SPEAKER_01 0:00

Hey everyone, welcome back to the Sandwich Bread Podcast. We've been off for a couple weeks, but we're back and we're moving to a bi-weekly schedule going forward. Today's episode is one you'll want to share, especially if you or someone you know is carrying student loan debt. I'm joined by David Gourley, a student loan strategy expert who has helped his clients secure over $17 million in forgiveness, and he's done over 700 consultations. There are some significant and time-sensitive changes happening in this federal student loan space right now, and this episode will walk you through exactly what to do and what to know. Let's get into it. Welcome everybody to another episode of the Sandwich Bread Podcast. I'm your host, Tom Kaminsky. On this show, we have conversations about life and money for the sandwich generation, and very special episode today. We're excited to have on the show David Gourley, Gore like Poor. He told me not to say that. Here we go. A few episodes ago, uh Ann Garcia was on and she offered a number of strategies on how to prepare for saving for college. David is the other side of the equation. You've gone through college, you've graduated, you got your diploma, you're very excited, maybe even gone through grad school, got a second diploma, went to get a PhD, got a third diploma, piles of debt have accumulated. Enter David. He is our student loan strategy expert. Is that fair? And uh a couple little nuggets about David. We'll introduce him before we get into the meat of the conversation. David is an EA enrolled agent. That's a new designation that he has has added. We'll ask him a few questions about the tax expertise associated with that. Um but love his backstory. He's a former high school math teacher and turned financial planner, so kind of a personal finance nerd, turned full-time nerd, personal finance nerd. Doesn't moonlight anymore, it's full-time. But what one thing I really like about David, besides being a fellow Kansas City and he really has a specific subset of folks he's focusing his energy and time on. He he likes to work with teachers and their spouses and partners, but he also does uh student loan consultations. So he'll do like case-based work specifically around student loans. And I am as a financial planner, my job is to have a good grip on all things financial planner, but planning planning when there is a niche or a narrow need, I like to pull in experts if appropriate. And David is one of those experts. So he knows this space extremely well. It's very opaque, it's very complex, which you'll learn very shortly here in this episode. And you really need somebody keeping the pulse of these types of things to do a good job developing strategies for it. So very interesting stuff. In David's work, he has done over 700 student loan consultations. He's helped folks secure forgiveness for 17 million plus in loans. That's probably framed all right. That's so he has deep expertise in this area. So welcome, David. Did I Yeah, you bet. So let's real quick on your background before we get into the the topic of the day. What was the pull that took you from a math teacher into the financial planning profession?

SPEAKER_00 2:57

Yeah, that's a good question. So a lot of it centered around my wife and I were both teachers. My parents were both teachers, grandparents were teachers, aunts and uncles teachers. I I come from a teacher family. And um, whenever we when I basically as I was growing up and kind of seeing how things were happening around me, I realized, and as I started my own family and was looking around, there I couldn't find advice and good advice for teachers. And so that kind of drove the conversation that somebody needs to do this work. And now that I've gotten out and done it myself, there's there is a nice community of teachers, former teachers that are financial planners, but I didn't find that back whenever I first started. And so that was really what drove me out of the classroom and to help other people.

SPEAKER_01 3:37

Super cool. And you can see the connection between student loans and and being a teacher, but what specifically attracted you to student loan consultation work and solving for student loan chaos? You know, we've experienced the last couple of decades have been just chaos with the student loan space. But what specifically attracted you to that or got you on that path?

SPEAKER_00 3:57

Funny enough, I I ran my own podcast back in 2020 and I had a guest on that talked about public service loan forgiveness, and I had never heard of it before that time. And then as I got out and was really getting into the financial services work, it it kept uh it kept coming up time and time again that student loans were the biggest pain point for most educators and most people in public service that needed some sort of a financial help. Student loans were always the front and center topic.

