Listen in as student debt expert and Board Member Dr. Tony Bartels in this next installment of our Student Debt Series. This episode we covering the following 4 topics:
- Consolidation deadline extended
- Loan servicers continue to be terrible
- Recertification dates
- The new SAVE plan
- Common mistakes made while using the Student Loan Repayment Simulator
As always, we want to hear from YOU. Please share your thoughts by sending an email or joining the conversation.
GUEST BIO:
Dr. Tony Bartels
Tony Bartels, DVM, MBA graduated in 2012 from the Colorado State University combined MBA/DVM program and is a VIN Foundation Board Member and Student Debt Expert, and an employee of the Veterinary Information Network (VIN). He and his wife, a small-animal internal medicine specialist practicing in Denver, have more than $400,000 in veterinary-school debt that they manage using federal income-driven repayment plans. By necessity (and now obsession), his professional activities include researching and speaking on veterinary-student debt, providing guidance to colleagues on loan-repayment strategies and contributing to VIN Foundation resources. Beyond debt, his professional interests include small- and exotic-animal practice. When he’s not staring holes into his colleagues’ student-loan data, Tony enjoys fly fishing, ice hockey, camping and exploring Colorado with his wife, Audra, daughter, Lucy, and their two rescued canines, Addi and Maggie.
LINKS AND INFORMATION:
VIN Foundation Student Debt Center
Check your current student loan servicers and other loan details — VIN Foundation My Student Loans tool
VIN Foundation GIVE page to support these programs & tools
VIN Foundation Blog, Related Student Debt Blog posts:
Personalized student loan Help from VIN and VIN Foundation
Infographic ONE-TIME FORGIVENESS COUNT ADJUSTMENT
One-Time Forgiveness Count Adjustment Video Case Study, 1999 DVM may save more than $65,000 in student loan costs:
Income-Driven Repayment Plan Discretionary income calculations, WikiDebt
New Grad Student Loan Repayment Playbook
Federal Student Aid Data, Consolidation, and Repayment Applications
SAVE Repayment Plan Offers Lower Monthly Loan Payments
Loan Servicers Having Trouble:
One-time Forgiveness Count Adjustment
Federal Student Loan Servicers
Public Service Loan Forgiveness (PSLF)
Stay up to date with VIN Foundation updates
Email VIN Foundation: studentdebt@vinfoundation.org
Get updates to stay tuned for the VIN Foundation webinars on student debt.
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TRANSCRIPT
Intro
Tony Bartels, DVM, MBA: This is one of the big errors in the Department of Education’s simulator, is that they assume everybody’s starting repayment from zero. These plans have been around long enough now where people have 5, 10, 15, 20, 25 years of repayment time logged under the count adjustment. So you have to account for that so we know how long to run your simulation, which gives you a more accurate picture of the total repayment cost. I can’t even tell you how many times people have posted on the boards and they’re like, “I don’t get it, you keep saying how great these repayment plans are, and I don’t see any financial benefit”. I opened up their simulation link that they shared with us, and it’s because they’re starting repayment from zero, and that’s going to add, if that’s going to add 10 years of repayment time, of course it’s not going to look very beneficial. So if you account for that time, you’ll see that there’s a lot of benefit on the table there for you.
Jordan Benshea: That is student debt expert and VIN Foundation Board Member, Dr. Tony Bartels, and this is the VIN Foundation’s Veterinary Pulse podcast, Special Student Debt series. I’m Jordan Benshea, Executive Director of the VIN Foundation. Join me as I talk with veterinary colleagues about critical topics and share stories, stories that connect us as humans, as animals, as a veterinary community. This podcast is made possible by individuals like you who donate to the VIN Foundation. Thank you. Please check the episode notes for bios, links, and information mentioned. Welcome everybody.
Latest Student Loan News for 2024
Jordan Benshea: We are back with our VIN Foundation Board Member and student debt expert, Dr. Tony Bartels, and this is our first episode of 2024, and why not kick it off with no other than the latest in student loan news. Welcome, Tony.
