker 2: And we saw this during COVID, where people had private
Speaker 2: student loans and they graduated, job market was trashed. Kid
Speaker 2: owns two hundred thousand dollars. Parents co signed on it,
Speaker 2: grandparents co signed on it, and there's no opportunity to
Speaker 2: ever pay us loans off. And now we have to
Speaker 2: have difficult conversations about settlement and bankruptcy moving forward. But
Speaker 2: the lenders made out well.
Speaker 1: And that's because right there are no regulations in place
Speaker 1: on private student loans the way there are on federal
Speaker 1: or very few.
Speaker 2: Right.
Speaker 1: So there is no income based repayment with private student loans, right.
Speaker 2: Nor why would there be. They don't have the same
Speaker 2: societal interest in having an educated population population the same
Speaker 2: way as the government does, so why would they subsidize it.
Speaker 2: You're borrowing something that we recognize you can't afford to
Speaker 2: pay back, or you're not a good bet to pay back.
Speaker 2: That's why your co signer is there to backstop it.
Speaker 2: But that's not the nature of how things. People have
Speaker 2: these conversations. They say, I'm gonna take out these loans
Speaker 2: for you as a kid, but you're gonna pay it back,
Speaker 2: and the kid it's like, yeah, I'm gonna pay it
Speaker 2: back and into a job market where oh my god,
Speaker 2: this is trash. But it's been this way for years,
Speaker 2: where like, I don't know about you, but it took
Speaker 2: me six to eight years to get my kind of
Speaker 2: like adult bridges on where I actually could feel like
Speaker 2: I can handle in. My income kind of stabilized out
Speaker 2: and I was able to start like really planning for it.
Speaker 2: But that didn't happen in year one. I know very
Speaker 2: few people that's the case for so the parent ends
Speaker 2: up on a hook anyways, but they don't think about
Speaker 2: it that way, and so they just end up over
Speaker 2: committing to a thing and it becomes a problem down
Speaker 2: the road.
Speaker 1: So would you say private student loans are the worst
Speaker 1: kinds of borrowing the individuals can do? Should those be
Speaker 1: off the table? Does that mean if you have to
Speaker 1: resort to private student loans you should be looking for
Speaker 1: a cheap option for school. You should be finding other
Speaker 1: ways to help you pay for it. You should be
Speaker 1: getting a part time job.
Speaker 2: Is it just?
Speaker 1: Is it that cut and dry?
Speaker 2: I don't think so. And this is where I made
Speaker 2: a terrible interview because I can just say it do
Speaker 2: this or that? Because what problem are you solving for? Right? So,
Speaker 2: once you run out of federal student loans, you need
Speaker 2: to be able to pay for it. What are your options?
Speaker 2: You may have equity that you could borrow against your home.
Speaker 2: Do you do that? Do you borrow from family or friends?
Speaker 2: Do you take against your retirement? Or do you take
Speaker 2: out a private stoodl loan that has an interest rate
Speaker 2: that you may not be able to pay back, But
Speaker 2: it doesn't put your It may not put your house
Speaker 2: in jeopardy the same way. It may not do this
Speaker 2: or that or retirement. So could you do that? Like? Yeah,
Speaker 2: I think they serve a purpose as long as you
Speaker 2: understand what are the pros and cons of them. Then
Speaker 2: if the problem you're trying to solve is I need
Speaker 2: to get my child into this school, and I will
Speaker 2: do that by any means necessary. Who am I to
Speaker 2: stand in your way and just say don't do that.
Speaker 2: That's a terrible idea. Yeah, we could all agree it's
Speaker 2: a terrible idea. We're gonna do it anyways, because solving
Speaker 2: a different problem. Yeah.
Speaker 1: I got more questions to get to with Stanley, including
Speaker 1: what about getting your advice student loan advice from the internet?
Speaker 1: How does he feel about that? And also what's going
Speaker 1: on with the education department that's supposed to be defunct.
Speaker 1: We'll talk about that and more. Right after this, I'm
Speaker 1: talking with Stanley Tap. We're talking about the student loan
Speaker 1: chaos and trying to make some sense of of the changes.
