Episode 29: Student Loan Success (and Carnage) Stories

In this episode, the Student Loan Planner® consultants — Travis Hornsby, Justin Harvey, Rob Bertman and Lauryn Williams — discuss cases they’ve had, with amazing success stories as well as financial catastrophes.  

In today’s episode, you'll find out:

• Fun background stories from each of the Student Loan Planner® consultants
• Cases from each of the consultants — success stories and ones where they were too late to stop someone from making a huge financial mistake
• Why banking on Public Service Loan Forgiveness (PSLF) isn’t risky for current borrowers
• How student loan forgiveness instead of refinancing, depending on the situation, might save someone money
• How, even on the verge of default, taking the steps to address your student loan situation can turn everything around
• Why Parent PLUS Loans can lead to financial disaster — and strained relationships
• How parents end up in PLUS Loan situations while trying to provide for their children
• Another PLUS Loan situation — and why pursuing grants and scholarships is better
• Why having tough conversations about student loan debt and budgeting is important
• How extensive budgeting allowed a parent to stay home with her child
• Why it’s imperative to make sure you’re on track for PSLF
• Travis’ thoughts on reaching out for student loan help as soon as possible
• How income-driven repayment could save end up saving someone money versus staying on the Standard Repayment Plan
• More interesting background stories from the consultants

Links mentioned:

• Student Loan Planner® Podcast Episode 16 (Lauryn’s episode)

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Episode 29 Transcript

Travis Hornsby [00:00:01]Welcome to another episode of the Student Loan Planner® Podcast. I have another wonderful treat for you all. We've got the entire Channel 4 News team — has assembled. And we've got Lauryn, and we've got Rob. And we've got Justin on the call with us. Welcome, everybody. Let's have a fun show today.

Justin Harvey [00:00:16] What's up, Travis? Great to be here.

Rob Bertman [00:00:17] Hey, good to be here.

Fun background stories from each of the Student Loan Planner® consultants

Travis [00:00:18] So before we pressed the record button, Rob was asking me about something that I had recently done. Rob, why don't you go ahead and ask me that question so our listeners get to hear.

Rob [00:00:29] Yeah. Travis, I know you had your performance at Carnegie Hall lately. How did it go?

Travis [00:00:33] So I was joking that I got a standing ovation, you know, just for me and, you know, the other 200 people on stage. And the first tenor section rocked it. So, we crushed it. It was amazing. My brother, however, was in the tenor two section, and he described it as a war zone. He's being a little overdramatic, but I think — I think it went pretty well.

Travis [00:01:01] It was super fun to get that experience, and, like, a large portion of my family was actually performing, so that's pretty neat. But I heard a rumor that you are a secret all-star performer yourself, Rob.

Rob [00:01:14] Well, I've been a part of good groups. I've performed at Carnegie Hall back in 1998, my freshman year of college, in the National Championship of Collegiate A Cappella — believe it or not.

Justin [00:01:24] That is phenomenal.

Rob [00:01:26] It was the very first year that they did this competition, but there were a lot of contestants and schools. You know, out east, there's like a lot of schools that are — have a lot of a capella groups. But when I was in college, a capella really, really exploded. And so this was the first year they did, like, an actual tournament. And so I believe — I think we got fourth place.

Rob [00:01:45] But our vocalist, one of our vocalists, got best lead vocalist for the competition. Jim Daly, he's awesome. He sang “Time After Time,” like, the Cyndi Lauper version but by Tuck & Patti, which was awesome. And it was just a crazy, crazy experience to be a part of that, too. So I'm glad that you had that experience.

Travis [00:02:08] Is that the one that's like, “Sometimes you think of me”? Like, that one?

Rob [00:02:09] That's the one.

Travis [00:02:10] Oh, man.

Rob [00:02:10] That's the one. You're trying to get me to sing, but I'm not going to do it.

Travis [00:02:13] Yeah. Well, actually, I think, isn't your wife way more impressive in terms of her performance abilities?

Rob [00:02:17] Oh, yeah. No, she was a professional in musical theater, and she's a triple threat. She has done all sorts of shows. She's a singer, dancer and actor, and can put me all to shame. But now she's a financial professional, so go figure.

Travis [00:02:30] And speaking of performance, I think Lauryn has a couple, like, gold medals or something like that. Like what — what did [you] do, Lauryn? Can you remind us?

Rob [00:02:38] You put us all to shame, Lauryn.

Lauryn Williams [00:02:39]I am just a little bit athletic — or at least, I used to be. Two silver medals and one gold medal in the Olympics.

Travis [00:02:48] Justin —

Rob [00:02:50] That is incredible.

Travis [00:02:50] — what do you do?

Justin [00:02:52] Oh, gosh. Nothing that attains to the glory of any of these.

Rob [00:02:56] Yeah.

Travis [00:02:56] You're supposed to be like, “I'm the workhorse of Student Loan Planner®. I do more consults than all of you.”

Justin [00:03:02] So, my claim to fame is that in my high school, I ran track and field, and I was renowned because I have seen, with my own eyeballs, two people get speared with a javelin.

Travis [00:03:12] What?

Justin [00:03:13] They attract me.

Travis [00:03:15] And get killed?

Justin [00:03:16] No, not killed. They both got hit in the leg. So it was not a big deal, but it was highly unusual and very scary at first. And then it gets kind of funny because it's really just a bunch of dudes just being idiots, and everyone's laughing because that guy got hit with a spear in the leg. And it's high school, and that stuff isn't supposed to happen.

Rob [00:03:35] I could see the first time being scary, but by the second time, it was probably not that scary anymore.

Travis [00:03:39] Holy cow.