Tony Bartels, DVM, MBA: Thank you, Jordan. Thanks for having me again. I guess it’s time to talk about more changes. We’re trying to keep up.
Jordan Benshea: More changes, and as we head into 2024, what borrowers need to know? There’s no question that 2021, 20- well, 2020, 2021, 2022, and 2023, the last 4 years have been complete job security for you and the team along with just an obscene amount of changes and confusion and probably a lot of stress and anxiety for a lot of people. Hopefully these podcasts and the information we are providing are helping them a bit. We thought it was just a good idea to, as we start 2024, what are the main things that we’re focused on and that we see are things that borrowers need to look at? So as we always do, let’s just sort of dive right in, and in this episode we’re going to be focused on really five main topics.
Consolidation Deadline Extension
Jordan Benshea: So one is the consolidation deadline extension. Two is, in not breaking news, the loan servicers continue to be terrible, unfortunately. Number three is recertification dates. Number four is the new SAVE plan and when, if, should you choose it. Number five is the common mistakes that we’re seeing when people are utilizing our Student Loan Repayment Simulator and hopefully guiding them with some helpful direction there. Let’s dive right in, Tony, and let’s start with our first topic of the consolidation deadline extension.
Tony Bartels, DVM, MBA: Yeah, so true to form as soon as we did our recent Climbing Mount Debt webinar where we talked about…
Jordan Benshea: Like the next day. I think it was the next day.
Tony Bartels, DVM, MBA: The next day or the day after that. Previously, the deadline to consolidate and have your new consolidation loan considered under the special one time forgiveness account adjustment rules was the end of 2023, and we did that recent webinar specifically to kinda light a fire under anyone who was still on the fence or hadn’t heard about that opportunity. But so, good news, that deadline was extended beyond the end of 2023 and is now April 30th of 2024. So if you still have older loans or loans that can benefit from consolidating to receive the maximum count adjustment under this one time forgiveness count adjustment period, you still have some more time to do that. But I wouldn’t wait too long, I mean, I was kinda surprised by how many people were flirting with the last deadline. I don’t think you really want to wait and test the last possible moment to consolidate because consolidation can be variable. It can take at least 30 to 60 days, if not longer depending on the complexity of your loans. Sometimes mistakes do happen, and you want to leave yourself some time to correct anything that you may need to correct if it doesn’t go exactly as planned. So if you needed to consolidate before or you’re just kinda learning about this now and want to look into it, this one time forgiveness account adjustment is crazy beneficial. So think of it as a time machine for everything you may have done wrong or missed with your student loans along the way, you have a chance to correct that. So any repayment time, and even certain deferment and forbearance time will be considered as eligible forgiveness time when account adjustment is applied. But the trick is making sure that you have the correct loans. So this is particularly relevant for those of you that might have older Federal Family Education Loans or FFEL program loans, that program was discontinued on July 1st of 2010. So if you were in higher education using student loans at any time before July 1st of 2010, you might have those older FFEL program loans. So consolidating those or using consolidation to maybe clean up some broken borrowing history where you had some repayment time before you started borrowing for veterinary school, consolidation can be really helpful to add forgiveness time to your new consolidation loan under the special forgiveness count adjustment, which can shorten the amount of time and the amount of money that you pay towards your student loans. Forgiveness time is super beneficial, so if you can add a year or more of forgiveness time by consolidating, you really want to do that, and you want to do that before the April 30th, 2024 deadline.
Jordan Benshea: Yeah, and it’s so tricky because we always want to be giving borrowers the most up to date information, and we held that webinar just with grave concern that there were some that were potentially lagging and weren’t going to get it in by the end of December 31st, which was the deadline. We had a feeling they might extend it, but there was just no way for us to know, and that’s unfortunately the deal with all of these deadlines. I mean, how many times did we see that during COVID with a forbearance. I mean, that was extended so many times, and yet unless we have that information, there’s just no way to know. So right now, April 30th is what we’re looking at, and best practices would be get that started now.