Speaker 1: And Stanley, appreciate your level heads as student loan policy
Speaker 1: has shifted. What are the most common misunderstandings that borrowers
Speaker 1: are having right now? And maybe what are your clients
Speaker 1: most worried about.
Speaker 2: I think the common misunderstanding is just like how I
Speaker 2: have people who want an affordable payment, but they also
Speaker 2: are worried about the interests accruing, and then they also
Speaker 2: want to work towards loan forgiveness, but then they don't
Speaker 2: trust the loan forgiveness is going to happen, and so
Speaker 2: they play this like messy middle playground of Okay, I
Speaker 2: mean take the income base for payment option pay less,
Speaker 2: and then when I get a large chunk of cash cash,
Speaker 2: I'm gonna just make a contribution towards one of the
Speaker 2: loans to try to pay it off. And that seems
Speaker 2: good on paper, but it actually doesn't. That doesn't how
Speaker 2: not really how life works out, because you can't really
Speaker 2: ride two horses at one time the way people would
Speaker 2: try to do. There. If you need the lower payment,
Speaker 2: then you're not really aromatizing the debt and the interest
Speaker 2: is going to grow. But the game you're playing is
Speaker 2: a forgiveness game at that point. The strategy you're on
Speaker 2: is working toward long forgiveness after twenty to twenty five years,
Speaker 2: So it really doesn't make any sense for you to
Speaker 2: try to pay extra on the interest, but you're psychologically
Speaker 2: worried about it, and so you want to do something
Speaker 2: about that because it freaks you out. But again, stud
Speaker 2: loans are operating by a totally different set of rules
Speaker 2: unlike your other debt. No other debt comes with loan
Speaker 2: forgiveness the same way, So you have to lock into
Speaker 2: that strategy. Now, if you're someone who doesn't really trust
Speaker 2: it and you don't think it's going to be there,
Speaker 2: then maybe you should instead of making periodic lump sum payments,
Speaker 2: perhaps you take that lump sum of cash that you
Speaker 2: have available and put in the high yield savings account
Speaker 2: and until keep stocking that away, socking away, socking away,
Speaker 2: and then when you can afford to pay off the
Speaker 2: whole thing, now you make a decision, do I keep
Speaker 2: working towards loan forgiveness or do I take out this
Speaker 2: money I saved and just pay it off and be done.
Speaker 2: But trying to ride two horses at the same time
Speaker 2: doesn't really work out. And that's like one of the
Speaker 2: biggest misconceptions I see all the time, that it actually
Speaker 2: hurts borrowers.
Speaker 1: What so for people who truly are worried about loan forgiveness,
Speaker 1: options going away. What would you say to that.
Speaker 2: Person, I say, I understand your concern, but we haven't
Speaker 2: seen that yet in thirty years. And this has been
Speaker 2: the most aggressive administration in overhauling STOO loan programs moving forward,
Speaker 2: and they didn't get rid of any forgiveness programs. They
Speaker 2: cut SAVE, but they're still a path forward to get
Speaker 2: income driven repayment forgiveness. And be technical here, Income driven
Speaker 2: repayment ID ideas and DOG describes a CA gegory repayment
Speaker 2: plans based on your income. Inside of that category, they're
Speaker 2: saved IBr ICR and then paigeorn your credit under save
Speaker 2: your credit under page EARN is fully transferable to any
Speaker 2: other plan in that category. So the government under this
Speaker 2: administration has left forward that type of forgiveness. I don't
Speaker 2: see that going away for existing borrowers moving forward, but
Speaker 2: I can see the government stop offering it in the
Speaker 2: future for new bars. But if you're someone with a loan,
Speaker 2: I don't see that going away. I understand people with
Speaker 2: concerns about public service loan forgiveness and kind of changes
Speaker 2: that we're being talked about there that may be coming
Speaker 2: down the pipeline in the future, but PSLF still exists.
Speaker 2: People are still getting forgiven today, So I don't think
Speaker 2: you need to worry about that today. But if you
Speaker 2: are worried, set that money aside, hold on to it,
Speaker 2: and when you have to make that decision the future,
Speaker 2: then make it. Then I don't see that there's any
Speaker 2: need to get ahead of it today.
