Meet Connor Pierce

[00:00:00] Connor: I call it pseudo-forgiveness and the crazy part is, again, I talk to highly intelligent people all day. Most people have never heard of this. They think loan forgiveness truly means loan forgiveness, right? It’s not like, oh, there’s a big asterisk, by the way, the IRS is saying, here’s your tax bill for $30,000.

[00:00:29] Linzy: Welcome to the Money Skills for Therapists podcast, where we answer this question. How can therapists and health practitioners go from money shame and confusion to feeling calm and confident about their finances and get money really working for them in both their private practice and their lives? I’m your host, Linzy Bonham, therapist turned money coach and creator of the course Money Skills for Therapists.

[00:00:50] Hello, and welcome back to the podcast. So today’s episode, I have guest Connor Pierce. He is a physiotherapist turned student loan consultant from Student Loan Planner. And today we are talking about student loans, specifically American student loans. As a Canadian, I got a good education today on some of the complexities of the American student loan landscape.

[00:01:14] For other Canadians listening, I will say it does get pretty technical today in terms of the specific American pieces, but I think some of the bigger pieces always apply when it comes to money. So I say hang with us even if some of the specifics won’t apply to you. It’s always good to listen to people talk about things that we don’t usually talk about,

[00:01:31] loans and how they work being one of those things. Today Connor and I get into the current state of the student loans landscape in the United States. What’s happening? What’s changing? We talk about what you can do if you are finding yourself with a lot of student debt, which I know many folks listening to this podcast are going to be in this position.

[00:01:50] We graduate from school with tons and tons and tons of debt. That is the default so lots of things we talk about today are going to apply to you. What you can do, if you do have a lot of student debt, and what are some of the loan forgiveness options out there? Something that I learned in this conversation with Connor is that student loans are a different beast.

[00:02:08] They are not your normal kind of debt where it’s like lower interest rate, or paying it faster, equals paying less money. With student loans, there is this whole other aspect of forgiveness programs that you might already be part of, or that you could be part of that just can completely change the math on how much you’re going to pay over time.

[00:02:27] So lots of complexity here. Connor does a great job of explaining so many facets of student loans that I definitely did not understand. Here is my conversation with Connor Pierce.

[00:02:46] So Connor, welcome to the podcast.

[00:02:50] Connor: Hey, thanks for having me.

[00:02:51] Linzy: Yeah, I’m very excited to have you on the podcast, as excited as somebody could probably be about student loans, cause as we were just talking about off mic, student loans is something that comes up a lot with the folks that I work with, like the therapists who I work with inside of Money Skills for Therapists.

[00:03:07] So I know that it’s something that probably most people listening have some student debt, maybe some very significant student debt. and it’s not an area that I know a ton about. So I’m excited to have you on because this is really your area that you work in. This is your, your total focus, if I understand.

[00:03:24] Connor: Absolutely. Student loans are complicated. They’re messy. They seem to be constantly changing, but hugely impactful for your life, for what you want your future life to be. So understanding that is, is my wheelhouse. That’s what our team is passionate about at Student Loan Planner. And that’s what we love to help people with.

[00:03:40] Linzy: Yeah. Great. So start by giving me the lay of the land. Cause I know that also some things have been, you know, happening and shifting with student loans in the United States. And for folks listening, we are going to be digging into specifically to the United States. I’m a Canadian, so this is something I know very little about.

[00:03:55] I think some of the stuff we’re going to talk about today will apply to Canadians in the general sense of your relationship to your loans, looking at your loans, being strategic about your loans. But I think a lot of the specifics we’re getting into is the American loan system, which is its own beast.

[00:04:08] So tell me about what is happening right now with the current state of the student loan industry in the United States. Yeah.

[00:04:19] Connor: That’s a great question. And it’s complicated. I don’t know if it’s still a Facebook status. It’s complicated, but that’s kind of the summary of student loans, especially over the past four years, because there have been some pretty drastic changes that have had a huge impact on clients of ours, on my personal situation, my wife’s situation.

[00:04:34] We actually both have student loans. But there’s this kind of constant flux of, there’s different repayment plans. So one thing that makes student loans, just if we step way back, different from every other type of debt is federal student loans in the United States have an option for loan forgiveness.