Tony Bartels, DVM, MBA: Yep, and it gives you some bonus time to look into it a little further if you want to. It really helped us too because there were so many questions on the VIN and VIN Foundation Student Debt Message Boards area regarding consolidation that there was no way we were going to get to all them before the end of the year. So that did help us to make sure that we can more critically analyze those questions and your student loan situations and make sure that consolidation, if it is right for you, that you’re pursuing that and now have a little bit more breathing room to feel more confident in that decision.
Public Service Loan Forgiveness Insights
Jordan Benshea: Okay, so how does this impact those that are trying to get PSLF, public service loan forgiveness?
Tony Bartels, DVM, MBA: Yeah, so that’s another group that can really benefit from the one time forgiveness count adjustment. So if you have different loans with different amounts of public service loan forgiveness time, which I thought would be kind of an infrequent occurrence, but maybe I’m just lucky and I get to see all of those who have varying amounts of public service loan forgiveness time on their loans. But it’s not as infrequent as I would have guessed. So that can happen for a number of reasons, but if you notice that you have public service loan forgiveness time that is different among your loans, consolidating them will help you get the maximum time on that due consolidation loan. So, again, it’ll help you increase your forgiveness time, which reduces the amount of time you’re in repayment and helps you to get to public service loan forgiveness sooner. So also a great opportunity for those of you that are working in that nonprofit environment and are hoping for public service loan forgiveness.
Jordan Benshea: Okay, and one more little section about consolidation is, what about these borrowers and colleagues that are in IBR 2009?
Tony Bartels, DVM, MBA: Yeah, so the IBR 2009 is largely going to be obsolete, and we’ll kinda talk about that a little bit later. But when I see somebody’s loan portfolio that’s maybe kind of complicated, I’m not sure if they’re going to get extra forgiveness time or not. But if they’re using IBR 2009, I’m going to encourage you to consolidate anyway because when you consolidate any unpaid interest you have will get capitalized, added to your principal as part of the consolidation process. But also if you switch away from IBR 2009 to SAVE, which nearly everyone who’s using IBR 2009 is going to eventually want to find their way into the new SAVE program, your unpaid interest will capitalize as part of that too. So there’s really no way for those folks to avoid unpaid interest capitalization and better to try to get added forgiveness time if your history will allow for it by consolidating and switching to SAVE than to just simply switch from IBR to the new SAVE plan. So it can actually be easier to consolidate to get into SAVE from IBR 2009 than simply switching and, again, we’ll talk about that in a little bit. But generally speaking, if there’s any question about whether or not you should consolidate before that deadline and you’re using the older version of IBR, what I call IBR 2009, then go ahead and consolidate before that deadline. It’ll just make things easier, and you get the added benefit of switching loan servicers, which I know is one of our topics to talk about. I mean, they’re, as I tell them.
Jordan Benshea: In number two here is that loan servicers are still terrible.
Tony Bartels, DVM, MBA: Right, and that’s what I tell everybody on the boards, and they’re all terrible, but during the consolidation process you get a chance to choose your terrible. So to the extent that you can’t stand your loan servicer anymore and you’re looking at consolidation, good news, you’ll be able to choose a different one. I can’t guarantee that the new one will be any better than the old one, but you do at least get to have a voice in that decision with the consolidation. Consolidation is the only opportunity you have to actually choose a loan servicer.
Jordan Benshea: Take it while you can get it.
Tony Bartels, DVM, MBA: Yeah, I guess. I mean, again, and we’re going to talk about this in just a minute, but we generally recommend people choose Mohela because they’re the official monitor for public service loan forgiveness progress, and public service loan forgiveness requires income driven repayment to qualify for it. So generally speaking, you would think that they would handle income driven repayment plans, applications, questions, better than the other ones, but as we’ve seen recently, Mohela has proven to be one of the worst too. So, it’s just a lesser of evils. You’re going to have to choose one, and, again, if you’re working towards public service loan forgiveness your loans are going to end up with Mohela anyway, and you generally want to reduce the amount of times that your loans get moved. So we’re still going to recommend whichever loan servicer happens to be the one that monitors public service loan forgiveness progress, and that just happens to be Mohela right now.