Speaker 1: What sort of bad information are you seeing out there
Speaker 1: in the student loan pay pretty much everything on I
Speaker 1: was gonna say, TikTok and Instagram reels have to be
Speaker 1: big culprits.
Speaker 2: No, No, I think the biggest thing really is related
Speaker 2: towards loopholes for forgiveness. There aren't any loopholes for forgiveness.
Speaker 2: There are literally like four main paths towards relief. There's
Speaker 2: public service loan forgiveness because you work for the governor
Speaker 2: or nonprofit. There is twenty to twenty five years forgiveness
Speaker 2: because you pay based on your income on on one
Speaker 2: of those plans. There's totally permanent disability because you become
Speaker 2: totally're permanently disabled according to your doctor the VA of
Speaker 2: Social Security. And then there's borrow defense to repayment for
Speaker 2: people who went to these kind of schools and advertise
Speaker 2: in the middle of the day on Jerry Springer and
Speaker 2: things like that, and that's the full kind of like nature.
Speaker 2: There's these small other programs, but for the most part,
Speaker 2: there are no loopholes here. And so I think the
Speaker 2: most important thing to remember is that there's really not
Speaker 2: an easy way out of this. We have to figure
Speaker 2: out am I on a pay it off strategy? Or
Speaker 2: am I on a forgiveness strategy? And once you lock
Speaker 2: that in, the question it becomes when do my facts
Speaker 2: change enough where I move from say forgiveness to all
Speaker 2: pay it off or pay it off to a forgiveness.
Speaker 2: And because it's not a decision that you make one time,
Speaker 2: it's a decision I think you analyze at least on
Speaker 2: an annual basis where you're saying, am I still on
Speaker 2: the right path forgiveness or pay it off?
Speaker 1: What's the current status of the Education Department in the
Speaker 1: aftermath of the twenty twenty five executive order, Like, it's
Speaker 1: not supposed to be around much longer.
Speaker 2: Right, I don't, So the current status is they still exist,
Speaker 2: they're still processing things, and there's talk about offloading the
Speaker 2: loans to different departments, maybe Department of Treasury, maybe SBA,
Speaker 2: but none of that has happened as if yet, and
Speaker 2: even if it does happen, it doesn't change, kind of
Speaker 2: like your obligations on the Daniel or payment plans moving forward,
Speaker 2: that will still be there. But right now the Department
Speaker 2: of Education exists. It is crippled, undoubtedly if this word
Speaker 2: table with four eggs, it will be on its last
Speaker 2: leg right now, and yet it's still trudging along and
Speaker 2: working so well. May there be some changes before this
Speaker 2: administration leaves office? Possibly? Do I think that's likely given
Speaker 2: everything else that's going on. No, but could Linda McMahon
Speaker 2: as acting Secretary find a way to really close down
Speaker 2: this Department of Education for good? Maybe? But I don't
Speaker 2: know how that changes anything to do with your repayment
Speaker 2: and forgiveness options except for possibly more likely delivering you
Speaker 2: an even less effective customer service solutions moving forward.
Speaker 1: All right, last question, what parting words of wisdom do
Speaker 1: you have for people who feel like their student loans
Speaker 1: are burden some and they want I don't know, it
Speaker 1: doesn't even have to be specific advice like get on
Speaker 1: this plan right and obviously every situation is unique, But
Speaker 1: what would you say to those folks who feel like
Speaker 1: they're struggling in nervous about repaying their loans.
Speaker 2: Is this a podcast where I get to cuss?
Speaker 1: No, we try to reframe, Okay, So the.
Speaker 2: Way I would say it would be more direct than
Speaker 2: how I'm gonna say it here, which is like, live
Speaker 2: your best freaking life possible despite the student loans. Don't
Speaker 2: pass up love, don't pass up jobs, don't pass up
Speaker 2: other things because you're worried about the student loan debt.