[00:04:49] And there’s actually two different subsets of loan forgiveness. There’s one that a lot of people have heard about, which is you go for nonprofit loan forgiveness, but there’s actually another option for folks in private practice, or folks who are part-time, or folks who aren’t working in the nonprofit sector, where you can get loan forgiveness.

[00:05:05] And within that loan forgiveness, there’s another type of way of paying off your loans, which is called income driven repayments where the amount that you pay per month is totally based on your income and not at all based on the amount of debt you have and the interest rate. So this is where student loans are their own beast and you actually treat them, when you go to pay them off, or maybe go for forgiveness, totally different than any other type of debt.

[00:05:29] Linzy: Which is interesting, and that’s kind of, in a way, that’s new information to me, because I think, as you say, it makes them their own beast. And it sounds to me like, from what you’re saying, the kind of forgiveness program aspect, and these income driven, is what makes it different than really any other kind of debt, because if I’m kind of understanding what you’re saying, it means that

[00:05:48] you might not have to repay that full amount in the way that you would have to repay, say like a line of credit or a mortgage with a student loan. The total amount that you pay in the end could vary depending on which of these programs you’re in, like significantly. Is that correct?

[00:06:02] Connor: That’s 100 percent right. And a vast difference. So, when we run the numbers sometimes, especially for someone who has, let’s just say, 50k, 100k plus in student debt, The difference between going for loan forgiveness versus trying to just pay it off aggressively, like everybody’s heard of the live in the basement on rice and beans and just throw everything at it.

[00:06:20] Like that’s one option and that’s an option for some folks. But for the folks who say, Hey, I worked really hard to get this degree. I kind of want to enjoy my life along the way. Things like income driven repayment plans and going for forgiveness can allow you to kind of have that lifestyle. And at the same time, sometimes it will also save you more money than just paying it off really aggressively like you would a private loan or a practice loan or a personal loan or credit card debt. Those are all loans where you just have to pay that thing off

[00:06:46] till it goes to zero for the most part. But federal student loans are where it just gets totally different, to your point, and it can even save you a ton of

[00:06:53] Linzy: Hmm. Right, so that really is a very different ballgame. Really, I was going to say strategy, but it’s like you have to find your strategy within that ballgame. Cause as you say, if you have a credit card debt, you’re going to have to pay it down.

[00:07:04] So it’s how fast or how slow. And I often talk with folks about: how do you balance the other parts of your life, as you’re saying. Make sure you actually enjoy your life. Don’t make your life all about debt repayment, or don’t make yourself feel poor. Because what also happens too, when we try to pay debt too aggressively is we put all of our money into the debt.

[00:07:19] Then some normal life thing happens, like your fridge breaks or your car breaks down, and suddenly you have to put more money back on the debt and you feel like you’re sacrificing everything and yet you’re losing. So there’s always that balance to find, but with student debt, I’m hearing that there’s a whole other set of variables in the game. That means that it’s, not just about your pacing, it’s about these programs and how you use these programs.

[00:07:41] Connor: Yeah, absolutely. I think you, you pretty much nailed it. Other types of debt, it’s really just a game of how much are you willing to pay, and the faster you pay it off, the less you pay overall. But again, there’s even a balance with that of if you’re too aggressive, you can put yourself in a bad position down the road and then feel setback, and feel like you’re kind of spinning your wheels.

[00:07:58] And student debt, again, is where it’s totally different. And just for perspective, there’s like 11 different repayment plans at the federal level. So usually when you lock in like a mortgage or a payment, it’s like, this is your payment. This is the interest rate. This is the option. You pay that amount for how many years. If you pay it more than the minimum amount, you pay it off quicker.

[00:08:18] But with student loans, there’s 11 different options. And some of them are that traditional, you pay it for 10 years, same amount, it’s paid off at the end of 10 years, or you pay it for 30 years, you pay it off after all the minimum payments over 30 years, you pay more than the 10 year plan.

[00:08:32] But that’s kind of like the traditional way. So you can still do that for federal student loans. But then there’s four different income driven repayment plans. And how these work is it takes your income and not just your income. It takes your adjusted gross income. So the amount that you kind of end up with on paper that you’d pay taxes on.