Justin [00:03:39] You kind of just start to laugh at it eventually. So it's not, like, an athletic achievement, but I bet Lauryn's never seen two people get speared with a javelin.

Lauryn [00:03:47] I have not. I've only read about one being recently impaled last week. It was, like, really big news. But —

Justin [00:03:52] Yeah.

Lauryn [00:03:52] Never seen it. Nor do I want to see that. I like to think of my sport as relatively safe.

Justin [00:03:59] When you're a thrower, things get wild. The runners get it easy.

Rob [00:04:01] It's a little crazy, right?

Cases from each of the consultants — success stories and ones where they were too late to stop someone from making a huge financial mistake

Travis [00:04:03] Well, besides talking about getting speared by javelins, we're also going to talk about spearing student loans. So we're going to transition. We're going to — You like how I rescued that? So, we're going to transition into talking about some of our cases that we've had recently. I think it's going to be really fine just to hear that wide spectrum of stuff that comes up in our business. Maybe some of you listening will kind of identify with some of these.

Travis [00:04:29] So I asked all the consultants to bring to the table the kind of broad details — obviously we're not going to give anything that could ever identify anyone— but the broad details of one super successful story that they had [where they] totally transformed somebody's life. And one story that they had where, golly, we wish we had gotten to that person sooner so we could have saved them from making a serious mistake.

Why banking on Public Service Loan Forgiveness (PSLF) isn’t risky for current borrowers

Travis [00:04:51] I'm going to go first, and feel free to jump in if you wanted to say something about these cases. But I had a physician couple recently. So one of them decided to do PSLF (Public Service Loan Forgiveness), and one of them did not want to. And so one of them had refinanced, and the person was really worried about the PSLF risk that was present, [that], you know, the government might take it away. And if one of us was on PSLF, then that is less risky. Right?

Travis [00:05:16] So I think that the concern that I have with this one is that people are vastly overestimating the true risk present with the PSLF program in the sense that, you know, the worst-case scenario is the debt is just there. And it would have been there anyway if you'd refinanced, right?

Travis [00:05:29] So that mistake was a six-figure mistake, and, you know, it's just very important that people realize that PSLF is actually not all that risky. The worst-case scenario: you're paying 1% to 3% more interest over, you know, five, six years while you wait around to see if it happens. And guess what? You can actually put your money into, like, even a high-yield savings account. It's going to get decent interest to kind of hedge against that risk.

Travis [00:05:51] So that really smarted, y'all. I don't know, that was — that was rough when I heard that.

Rob [00:05:56] Yeah. It's, I mean, also — I mean, one of the — The only good thing about student loan debt and interest is just that it accrues. Right? So if someone is — Someone's loan’s going to accrue $20,000 of interest, but they can save $20,000, they're kind of growing their savings right alongside. So it makes it even more compelling to kind of play the PSLF game, even if you're nervous, and just save aggressively on the side as defense just in case.

Travis [00:06:17] What if I don't trust the government?

Justin [00:06:18] Well, I mean, I don't trust the government. I'll just come out and say it.

Travis [00:06:22] Justin is our resident conspiracy theorist.

Justin [00:06:24] Well — Oh, 100%. But the thing that I point to — and I know, Travis, you've written about this a bit — is, you know, the tenor of the conversation in Washington recently with, I think it was Senator Warren's proposal and some of the stuff coming out of the Democratic Party, which has been very progressive and borrower-friendly, as it relates to loans.

Justin [00:06:41] So if there's any shift that's going to take place based on what we see right now, it's going to be a shift towards more leniency, more flexibility, more optionality and not less. How that's going to apply to current borrowers is anybody's guess, based on what Congress decides to do.

Justin [00:06:57] But Congress recognizes this is an issue, and I don't think they recognize what a big issue it is. I think they're just getting a little bit of an idea right now, but ultimately, they want to help. And student loans make for great PR (public relations) for Congress people, so they want to talk about it. They want to try to at least look like they're doing something. And a lot of the changes that have been discussed have been pretty favorable for borrowers thus far.

Travis [00:07:17] That's a great point. And I like to think as, like, “Deal or No Deal.” You know, it's like Howie Mandel, right? You got the briefcases, and they're all in there. You know, you're down to your final two briefcases. And in one briefcase, you've got $10,000, which represents the total amount of interest that you'll lose out on if you don't refinance right now and you just hang out on the government repayment plans just to see what happens. Right?

Travis [00:07:36] And in the other case, there's $200,000. So basically, when you refinance when you should be doing PSLF or should be gambling on PSLF, then you're, like, just accepting the $10,000 case without even, like, getting anything for the option with PSLF.

Travis [00:07:56] So it's super bad math when folks do that. I get why people do it because it's really scary to think about something that you have being taken away, so it feels like you have a $300,000 loss that could happen when PSLF is going to go away for you. That's not actually what happens because by refinancing, you're guaranteeing that you have to pay back the debt. So psychologically, it feels like you're losing $300 grand or $200 grand or whatever it is if PSLF goes away, but you're not losing that because you already owe it. If anything, all you're doing is gaining that money.

How student loan forgiveness instead of refinancing, depending on the situation, might save someone money

Travis [00:08:25] The other one I want to talk about was a success situation. So we had these two dentists. They were going somewhere, I think for a residency, and they were going to move back home, and they're kind of large, metro area out west. Super happening place — wonderful place to be young, starting a family and starting a career.

Travis [00:08:42] And they were thinking, well, we have to refinance our loans right now. We got to get ahead of it. Tons of interest that's accumulating. You know, we got to shop around all the different lenders and just really, you know, get on our loans right away.

Travis [00:08:54] And the problem was is that they both wanted to operate businesses that had enormous ability to write off income, which, you know — you know, dental practices have a ton of ability to write off taxable income to get your AGI (adjusted gross income) lower. And remember, your student loan payment's based on your AGI.

