THE Cambridge Connection - Episode 17

But groceries or gas, those prices fluctuate and as you know, they’ve been going up recently. So you want to keep track of what you’re spending to see if you need to make some adjustments. So that’s one of the main goals that I have. So we’re very excited for this new year and we want to share as much information as we can to help you, the listener, to deal with working on your financial situation, whether it’s in good shape now or it needs some work or you’re having debt problems, whatever that might be. We’re sharing as much information on this show and today’s a very important one because we’re going to talk about public service loan forgiveness and student loans that many, many people have.

Introducing guest and student loan forgiveness topic

And today on this show, we have special guest, Betsy Mayotte. She’s the president and founder of the Institute of Student Loan Advisors known as TISLA. And we’re going to talk about public service loan forgiveness, the basics. And we’re also going to talk about some changes that have come because even though you don’t have to pay student loans right now and the moratorium was continued until May, there is a process with the public service loan forgiveness where there’s a waiver involved and we’re going to get into all of that so that you, the listener, can understand what steps you need to take if you are looking into whether you are eligible to get your loans forgiven or not. And it is my honor to welcome Betsy Mayotte.

And Betsy is the president and founder of the Institute of Student Loan Advisors. And she’s been working in the student loan industry doing compliance and advocacy work for over 20 years and has helped thousands of borrowers with their student loans. Welcome Betsy. Hi. How are you today?

I’m well. I’m excited to talk about one of my favorite topics, which is student loans. Absolutely. And it’s the new year and even though there’s a moratorium on the student loans until May right now, we can’t say enough thank you to you for being on the show because public service loan forgiveness has been convoluted for a long time and we’re going to get into that. We’re going to get into all the new rules and the waiver process.

Guest background and TISLA

But before we do that, can you tell the listeners a little bit about yourself and a little bit about your experience so far? Yeah, sure thing. Well, as you mentioned, I have been working in the student loan industry, feels like since the earth cooled, I spent a lot of my career doing student loan compliance and advocacy work. I actually helped write some of these very regulations, whether that’s a good or a bad thing, I think depends on the regulation. And then in 2017, I left my employer to start the Institute of Student Loan Advisors.

The whole point of TSLA, I saw a need for people to have a free expert and neutral resource to help them manage their student loans. Anyone can go to our website and self-help. I’d like to think that all our stuff is in plain English. If they need additional help, they can email us and we’ll help them. Everything from getting out of default to managing TSLA, to helping them choose the best repayment option, depending on their financial situation and everything in between.

Broad student loan forgiveness debate

There’s been some information in the news for a very long time now that the government is trying to forgive the loans for all borrowers anywhere. The recent administration has talked about $10,000 to $50,000 of forgiveness. Some people are really pinning their hopes on that. What advice would you have for them at this point while that still goes on? Prepare for the worst, hope for the best.

My gut says that they will not be doing broad student loan forgiveness. What people sometimes forget is that student loans are not the problem. Student loans are the symptom of the problem. The problem is the cost of higher education. Until they find a way to resolve that, so the student loans, forgiving a bunch of student loans only to have them accrue all over again is a hard policy pill for both sides of the aisle to swallow.

I have tweeted that question. If you’re not going to fix the root cause, what is that going to do to help anything at this point? I actually had some hope. If the original Build Back Better Act had a proposal in there, it would have gone a long way to ameliorating the student debt issue. If that had passed, then I would have had a little more hope that there would have been at least some limited, maybe income-based loan forgiveness, but that got stripped out of the Build Back Better Act without even a whimper, which was really disheartening to me.

That would have created a two-year degree and an easy pathway to take you down to a four-year degree. That would have significantly reduced the amount of student debt that was accruing, which again would have made the idea of any type of broad student loan forgiveness a little bit more politically palatable. Sure. Even to the extent where you have income-driven plans that if you’re not eligible for public service loan forgiveness and you’re low income and you’re not paying any payments for 20, 25 years, there’s a tax consequence at the end of that, which again, for people that are low income, that just seems very unbalanced for the purpose of getting them through the process. But there isn’t.