Recertification Dates Explained
Jordan Benshea: Okay, number three on our topics are recertification dates. What do borrowers need to know about recertification dates?
Tony Bartels, DVM, MBA: So recertification dates, the earliest that you should be required to provide updated income information if you’re using an income driven repayment plan is March of 2024. Now some of you are going to have dates that are well into the future, and that’s okay. This is all part of how they decided to restart repayment, because we had the pandemic forbearance benefits that shut off interest and shut off payments, and they kept pushing out their renewal dates as part of those pandemic forbearance benefits. When they turn payments back on, the part of the rules that govern that restart said “we’re not going to require anybody to provide income information to have their payment recalculated under an income driven plan until at least 6 months after repayment restarted”. Well, that happens to be March of 2024, so that’s the soonest that anybody should be required to provide that income documentation. But many of your files, many of your loan servicers are showing you dates that are either still in 2023 or might even show January or February of 2024. Those are not correct. So if your file shows you that, if you uploaded it into the VIN Foundation My Student Loans tool or your loan servicer portal is showing you that you need to renew this month or next month, that’s incorrect. You add a year to your recertification date until that date gets to March 2024 or later. So many of you have renewal dates that are correctly showing February of 2025 or March of 2025, and that’s good, particularly if that’s a beneficial monthly payment for you. So if your income has since increased and your payment is otherwise lower than it would be if you did use your current income information, enjoy it. Make sure that you’re on the correct repayment path. Enjoy that lower monthly payment while it lasts and use that as an opportunity to boost other more critical areas of your overall financial wellness.
Jordan Benshea: A lot of people kind of ask the question around, especially if this is March, should they recertify? Should they file a tax return before that? Or should they use their previous year tax return because they have until April 15th, so it seems like we get a lot of questions around that in terms of what income they should be sharing.
Tony Bartels, DVM, MBA: Yeah. Well, income income documentation is a pretty complex topic, but they will generally, they will always accept your most recently filed tax return adjusted gross income. For everybody right now, that’s generally your 2022 adjusted gross income, which feels like it was eons ago, but that’s okay. I mean, if you’re required to renew this March, you’re probably not going to have your 2023 tax return filed yet or be available to be used for your income documentation. So you can certainly use that 2022 tax return AGI even if it’s much lower than you anticipate your 2023 AGI to be. That’s how the income driven plans work, they will always if you think of the adjusted gross income number from your recent tax return as kind of the gold standard, they will always accept that number. Now if your income currently is less than what your 2022 adjusted gross income shows, then you don’t want to use that 2022 adjusted gross income.
Jordan Benshea: Right, you want to use the one that shows the lower AGI.
Tony Bartels, DVM, MBA: Exactly, and you have that option. So you can either, it is easiest and usually the most accurate to use that recent AGI that’s on file. If for some reason your income has changed or it’s decreased, maybe you’re taking a family leave or you switch jobs or you’re moving, whatever the case is that has your current income less than whatever that prior tax return AGI is, then you can use current income information as well. So your payment will be more reflective of your current income situation rather than a higher number that might not reflect your current situation anymore.
Jordan Benshea: We just get a lot of questions around AGI, which is adjusted gross income after your credits and deductions. So there’s a lot of information out there on the IRS website if you’re curious about that.