[00:08:48] So you get to deduct things like retirement contributions, or if you have a health savings account and you contribute to that, believe it or not, that lowers your income, which then lowers your payment that you owe each month, because what they do is they take a percentage of that. So you’re paying a percentage of that per year.

[00:09:05] So just for example, one of the plans that it’s actually in a little bit of a question right now, but called the SAVE Plan, which the Biden administration released. It would give you the lowest payment that there’s ever been. You’d only pay 10 percent of your adjusted gross income per year.

[00:09:19] So like rough math, what does that mean for someone who makes like $70,000 a year? You might only have like a two or $300 payment per month, which makes it a lot more affordable depending on your amount of debt.

[00:09:31] Linzy: Right. Okay. So that’s a  program that we were chatting off-mic before that that is now kind of under, I don’t know. It’s imperiled. It might not survive. Can you give me a sense?

[00:09:42] Connor: Under duress.

[00:09:42] Linzy: Yeah, it’s under duress.

[00:09:43] Connor: I’m not sure what the right word is either.

[00:09:46] Linzy: It’s in danger. It’s an endangered lone species. Because that’s being challenged right now in the courts.

[00:09:51] And I’m curious, again, as a Canadian outside of the system, I have like a bazillion questions. So some of these things, for Americans listening, might be things that they already know, but how do you even get onto these different repayment programs? Like, let’s say I’m on a certain repayment program.

[00:10:06] How do I change programs? Will the loan company offer me different programs once you’re locked into a certain type of program, is that where you stay? Like, how is it even determined which of these programs you end up in, in the first place? And how do you change between these different options?

[00:10:23] Connor: So you can change between the programs, for the most part as much as you want. Now, there sometimes is a consequence if there’s outstanding interest. It can get, it’s called capitalized, which just means the interest that’s outstanding gets lumped on the principal which means that the interest will accumulate.

[00:10:38] So that’s the main thing to be wary of if you switch plans. But you can switch between the plans, for the most part, as much as you want. And the way it works is, you graduate. Once you finish your degree, there’s this required thing at every college in the United States, every university called Exit Counseling.

[00:10:53] And it’s kind of funny because it’s like this 20, 30-minute, like you click through, you answer these questions and it’s like, do you understand you have to repay this? You’re going to be in debt, whatever. and it doesn’t really teach you anything about the plans. It just says that. So the default is the standard 10 year plan, which is just you’re paying off the loan in 10 years.

[00:11:11] And over 50 percent of people are actually in that plan. Why? Because it’s the default but for the vast majority of people, especially as a new grad , it’s probably not the best plan for most people because these income driven repayment plan options, they’re kind of confusing. They’re kind of maybe scary, if you will, especially because I know for me, like if it’s unknown, it’s a little bit scary, right?

[00:11:32] Like, I don’t fully understand that. What does this mean? But it can give you a much more affordable payment. And there’s four different ones that are available for income driven. Save is one. Another fancy word is pay P A Y E. It’s called pay as you earn. There’s one called I C R and I B R, and they all take a different percentage of your income to come up with that payment.

[00:11:52] But at the end of the day, they’re all “income driven repayment plans” , which is kind of that umbrella term. And they all are based on your income. So you can switch between the plans. But you just have to know which plan is best for me and for my situation, because as with all things finance, they make it super complicated,

[00:12:08] it seems like. And especially with student loans where, you know, it can make a big difference depending on what plan you’re in.

[00:12:13] Linzy: Yeah, absolutely.

[00:12:15] Let’s say, for example, a therapist graduates with, let’s say $150,000 of debt. That’s a pretty typical number that I see when I look at people’s numbers with them.

[00:12:24] And, they move into private practice, right? And sometimes I see this, like folks who’ve graduated, they move right into private practice, which is a slow build sometimes for people. So it’s fairly normal, like in the first year of private practice, that somebody might get paid like $45,000, right? That’s what they’re earning at the end of the day, after they’ve paid their expenses.

[00:12:41] What options does somebody like that have? Like they have a ton of debt. They’re not making a lot of money yet. How would you talk somebody through, or like, yeah… What does this process look like of figuring out which program somebody like that should be in?

[00:12:55] Connor: That’s a perfect example, because we see examples like that all the time, right? Like, it’s like making that leap, whether you’re a new grad or even if you’ve been working for a while into private practice is like, you don’t just automatically start making a ton of money unless you’ve had a very successful side hustle, right?