Travis [00:09:12] So in this case we identified — or I identified; this was my client consult — identified that the probability that they were going to have a taxable income over a certain level was just very, very low. And if you ran the numbers, then going for forgiveness actually saved them over $100,000, which they could have put into their retirement and other goals, like starting a family, buying a house, things like that.

Travis [00:09:35] So that's one of those really difficult things when you're trying to decide to go for refinancing or forgiveness. And I think why it's helpful to have the context that we have, compared to maybe, you know, like a financial adviser who's super knowledgeable but maybe does, you know, five of them every year in terms of student loan plans. Just because it's really important to kind of have a really good idea of what the salaries for a specific occupation are in, say, like, the metro Kansas City area or, like, the metro Miami area, for a specific kind of degree. And that has huge implications for whether or not you think that you're going to hit a certain debt-to-income ratio to refinance or go for forgiveness.

Travis [00:10:11] So I was super excited about that. Showed them a lot about how that money could be used for retirement and other things. So I think that we probably knocked off a couple years off of their required working career just by virtue of showing that they didn't have to refinance, and they were assuming that they needed to.

Rob [00:10:26] That's fantastic.

Travis [00:10:27] So enough about me. Let's hear more from our team here. Justin or Rob — I think maybe we'll pick on Justin first. Does that sound OK?

Justin [00:10:35] Yeah, great.

Travis [00:10:36] Justin, tell us a really amazing success story that you've had recently. What the issue was. And then tell us one that we wish we could've gotten to them sooner.

How, even on the verge of default, taking the steps to address your student loan situation can turn everything around

Justin [00:10:44] OK, I have a success story that actually happened just this weekend. And Travis, I didn't tell you about this. I might — this might put me in running for like the Student Loan Planner® consultor of the month — consultant of the month. You can tell me what you think.

Travis [00:10:55] There's only four of us. So yeah, I hope you get the award occasionally.

Justin [00:10:58] I got this — On short notice, somebody had reached out and said, “Hey, I'm like — I'm in bad trouble. Schedule the call.” This was, like, on Thursday for just last week. This scheduled it for Friday. They said, “Here's the situation. We got a bunch of loans.” It was about $230k. They had been sitting for almost 15 years; they hadn't made any payments. They were on the verge of default.

Justin [00:11:17] The call kind of came and went. I wasn't able to get a hold of them, and I emailed them. I said, “Hey, like, if you want help, I can help you. But, you know, we're going have to do it next week.” And they said, “Oh my gosh, Tuesday is the day we're going to default. We're going to default on Tuesday. We need — We need something stat.” And I was traveling on Saturday. Yada yada. I was down in D.C. So I was like, “OK, listen. I'll be on the road. Let's make this work.”.

Justin [00:11:39] I was down in D.C. seeing one of my financial planning clients on Saturday, which went way long. So on the way back, during the time of the call, so I had to park on the side of [I-95]. Hop on the laptop, get on my phone and call in. And I did this call with these people, who were two days away from defaulting on their loans.

Justin [00:11:56] They had FFEL (Family Federal Education Loan) Consolidation Loans, and they were about to — They were on the precipice of, really, financial disaster. They had a bunch of tax liens. They had no free cash flow. They were really up against a wall.

Justin [00:12:07] And what we were able to discover was that if they consolidate these FFEL Loans that were on the verge of default, they can turn them into Direct — federal Direct Loans and then can pursue forbearance for a period of time. Because they owed tens of thousands of dollars in back taxes that they were working on paying off with their somewhat meager income. So what they needed to do was buy time.

Justin [00:12:28] So we were able to consolidate the loans. Turn them into Direct Loans. Buy some time. And then they were going to be able to get on Revised Pay As You Earn on the back end of that and have income-driven payments that were going to be reasonable based on their income. And it was going to allow them to save actually $80k or $90k versus a full repayment strategy in the long run, even going for taxable forgiveness and making payments for 2.5 decades.

Justin [00:12:52] So they went from almost defaulting to being able to have a lot more free cash flow. And then after a period of time, have a monthly payment that they were going to be able to stomach. All while I was sitting on the side of [I-95 North], which I thought was an awesome Saturday.

Lauryn [00:13:08] That's really badass.

Travis [00:13:09] Justin, do you get, like, hazard pay or something? Shoot.

Justin [00:13:11] I don't know. I feel like I should.

Travis [00:13:12] After this podcast, I'm going to get hit up for hazard pay. Maybe you deserve it. Shoot.

Justin [00:13:15] Yeah.

Travis [00:13:16] Well, that's — I mean, that's just an amazing story. So they had loans that — FFEL loans, or loans that were from before 2010, right?

Justin [00:13:22] Yeah. A lot of their loans were — It was actually from the late 90s. And then they had done one consolidation to FFEL Consolidation Loans in, like, '04 or '05.

Travis [00:13:31] Wow, that's just amazing. And instead of defaulting and wrecking their credit, you know, having all these negative, like — Yeah, I think there's, like, collection fees that are assessed, too, where it's, like, 16% up to that they can add on. I don't know. I'd have to look up the exact number.

Travis [00:13:43] But instead of having that happen on just thousands and thousands of dollars, they're now getting into a situation where they'll be able to make a payment based on their income that they can afford and have all those bad things not happen.

Justin [00:13:53] Yeah.

Rob [00:13:53] You know, what also is great about that story, Justin, is, you know, a lot of times people, they just don't want to look at it. And they don't want to face it because they feel like there's no way out. It took them to being on the verge of default — two days away — to schedule the consult and talk with you. And at the end of the day, it's, like, a totally manageable plan.