SPEAKER_01 4:23

And so I just kept pushing more and more of how can I get myself to be in a position where I can help the and I would imagine, you know, you see the a wide spectrum of income levels with the consultations you've done, but teachers in particular, you know, if you've got a couple hundred thousand dollars in student loan debt, forgiveness is the path, right? You have to figure out that journey to get out from under it because the salaries aren't sufficient typically to pay off the loans. Uh whereas if you're a physician, surgeon, somebody who specializes, your income is such that you could kind of fumble your way and inefficiently get your loans paid off by virtue of your income. But for folks, sh social workers or folks or teachers, that you have to figure out the journey. You have to you have to come up with solutions. And for the listeners, if you have student loan debt, you've you've seen over the last 10, 20 years with each new administration a sharp turn, or even worse than a turn is a layering of programs on top of one another. The layering of programs on top of each other uh is awful. It's awful. And I feel horrible for borrowers because it's just an unfair set of circumstances for folks to navigate. My wife and I actually went through the getting her student loans forgiven. And the the turns we experienced on that journey, you know, as we were doing everything diligently, were very stressful and took a lot of careful planning to get that forgiveness. And even then, when we logged into our service or website and saw the zero, we were like, all right, download every document, screenshot everything. We were so skeptical that it actually had been accomplished. So it's a very difficult and stressful journey. And our goal for this episode is to update you on the state of affairs. We have a big deadline coming July 1st, and David can kind of catch us up to speed on what that what that deadline means, all the nuances of the changes that are underway, and uh add the careful caveats that it could all change in the the be the blink of an eye.

SPEAKER_00 6:13

It seems to do that quickly, right?

SPEAKER_01 6:14

Yeah, so let's get into it. July 1st. David, could you outline for us why this July 1st deadline and all the things that we need to have our eye on as that deadline approaches for folks with student loan debt?

SPEAKER_00 6:24

Yeah, before we dive into that, let me just touch on one real quick thing that is not changing, and that's the public service loan forgiveness program in general. I've heard a lot of people that say, hey, you know, like I've heard a lot of changes are happening. What's going to happen with public service loan forgiveness? As of today, there are no changes. The only thing that could potentially come down the road is who could qualify for public service loan forgiveness. Public servants and also nonprofit workers, and who qualifies as a nonprofit could, that's kind of on the chopping block, especially with hospitals and different nonprofit entities. But the program itself, public service loan forgiveness, is safe. It went through the negotiated rulemaking last summer, they're not going to make any changes to it. So that's the good news. The bad news is that July 1st, there are going to be some big changes. The first one of those is borrowing limits. And I don't want to go into the exact specifics of what those limits are. They're easily Googleable. But um, but it's important to note that if you're gonna be a new borrower, or you're starting a new program, even, or you have a kid who's starting a new program, there are borrowing limits out there for parent plus borrowers, for undergrad borrowers, for for graduate borrowers. Actually, undergrad didn't change, but for for graduate borrowers as well. So that's an important thing to note, and it's gonna change, it's gonna have to change the landscape of student loans because college prices don't tend to trend downwards, right? But people are still gonna need to borrow that money, and so the question's going to be where is it gonna come from? Maybe private loans, maybe more scholarships and grants. I don't know what that is going to look like, but uh but certainly something that people need to be aware of.

SPEAKER_01 7:58

And my perception, challenge me if appropriate, is that the private loan space will have higher interest rates and less and less, well, no federal protections or less federal protections.

SPEAKER_00 8:09

Correct. And almost always they're gonna require a cosigner because they're not gonna give as much money to an undergrad borrower, you know.

SPEAKER_01 8:17

Yeah, not good. That was the first question that came to mind though. Is as they establish borrowing limits, are you seeing any changing in tuition prices? Have you noticed any like any ways in which the schools are trying to navigate less money? Well, less easy.

SPEAKER_00 8:31

It doesn't really affect anybody just yet.

SPEAKER_01 8:33

Yeah. Right?

SPEAKER_00 8:34

But I think there's going to come something's gonna happen. And what I think is gonna happen overall is that less people are going to be able to get into the programs. And so what's gonna happen then is you know, are they going to have to shut down certain programs at certain universities? Are the universities as a whole going to going to suffer overall? I don't know. There's gonna be some, you know, I think it's gonna be about a five to seven year window before we really see the ramifications of what happens today.

SPEAKER_01 8:58

Interesting, very interesting. Okay, all right. So borrowing limits are changing. That's gonna happen July 1st. And you said it'll primarily be for graduate loans and undergrad loans. Parent plus borrowers. Parent plus borrowers. Okay, cool. All right. Next up, what's what's the next big thing on the July 1st deadline?