[00:13:08] But for most people, it is a drop in income. And that’s where these income driven repayment plans are a super great tool in the tool belt, right? Like not everybody should do anything, but if you have federal student loans, maybe 150 K, that’s going to be a really large payment. If you’re trying to pay this thing off in 10 years, like upwards of 1,500 a month, and if you’re thinking I’m making 45 K, paying 1,500 a month, how are you living on like the rest of that?

[00:13:31] Right. But with an income driven repayment plan, if your income is only 40,000, you could have a very minimal payment to the tune of like maybe a hundred, 200 bucks a month. It would be very small. And that would allow you to, you know, invest in the practice, continue to live your life during those lean years as you start things up.

[00:13:49] So that’s just one example of, you know, I’m a huge proponent, even part of my personal story. Little background. I transitioned from being a physical therapist full time to going into kind of my own business and doing this as a contractor. So there was a large dip in my

[00:14:02] income, but I actually utilized myself and income driven repayment plan to say, Hey, while I’m in this dip, affording a student loan payment is going to be really tough, but I was actually able to lock in a 0 payment because my income truly went to zero.

[00:14:15] So if you take the percentage of, you know, what’s 10 percent of zero, it’s zero.

[00:14:20] So I actually had a 0 payment on my student loans when I first switched over. So that’s just an example that I think is super applicable for a lot of therapists thinking of jumping into private practice, but maybe that student loan is a barrier.

[00:14:31] It’s saying, Hey, well maybe there’s more options out there than what traditional advice would, actually say.

[00:14:37] Linzy: And for somebody like that, then, you know, let’s talk about, you know, our therapist who’s at 45,000 a year so maybe their payment goes down to a couple hundred dollars a month, I’m hearing, might be what that would look like if it’s… Yeah, is that about right? If it’s ten percent?

[00:14:54] Connor: Yeah. Yeah.10% would be the yearly payment, but then you break that down divided by 12. It’s a little bit more complicated. One part I left out is there’s a federal poverty line deduction based on your family size. So, like the Save plan, for example, that was  the most advantageous.

[00:15:06] There’s actually a 225 percent poverty line deduction to calculate the income that they use. So they take, this is like a little finance-y, but so you take your gross income, and then you go to your adjusted gross income. The government uses your adjusted gross income. Then they do a federal poverty line deduction multiplier to lower your discretionary income, and discretionary income is where they take the percentage. So in the Save plan for a single person, that’s thirty three thousand dollars. So what does that mean? If your adjusted gross income is less than thirty three thousand dollars, you have a zero dollar payment.

[00:15:38] Linzy: Right. Right.

[00:15:40] Connor: If you have a forty thousand dollar payment, you’re going to have a minimal payment, but probably less than a hundred dollars on the Save plan. Now, granted, some of the other plans only take 150 percent deduction, or 100 percent deduction. So the numbers can vary pretty significantly depending on which of those plans you’re in, but it can make it pretty friendly at the end of the day.

[00:15:59] Like the TLDR, Connor, get out of the finance world. Talk to a normal person, who doesn’t study student loans all the time.

[00:16:05] Linzy: Yeah, yeah.

[00:16:06] Connor: It can make it super affordable. And depending on the plan you pick, it can be more affordable than other plans.

[00:16:11] Linzy: And so, you know, I think that’s the suspicious part of me, right?

[00:16:15] Connor: Oh, let’s hear it.

[00:16:16] Linzy: Yeah, it’s like, okay, so, you’re paying less. Oh, that’s fun. That’s cute. Like, great. I only pay 150 bucks a month. What is happening to their balance while they’re paying these super low, like, low loan payments? Like, isn’t their balance growing? Yeah.

[00:16:35] Connor: Correct. The balance would be growing. Again, the plans are all a little bit different. Some of them actually offer an interest subsidy. So believe it or not, part of the reason is that the Save plan, which is going through some court cases as of the date that we’re recording this, says, “Is this plan even legal or not?”

[00:16:48] Because it was so advantageous, it would give people a very low payment. And part of the role in there was any interest that would accumulate beyond your required payment was actually covered by the government. So you actually never watch your balance grow, which is crazy, right? To have a 0 payment, maybe there’s typically $500 of interest accumulating, but that would never happen.