Justin [00:14:08] Yeah.

Rob [00:14:08] You know — And had they done that sooner, they could have been there already. Right? They could have been debt-free in the not-too-distant future. So it just kind of speaks to — even if you feel like your situation's hopeless, there is a way out, you know. So, like, get help as soon as you can and figure out what the best path forward is.

Justin [00:14:23] Yeah, totally.

Travis [00:14:23] That's really fascinating. No, that's a great story. Wow.

Justin [00:14:26] And it was one of those ones, too, where I was like, “Oh, is this, like, a real person?” Because, you know, we get a lot of emails from people. And I wasn't sure, like, do I really want to reorient my Saturday?

Justin [00:14:35] Because I — I've done some — you know, some plan — I've accommodated outside of my normal time schedule to have people, like, not show up or whatever. Because they figure, well, I'm a random guy on the Internet, and I may or may not be the real deal, so — And that's understandable, obviously.

Justin [00:14:48] But it was — it was a great moment of, like — I saw the humanity in their plight, and I was like, “You know what? I'm going to — I'm going to try to do this just because I can. And something in my, I don't know, my soul is telling me, ‘I should just try to help these people because they need it.'” And it was great.

Justin [00:15:02] I don't say that to toot my own horn. But it was just a really great thing to be able to address a need at just the right time and get people the help they were really looking for.

Travis [00:15:10] Yeah, but that's — I just want to say something real quick. That speaks really highly, I think, of all of y'all's character, just because all three of you could be making money doing something else. Not to say that you don't make good money working for Student Loan Planner® — I hope you feel that way. Nervous laughter.

Travis [00:15:23] But one of the things I try to look for it when we we're deciding to work together was just somebody who was passionate about people and helping them. And when you're looking back at your career of being, like, wow, I transformed a lot of lives.

Travis [00:15:36] And look, I think that there's a wonderful thing to be said for having a small group of people you're having a massive impact for — you know, running your own financial planning firm. But I'm super grateful that y'all care enough to do something like that.

Justin [00:15:49] Yeah, totally. And honestly, this is really impactful work, and that's why I love it. And so I keep doing it because in an hour in my car on the side of 95, I literally changed these people's lives. And there's not a lot of jobs where you can say that.

Why Parent PLUS Loans can lead to financial disaster — and strained relationships

Travis [00:16:00] So let's talk about a situation where you did not change their life because you didn't get to them fast enough.

Justin [00:16:05] Yeah, I had one. It was a middle-aged lady who had taken out a bunch of Parent PLUS Loans — like, $200,000's worth for her daughter. And they had some kind of deal where the mother was going to take out the loans, and then the daughter was going to take them on upon graduation.

Justin [00:16:22] And what happened was, you know, of course, what 22-year-old understands the real financial impact of $200,000 of debt at the beginning of your career? Like, hardly any of them. I mean, that's why we all have jobs right now.

Justin [00:16:32] This mother was really strapped for cash. She was scraping by. She had several other kids in college and trying to pay the bills, and she needed to offload this debt to her daughter. But her daughter was living it up in [a] major metro area on the East Coast and was making, like, $32,000 a year that barely covered her rent, let alone all the other expenses that she was going to have.

Justin [00:16:54] So because the mother had a significant income, her required payments on the Parent Plus Loans were high. We're — A four-figure number, like, $1,100 bucks. She was torn. So her options are: A) Mom can pay the loans herself and basically fall on the sword; B) Mom can try to have her daughter help out on the payments; or C) Mom can refinance the debt to her daughter and just totally shove everything off and pile this massive burden onto her daughter. Which, I mean, you can sort of figure out what's the least terrible of those answers. Those are all not great alternatives.

Justin [00:17:32] The fact is, if the daughter had known upfront, well, maybe we shouldn't do Parent PLUS Loans. Maybe we should do just Direct Loans that the daughter can have in her own name all along. Then all of a sudden, instead of Mom facing either paying a huge amount or refinancing for the daughter and having the daughter pay a huge amount, Daughter can get on Revised Pay As You Earn or something like that with an income-driven mechanism that allows her to make payments based on $32,000 of income. And she's paying, I don't know, a hundred dollars a month instead of $1,1000 a month.

Justin [00:18:01] And it would have saved a ton of stress and heartache and family tension. But instead, they've got this huge problem. And I — I'm honestly still not sure how they're going to be able to deal with it.

Travis [00:18:13] Let me dig a little deeper there, though, Justin. So $200k of Parent PLUS debt that's in the mom's name. Are we saying that the mom was making too much income to benefit from consolidating it and using the Income-Contingent Repayment plan?

Justin [00:18:23] Well, so her payments are still going to be very high because the house they were in California — the household income was still considerable. And it was such that the income-driven options for them weren't going to meaningfully reduce their payments.

Travis [00:18:36] So I'm going to play devil's advocate. What if — What if we convinced them that there's no time like the present to walk away from all your [leisure] comforts and retire in five years so we could get your student loan payment to be really low.

Travis [00:18:49] Was there anything that could be done, like, for example, maybe using forbearance? Or perhaps, you know, to delay payments? Or perhaps to, like, really throw tons of money or filing separately for taxes? Or was it just this situation where this person was making, like, six figures, really high income?

Justin [00:19:03] It was six figures, and it was a situation where we did do forbearance for a period of time. And they were they were essentially trying to figure it out. They had high fixed costs, and they were — They just did not have a lot of financial flexibility.

Travis [00:19:16] So what —

Justin [00:19:16] So —

Travis [00:19:16] So what age range would this person be in? Like, broadly.

Justin [00:19:18] She was probably, like, 50.

Travis [00:19:21] That young? Like, early 50s or late 50s?