Through 2025, Congress temporarily removed that tax bond provision, and now that that is actually in place, I have high hopes that that will be a permanent thing. Wow, that sounds terrific, because that was an early concern that just didn’t seem like it added up for the assistance that was trying to be given to people that were low income. But you bring up a good point, Gordon. You know, all this talk about student loan forgiveness and whether that is a necessary ... Necessary isn’t the right word, because especially for low-income borrowers or those that have debt and no degree, one, there’s a good argument that it is necessary, but from a broader perspective, it’s fascinating to me, and talking to the borrowers that I work with, the general consensus seems to be, sure, forgiveness would be great, but But I would prefer if they permanently lowered the interest rate.

I’m okay with paying back what I borrowed, but I don’t feel like I’m on an even playing field because of the amount of interest that’s accruing. And I’m starting to talk to policymakers about that because, to me, permanently reducing student loan interest rates or allowing federal student loans to refinance to a lower rate like you can do sometimes with private loans, seems like it might have more bipartisan legs to it than outright loan forgiveness. Absolutely. Yep. That’s a big one.

What is it? What’s the number now? 7 trillion? So, yeah. 7 trillion is where we’re at, the last numbers I saw.

But I also know that earlier this week, the Federal Reserve came out with the most recent numbers. I just unfortunately haven’t had a chance to look at them. 7 we’re already at. Yeah. Well, that number keeps rolling, right?

Sponsor break and show promo

Sure does. All right. So, we’re going to take a short break, and then we’re going to come back and dig into public service loan forgiveness. And this is Gordon Oliver with The Cambridge Connection, here with my guest, Betsy Mayotte. Hi, I’m Christopher Viale, President of Cambridge Credit Counseling.

As 2022 begins, The Cambridge Connection is ready to continue to tackle the financial issues and challenges that matter most to you and your family. This month, they’re going to feature critical conversations around student loans, paying off holiday spending, budgeting for the new year, and other financial wellness tips to help you meet any financial challenge. And as always, they’ll include experts in those fields and a few real-life scenarios and success stories to show you how following reasonable steps can help you regain control of your family’s finances and get you back on track toward your goals. 5 FM or 1400 AM. Or find all The Cambridge Connection episodes anywhere you listen to your favorite podcasts.

And in the meantime, if you’d like to speak to one of the counselors at Cambridge Credit Counseling, there’s no obligation to call. 1-800-CAMBRIDGE. Welcome back, everyone. This is Gordon Oliver with The Cambridge Connection, here with our special guest, Betsy Mayotte. And we’re talking about an extremely important topic, which is how to manage student loan debt.

Public service loan forgiveness basic rules

And specifically in this show, we’re talking about public service loan forgiveness and some of the recent news that’s come out about it. So Betsy, can you tell us a little bit about the Public Service Loan Forgiveness Program and the recent rules that have come out about it? Yeah, sure thing. So just for your listeners, it can be a little bit confusing, so I want to sort of start at the beginning. So the existing and permanent rules for public service loan forgiveness at a high level are as follows.

You need to make 120 eligible payments, and an eligible payment is one that’s made on time and in general under an income-driven repayment plan or under a 10-year standard plan. On an eligible loan, an eligible loan is a federal direct loan, which if you took your loans out since July 2010, then your loan is almost certainly a direct loan. Just for the listeners, private loans are loans that come from the banks, and federal loans are loans that come from the federal government, the Department of Education. Well, for the most part, prior to 2010, there was another federal loan program, which about 20% of all federal student loan borrowers still hold loans under, which is called the Federal Family Education Loan Program, or the FFEL, and private lenders were involved in the FFEL. But those are considered federal loans, they’re just not considered eligible for public service loan forgiveness unless they’re consolidated into the direct loan program.

So public service loan forgiveness basic rules, 120 eligible payments on an eligible loan, which is a direct loan, while working for an eligible employer. And I just want to highlight that. One of the big myths about PSLF, as I’m sure you’ve seen, Gordon, is that people think it matters what you do for a living. It doesn’t matter at all what you do for a living. What matters is who you work for.