[00:17:08] So that’s part of the reason that plan is under duress, and potentially going to get thrown out in the courts, but the other plans, for the most part, your interest will continue to accumulate. So if you’re making a minimal payment, you can’t just set it and forget it, so to speak. It’s like, hey, at some point I’m going to have to pay a portion of that, but that’s where things like loan forgiveness come into play because maybe you don’t have to pay the entire balance.

[00:17:32] And again, another very confusing part of federal student loans is that you don’t expect to get your credit card debt forgiven. Don’t expect to get that personal loan or that practice loan forgiven. But with student loans, there is an option for forgiveness.

[00:17:44] Linzy: Yeah. Cuz that’s a whole other variable in this game because I will say, as a Canadian on the outside of the system, the fact that folks can have loans that grow is insane. Just like, you know, to give you an outsider perspective. Cause like in, in Canada, we don’t, we don’t have that, right? Like if you have a student loan, as far as I know, and maybe Canadians who’ve had different experiences than me or know something that I don’t will correct me on this.

[00:18:09] But, when you are in like loan repayment forgiveness for a little bit, for instance, your balance does not grow. Right? So it’s a very different system, and this is something that from the outside, I’m like, it seems predatory to me, because the vast majority of people are not financially educated, like we’re not given financial education in the public system, and we’re not given them in our education. It almost feels like a little bit of a bait and switch to me, or something like that, where for so many people who don’t understand the implications, it’s like, Oh my God, I don’t have to pay 150 bucks a month on my loan.

[00:18:39] This is amazing. This is so great. But they don’t realize that, the loan is growing. And it’s growing like 7% a year or whatever and over 10 years that can be hundreds of thousands of dollars.

[00:18:50] Connor: You’re totally right. I hear that word often when I’m doing a one-on-one consult with people. They just feel… they feel they weren’t properly educated on it, which I 100 percent agree. How can you go through K through 12, undergrad, most of our clients have been through grad school as well. Super intelligent, super smart people who are highly, highly effective at following directions.

[00:19:13] But sometimes the federal loans change the rules because of different administrations or different political agendas. And it’s, it’s super frustrating and super discouraging and, and disheartening to say, Oh, I thought I was on the right thing. Wait, they’re going to change the roles, or I thought I was doing things to get forgiveness in this program, but I missed one box that I needed to check.

[00:19:32] Now, what does that mean? So it’s stressful. There’s no doubt about it, especially when It’s kind of a weird job, right? Like I’m a student loan consultant. Sometimes I make the joke with folks of… I tell people that they’re like, what do you mean? And if you have student loans in the American system, you totally get it.

[00:19:46] Cause you’re like, it’s so complicated. Yeah, yeah,

[00:19:48] Sometimes people look at me sideways. They’re like, you do what? It almost feels like it’s shady. Like, Oh, you, you like do student loan stuff? Like that has a bad connotation. I’m

[00:19:55] Linzy: like no no payday loans kind of thing?

[00:19:58] Connor: No, we just do fiduciary financial planning. Like it’s, it’s just, hey, here’s the best for your situation. There’s no back end thing. It’s just, it’s complicated.

[00:20:07] Linzy: Yeah. it absolutely is. Cause the forgiveness piece I feel like is this wild card, it feels like, in this whole thing of if your loan is going to be forgiven one day, it changes all the math, right?

[00:20:18] What I’m understanding is if you, if you jump through certain hoops, if you do certain things for certain periods of time within certain programs, then they’re like, you did it. Good job, you know, like you don’t have to pay the rest, right, which would have a huge impact on the math. It would change all the math,

[00:20:32] being forgiven. But the fact that it’s also, as you say, administered by the government, which means that administrations can change, programs can maybe come and go, or just like government bureaucracy, as you say, like, you don’t tick the right box and like, Oh, sorry, you didn’t tick the right box in 1997 and now you owe us an extra 150,000.

[00:20:51] It seems like something that would be hard to really keep track of in a meaningful way as an average person when you’re coming to these different programs. And this is what I’ve heard one of my students say just recently is like she was told, after 20 years, you’re not going to have to pay anything, so it sounds like some sort of forgiveness program, but then that never really… It kind of seemed to go away and she wasn’t sure she had it anymore.