Speaker 2: We will find a way to tackle the student loans
Speaker 2: and to make them fit around your life, but it
Speaker 2: does come at cost. We may not get rid of
Speaker 2: them as aggressively as you would like, and yet you
Speaker 2: will have that love that you were holding out for.
Speaker 2: I see far too many people that stop living life
Speaker 2: because the thought of this debt hanging around forever freaks
Speaker 2: them out. But it's not even just the thought. It's
Speaker 2: the thought that is uncoupled from actual kind of consequences
Speaker 2: of understanding what are the real consequences here, and then
Speaker 2: what are my real options available. I'm not promising anyone
Speaker 2: that she'll have a perfect solution that works. It doesn't exist. Yeah,
Speaker 2: but can we mitigate the damage that allows you to
Speaker 2: kind of balance everything. Absolutely so I always want people
Speaker 2: to live their best freaking life possible despite their student loans.
Speaker 2: And we'll find a way.
Speaker 1: Forward, dude. Great way to end it, Stanley Tate, thank
Speaker 1: you so much for joining me. Where can how the
Speaker 1: money listeners find out more about you and your content.
Speaker 2: You use this place of though is just check us
Speaker 2: out at t DSQ dot com or if you pop
Speaker 2: in Stanley Tate Lawyer, it is gonna pop right up.
Speaker 1: Awesome. We'll link to you in the show notes too.
Speaker 1: Thanks Stanley, Thank you. Oh man, what a great combo
Speaker 1: with Stanley Tate. And I just appreciate too. In an
Speaker 1: area of incredible headlines and a lot of change, there's
Speaker 1: there's just a lot of freak out in the student
Speaker 1: loan space, and I feel like Stanley is such a
Speaker 1: solid presence with good advice without being over overly reactionary.
Speaker 1: And I just think we're in a time where and
Speaker 1: I get it, I totally get it where there are
Speaker 1: abundant reactions and a lot of fear and I think
Speaker 1: Stanley cuts through that really well by offering his thoughts
Speaker 1: and advice and insight without just being like hair on
Speaker 1: fire and so what he said too. I love this.
Speaker 1: I think it makes total sense that a lot of people.
Speaker 1: My big takeaway is that he said, pick a strategy
Speaker 1: and stick to it. You can't ride two horses at
Speaker 1: the same time, and it's understandable why someone would say, well,
Speaker 1: I just I don't know that I trust you, know,
Speaker 1: forgiveness to stay around, and so I feel like I
Speaker 1: have to do both of these strategies at the same
Speaker 1: time in order to feel comfortable. And then even at
Speaker 1: the end right what he was saying was like, live
Speaker 1: your life, and it's really it's really hard. I think
Speaker 1: it's really for a lot of folks. It's become easy.
Speaker 1: It's become normal to let student loans influence a lot
Speaker 1: of life decisions. And I just appreciate his way of thinking, saying, well,
Speaker 1: they can't change every future decision you make, and they
Speaker 1: might be with you for a while. Whether you are
Speaker 1: on the income driven repayment plan and you're saying, listen,
Speaker 1: I'm gonna try to pay these loans off in quicker
Speaker 1: than before, you know, trying to get some sort of forgiveness,
Speaker 1: or whether you're on the long term forgiveness route, there
Speaker 1: are there are ways I think to despite the impact
Speaker 1: of student loans in your life, live your life, and
Speaker 1: to not allow those to dictate most of the choices
Speaker 1: you make are many of the choices you make, whether
Speaker 1: it's about love, starting a family, all that kind of stuff.
Speaker 1: So I thought, yeah, Stanley had a lot of good insight.
Speaker 1: If you are interested to hear more from him, I
Speaker 1: will put links to his YouTube channel, his newsletter, his
Speaker 1: newsletters spot on every time it comes out, and just
Speaker 1: if you are in the uh hey, I need to
Speaker 1: help in hand in the student loans space. Stanley's definitely
Speaker 1: a great place to turn. But that's going to do
Speaker 1: it for this episodisode. I hope you enjoyed it. We'll
Speaker 1: see you back here on Friday for a fresh Friday
Speaker 1: Friday flight. Until next time, best Friend Out.