Tony Bartels, DVM, MBA: I wanted to go back to, just really quick, the loan servicer thing too. So there’s some, all the loan servicers are terrible, and we’ve known that for years. But turning the repayment back on like they did, didn’t really set them up for success. I’m certainly not going to make a lot of excuses for them because it’s not like this was sudden. They knew that this was coming at some point, but they’ve been especially terrible. They’ve failed to provide statements on time, and they failed to process people’s switches from one repayment plan to another. The Department of Education has actually forced the loan servicers to put certain people’s loans into an administrative forbearance. We’ve gotten a lot of questions about that as well, they’re like, “oh, why am I in this forbearance, I thought payments were supposed to be restarted, and I want to receive the benefits of SAVE, but my loan servicer keeps my loans in this administrative forbearance period”, and that’s okay. As part of that Department of Education directive, they’ve told loan servicers to put those loans that they’ve kind of inappropriately handled into an administrative forbearance and turn the interest off. So it’s kind of like another extension of the pandemic forbearance benefits, if you will. So that time is going to be counted as forgiveness eligible, and you shouldn’t be accruing any interest on that time anyway. But if you do see that happening on your account, just know that that’s kind of part of the process that your loan servicer has been particularly terrible in this restart process. Once they get it fixed, that time should still be credited towards forgiveness and you shouldn’t have any additional interest that has accrued as a result of that. At first, that was just Mohela that they applied that to, but now that has since expanded to Aidvantage, Edfinancial, and Nelnet as well. So, if you’re seeing that administrative forbearance, then you should also be receiving, not be charged interest because I’m seeing those files where people have zero interest rates, and that’s why. It’s because they’re part of the group of folks who have been identified to have had their loans mishandled by their loan servicer.
Jordan Benshea: Okay. Good clarification.
The New SAVE Plan
Jordan Benshea: Number four on our topics is, the new plan that was introduced in 2023, which is SAVE. There’s a lot of questions around this, when, if, should you choose SAVE? What is SAVE? What are the details? So let’s start, and let’s dive into that.
Tony Bartels, DVM, MBA: So SAVE is the newest of the income driven repayment plans, it’s actually a conversion of a previous one. So it used to be Revised Pay As You Earn, and they took Revised Pay As You Earn and they turned it into SAVE. So anybody who was using Revised Pay As You Earn previously was automatically converted to the new SAVE plan. But anybody can choose to use SAVE who wasn’t using RePAYE previously as well, at least if you have direct loans. So the requirement for using SAVE is that you have federal direct loans. That’s another overlap with the one time forgiveness account adjustment and the consolidation because if you consolidate into a direct consolidation loan and you throw in maybe those loans that aren’t normally eligible for a plan like SAVE, you can make your new consolidation loan eligible for the SAVE plan. So if you’ve got those older FFEL program loans, maybe you’ve got some Health Professional Student Loans, Perkins Loans, Loans for Disadvantaged Students, all of those can be consolidated into a new direct consolidation loan and made eligible for the new SAVE plan. If you do that before the April 30th deadline, you’ll get the forgiveness time, the repayment time all credited as forgiveness eligible when the count adjustment is applied. So SAVE is really beneficial. It’ll have the lowest minimum monthly payment of all of the income driven plans. It has a 100% unpaid interest subsidy, which means if your payment is below the monthly interest accrual the Department of Education covers the remaining unpaid interest each month. So you will not see your loan balance grow like you did previously in any of the other income driven plans. The unpaid interest subsidy will stop that phenomenon.
Jordan Benshea: That’s huge.
Tony Bartels, DVM, MBA: It is huge, and it’s one of the, probably the biggest benefits of SAVE. One of the biggest drawbacks of SAVE is that it requires 25 years of forgiveness eligible payments to reach forgiveness. So now we’ve got this competition between the 25 year forgiveness plans and the 20 year forgiveness plans, and it’s not always so easy to know which one is going to result in the lower total overall repayment cost. So that’s where the simulator is so valuable, to crunch those numbers and really refine those inputs, particularly your income inputs with your best guess of what you think your income is likely to do. Then we can have some quantitative analysis of what your options are and which one is the best for you to choose.