[00:21:11] So she refinanced. And now, from the outside, it’s like I hope that was the right thing that she refinanced, you know, I hope she got the right advice. But it almost seems like it’s removed that forgiveness option. So tell me a little bit more about these forgiveness programs that exist and like, how do folks know if they’re in a forgiveness program?

[00:21:27] How did they get onto a forgiveness program? What are those options? Because I’ve certainly heard about the non profit forgiveness program. Often I see people who are at the end of their 10 year non profit time, and it’s like they’ve served their time and they’re about to be free of their student loan, and then they’re going to quit their job. Because they’ve basically just been like, biding their time in the non profit because the loan forgiveness is worth it, and then they move into private practice.

[00:21:48] So that’s mostly who I see, and that’s the program I’ve heard the most about. Tell me more about that forgiveness program, other forgiveness programs. Yeah. What, what is that landscape?

[00:21:58] Connor: So one clarification just to make, and speaking to your client situation, cause I’ve seen this as well, and loan forgiveness is only for federal student loans. So when you refinance, you take loans from the federal sector to the private sector, and in the private sector you might be able to get a better interest rate, but there is no loan forgiveness option. There is no income driven repayment option so you’re kind of… It’s a one way ticket. You’re kind of locking things in, and there’s no undo button. So some folks, that makes a lot of sense

[00:22:27] for. A lot of folks, though, are better off, especially if there’s a high debt to income ratio, are a lot better off in the federal system because of some of those flexibilities. if you pass away and you have federal student loans, the loans go away.

[00:22:40] They’re forgiven. They’re discharged. If you become fully disabled, your loans get discharged. If you have private student loans, that might not be the case. They might become a spouse’s. They might become a child’s, or the estate’s kind of issue. So that’s another thing just to really understand before you kind of pull the trigger, understand the pros and cons before you make a, like a, a no undo button decision, like refinancing.

[00:23:05] Linzy: Because I think in simple terms, it would be tempting to think, Oh, I have a lower interest rate here. Lower interest rate means less debt paid because, you know, if we go back to what we talked about at the beginning in typical debt situations, that is how it works, right? If you have a lower interest rate, that’s good.

[00:23:21] You can pay it faster. The lower the interest, the faster you pay it, the less you’re going to pay over time. But in student loans, it sounds like that is not the case when we’re talking specifically about the switch from federal to private loans.

[00:23:32] Connor: You nailed it. Yeah, if you already have private student loans, refinancing them, not a huge deal. Still read the terms and agreements, right? It’s called the promissory note. Fancy word for just terms and agreements of “what are you switching into?” Because some companies have different terms and agreements, but most private companies are pretty similar.

[00:23:49] But that federal loan, Department of Ed loan to any sort of private refinance is a really big decision. So that’s one that you definitely want to understand what you’re trading off and what you’re getting.

[00:24:00] Connor: But to kind of circle back to your question about loan forgiveness, the nonprofit forgiveness, it’s called PSLF.

[00:24:06] So Public Service Loan Forgiveness. And that means you have to be working at a nonprofit or government entity while you’re paying the loans. So after 10 total years, which is 120 months of payments, if you’ve been making payments in an income driven repayment plan. During that time period, you can get your loans forgiven.

[00:24:25] So your point, if you have clients who are like, I’m finally ready to go start my own business, I’ve served my time. I got my 150K or 250K forgiven. The thing is, it doesn’t matter what the amount is, whatever gets forgiven, gets forgiven. There’s no federal tax consequences. It’s just 150K there. Once you make the 120 payments, it gets forgiven and it goes away, which is incredible.

[00:24:47] Like those are my favorite emails that I get all week. And I get a lot of emails because this stuff’s confusing, right? But that’s such an oh my gosh, like what a relief right of just, holy cow, like burden off your back Move forward with life. It just feels like a total fresh start. So that’s public service loan forgiveness in a nutshell. Now there are some nuances to that.

[00:25:06] There’s even some scary articles about public service loan forgiveness from 2017/ 2018. Because the program was established in 2007. So the first couple years, people didn’t know the boxes to check for that program. So less than 1 percent of people got loan forgiveness through that program.