You need to be working full-time for either a government employer, and that’s either federal, state, local, or tribal, 501c3 nonprofit, or there are some other nonprofits that aren’t 501c3 designated that could be also eligible for PSLF. So those are the basic rules for PSLF, under an income-driven plan or a 10-year standard plan, on a direct loan, while working full-time for an eligible employer. The problem is, is that the communication and education for PSLF, for the first five, six, seven, eight years after it was signed into law, was poor at best. And because of that, there were a lot of borrowers who thought they were progressing towards PSLF when they weren’t. They were on the wrong payment plan.

PSLF waiver changes and deadline

Maybe they were on a graduated plan or an extended plan. They had the wrong loans. A lot of people had those fell loans and thought that those qualified when they did not. This is one of the good things that has come out of the pandemic, believe it or not, because under the HEROES Act and because of the national emergency that we’re under for COVID, the Biden administration is able to make some temporary changes to what normally would fall under federal law and allow people that normally would not have been eligible for PSLF to get eligible. On October 6, they announced that they were going to implement these waivers, and basically what these waivers do is they allow any month that that borrower was in repayment while working full-time for an eligible employer to count towards PSLF.

So it doesn’t matter under this temporary waiver, it doesn’t matter if you made the payment on a fell loan, it doesn’t matter if the payment was late, it doesn’t matter what payment plan you were on. If you submit proof of eligible employment for that period, then the government is going to count that month towards PSLF. Wow, that’s incredible that the government actually stepped in to expand these rules a little bit to make people more eligible. For listeners that are on right now, if you’re just joining us, I’m here with Betsy Mayotte, and we’re talking about Public Service Loan Forgiveness, also known as PSLF. Yeah, no, I agree with you.

I think that was a good check-in because, just to put it in perspective, prior to the announcement of the waivers, a total of 16,000 people had been approved and gotten their loans forgiven under PSLF. Just in the two months since they’ve announced it, an additional 20,000, if not 30,000, have received forgiveness just because of those waivers. Now, the waivers are temporary. So, if your listeners think that they might fall under these waivers, they need to take action no later than October 31st of 2022, and that is a hard stop. Remember, these waivers, the Biden administration is only allowed to do it under this limited authority under the HEROES Act, and that expires on October 31st, 2022.

So, there’s nobody that can give you sort of a grace period for that drop-dead date. So, with the waiver, what advice for our listeners, if they are not sure about this at all, what should they do next with the waiver process? Educate yourself. I mean, I just gave your listeners sort of the 5,000-foot level explanation of it. org, there is a write-up on each of those websites.

Actually, my website, we’ve also created a really extensive FAQ document, including some case studies, to try to walk people through this kind of confusing temporary waiver. So educate yourself. If it appears that you need to consolidate in order to get access to this waiver, I would do that sooner rather than later. gov. And make sure you’re submitting proof of all periods of eligible employment.

Sponsor break and TISLA promo

So we’re going to take a short break here. This is Gordon Oliver with The Cambridge Connection. We’ll be right back. Confused or overwhelmed by your student loans? The Institute of Student Loan Advisors is a nonprofit dedicated to providing free, expert student loan advice to all consumers.

Whether you’re trying to choose a repayment plan, navigate loan forgiveness, or trying to get out of default, the Institute of Student Loan Advisors can provide the information you need to successfully manage your student loan debt. They can also provide training and other services to employers, schools, or associations who want to assist their team with their student loans. org. Welcome back, everyone. This is Gordon Oliver with The Cambridge Connection, here with Betsy Mayotte for our Real People, Real Problems conversation.

Listener question on loans

We had a listener email in with some questions about their student loan situation, and this whole show has been about protection for consumers and information on public service loan forgiveness for the basics, and also the current waiver process that expires in October. So, Betsy, again, thank you for joining us. I want to share this Real People, Real Problems situation, and then if you can help us break down the answers, that would be terrific. I love it. Let’s do it.