Jordan Benshea: So we keep hearing a lot about this phrase that you’ve been calling the pickle. It’s come up in some of our webinars and a lot of people asking questions and our answer is, “oh, you are in what we call the pickle”.
Tony Bartels, DVM, MBA: Yeah.
Jordan Benshea: So what is the pickle?
Tony Bartels, DVM, MBA: Well, so this is probably my least favorite aspect of the changes. Overall, the changes have been very good for borrowers, however, as part of the changes that created SAVE, they’re also phasing out Pay As You Earn. Pay As You Earn was probably the most beneficial of all of the income driven repayment options before the changes were put into place. A lot of people will still benefit from staying with PAYE, and one of the reasons for that is because it has a 20 year forgiveness timeline for folks that have graduate school student loans. So there’s an interesting scenario that arises where if you’re eligible for Pay As You Earn but not eligible for the new version of IBR, which also has a 20 year forgiveness timeline for folks with graduate school student loans. You’re kinda stuck between choosing the 20 year forgiveness plan, staying with PAYE, which will have a slightly higher monthly payment and no unpaid interest subsidy compared to SAVE or switching over to SAVE, but being in repayment for 25 years until you reach forgiveness versus the 20 years using PAYE, and that’s hence the pickle. It’s a tough decision because it kinda requires a crystal ball, and you have to make that decision by July 1st of 2024 because that’s when Pay As You Earn is going to be phased out. Anybody who’s using Pay As You Earn on that day can keep using it, but after that date, if you’re eligible for Pay As You Earn and you’re not in it, you can’t get back into it or you can’t select it as your repayment strategy. So this is the part that we’re spending a lot of time with. You do still have some time, a little bit less than 6 months now to kinda work through that analysis to see if you should stick with PAYE versus SAVE. Again, it still requires quite a long vision crystal ball to really make, but it’s a tough decision. It’s really hard to maybe give up that 20 year forgiveness option in favor of a longer forgiveness option. Now that’s why, again, we run the numbers on the simulator. For some of you, it’s obvious. It’s like, oh, well, you should change to SAVE because you’re going to save 10’s, if not 100’s of 1,000’s of dollars. But for some of you, it’s going to make more sense to stick with Pay As You Earn, and that usually is for those of you that already have quite a bit of forgiveness time logged. So 5, 10, 12, 13, 14 years or whatever, and you’re kinda getting close to that 20 year target, Pay As You Earn is generally going to be much more financially beneficial for you. So we run the numbers, we kinda counsel you through that on the Student Debt Message Boards and push back on some income assumptions, and try to help you make that decision.
Jordan Benshea: Yeah. That is a pickle.
Tony Bartels, DVM, MBA: Yeah. That’s a pickle.
Jordan Benshea: That’s a tough one. I mean, asking borrowers to swallow an extra 5 years, that’s a lot, like of the 20 that’s a quarter, obviously, and then adding that on again. That can be tricky, and really running the numbers are what will hopefully provide some insight there for the individual situations.
Tony Bartels, DVM, MBA: Absolutely.
Jordan Benshea: Okay.
Switching from IBR to SAVE
Jordan Benshea: So next, we have the switch.
Tony Bartels, DVM, MBA: Yeah, and there’s two versions of the switch. So we’re either switching from the old version of IBR to SAVE because, as I kinda alluded to earlier, the old version of IBR is largely obsolete now that SAVE has been created. Then we’ve also got a new opportunity for folks who are using SAVE and also eligible for the new version of IBR to switch from SAVE to the new version of IBR down the road. So you kinda get to benefit from the lower payment and the unpaid interest subsidy of SAVE for a certain period of time, and then you can switch to the new version of IBR if you’re eligible for it to reach forgiveness at the 20 year time frame versus the 25 year time frame.
Jordan Benshea: So IBR 2009 to SAVE and then potentially SAVE to IBR 2014.
Tony Bartels, DVM, MBA: Correct, and that really depends on which IBR you’re eligible for. It’s an either or.
