THE Cambridge Connection - Episode 51

And those payments also count. There’s a waiver process we’re going to discuss today that expires on Halloween. And we have special guest Betsy Mayotte, who is the president of the Institute of Student Loan Advisors, who her and I are going to have a dialogue and conversation on the important things to know about loan forgiveness, about the recent plan that was unleashed by the Biden administration for giving $10,000 or $20,000 in loans. And another important one, if people are in default on their loans, there’s going to be an opportunity to get out of default pretty easily and with a very good standing and an improvement in your credit profile if you do everything right. So we’re going to cover those issues today.

Lots to talk about. Going to take a quick break, and then we’ll come back with our special guest, Betsy Mayotte. This is Gordon Oliver with The Cambridge Connection. We’ll be right back. Are the rise in prices for gas and other expenses crushing your budget?

Introducing guest Betsy Mayotte

Cambridge’s typical clients save $140 per month while paying down their credit card debt at much lower interest rates. Call 1-800-CAMBRIDGE. Welcome back, everyone, to The Cambridge Connection. I’m your host, Gordon Oliver, here without my co-pilot, who hopefully is dealing with a towing service, helping with her flat tire. But it is my pleasure and honor to introduce our special guest, Betsy Mayotte, the president of the Institute of Student Loan Advisors.

Betsy, thank you so much for joining us on the show today. Oh, it’s my pleasure. Such important work that you do. So important that listeners, borrowers of federal loans are paying attention right now to some things that they have to know that are available, and we’re going to cover that in this segment. And before we do that, can you please tell our listeners a little bit about you, your career, and what you’re doing?

Sure thing. So I’ve been working in the student loan industry. I don’t know, it feels like since the earth was round, I spent most of my career in a compliance and advocacy role. And about five years ago, I founded the Institute of Student Loan Advisors because I saw there was a need for consumers with student loans to have access to free, expert, and unbiased student loan advice. So anyone can utilize our services for free.

org, is pretty comprehensive and more importantly in plain English. And then anybody who has questions or maybe even a dispute about their loans can email us through our TSLA email on our contact page, and we’re happy to help them. We also work with employers and associations and other organizations that want to help their constituencies, you know, successfully manage their student debt. Couldn’t be a more important topic for us to be talking about. Obviously, there’s some deadlines that are coming up and some uncertainty about some of the recent announcements.

Biden student debt relief details

So let’s start with the debt relief that the Biden administration just released. Can you speak to how that’s going to work for people as we know right now? Yeah. So I think, you know, I think you ended your question with a really important piece, which is we don’t have all the information right now, and we’re expecting the rest or more details to come out probably by the beginning of October. But here’s what we do know.

The Biden administration has announced student loan forgiveness for borrowers with federal student loans, and that’s pretty much, as far as we can tell, most federal student loans. So that, you know, undergraduate or graduate, Stafford loans or Parent PLUS or Graduate PLUS or whether the loan’s in default or whether the loan’s been consolidated within the federal program, all of these seem to potentially qualify. And the criteria that we know as of right now is that the borrower has to have had an adjusted growth income of under $125,000 in either the 2020 or 2021 tax years, and that’s for a single person. For a married couple, filing as married and their total household income can’t be more than $250,000, and again, that’s adjusted growth income. We also know that these borrowers stand to get up to $10,000 in loan forgiveness.

But if they ever had a Pell Grant at any time in their academic history, whether it overlapped with a loan or not, they stand to get up to $20,000 in forgiveness. So that’s sort of the headline. You know, of course, there’s a lot of questions that go along with that. You know, a couple of the common questions that we get is, for example, what if I have a Federal Family Education Loan Program loan, which is a federal loan, but unfortunately has been excluded from a lot of the relief that’s been given over the last couple of years? Well, we know about borrowers with cell loans.

loans is that the Department of Ed has said that they’re working on a process that would allow FFEL borrowers to qualify as they stand. But in the meantime, these borrowers, if they choose to and if it benefits them, can also consolidate into the direct loan program to get access to that debt relief. So borrowers with a FFEL loan, unless it benefits you to consolidate right now, it doesn’t hurt to hang tight for a couple more weeks till we get that additional guidance. Important to know each of these details that the most important thing about the update you’re giving us now is that people have to understand they’ve got to keep an eye on it and reaching out to your organization or the sponsor of this show, Cambridge Credit Counseling, to get updates is always smart. And I know Cambridge is putting out updates and I know you work with the Director of Education, Marty Lynch, over there.