Justin [00:19:24] Yeah. Like, early 50s.

Travis [00:19:26] That's a tough one. I mean, I think that the approach that I would maybe try to take is, if you're married, then you could both try to delay your Social Security to get those higher payments. Right? And then you could try to use as much forbearance as possible.

Travis [00:19:40] So, try to use forbearance on your existing Parent PLUS Loans. Then consolidate and you get an extra three years of forbearance. And you need to try to focus on, while you're doing that forbearance, shovel gobs of money into your retirement accounts. Right? Like, $25k per year if you're over 50.

Travis [00:19:57] And then maybe, just maybe, you would have enough money in your retirement account to retire at 60 and then also simultaneously sell your house and the things that are causing the big fixed expenses in California. And then move to a lower cost-of-living place, and then just make, you know, very modest payments by filing taxes separately on ICR. But I don't know. I mean, that's a tough one, though.

Justin [00:20:20] Yeah. And the challenge was — Mom's agreement with Daughter was Daughter's taking these on. And that was the understanding because Mom didn't have the capacity because they had no retirement savings and other kids coming up through college, and there was very little ability to even make those payments even. You know, there was forbearance for a little while, but that was only a Band-Aid.

Travis [00:20:38] Wow.

Justin [00:20:39] So.

How parents end up in PLUS Loan situations while trying to provide for their children

Travis [00:20:39] Wow. Any — Any thoughts about that, team? Does — [Do] Justin's extreme scenarios just blow the mind?

Lauryn [00:20:47] Wish I would have been able to help more. It's pretty similar. And I think it's really tough when you end up in a Parent Plus Loan situation, and they've already taken out all the Parent Plus Loans. Because from my viewpoint, Parent PLUS Loans come into play because there's income in the household, and then parents chose maybe not to save for their child's education. And then it came time for education, and it's, “Well, I can't leave my child hanging.”

Lauryn [00:21:11] So, like you said, they fell on the sword, metaphorically, too, by taking out these loans. But then it was time to deal with the loans, and it's like, “Oh wait, wait, wait. I really don't want to do this. But, you know, I couldn't not send my child to school.” And so there's a lot of back and forth and a lot of emotion tied up into the Parent Plus Loan borrowing.

Lauryn [00:21:29] And, you know, when you get to a Parent Plus Loan situation, people kind of have their financial habits, so it's a little bit harder to do. When I talk to someone in their 20s that is not making the best budgetary decisions and is really stressed out about their student loans, it's a lot easier to correct them and, you know, sell them the future.

Lauryn [00:21:44] Whereas someone in their 50s [who's been] making bad decisions for quite a long time, while it's never too late, they're usually a lot more apprehensive to make big changes to their budget. Like you said, sell the house. Sell the car. You know, go — go buy a vehicle that's a lot more affordable for the family and give up that lifestyle and that perception.

Travis [00:22:04] You know, one thing that I thought about when you were saying that was a lot of the Parent PLUS borrowers that have massive, massive sums that I've seen, I don't think I can think of a single one that we've seen that has more than $200k of Parent Plus loans that has not been in a very high cost-of-living area. Like, for example, I've seen a lot of people like this in, like, New York and Massachusetts and Hawaii and California, but I almost never see huge Parent PLUS borrowers in places like Nebraska.

Travis [00:22:34] And I don't know if that's just because, you know, there's not a loaded gun to your head financially in Nebraska — like, there's no $50,000-a-year places there. Or maybe it's kind of like a keeping up with the Joneses effect. Or maybe it's, you know, there's not really any good prepaid tuition plans in some of these places where, like, you know, housing costs are just out of control expensive and taxes are high, so you don't really have the ability to save long term. I don't know. Do y'all have any thoughts about that?

Rob [00:23:02] Yeah, I've had a couple — I mean, Parent PLUS Loans, they're just — they're just killers. I mean, I've had a couple that are in more rural parts of the country. And I'm the only parent of the consultants, right? So just me, and I've got three of them. And as a parent, we want to do what we think is best for our kids. But sometimes, what we think is best for our kids is actually going to hurt us financially or hurt them financially, right?

Rob [00:23:25] And so it's really important, especially parents who have established a life somewhere and a house, and they have all these memories of all their kids growing up. And it may not be keeping up with the Joneses as much as it's ‘I'm dedicated to my family at all costs.' But when they figure out how difficult it is to pay back Parent PLUS Loans, they sort of regret the decision, and it's really, really tough at that point.

Rob [00:23:45] There are things that can be done. Like you said, Lauryn, like, it's never too late. But I think it's just sort of a parental mindset that, for all of you parents out there like me, like, we just have to be careful of, that we're not putting ourselves in huge financial risk for the sake of our children.

Travis [00:23:59] I had one case where this dad actually just broke down in tears and just started crying on the call with his kids on the call. And he was just like, “I was supposed to be able to handle this. I was supposed to be able to provide. And then life happened. And, you know, I was an executive, and suddenly I wasn't an executive because I got laid off. And I feel guilty as hell.” And they just started — It was amazing to see because the kids were just so supportive and such good people to try to get their dad out of that place psychologically.

Another PLUS Loan situation — and why pursuing grants and scholarships is better

Travis [00:24:28] But anyhow, let's transition to Lauryn. So Lauryn, you mentioned a little bit of a teaser there about one of your cases that you — you weren't [able to] help. So maybe if you wanted to elaborate on that a little bit, and then maybe also share one of the cases that you were able to have a big impact with.

Lauryn [00:24:41] Yeah. The one I wish I would have gotten to sooner was a young lady that reached out with around $165k of Parent PLUS Loans and had a household income up $245k. So initially, I'm looking at the consult form, and I'm thinking, like, ‘Oh, this is — you know, should be relatively easy refinance situation.'.

