Episode Transcript
[00:00:00] In this brief episode, we delve some cold water on some of the stories you may have seen in the news, share some other quick updates as it pertains to your student loans and recent developments at Escape Student Loan Debt. Let's get started.
[00:00:13] Are your student loan payments or loan balances a major obstacle in your financial life? Then tune in and let's Escape Student Loan Debt.
[00:00:24] Hello, my name is Brenton Harrison of Escape Student Loan Debt and your host for the Escape Student Loan Debt podcast won't have a long episode today. We're really just going to address some of the things that you might have seen in the news when it comes to your student loans and education funding, and then share some developments when it comes to initiatives that we've talked about at Escape Student Loan Debt. So we'll start with the announcements, then we'll get into the brief touching on the news segment when it comes to those announcements. The first thing we talked about a couple episodes ago, maybe it was last episode, was we are opening up the opportunity to have your student loans reviewed with all of your information de identified as a part of future podcast episodes. We've gotten a really good response, to be transparent, few more responses than I expected.
[00:01:06] So the process of going through that would be you'll fill out a survey that kind of tells us about your loans. You'll submit some documentation, most recent tax return pay stubs, loan statements and so on and so forth. We will then scrub it of all your personal data and then we'll make sure that we do that to your satisfaction. We'll have the review and make sure that you get a final copy of that episode so that you're comfortable that your face isn't on screen, that none of your personal information is on there. And we have gotten some submissions that we feel would bring be useful and instructive for our audience. So you are going to see that in the next few episodes as we kind of work through those that have been submitted thus far. If you're interested in being considered for a future episode, you can go to escapestudentloandet.com review and once you've submitted that information, we will go through the process of getting you set up. So that's announcement number one. Announcement number two, I'll tell you that when we started this podcast there was a reason that we did it beyond just doing a bi weekly podcast. The initial intention was to do a student loan course. Matter of fact, if you actually don't skip through the commercial, you'll know that we have had a wait list for that course for going on two years now. And the reason that we have still not launched it is not because I'm just being lazy. It's because we're trying to wait for there to be a slowing down of the changes and a solidification of the changes when it comes to student loans. Because what we didn't want to do was take all this time and effort and money to create a course. And then a week after we create it, some announcement makes all of the information that we put in that course invalid and outdated. And I've kind of come to the conclusion that when it comes to updates, at least for the foreseeable future, they're not going to be slowing down. Right. So I think that a course may not be the thing that adds value to our community. So we've been talking about internally doing a membership model where we have resources that are available to some of our paid subscribers. And we want to hear from you in terms of what elements of that membership model would be most valuable. So if you're listening to this or watching this on YouTube, we're going to put in the show notes or in the video description, a link to a survey. We're also going to email this out to our email community this week, where we ask you to kind of tell us what would it look like for you to do a membership model? What would be an appropriate price to charge for that model? Obviously, it's gonna be something within reason. You can't ask for, like monthly reviews and then say that you're wanting to pay $10 a month. But we want to do the best job we can of having an offering that goes a little beyond the podcast, gives you the ability to have a community of people in a similar situation and also more access to me. And we want your insights on what would make that most valuable. So check the show notes, check the video description for that survey, and we'll start to structure something that we feel would be a value add to the audience. So those are the two updates. And now that that's out of the way, let's get to the news story, or I should say, one of the many news stories that you're probably seeing come across your feed or come across your television. And that is the Trump administration's desire or intention to shut down the Department of Education. If you're following the news, you probably seen that President Trump intends to issue an executive order that would start the process of dismantling the Department of Education. And this is something that was a campaign promise. It is also something that there are several members of his administration who are tied to Project 2025 or whatever that thing is called. And as a part of that document, they also signaled that not only do they want to do away with the Department of Education, but specifically the student loans. They want the federal out of the student loan business completely, most definitely out of the forgiveness of student loans business. So this is the following through on a campaign promise or the attempt to follow through. And it has a lot of people nervous because even though if you're listening to this podcast, you're most interested in the student loan element of it, the Department of Education actually does a number of things when it comes to things like enforcing and securing the civil rights of certain students, funding of education initiatives, and just education in general at the K12 level. And when it comes to student loans, if you go back through the history of student loans, which is something that we covered in literally the very first two episodes of this podcast, you'll understand why there is a symbiotic, in a negative way connection between the prices that colleges charge for their tuition and the availability of student loans to fund that cost that can be given to their students. And if you haven't listened to those episodes, it's not like necessarily instructive as to how to pay back your debt. But I do think it's an interesting listen to go back and listen to episodes one and two of this podcast, which we'll link to in the show notes about how our current situation came to be. And at the very least, it will give you an idea of why it's almost impossible to do some of the things that the Trump administration is trying to do in short order for many reasons. First off, when it comes to the disbursement and management of student loans, the Department of Education partners with private student loan servicers like the Nelnets, the Davients, all of these different places to manage that student loan debt. And in the absence of those private entities, they would have to shift that responsibility to another department. Now, they've also said that they're going to try to shut down the FDIC and shift those burdens to the Treasury Department as well. And for all of these reasons, in terms of the amount of student loans that are out and have to be serviced, which if you combine those and treated it like an asset, it would be like the biggest private financial institution in the country. That's how much is outstanding in student loans in this country, to go from a system that is a legacy system that has all of These private entities managing the debts of all these hundreds of thousands, if not millions of borrowers to the Treasury Department. Not only is it unlikely, it would take a tremendous amount of time to set up a system that was able to monitor that level of debt. Now, in addition to doing well with the Department of Education, again, a part of that Project 2025 initiative was to also do away with programs like public service loan forgiveness. And these are things that have come under attack before. And just like I told