So between the two of you, I know you have your pulse on what’s going on and you’re paying close attention. So anyone that needs an update or needs to reach out to get more information should definitely reach out to you to ask questions or get more details. Yeah, for sure. We also put a banner on the front page of our website with a link directly to information about this program. And that’s a good place to keep an eye on for when these updates come out, which again, we’re expecting these updates to come out likely the beginning of October.

And that’s also when the Department of Education has said they plan on making the application for this debt relief available. Now, not all people are going to be required to apply. There are going to be some people that it’s just going to magically happen. But there will... I would say at least half, if not more than half, of federal student loan borrowers will have to apply through this application process, which we don’t know what that’s going to look like yet.

Yeah. And I want to talk about that magic. It’s important for people to understand that I know, that I’ve read, people are not getting a stimulus check to apply towards their student loans. It’s going to just be deducted off the balance before, what is it, June 30th? Is that what the current deadline was?

No. For people that apply by November 19th, the Department of Ed has said that they will get their forgiveness by the time student loan payments resume in January. Oh, wow. But the actual deadline for this is actually not until December of 2023. Got it.

But what loans qualify? Like, what disbursement date was it that, anything on that date or before, the ones that would qualify? Right. And I’m glad you asked that question, because that’s another common question I get, which is, if I take out a new loan right now, can I get it forgiven? And the answer is a hard no.

Only loans... Betsy here, no, Betsy. Sorry. I’m not here to sugarcoat it, I’m here to give, you know, the right information. I love that.

We always talk about this show not being doom and gloom, but sometimes when you have it to give the facts, it’s some of it, you have to just know what it is and what it is not, right? Right. So only loans where at least one disbursement has gone to the school by June 30th are going to qualify for this debt relief. So, you know, a lot of your listeners, if they have children in school or if they themselves are in school, they probably applied for a loan over the summer and got it approved, and it may have been approved before June, but it likely didn’t start getting disbursed to the school until the end of August or September. And that scenario would not, that loan would not qualify for this debt relief.

Yeah. Again, important to keep up to speed on any of the updates, but those seem like some pretty concrete things that are in place, right? Right. The things that we’ve talked about so far are the things that we, you know, the Department of Ed has published and we’re pretty confident about that information. Okay.

Discussing cost of higher education

And we’re going to get into the public service loan forgiveness and the waiver process that’s in place, but in just basic dialogue in the work that you do, doing a program like this, obviously there’s pros and cons and some people are very happy about it. Some people are not happy about it that have paid their loans or paid their education or their children’s education. What are you, are you seeing anything about what’s going to fix what’s gotten us into this situation with kids coming out of high school, borrowing ungodly amounts of money to fund their education? Are you seeing any reform that’s being discussed? You bring up a really great point.

Something that I talk about all the time, you know, we talk about the student debt crisis, which is a real thing. And I think that what the Biden administration has done with this targeted debt relief is amazing. It’s nothing I ever thought I would see in my career. But the fact of the matter is it doesn’t address the real problem. Student loan debt is a symptom.

The problem is the cost of higher education. And I will fully admit to being frustrated and flummoxed as to why there hasn’t been broader conversation and policy discussions on how to fix the actual problem, which of course is the cost of higher ed. And that’s the debt relief mind, right? That’s where I kind of come from. If we’re looking at such a huge problem now, right?

If we’re going to be throwing money at that to help get people some relief, again, what’s going to be done to fix the problem? And I feel like that’s not an easy dialogue and I feel like that’s not even an easy fix at the moment. But I would love to see some headlines showing that there are people collaborating on how to fix this. Because at the end of the day, when you have someone young, and again, there are plenty of age groups that go through borrowing for education, but a good majority are coming from high school knowing or thinking that they have to get an education to be successful in the world, and then taking out loans that they’ve never ever even come close to being responsible for, and don’t really even feel it while they’re in school, and then they wake up to when school is over to having to create a life for themselves, a budget, living on their own, the cost of living, which obviously in this economy we know is in somewhat trouble right now. So I’d love to see some more discussion on how we’re going to fix this.

Me too. You know, we saw a quick minute of it when, in one of the most recent reconciliation bills, there was a Biden proposal in there for the Build Back Better Act. And that could have gone a very long way in addressing this issue. But unfortunately it got stripped out of that bill without so much as a whimper. And I found that extremely frustrating.

Yeah. Well, I think, and if you’re open to it, we’ll have you back several times in the show. We got extended again. We just had our one-year anniversary, so we’d love to have you back on at some key points to talk about updates and maybe helping to start that dialogue with you. I’d love that.