SPEAKER_00 9:15

Next thing is that we've got a new repayment plan. Everybody cheer because we've already got so many. I'll run through them. I don't expect you to know all of them or to understand exactly what I'm saying, but right now we have the income contingent repayment that's scheduled to sunset in 2028. We've got the income-based repayment. Don't worry, it's not that simple. There's an old version and a new version based on when you took out your student loans, with 2014 being that timeline of difference between the old and the new. Um, and they have different rules for each one of those with the old and the new IBR. Uh, then we've got pay as you earn, pay, and that is also scheduled to sunset in 2028. And we'll talk about that here more in just a moment as well. Then we had um we had repay, which was revised pay as you earn. Repay turned into save, save got cut, it's dead. And now finally in 2026, they're introducing the repayment assistance plan. And so that's going to be the new repayment plan. Repayment assistance plan that's scheduled to start July 1, but loan servicers are in disarray. They don't know what they're doing. I'm not sure it's actually going to start July 1, but we'll have to see how that works.

SPEAKER_01 10:23

I mean, and if I'm not mistaken, I think that's four administrations that I mean that's how you can kind of timestamp these things. A new administration comes in and they basically say, Well, this program's a disaster. I'll add another layer on top of it to solve the problem.

SPEAKER_00 10:37

And this repayment assistance plan as a general kind of rule of thumb, which those don't always work out, right? But if we were to look at it, if if somebody were just to listen and had no idea what they were doing, old IBR is generally the worst repayment plan. Repayment assistance plan, this new one, will probably be the middle. And if you qualify for pay or the new version of IBR, that's generally the best option to be on. And the reason why is because how they calculate the the monthly repayment amount. The I don't want to get into specifics, it will get intensely complicated at that point. But yeah, but they're all based on different factors. And so, usually, like I said, old IBR is generally the worst repayment option. Repayment assistance plan wrap, that new one that comes out July, is going to be the middle one. And if you qualify for the new version of IBR or potentially pay, those are the ones you will probably want to get on.

SPEAKER_01 11:31

Okay. And the the action item for listeners would be try to get into these programs before July 1st because those doors will be shutting. Is that fair?

SPEAKER_00 11:39

New IBR does not shut. Old IBR does not shut pay. They're talking about right now shutting the door on it on July 1. July 1. Or any new, like new applicants trying to get into pay as you earn. You need to get, I would get on that very quickly. So who does that affect? This is borrowers who took out loans between 2007 and 2014. That's the subset that we're talking about right here. If you took out loans before 2007, you don't have access to pay. If you took out loans after 2014, then you can go on to new IBR, which is the exact same terms as pay. So really there's a there's a middle ground when we talk about the sandwich. This is the sandwich right there, right? Um for the sandwich bread podcast. This is a sandwich right there from 2007 to 2014, where if you took out loans during that time, you want to get on PAY quickly. So that way you can um you can take advantage of the lower repayment options. Okay.

SPEAKER_01 12:30

All right, very good. Until the next next administration, then we'll have a new they're running out of acronyms though. Yeah, there's only so many eyes for income and various like iterations that they'll just have to so okay, very good. Let's talk consolidations after July 1. Are there limitations there in the future?

SPEAKER_00 12:48

If you take out a new loan after July 1, or if you consolidate old loans, those particular loans will only have access to the repayment assistance plan. So you lose access to IBR, you lose access to pay, you lose access to ICR if it's around. So all those things that you could potentially get on right now, if you take out a new loan or you do a consolidation after July 1, you're done. Rap is it. Rap is not, it got a bad rap. Is that for a little while? For a little while it got a bad rap, but after I've kind of dug into it, it's not a terrible, terrible plan. It's just why not take advantage of the even better plans if you can? Like new IBR. But the bigger one on this as far as consolidations is parent plus borrowers. And parent plus borrowers have a very, very tight deadline right now. We're at the end of May when we're recording this, and they have until July 1st to consolidate their parent plus loans into a direct consolidation loan and apply to get on the income contingent plan before July 1. This is the reason why this is a big deal. If they don't have that loan processed by July 1, and what that means is that they can apply for it today, it generally takes several weeks for the processing to take place. They have to be processed by July 1, or they will never have forgiveness opportunities again under this current administration. What will happen in the future? I don't know. I would assume that that would be one of the first things that they pull back on because there's a ton of Parent Plus borrowers. Most of them, you know, I know your podcast is getting several million downloads a week, but I'm not sure that all the Parent Plus borrowers are listening to the podcast right now. And so um there's gonna be a lot of people that don't know that they need to take action right now.