All right. I graduated undergrad in December 2006 and began teaching full-time in August 2007. I’ve been teaching music at the same Title I school since 2007. I’ve never missed a loan payment. I was put on an auto-deferment while I was completing my master’s degree from 2011 to 2013.

After graduating, my loans auto-restarted. I did apply for and received the loan forgiveness of $5,000 after working in a Title I school for five years. After 10 years of on-time payments, I applied for the Public Service Loan Forgiveness Program. I was told that I would have to restart with an income-based payment plan, but if I did that, I’d have my loan paid off before I made the 120 required payments. I have three accounts with student loans, Navient, American Education Services, and Fed Loan Servicing.

I know that there’s a temporary change to the requirements for the PSLF, but when I looked into it, it didn’t seem like I would qualify unless I changed my payment plans. Also, the income-based payment plan would increase my payments to an amount that with two kids, three cars, and a house, I cannot afford. I’m wondering if there’s any way that I can qualify for PSLF now. I’m also wondering if it’s actually better to refinance my loans or consolidate them and which company is trustworthy. I see offers all over the place, but I’m wary of scams, so I haven’t made any changes.

Breaking down the listener’s PSLF situation

“ Now, obviously, we have a lot that’s involved in this question. Yeah, there’s a lot to unpack here. The first thing I want to tell your listener is, unfortunately, even with the waiver, they lost out on five years of the 10 years needed towards PSLF by taking advantage of that $5,000 for working at the Title I school, which is the Teacher Loan Forgiveness Program. That’s been one of the confusion areas for teachers, right? Whether to take the Teacher Loan Forgiveness, and if they do, they can’t double-dip.

Isn’t that what it’s called? Right. You can’t double-dip for the time. So for the five years that was allocated towards this borrower getting the $5,000 for Teacher Loan Forgiveness, she can’t count any of that five-year period towards the 120 payments she needs for Public Service Loan Forgiveness. So if I’m hearing her case correctly, she started teaching in 2007, so hypothetically, that’s when she started making payments.

She lost out on two years of payments while she was completing her master’s degree, so we’re at what? Help me out with the math here. She would have had four under her belt until she went and got her master’s, and then another seven, so that brings us to 11 minus a five. So she’s at around five or six years now towards Public Service Loan Forgiveness. Now, she mentioned that getting on an income-driven plan is not feasible for her for several reasons.

Most importantly, that it’s not affordable. One option this borrower has, but based on her timeline, is somewhat risky, is there’s another program called the TEPSLF, and that one, it doesn’t matter what payment plan you’re on, so this borrower could continue on the plan she’s on for another five years and then apply for the TEPSLF. The problem is, is the TEPSLF has a finite amount of money in it, and five years is an awful long time. I can’t assure this borrower that there will still be money left in the TEPSLF five years from now. Yeah, that’s the ...

It was just funded with a certain amount of money, right? It’s not like this waiver process where it opens it up so that anybody that missed out on requirements, they can be involved. Right. So, I mean, there’s a chance, it’s $750 million, there’s a chance there’ll still be money in that fund five years from now, but I wouldn’t hang my hat on it. This borrower might want to instead ...

Listen, the name of the game is not loan forgiveness. The name of the game is paying the least amount over time. It’s unfortunate. If I could go back in time, I would tell this borrower not to do teacher loan forgiveness because she would have gotten a lot ... She would have gotten a much bigger benefit if she just held out for PSLF, but that ship has sailed, so at this point, it might actually be the most beneficial for her to look at her budget and pay her balance of her loans off as aggressively as possible.

I don’t know how much she owes. That’s sort of the big piece of the puzzle that’s missing from this inquiry. Sure. And that’s ... Look, the sponsor of this show, Cambridge Credit Counseling, they counsel teachers in Massachusetts and New York and Connecticut, and I think feedback-wise, these have been a lot of the pitfalls of people not knowing what the actual parameters were and because it felt like the right thing to do while I can get $5,000 off my loans.