And congratulations on your anniversary and extension. Thank you very much. We appreciate it. All right. We’re going to take a quick break, and we’ll come back to talk about the PSLF waiver and anything else we can fit into this 28-minute show.

Public service loan forgiveness waiver

This is Gordon Oliver with The Cambridge Connection. We’ll be right back. Cambridge Connection is pushing family finances to the brink. Don’t let that happen to you. Call 1-800-CAMBRIDGE and find out how to pay your bills in full while saving money in the process.

Take control of your debt before it starts controlling you. Here we are, everyone. Back again with The Cambridge Connection. I’m here with special guest Betsy Mayotte, the president of the Institute of Student Loan Advisors. And we’re talking about...

about the different programs that are available for relief and loan forgiveness. And Betsy, again, thank you so much. This information is so important for our listeners and for people to be paying attention to right now because there’s important deadlines that are coming up and I’d like to talk about those. Yeah, absolutely. I think the one that comes to mind, the closest deadline is related to borrowers that may qualify for a program called Public Service Loan Forgiveness.

The Biden administration took advantage of the pandemic and the limited extra authority that they have during the national emergency and they issued this temporary waiver for this program that essentially allows borrowers that may not have understood how to pursue the program in the past to get credit for past payments that normally wouldn’t be eligible, which is really amazing. And I’ve seen people that had no credits under their belt before the waiver get their loans completely forgiven within just a couple months because of this waiver. But it does have a deadline and that deadline is October 31st. Now that October 31st deadline is not the deadline for when you actually have to have forgiveness processed. It’s just a deadline for when you have to have your paperwork submitted.

So in order to take advantage of this waiver, you need to have submitted at least one period of PSLF-eligible employment before 1031 and then there are some borrowers that may need to consolidate to access it and they would also have needed to submit their consolidation application by then as well. But this program is for anybody who works full-time for either a government employer and that can be federal, state, local, or tribal, a 501c3 nonprofit, and even in some limited cases, other nonprofits that aren’t 501c3s. Even if you worked for an organization like that in the past and don’t work for one anymore, under this waiver you can still potentially get credit for those months that you worked for one of those employers. So just to summarize it, that I understand it, so the criteria is work for an eligible employer, be on the right repayment program, make 120 eligible payments, and if any of those things aren’t in place, either through consolidation and or submitting this application, you can fix those problems and get credit to actually potentially get your loans forgiven. Is that right?

Pretty much. The only thing that is not altered under the waiver is the definition of eligible employment. So it still has to be, you know, a government employer, it has to be full-time, it has to be either a government employer, a 501c3 nonprofit, or in some limited cases, other nonprofits that aren’t 501c3s. But that form with the employer helps you figure that out, right? If they submit or fill out the form, even if it’s one that they’re not sure of, they can find out through submitting the form if the employment is eligible.

Absolutely. gov, which is the Department of Education’s website, called the PSLF Help Tool, and oftentimes you can just submit your employer’s employer identification number and find out on the spot if that employer is a qualifying employer or not. Okay, I have a very, very important question to ask you, and this is going to come to what you understand about the processing. So let’s say December 20, I’m sorry, October 20, you know, 11 days before the waiver expires, if someone has to consolidate their loans, that takes time. So how do they get in the waiver process if they are not eligible and they have to wait past the deadline to get something to happen from the loan servicer?

So again, as long as they submit by the deadline, it doesn’t matter when it’s processed. So if I’m someone, even someone today, if they figure out that they need to consolidate, and not everybody does, but if they do need to consolidate, I would actually submit the consolidation application and the public service loan forgiveness application now. That way they’re in the door and you’ve raised your hand, essentially, to be counted under the waiver. And then if it doesn’t get processed till after 1031, you’ll still be counted under the waiver. The key is that I’m understanding, and please correct me if I’m wrong, before October 31st, the PSLF eligibility form is what needs to be submitted to just at least be in part of the process.

It needs to be submitted, complete, and be certifying a period of eligible employment. So if you worked for Target, for example, or State Street as another example, both of those are private for-profit companies and don’t count for PSLF. If you were to submit a form for PSLF with information from Target or State Street, it wouldn’t qualify you for the waiver because those aren’t periods of eligible employment. But if you submitted for, let’s say you worked for the Red Cross, or you worked for the Boston Public School System, as long as you submitted a completed application for a period of that eligible employment before 1031, then you will be counted under the waiver. Okay, and lastly, and then we’re going to pivot to talk about defaulted borrowers.