Lauryn [00:25:01] And then you get down to the nitty-gritty of the details, and you learn this is one of three children that she's intending to put through school. There are quite a few high expenses. There's a $4,500 mortgage. They're saving about $600 a month for retirement, but they have a car payment that is $800 a month. You know, you see quite a few different things in the budget.

Lauryn [00:25:25] So when we get to chatting through the call, it was kind of similar to what I described earlier, where sometimes our job is, especially as certified financial planners, is nailing down areas in the budget that you can cut back in order to be able to afford the other things in life.

Lauryn [00:25:39] And it's a matter of prioritizing and being able to say, “OK, this is what this looks like. But this is also, you know, this is not the most fun thing to pay. But it is one of the things that you agreed to pay. And so we've got to fit this into the budget.”

Lauryn [00:25:51] And this family was looking sort of for more of a magic wand, and there was no magic wand because there should be, from a discretionary standpoint, the ability to pay those loans.

Lauryn [00:26:03] So we did end up coming up with a strategy for the $166k, knowing that there's going to be an additional $250,000 of loans. And I've talked extensively about the idea that, for the next two children coming along down the pipe, is, instead of — You know, like you said, there's this intense obligation as a parent that no matter what, I'm going to have to take care of them the same way I took care of the first one. But to be really, really aggressive about grants and scholarships and really investing the time.

Lauryn [00:26:32] Because it's so easy to fill out the paperwork, send it in and know that you're going to get these loans. But you know, it seems a little bit more tedious to jump through the hoops of getting the different scholarships and finding out where the financial aid options are and considering other schools that are more affordable because, like you said once again, you want to give your kids everything.

Why having tough conversations about student loan debt and budgeting is important

Lauryn [00:26:51] So it was a very emotional conversation about nailing down the budget. They didn't like the recommendations of getting rid of the $800-a-month car payment. But one of the things I've learned from Travis — and I think three of the four of us have physician spouses. You know, I have a really hard time telling people that they should make some changes. You can see these big red glaring lights saying, “Don't do this. Don't do this.”

Lauryn [00:27:13] But Travis, you know, had to talk with me at one point and said, “Lauryn, it's similar to what our spouses do as physicians. If I don't tell you the God's honest truth, then, you know, your life could be on the line.” And we need to be thinking of that.

Lauryn [00:27:25] If this is your one chance that you're walking into this doctor's office (i.e., having the student loan call) and this is your one time that you're going to speak to somebody that's a certified financial planner, even though you're only calling about your student loans, which is really intertwined with various parts of your financial life, that we need to be incredibly honest about the other gaping holes that we're seeing and the changes that need to be made, whether you like it or not. Because it can be life-altering if we do or we don't tell you that.

Lauryn [00:27:51] So this was one of those conversations that wasn't fun for me to have, but I knew at the end of the day, whether they liked me or not at the end of the call, that I was doing the right thing and helping them being able to change their financial future.

Travis [00:28:02] Can I just share, like, a funny story? So I was driving my wife to work recently, and we saw this woman. She looked like she was, like, 90 years old, and she was walking around outside in the courtyard in front of the hospital. Like, not like a protected courtyard, like, a wide-open, like, anybody in the public can walk around here, right? She's walking around with her old hospital gown with the little drip thing, like, I.V. fluids connected still in her arm. Right? And she's just, like, walking around chain smoking.

Travis [00:28:30] I'm just thinking, like, I get, like, the Hippocratic oath is to treat everyone, regardless of people's personal choices and everything. But at that point, why are you even at the hospital, right? Just go home and live your life, and I don't know. I just thought that was so fascinating.

Travis [00:28:43] I'm very passionate that if I think somebody is doing something that's really foolish, I'm going to tell you that. And if you don't like us because of it, like, yeah, we've had a couple of people not pay us out of 2,000 that have been making some really foolish decisions with their finances. But I would much rather have a couple of people just get mad at me and not pay rather than have potentially dozens or maybe even hundreds of people that are making a very foolish choice make that choice and then regret it later. So, thanks so much for saying that, Lauryn. What about the situation where you changed someone's life?

How extensive budgeting allowed a parent to stay home with her child

Lauryn [00:29:14] Yes, yes, yes. On a lot more positive note, there was a couple that reached out. This young lady was very stressed because she was carrying the student loan burden, and she wanted to stay at home. So she had just recently started staying at home and had about $175k of student loan debt. And the spouse was making about $80k.

Lauryn [00:29:33] From a value standpoint, it was very important from their family that, you know, they just had their first child. They were planning on having two more. The husband had a pretty decent income projected out into the future, and they lived in a low cost-of-living city. She felt like it was her job to carry the burden and that she was going to have to go back to work.

Lauryn [00:29:51] And she was really upset because childcare was around $1,500 bucks a month. And she's like, “By the time I go to work, I'm just going to be paying for child care. And I'd really love to be able to stay at home with my children. That's what we discussed. That's what we want to be able to do. But we just can't figure it out with these loans. And I don't really like my husband having to carry this burden.”

Lauryn [00:30:10] So what we ended up talking through was, we looked at married filing joint versus married filing separately and what that would look like because that was something they had heard about and read about and the reason they reached out initially. But they'd be looking at 25 years of doing married filing separate in order to get the $25 — the $0 payment, based on her not working. And from a tax standpoint, that was not going to be the most advantageous way to go about it

Lauryn [00:30:33] So we talked extensively about their budget. And they were living pretty modestly but to really nail down their budget and start piling money, like, you know, like — One of the things that makes Travis really excited is when people start putting money into their retirement. I mean, it makes all of us excited. We showed them how to pile money in such a way that they said we're going to lower the loan payment. So it was almost nothing. It was like, I believe, was like $60 bucks a month. They're going to stack money — another hundred a, maybe, sixty bucks or something away — in their [retirement] — in the brokerage account and get ready for the tax bomb.