Eligibility for New IBR Version
Tony Bartels, DVM, MBA: You’re either eligible for the old version or you’re eligible for the new version, and to be eligible for the new version you have to be considered a new borrower as of July 2014, meaning you didn’t have any student loan balance when you started taking your loans after July 1st of 2014. So that’s going to be most recent graduates, but for those of us like myself who graduated in 2012 from veterinary school, I’m not eligible for the new version of IBR. So I have the old version of IBR available to me, but it’s obsolete so I’m using SAVE. So that’s kind of the thought process in terms of where you should be sitting. In either scenario, you should be using SAVE for the time being. Now there’s a little bit of art there in terms of when you should move from the old version of IBR to SAVE. If you have a really beneficial low monthly payment because you’ve been in the pandemic forbearance benefits for nearly 4 years, and the last time you provided income information was in 2019 and your income has significantly changed since then and increased, then you may want to hold on to that low minimum monthly payment under the old version of IBR, at least until the next time you’re due to renew and then switch to SAVE. But if you can get a same, similar, or lower payment by switching to SAVE now, then switch to SAVE now.
Special Forbearance for Switching Plans
Tony Bartels, DVM, MBA: When you switch from IBR 2009 to SAVE, there is an extra step. When you leave IBR because of the way the law was written when it was created, you’re technically required to make a standard 10 year plan payment in order to process the switch. But they’ve since created a special forbearance period payment that can be as low as $5 to process your switch from IBR to another plan. So if you’re going to switch from IBR 2009 to SAVE and it doesn’t involve a consolidation, then you’re going to want to choose this special one month forbearance and choose to make a $5 payment to officially switch from IBR 2009 to SAVE.
Jordan Benshea: Is there a deadline to do that?
Tony Bartels, DVM, MBA: There’s not a deadline.
Deadlines for Switching Plans
Tony Bartels, DVM, MBA: So the deadline for that switch would be when you’re next due to renew or if you can get a lower or similar payment if you switch now to SAVE. But there is no deadline there other than you’re likely going to have a deadline to provide additional renewal information for that IBR plan at some point. So it’ll either be as early as this March or it’ll be sometime in 2024 or early 2025.
Jordan Benshea: Then if they’re already in SAVE and decide they want to switch to IBR 2014, is there a deadline for that? You’re saying not so much a deadline, more the soonest they could.
Tony Bartels, DVM, MBA: Yeah. So the switch from SAVE to IBR 2014 to reach forgiveness sooner does have a deadline. So that one, as part of the rules that created SAVE, they recognize that graduate school students are going to have this dilemma between choosing a 20 and 25 year plan. We don’t want people to use SAVE for 19 years and then switch to the 20 year plan right before they, it would have been nice if they let you do that, but they don’t let you do that. But they will let you use SAVE for up to 5 years and still allow you to switch to IBR 2014. So that 5 year clock, 60 months, so that’s now a requirement for using IBR 2014 or will be on July 1st of 2024. They’re going to institute this clock where you can’t have more than 60 monthly payments using SAVE in order to use the new version of IBR. So that account will start on July 1st, 2024, which means the earliest deadline for somebody who would want to switch from SAVE to the new version of IBR to receive forgiveness sooner would be July 1st of 2029. Okay, and that’s a acronym and word soup and really confusing.
Benefits of SAVE Plan
Tony Bartels, DVM, MBA: Anybody who’s eligible for any of the IBR plans right now probably shouldn’t be in them, you should be using SAVE. SAVE is more beneficial than IBR, and if you’re eligible for the new version of IBR, you definitely don’t want to be using that right now. I do see that occasionally. Some new grads, somebody told them that they should be using IBR, and they choose IBR, and they’re in the new version of IBR. That’s not very helpful right now.
Jordan Benshea: You might as well grab those first 5 years in SAVE.