you before, there was not enough political appetite to overcome the filibuster. It's not something that I'm worried about there being an appetite to do away with. Now, programs that were created by the Department of Education itself, like pay as you earn, like save, is a different story. But do I think that there's any risk to programs like public service loan forgiveness or income based repayment in the foreseeable future? No, I don't. I've been wrong before. But this is something where I can at least back it up with saying here's all the things that would have to come into play in order for that to occur. Benefit of this, if there is any benefit to it, is to me a distraction that is taking them away from the things that we're actually hoping have more time to kind of fly under the radar. Things like your income recertification, which for people who are on the save plan is something they may not have to deal with for months and months and months, allowing them more time to either have for merits or to have a payment that's based on a tax return that occurred many, many years ago. Things like the ability to sign up for the pay as you earn plan. And this is one where we've done an episode on this in the past because to me, I think there's a group of people who are in like this real danger zone when it comes to federal student loans and income driven repayment plans. And those are people who are currently on save for merits who are eligible for pay as you earn but not eligible for new income based repayment. Because if you're on save for merits, you have the ability to avoid payments now. But right now the pay as you earn plan is currently open. So if you switched to pay as you earn, you have the ability to sign up for a plan that only requires you to pay for 20 years at 10% of your discretionary income. But the longer you wait, there's an increased possibility that they do away with the pay as you earn plan. And the only option that you would have left is old income based repayment, which would require 25 years of payments at 15% of your discretionary income. We actually did a case recently where we had a family where they earned about $200,000 of adjusted gross income family of three. And the difference between the two payment plans at pay as you earn was around $1,300 a month, and at old income based repayment it was about $1,900 a month. So not only is the first option a lot of money, but $600 more every single month for five additional years is something where you really have to make a decision on whether you're just going to get out of, say, forbearance now and switch to pay as you earn while time, or are you going to take the risk that you wait until, say, forbearance ends, but by that time they have also done away with pay as you earn. So that's kind of the danger zone. But as long as the Trump administration is focusing their efforts away from these programs, hopefully it gives you a little more time to make the decision to fly under the radar and still be able to switch to the more viable plan when the time comes to do so. Additionally, programs like Public Service Loan Forgiveness buybacks are something that don't appear to be the focus of the Trump administration, at least currently. So if you're in a position where you're eligible for Public service loan forgiveness buyback, or in a few months you'll be eligible for Public Service Loan forgiveness buybacks, not only is this distraction hopefully giving you more time to have that option, but as soon as you are eligible for that option, you need to take the bull by the horns, get your application in and start tracking the process. And lastly, and this may not be something that is as relevant if you have already taken out your last student loan, and some of this is just all of this matter of fact, is just personal opinion. There are people who listen to this podcast who intend to go back and get another degree, maybe an MBA or a PhD, so on and so forth. There are also people listening to this podcast who may have taken out Parent plus loans for one child that they're already dealing with, and they have another child that's coming down the pike where they're trying to figure out how they're going to manage that student loan process as well. Or you may have a child who hasn't reached that point. You're not planning to take out student loans in your name for their college, but you are trying to help them navigate the process of managing on their own. And this is a personal opinion that, to me, has just gotten stronger over the years as we see all of these inflated numbers for tuition that schools are just charging with no consideration for how the borrower is going to pay it back. With these attacks from different presidential administrations on different things like the SAVE Plan and other initiatives to reduce the amount of debt that borrowers have to take out to fund their education, I have always felt. I shouldn't say always, since I have been in the position to help people with their finances. I have been of the opinion that you should not blindly go to an institution with no thought as to what you're going to be paid as compared to the amount you had to borrow to finance the education. But to me, I feel even more strongly about that point that if you are entering into a new degree or considering a different college or educational institution over another, you have to more than ever look at the value of that degree in terms of how much it costs you to obtain it as compared to the income that you're going to earn after you've obtained it. And that sucks. It's a terrible thing to recommend to a person who might have found an industry in which they find passion. But the fact of the matter is, they've also found a school that's going to cost them four times what they're going to earn on an annual basis once they receive that degree. And you don't want to tell someone who may be interested in elementary education or the arts that they shouldn't or can't go to some private liberal arts college because they're going to make on average, 50, $60,000 when they leave, and it's going to cost them 250,000 or $150,000 to OB degree. But the fact of the matter is, until we do have some clarity as to the programs that are going to stay, the repayment programs that will be available, the options for forgiveness that will stand the test of time, like public service loan forgiveness. It's an additional consideration that has to be made so you don't find yourself in the situation like so many of our clients, who may make great money, $100,000, $200,000 a year, but the options that they have mean they're paying 1500, 2000, $3000 a month, which radically what they thought their lifestyle was going to look like when they got that degree. So I'll leave it at that. I'll get off my soapbox. But as it pertains to the things that you see in the news about the Department of Education. I wouldn't worry about it. Not because there's not the desire to go through with all of those things, but I don't think there's the mechanism to go through with all those things. The only thing that I would be doing is making sure that you have accurate records that are not dependent on your loan service or, as it pertains to your credit, towards things like forgiveness. And until then, we're kind of in a holding pattern until we see what additional, more realistic things this new administration plans to address when it comes to your student loans. So we may post slightly less frequently. If there's not a real update that would add value to you every two weeks, I'm not going to just put up an episode for no reason. You also will likely see us doing some reviews during this period to make sure that you are getting some value even in the absence of an update. But I wanted you to have this information and hopefully it gets you a little closer having your student loans forgiven, reduced, reorganized or expedited. I'll see you in a few weeks.
[00:14:55] From Escape Student Loan Debt this was the Escape Student Loan Debt podcast, a show for established professionals whose student loan payments or loan balances are impacting their marriage, their business, their credit, or their dream of achieving homeownership.