Lauryn [00:31:09] And it was going to be feasible from a student loan standpoint for them. From a monthly-cost standpoint, it was going to allow her to stay at home and look after her family, and it was also going to allow them to max out their retirement and still live a normal life. Like, we still found discretionary funds after doing all those different things.

Lauryn [00:31:26] And a lot of people are just like, “Where do you find the money?” And it's really about, like you said, committing yourself to, you know, living within your means and committing to financial freedom. So they felt great after they got off the call because she could stay at home. They were stacking money away for retirement, and they felt that they had a clear plan for how they were going to be able to afford to have two more children.

Rob [00:31:46] Fantastic.

Travis [00:31:46] Love that. Wow. So you might literally be partially responsible for two additional lives in the world.

Lauryn [00:31:52] Yes. Two productive citizens hopefully joining because they have such a great mom caring for them.

Travis [00:31:57] Sorry, I said that probably a little weird, right? Oops. I'm great at putting my foot in my mouth.

Why it’s imperative to make sure you’re on track for PSLF

Travis [00:32:03] So anyways, on that note, Rob, let's bring you into the fray. What are some — a couple of cases that you want to share with our listeners.

Rob [00:32:10] Yeah, sure. So one that I wish — I wish would have reached out sooner, I could've gotten to sooner. I was going to talk about another Parent PLUS situation, but we've had a lot of those. And those are really, really tough conversations in general.

Rob [00:32:22] I did have a really tough one where it was a doctor with over $300,000 of student loans. Graduated from medical school in — it was either 2011 or 2012 — and had been working for a nonprofit and was on IBR (Income-Based Repayment). So they thought that they were on track for PSLF.

Rob [00:32:39] I took a look at their NSLDS (National Student Loan Data System) file, which tells, for those of you who don't know, it tells you all the loans you've ever taken out. Like, if they're Direct, if they're FFEL loans and all that stuff. And also, their loans weren't at FedLoan. So this was maybe a clue that they had not actually been eligible for the PSLF program.

Rob [00:32:56] So anyway, they had been on IBR for seven years, and it turns out that only, like, $80,000 of the $300,000 student loan debt was on track. And the other $220,000 were FFEL Loans that, if they wanted to go for PSLF, they had to consolidate to make the loans Direct and basically start the 10-year period today on their higher salary.

Rob [00:33:16] So I felt really horrible for them because here they thought their loans — all of them were going to be forgiven in three years, and it was either 10 more years on PSLF or just aggressively pay them back in five years or less. It was a really, really tough conversation.

Travis [00:33:29] Man, that's really rough.

Rob [00:33:30] Yeah.

Travis [00:33:31] What did you end up saying?

Rob [00:33:32] Their income was too high to qualify — like, they're already above the cap. So it ended up being, like, just pay off the loans, and, like, let the ones that are — The $80,000 that were eligible, you know — file the Employment Certification form. Have them moved over to FedLoan. See if you can get the seven years of credit, if they can even get it at that point, because there's no guarantee that FedLoan is going to get it right.

Rob [00:33:50] But then the other loans, you know, it's refinance and pay them off aggressively because they were above the payment cap, and they weren't eligible for Pay As You Earn. So, you know, REPAYE (Revised Pay As You Earn) would put them well over the 10-year Standard plan. You know, it's one of those things where they thought they didn't have very long to go, and it turns out they had a long time to go.

Travis’ thoughts on reaching out for student loan help as soon as possible

Travis [00:34:08] Yeah. One of the most common questions I get via email from people is, like, “When should we work with you?” And the best answer is “as soon as possible,” because even if something wasn't going wrong with your situation, there's a great chance that it could have been going wrong.

Rob [00:34:23] Yeah.

Travis [00:34:23] And a few hundred bucks to be confident that there isn't something terrible that's broken with your situation, it's, you know — I feel like it's a no-brainer.

How income-driven repayment could save end up saving someone money versus staying on the Standard Repayment Plan

Travis [00:34:33] But not to get to sales-y or anything. Rob, tell me about the one that you were able to change.

Rob [00:34:38] Yeah. The one that I was able to change was pretty great. It was an optometrist who owed about $325,000 in debt at 6.5%. And he was on the extended plan — like, the 20-year extended plan, making payments of, like — I don't know, I think it was, like, $2,500 a month or something like that.

Rob [00:34:54] So the loans are going to be paid off in full in 20 years. And they didn't realize, he didn't realize that he could go onto Pay As You Earn and go on income-driven repayment for 20 years and have the loans forgiven and just pay the taxes on it. So, if he would have seen the extended plan through, I think he would have ended up paying, like, close to $600,000 including principal and interest to pay off the loans in full.

Rob [00:35:15] But Pay As You Earn — the payments were only going to be about $175 over the next 20 years and then with, like, a $225,000 tax bomb. So $400,000 all in to pay off $325,000 of loans over 20 years versus $600,000 — I think it was, like, $580,000, actually. They were just like, “Wow, you know, I'll be debt-free in the same amount of time, and I'll get to save $180,000 paying back my loans.” I mean that's — That's an incredible difference in money, paying back loans, for sure.

Travis [00:35:42] That's so funny. I had a — I actually have a friend who went to pharmacy school about the same time that I was an undergrad, and then we knew each other kind of vaguely. And then at some point, he reached out to get help with his loans because he was paying, like, $2,000 a month. And this guy also did stand-up comedy. So he was a pretty funny guy. And so he was paying $2,000 month.