Why borrowers lack loan information

It may not be the thing to do, and that’s why getting the information before decisions are made is extremely important and why we continuously on this show and the work that you do and the work that our sponsor, Cambridge Credit Counseling, does to try to get people as much information as we can. It’s intriguing and unfortunately a little upsetting that people that are educators didn’t know this information, and you’ve been in this business for a very long time. Can you kind of explain to people that may be feeling like, oh man, I made mistakes, how they really didn’t understand it or didn’t know it? You know, so up until ... Again, remember, I’ve been in this industry when information was distributed via carrier pigeon or the equivalent.

Up until fairly recently, proactive outreach and education about the different aspects of the ... And when I say that, I’m blaming—I’m pointing the finger at everybody—Department of Education, colleges and universities, loan servicers, advocacy organizations like mine. It was just—it was done badly. It’s much easier to educate yourself about these programs today than it was even five years ago, because there’s a lot more information online. But the other issue, and I—just to be clear, I am not borrower-blaming, because I am—as a consumer, I am just as guilty of this as everybody else, is, you know, people don’t read the Apple terms and conditions.

And it’s really important, and this is—on the teacher loan forgiveness application that this borrower would have had to fill out to get that forgiveness, it states on there that by using this forgiveness program, you’re losing—you can’t double-dip with public service loan forgiveness. Right. So, again, when I say that I’m pointing the finger at everybody, I mean everybody. As consumers, we all need to learn how important it is to read all the things. Take control of your student loans rather than letting them control you.

Yeah. And then from the other side of things, you know, even though things are much better than they were, we as an industry—and I’m talking about Cambridge Credit Counseling and TSLA and the Department of Education and the colleges and universities and the servicers—we all need to be doing a better job to proactively push that information out to consumers in the first place. Absolutely. And to your point, you can’t rely even on the servicer for that end. You know, these are contracted companies that are doing a service, but that doesn’t necessarily mean that they’re going to do the full-blown explanation to a borrower when they call in and maybe, in fact, just answer the very basic of questions just to kind of get on to the next caller or the next person inquiring.

Annual student loan check-ins and closing

So that, to your point, you have to be—you know, you have to kind of form your own destiny by taking control of what you’re dealing with. And student loans aren’t going away anytime soon, and the more that people see—and you can understand why people are outraged—but the more that you see that you really have to be tuned into anything that’s a direct reflection of your financial situation, this is a prime example of that. It really is. And, you know, I’m so glad you brought this up, because I would like—I’ve been trying to start a trend, and maybe you and your listeners can help me. Just like we’re in the habit of checking the batteries on your smoke detector at daylight savings time, I think that all student loan consumers should be in the habit of re-evaluating their student loan strategy once a year, and I’m recommending tax time, just because that’s when you have all the things in front of you that you need to really do that.

Let’s certainly talk about that. I would love to start some kind of a movement like that, that people actually were able to have some accountability help. Not accountability like, you better do this or else, but just as some help and assistance to know that they can get some coaching involved with dealing with these debts until they’re taken care of. Absolutely. Well, Betsy, unfortunately we’re out of time.

We could talk for a very long time, because there’s so many ways to go with this. But we’re grateful for you being on the show, and would you be able to join us around tax time again, so we can continue to maybe start talking about this movement? I will talk about student loans all day, every day, any day. So just say the word. I’d be happy to.

Awesome. And just before we leave, can you tell listeners how to find you once again? Sure. org. You don’t need any registration, there’s never any fees or charges or anything.

Awesome. Again, I can’t tell you how grateful I am to have you as a guest. This is such important information. I look forward to having you back around tax time, and Happy New Year, and thank you so much for joining us. Thanks for having me.

Happy New Year. 28 minutes goes by very quick, and huge thank you to my producers, Leah and Lisa, for helping us put together this amazing show. And this is the new year, so we have some great experts on the horizon. com or find us where you listen to your favorite podcasts. org or feel free to call 1-800-CAMBRIDGE.