SPEAKER_01 14:26

So the most of the folks in the country with with those types with parent plus loans. We get most of them listening. So we should go listen at all.

SPEAKER_00 14:33

We've got to get more people listening to the Sandwich Bread podcast so that way they know that they need to make this consolidation and do this action, this action step before the July 1st deadline. So the last part we've we've kind of touched on already, switching to pay, I think, is going to be very beneficial for people that qualify during that, like I said, from 2007 to 2014. That's when you took out loans. I would strongly look at um at switching to pay uh for that reason.

SPEAKER_01 15:00

Big deadline coming up, and so folks listen and re-listen to this section of the podcast if needed. David is a wonderful resource. So if you do need to dig in deeper, we'll share in the show notes uh where you can find him if you do need sort of a one-off consultation. Bigger picture though, in the student loan space. Do you have any other comments to add about things, trends you're seeing, things with uh new plans that are out that you'd like to share some notes on?

SPEAKER_00 15:24

Yeah, one of the big things that has come up, they were saying for a while that the anybody who's working on public service loan forgiveness, that the if you did a consolidation, you were going to get a weighted average of all of your payments. So, what that basically means is that if you had old loans that had a higher payment count and new loans that had a lower payment count, you could consolidate them and get the weighted average on those, on those, um, on those two consolidation loans together. They've also gone one step further and said that if you're working towards any forgiveness, even including the IDR long-term forgiveness, that the weighted average does count now. And one of the things that I'll hear sometimes is like, why would I want to let's let's use an actual example. Let's say that you've got um newer loan that you took out is $25,000 and you've got no payments towards PSLF so far. You just took it out, and you've got an older loan that has a hundred credits towards public service loan forgiveness. You could consolidate them in if they were the equal, if they had the exact same, they were both $25,000, and you consolidated them, basically you would take the $100 and the zero together, divide by two, to get 50 payments on your loans. And what I'll hear people say is, well, why would I want to lower my 100 payment count down to 50? Why would that make a difference? And the thing is that most people don't understand about the student loan repayment structure is that your income-driven repayment plan is based on income and family size. It has nothing to do with how much you owe in loans. So the person that has $25,000 in loans is paying the exact same monthly payment as the person that's in the exact same boat as them, same family size, same income, as somebody that has $2.5 million of loans, right? It doesn't matter. So if you have 100 payments on your old loans and they get forgiven in 20 more months, but you have these other loans that have zero payments on them, that means you're making the exact same monthly payment for 120 more months to go from this point on. Whereas if you did a consolidation and you and you got 50 payments now, from this point forward, you would only need to do 70 more payments on those loans to get full forgiveness. And again, it's not based on the amount of the loan. So you went from 50,000, you got part of them forgiven. Hey, great, you made 20 months, you got half of your loans forgiven. But if you still have the $25,000 of loans, your payment didn't change because your loans got cut in half. Got it. That's a lot, that's something a lot of people don't understand.

SPEAKER_01 17:43

Yeah, interesting. Interesting.

SPEAKER_00 17:45

Consolidation does make a big difference and it's a big deal.

SPEAKER_01 17:47

Yeah, and previously, under previous iterations, my understanding is that you could either lose credit for when you consolidate, lose credit for payments made, which could be devastating if you're working toward forgiveness, um, or the interest rates may not be work in your favor as well. So this seems like actually a very logical and a positive thing for borrowers. It's shocking that they're doing what they said they were gonna do. Logical and helpful for borrowers is not usually how this shakes out. So good.

SPEAKER_00 18:14

And it's happening. Save is officially ending. Right now, they're saying that on July by July 1st, the loan services are gonna send out notifications to all borrowers. There's over 7 million people, they're still on save right now, so this is gonna be a lot of people, that they have 90 days to make a switch to a different repayment plan or they will automatically be put into the standard repayment plan. And I don't know which exactly standard repayment, maybe if if you've never done a consolidation, it's generally the 10-year is the standard repayment. So these people that got on to save thinking that they were gonna pay, you know, $100, $200, $300 a month, are gonna see bills that might look like $1,600, $170, you know, $2,000 a month, and they're gonna be shocked. Make sure to take advantage of that. It's a 90-day window from July 1st essentially until September 30th, um, where they can uh, you know, you have to make a choice to move to a different repayment plan, or you're gonna be automatically put into one.