Travis [00:36:00] And I was like, “Hey, you know, you're working for, like, the community pharmacy that's not-for-profit. You could pay $600 a month instead and qualify for PSLF after seven more years because you made payments for three years on the Standard plan.” Which — which counted in his case. So instead of paying $2,000 a month for the next seven years, you'll pay $600 and have, like, $150k forgiven.

Travis [00:36:19] And there was this really long pause — like, really, really long pause from the other side of the phone. I thought I lost him or lost the connection. And he goes, “Travis, I do believe that I'm going to have to buy you a very nice beer.” It wasn't me. It was, like, the government, right, that passed this.

Travis [00:36:38] But yeah, that's — It's just amazing. Like, sometimes people see that huge amount that's staring back at them in savings, and they're like, Holy cow. This was such a big opportunity. Such a big mistake.” Right? Golly, that's a great one, Rob. So they — what do they want —What did they do with all the money? Did they buy, like, a Tesla? Or what did they do?

Rob [00:36:56] Well, I told them that if we looked at the at the net-worth calculator on the spreadsheet, too. And I said, “Imagine if you took the difference in the payments” — which I think Pay As You Earn was going to be, like, $800 a month. So it would lower the payments by, like, $1,700 a month. So you know, maxing out the 401(k) and all that stuff and how that would change the payments. And that their net worth was — I forget the exact number — but their net worth in 20 years was going to be just astronomical because of that. Because they're investing the difference in payment rather than paying off the loan. It was just incredible.

Travis [00:37:25] You said they were an optometrist, right?

Rob [00:37:28] Yeah.

More interesting background stories from the consultants

Travis [00:37:28] So, to circle back: “I can see clearly now, my loans are gone. I can see all the tax bombs in my way.”

Rob [00:37:38] I like all the singing. You're still in the Carnegie Hall mode.

Travis [00:37:41] Yeah.

Rob [00:37:42] That was awesome.

Travis [00:37:43] I'm trying to do funny singing, not legit singing. OK? I try to do that sometimes, and it like, “Wow, your voice really stinks, Travis. I can't believe they let you sing there.” And I'm like, “Hey, my choral voice is different, OK, from my joke voice.”

Rob [00:37:53] On the email list, when you sent out that — about the email list, that you were going to do that, and you sent that video highlights of you, I thought that was pretty awesome. So if you aren't on the email list for Student Loan Planner®, you got to check out Travis's highlight video. Maybe we could put it in the show notes or something so everyone can watch it.

Travis [00:38:09] We don't want people seeing that. I actually had somebody reply, “That was funny. And I'm in St. Louis, and you're in St. Louis. And this is going to be super weird. Let's get lunch because you seem like an interesting person or, like, funny enough person to, like, not be super serious.” I was like, “OK, let's do it.” And then we actually invited them out to karaoke.

Travis [00:38:27] So that was really weird because we were sitting around after karaoke, like, at this place with a bunch of friends and stuff. And they were like, “Oh how did you guys meet?” And we're like, “Oh, you know, we're internet friends.” So, like, he's — He's on my email list.

Justin [00:38:40] Craigslist.

Travis [00:38:40] It was — It was very funny.

Rob [00:38:42] You know, St. Louis is actually a hotbed for barbershop music. I don't know if you know that. There's, like, an International Championship Barbershop Chorus that I used to sing in here called the Ambassadors of Harmony. So if you're looking to sing, it's 160-people barbershop chorus with plenty of subset quartets that have also won international championships.

Lauryn [00:39:00] Justin, we need to get a hobby.

Justin [00:39:03] I know. No kidding.

Lauryn [00:39:04] What's going to be our thing, Justin? Like, Rob and Trav are going back and forth here.

Travis [00:39:09] Wait.

Lauryn [00:39:09] And I'm feeling pretty left out.

Travis [00:39:11] Whoa, whoa, whoa. Lauryn weren't you — Didn't you just get off a plane?

Justin [00:39:13] Yeah, I think it's just me.

Travis [00:39:14] From, like, Japan or something?

Lauryn [00:39:16] I did. I was volunteering. But that's not, like, a superpower. Volunteering is something everyone should do.

Travis [00:39:22] Whoa, whoa, whoa. Tell us more about this, though. Tell us more. What did you do in Japan?

Lauryn [00:39:26] I was helping elite athletes for Team USA at the World Relay. So, it is a two-day event where Team USA rocked it. There were nine different relays, and we got seven medals. And my job was, like, all the logistics stuff behind the scenes.

Lauryn [00:39:42] And I mean, it just kind of really, like — The sport gave a lot to me and really helped me get going, and I'm really grateful for that part of my life. So anything I can do to make it easier for athletes that are currently competing, I'm happy to volunteer my time to do so.

Travis [00:39:54] So Student Loan Planner® community, please send your suggestions for what Justin's hobby should be to Podcast@StudentLoanPlanner.com. Perhaps the next episode, we will do a top 10 hobbies that Justin could adopt. Does that sound okay, Justin?

Justin [00:40:09] Sounds great.

Rob [00:40:10] Yeah. See Lauryn, I was going to say the problem with you is that, you know, you just accomplish your goals so fast. Becoming a silver medalist in the Olympic bobsled but only training for six months to make that happen. I mean, you just did it too quickly.

Lauryn [00:40:24] Well, I try to pack as much into life as I possibly can. So. They say you can sleep when you're dead, and that's kind of the theory I'm running with here.

Travis [00:40:31] Yeah, that podcast episode — if you have listened to it, go back and listen to Lauryn's episode because that was unbelievable. Basically Lauryn just, like, woke up one day and was like, “Wouldn't it be funny for the lulz if I just meddled in some sport I've never done before in, like, six months.” I'm like, “What?” You know?