[00:25:24] And if we really dig back into it, in 2007, they weren’t even giving out the proper loan to get loan forgiveness. You have to have a direct loan. They were giving out FFEL loans. The only way you would have known that is if you like had a friend at the government who made the program. So the numbers were staggering of how few people got forgiven.

[00:25:40] Now, fast forward to now, we know a lot more about the program. The information is much more readily available. There’s people like our company at Student Loan Planner who can help you make sure that you’re on the right track and kind of give you guidance there. And then the other thing is, just over the past, three years, they did this program called the IDR waiver or the one time account adjustment

[00:26:00] and that program was actually designed to essentially correct some of those things like oh, you missed checking that one box back in, you know, 2008. You no longer get loan forgiveness, and you’ve served your ten years. So actually tons of people were able to get forgiveness who previously never were because of this program that was designed to clean up some of the mistakes of the past and allow people to have a better situation moving forward. So that’s kind of the optimistic view of, Hey, they’ve kind of realized they’re trying to make some changes here, but not all student loan changes are positive.

[00:26:34] Like with the Safe court case going on, if that plan goes away, there’s over 8 million people in that plan, my wife and I included. So like, it’s going to change our situation for our family. It’s going to change a lot of people’s situation, and what they replace that with, or if they just take it away, we don’t know 100 percent for sure what that’s going to look like on a going forward basis.

[00:26:54] So. So that’s kind of the PSLF loan forgiveness plus a little.

[00:26:58] Linzy: Right, right. Okay. It does make me think, too, about what happens when you mix bureaucracy and finance, which is just like, a shit show? Because when you talk about 1 percent of folks actually getting what you’re supposed to get from their program, like that just sounds basically like a massive bureaucratic failure.

[00:27:13] Like that’s insane. So it’s nice that there’s a little bit of cleanup happening there. And hopefully many more people get what they were promised. So tell me about other types of loan forgiveness programs. That’s one I’ve heard of. What are other options for folks listening who didn’t go into the non profit sector or the government sector, but still have a ton of debt that they’re living with?

[00:27:32] Connor: Yeah, this is probably the other type of forgiveness. So PSLF is one bucket. 10 years at a non profit; you have to kind of check all the boxes. The other is, it’s called long term loan forgiveness, and it’s called long term, because you have to pay for 20 or 25 years and the 20 or 25 years depends on which one of those four different income driven repayment plans you select.

[00:27:52] It also depends on when you borrowed your loan. So a couple nuances to figure out which one is best for you, but it could be 20 or 25 years. The great thing is you can work anywhere you want. You’re not locked into that job where you’re like, I got to stay here for 10 years, and you’re kind of at the mercy of… I’ve even seen cases where someone’s at a nonprofit, and then it gets bought out by a for profit, and they have to make this decision of, Oh my gosh, like, do I leave my job to finish loan forgiveness?

[00:28:17] Or do I stay here, and think, what are the other options? So there is another option. But it’s an extra 10 to 15 years to reach that 20 to 25, and there’s also a tax on the loan forgiveness. So that’s the biggest other differences. Once you get to the finish line, in PSLF, everything’s forgiven. No tax. When you do long-term forgiveness, you actually have to collect that total amount that gets forgiven as income and pay a tax on it as if you made that money.

[00:28:45] Linzy: So if I get to the end of the program, I have 100,000 that was forgiven in this year. That would add $100,000 to my income for tax purposes, and I might have to pay 20,000 or 30,000 of taxes on that when I do my taxes. Okay. Okay. So it’s like this beautiful forgiveness, but the tax bill is going to suck is what I’m hearing.

[00:29:04] Connor: Right, I call it pseudo forgiveness and the crazy part is, again, I talk to highly intelligent people all day. Most people have never heard of this. They think loan forgiveness truly means loan forgiveness, right? It’s not like, oh, there’s a big asterisk. By the way, the IRS is saying here’s your tax bill for $30,000. You’re forgiven. Also give us $30,000, which is a big enough number that somebody would probably have to get new debt to finance the tax debt that they get from being forgiven.