After this deadline is expired, do you think there’s going to be some kind of a new bill written to try to help people? Because you know some people are going to miss the boat here. No. You see, I don’t see anything, I don’t smell anything in the air of Congress making, you know, long-term statutory changes to public service loan forgiveness. There are some regulatory changes in the works that we’ll know by November 1st what those are going to look like.

That is still not going to change the definition of eligible employment. It’s not going to change most of what I call traditional PSLF rules. Now with that said, there is another waiver on the horizon called the Income-Driven Plan Waiver and that’s going to be, it’s like a one-time adjustment that the Department of Ed is going to do sometime this fall or maybe even early next year to essentially all federal loan accounts and they’re going to give those accounts credit for income-driven plan forgiveness counts regardless of what repayment plan the borrower has ever been on. And again, they’re going to do it, it’s going to be like throwing a switch. One-time adjustment, we’ve never seen it before, we’re never going to see it again.

But that in and of itself could end up getting people additional PSLF payments because as you mentioned, under traditional rules, a PSLF payment has to be made under an income-driven plan. Got it. And again, we’re going to be very active on this show, at least sticking a couple of shows to dedicate to updates on this. Okay, Betsy, also on this show we talk a lot about scams and information on how to protect consumers and when people are in desperate times or they’re uninformed and they don’t understand what’s going on, there’s a lot of scams out there that take advantage of people in desperate times. Can you speak to that in this process, in this part of the industry about student loan debt scammers?

Student loan scam warnings

Yeah, I’m so glad you brought this up. Unfortunately, so with all these amazing programs that have been coming out of the administration, the debt relief, the PSLF waiver, Fresh Start, unfortunately that is fodder. I mean, this is Thanksgiving, Christmas, and Easter all rolled into one for the student loan scammers out there. And we saw them active. very day of the debt relief announcement, so I would advise your listeners, no one’s ever going to call you or offer to help you for a fee, go through any of these programs.

So you know, if you ever get a call like that, hang up, report them to the Federal Trade Commission. Just be very careful, and when in doubt, contact your servicer directly, and they’re happy to help you. It’s so funny because it makes it confusing when someone like yourself and your institute are doing such hard work to get information out to people to make sure that they’re put in the right place. But this is something that we have to deal with in every industry where there’s people just looking to take advantage of people that are maybe uninformed or desperate. So again, can’t say enough about making sure you reach out to your servicer for information about your student loans, and that’s the phone number or website that’s in your statement or in your account for you to get that information.

Fresh start program for defaulted loans

And before we let you go, I really would like you to quickly summarize for anybody that’s in default with federal student loans. What’s going on there? Yes. So there’s another awesome thing. The administration’s been very busy the last two years.

It’s called the Fresh Start Program, and they’re just starting to roll this out. But essentially, any federal student loan borrower whose loan is in default now can get their loans almost immediately out of default by opting in to this Fresh Start Program. They don’t have to make any payments. It’s going to take the default line off their credit report. There won’t be any additional collection costs.

It doesn’t matter if they’ve defaulted more than once in the past. So all the usual rules for getting out of default are sort of out the window, and it’s a Hail Mary. So anybody who has a defaulted federal loan should absolutely contact whoever the holder is and ask about this program. And just the benefit of removing that default line, I mean, that doesn’t happen very often. No, it doesn’t.

That’s an enormous benefit, and it also will give these borrowers access to affordable payment plans. It really is. I’m really excited about this other initiative. You are amazing. I mean, again, I could probably be on here for two hours with you.

Your knowledge and just the care that you have about knowing how many people this affects in their financial lives. So appreciate the work that you do. And again, before I let you go, let our listeners know where they can find you again. org. Betsy Mayotte, you are wonderful.

Thank you for all the hard work you do. We’ll see you next time on the show. Thank you. Amazing guest. This is critical information.

For those of you that are listening that have family members or friends that you know have student loans, federal student loans, we’ve covered one-time student loan debt relief, why the system is broken, eligibility of these programs, being prepared, applications that you need to fill out, and one that’s coming that’s not even ready yet for the new Biden loan forgiveness for the $10,000 or $20,000 for the families. Public service loan forgiveness, defaulted borrowers that have loans in default that are behind that have now a program to get out of that default and remove the default line. I mean, that is just incredible. org. I’ll be happy to forward your information to Betsy and or a certified counselor at our sponsor Cambridge Credit Counseling to help you as well, especially if you have other debt problems.

Closing credits and podcast information

Unfortunately, another 28 minutes has gone by. A huge thank you to our producers, Leah and Lisa. 7 trillion and growing. com and click on podcasts or you can find the show where you listen to your favorite podcasts. org or feel free to call 1-800-CAMBRIDGE.