SPEAKER_01 19:11

Yeah, and the 10-year standard tends to be on the higher end, you know, because you're basically just take that number and it's a flat 120 payments, if if I'm recalling correctly.

SPEAKER_00 19:20

So it's amateurized based on your interest rate, too. So it's not just a hundred and it's not just your your principal divided by 120. Right.

SPEAKER_01 19:26

They they tack in the interest. So that'll be kind of shocking and disruptive. I hope your calendar is clear, David. You're gonna get a lot of calls.

SPEAKER_00 19:32

Summertime, we like to, you know, we don't need calls in the summer, but yes, we I'll I'll have enough for people to to book something. And then the final thing that I think is important to note here is that how you file your taxes makes a big impact on your income-driven repayment plan. So if you are married and you and you file separately, um, and I always put a caveat on this and like a little asterisk, you need to work with somebody that can run a report for you on what it looks like to file taxes married filing jointly versus married filing separately. Because more than more often than not, you're going to have a tax consequence to filing separately, especially if you and your your spouse have income discrepancies. If one person makes more and one person makes less, uh, you're gonna have some tax consequences. You're also gonna lose some tax deductions, some tax credits. There are things that don't work well for married filing separately, but you have to kind of take that part of it and then say, what is going to be the benefit on the student loan side of filing separately, and then weigh if it's worth it or not. Most of the time, it's better. Well, from a from a just a student loan standpoint, it's always better to file separately. When you tack in the, you know, looking at the the tax consequence side, there's really not very many times I've seen where it still doesn't work out, but it's important to note what you're gonna be paying.

SPEAKER_01 20:49

Yeah, be aware of the consequences and work with a tax professional, have them run side-by-side projections of what you filing jointly versus single or separately would look like. And understand, you know, because to David's point, you might be looking at a couple thousand dollars of difference in your tax bill. But if that translates to your student loan payment being cut in half, you might be looking at five, ten thousand dollars in student loan payment savings versus a two thousand dollar inefficiency with your tax filing. Run those carefully side by side and revisit that that it adds complexity and you have to really be on top of the math to make it make sure you're doing the right thing.

SPEAKER_00 21:28

And it's complex here in Missouri, but then when you throw in community property states and like I've got a uh a pretty decent amount of clients out in California, and we have to like navigate, you know, not only are we filing separately, but then we have to look at the community property income and how that impacts the tax return as well. You know, if you're a if you're the higher earner in your family, it actually works out well, it brings your income down. If you're the lower earner in your family, then it brings your income up. And there are ways to use what's called alternative documentation of income, and you can use pay stubs. Instead of using your tax returns to get your monthly repayment amount calculated. So there's there's a lot of things that, like, kind of to your point, what you said earlier, is if you're not working with somebody who understands the ins and outs of student loans, you're probably leaving money on the table.

SPEAKER_01 22:12

Yeah. David, this has been awesome. It's been a really good update, timely. With that deadline coming, we really appreciate you bringing your expertise to the table. David, where can folks find you to either listen to your if you have a regular newsletter, you know, where can they find that? And and where could they find you either online or elsewhere?

SPEAKER_00 22:29

Yeah, my website is probably the best place to go, and that's www.k-12planning.com. K-12planning.com. And I try to keep up with a blog. That sometimes happens, but I do have a weekly newsletter that comes out every single week. Um, and I actually just did this exact topic in a newsletter as well. So it's so it's one of those where as changes happen, as I as I find out information, I'm pushing that out to the people on that newsletter as well.

SPEAKER_01 22:55

Very good. Well, we'll have to have you back on because uh, you know, by the time this is published, I'm sure there will be a new executive order blowing up half of what was discussed here, unfortunately. So we appreciate you taking some time to catch us up to speed on student loans.

SPEAKER_00 23:08

Yep. Thank you for having me. I appreciate it.