[00:29:22] Connor: That’s another thing…

[00:29:31] Connor: It’s a good trade off to say, oh, I’m going to get two thirds of it forgiven, but I’m still going to owe this tax bill in the end. So it’s less of a debt, but then it’s like, if you’re not preparing for that, and you’re going that route, that’s definitely something that we encourage people to say,

[00:29:43] hey, you need to be paying your debt at this amount in an income driven repayment plan, which is one of the requirements, but you need to be investing this extra on the side so that can grow so that when the tax bomb comes, you can just cover that. And then you’re, you’re debt free. It’s not, Oh my gosh, where am I coming up with 30 plus thousand dollars to say, I was not ready for this.

[00:30:04] Linzy: Yeah, I mean, it sounds like there could certainly be strategy there, but first you need to understand what’s coming. Cause yeah, I think the term forgiveness might be a little generous in that case. It’s like, yeah, as you say, forgiveness with an asterisk, so could still be more advantageous, probably is, from what I’m hearing, but you have to anticipate the fact that there’s going to be then this additional bill coming,along with your forgiveness.

[00:30:27] Connor: 100 percent

[00:30:28] Linzy: Okay.I feel like you have really illustrated well that it is complicated, this whole world. This is why student loans consultants exist.

[00:30:36] Connor: So Connor, thank you so much for coming on the podcast today. And if folks want to learn more about what you folks do, and get more resources and maybe people listening have realized like, oh, I need to understand way more about my student loan situation and where I am.

[00:30:48] Linzy: Where can they get that information?

[00:30:51] Connor: The best place to go is studentloanplanner.com. We have tons of free resources. We’re really big on… We have lots of blog posts. We have some calculators where you can actually kind of map out your own and DIY your situation. there’s also a place that you can book on there. I know you have a special link, I think that gives people a discount.

[00:31:06] So that’d be great to share with them. if they wanted to get a one on one console and just say, Hey, I’ve heard enough about student loans. I don’t really want to listen to it anymore or DIY it. Just tell me the answer. Tell me the best options available. That’s a great place to go to.

[00:31:18] Linzy: Yeah. So if folks look in the show notes, there is a link that you can follow and if you follow that link, then, they will know that you came from this podcast, which is also a great way for people to support the podcast while getting, you know, help with your student loans. So it’s a win win.

[00:31:33] Thank you so much, Connor. This has been very enlightening.

[00:31:46] This conversation with Connor today really just affirms to me a belief I already have, and that you’ve heard me talk about many times, which is the importance of clarity, just the importance of understanding and student loans are one of these things that has so much complexity and so many moving parts that it’s not just about the numbers you see on paper but there’s all these other factors at play, these other variables in terms of forgiveness.

[00:32:08] Programs that you’re in, whether boxes have been checked, are programs going away, like he talked about even if you do get forgiveness depending on the program you’re in, if you’re in this kind of private, forgiveness track where you’re not working for a nonprofit, you’re going to have a big tax bill.

[00:32:22] So it’s like, you’re going to be forgiven, but also there’s this other financial consequence that comes up. There’s just a lot to know. And it’s normal that we don’t know these things because we’re not taught these things. And also this information is not made readily available. It’s not made transparent by the folks providing the loans.

[00:32:38] And so this is where investing in being with somebody who lives and breathes these things can be a very worthwhile investment in general. That is true of, you know, investing in a financial planner, investing in financial education, investing in a course, like Money Skills for Therapists, for example.

[00:32:57] But it definitely sounds extra true of student loans, where there could be, you know, 100 or 150, 000 difference at the end of the day. if you get into the right program that suits you and do all the things to make sure that you’re actually checking the boxes to fulfill that forgiveness program. That makes a massive financial difference.

[00:33:14] So lots to know here, Definitely worth getting some support with student loans, if it’s something that you do not have clarity on your own situation, or if you don’t know your options, I do encourage you to, check out Student Loan Planner, and you can again, click on that link in the show notes so that they know that you came from me

[00:33:30] and that’s also a way that you can support the Money skills for Therapists podcast. So appreciate Connor, bringing all of this, what to me, is new information and hopefully for many of you was also some new information today. You can follow me on Instagram at Money, Nuts and Bolts and if you’re enjoying the podcast, I’m going to go back to the thing I used to ask you to do a lot, which is leave me a review.

[00:33:51] If you can leave a review of the podcast, it just gets us more traction on Apple podcast and it’s a great way for other therapists of all stripes and health practitioners to find the podcast and to maybe learn more about student loans, like you did today. So thank you so much for joining me today.