Tony Bartels, DVM, MBA: Exactly, so you want to use SAVE as your repayment plan and then put a pin in that potential switch depending on what your circumstances are around that 5 year time frame, to see if it makes sense. Now for some people, it’ll be a slam dunk. You’ll want to switch, get forgiveness sooner. For other people, those folks that might have a starting debt to income ratio of 3 or higher, you’re probably going to want to stick with SAVE. It sucks to be in repayment for another 5 years, but it’s going to save you a lot of money. So it’s not a slam dunk that everybody should switch from SAVE to IBR before that 5 years is up. So you’re going to want to, again, run those numbers, based on what your situation is at that time and is most likely to be going forward at that time.
Jordan Benshea: Alright, so we’ve got the pickle. We’ve got the switch times two. What about unpaid interest subsidies and extra payments? We kinda touched on this earlier, but there’s a little more.
Tony Bartels, DVM, MBA: Exactly. So, yeah, there’s an additional wrinkle if you’re using SAVE. So super beneficial part of SAVE is that you don’t have any unpaid interest growth. So whatever your monthly payment is, if that monthly payment, that minimum monthly payment is below the monthly interest accrual, the Department of Education covers the remaining unpaid interest. If you make an extra payment during that period, a payment above what your minimum monthly payment is, it’s going to be wasted. So that unpaid interest subsidy is net of your payments that month. So if you, let’s consider a circumstance where you have a $1,000 a month of interest accruing and your minimum monthly payment is 500, you’re going to receive a $500 subsidy covering that remaining interest each month. But if you make an extra payment of, say $200, instead of receiving a $500 a month subsidy you’re going to receive a $300 a month subsidy, and your balance is not going to change. So you literally are wasting that $200 monthly extra payment that you’re making. You can find much better things to do with that money that’s going to help grow your overall wealth and wellness long term, than to make extra payments to your student loans while using SAVE. This is particularly, we’re going to talk a lot about this when we do this upcoming year’s new grad playbook and future new grad playbooks, but generally speaking, for recent grads, new grads, SAVE is hugely beneficial. Nearly everyone who graduates from veterinary school, if you file a tax return before you graduate, can have a zero or very, very low monthly payment with SAVE for at least that first year. Which means you’re essentially, you have a no interest loan for your student loans for at least that first year after you graduate, which gives you a huge leg up on graduating, moving, getting started, feeling out your career, getting your budget reconfigured, and jump starting your overall financial wellness without your student loans costing you a thing. So that SAVE is hugely beneficial in that regard, and also that extends to anybody who’s not a new grad who might have a decreased income circumstance for any reason. So family leave, taking some time off, taking care of an elderly family member, switching jobs, spouse switching jobs, you’re moving, whatever the case is that you might have lower income for any reason, SAVE can really help to kind of pause your loans, if you will. You’ll still earn forgiveness time, but your loans won’t cost you anything, and you won’t have a payment or a very high payment due. So hugely beneficial for those kind of transitionary periods where your income might be lower than otherwise is.
Jordan Benshea: It’s a huge opportunity.
Tony Bartels, DVM, MBA: Yeah, for interns and residents too. That’s another area, again, we talk a lot about that too with the new grad playbook because a lot of you head into those internships and residency pathways, but SAVE is a hugely beneficial plan for anybody doing that advanced training because your incomes are lower during that period.
Jordan Benshea: It just gives you a little bit, I mean, a little bit less stress during that time where you’re already very stressed based on the program.
Tony Bartels, DVM, MBA: Exactly, and watching your unpaid interest balance grow, I’ve been through this, it is very stressful. Just eliminating that part of it is hugely, a huge help in terms of just managing your student loans. It’ll reduce the total cost of your loans, no matter how you manage them, whether you pay them to zero or you hit forgiveness after that. It will help to reduce those costs too.
Common Mistakes with Loan Simulations
Jordan Benshea: Okay, our fifth topic, common mistakes that we’re seeing when people are utilizing our VIN Foundation Student Loan Repayment Simulator. So what are the common mistakes that you’re seeing?
Tony Bartels, DVM, MBA: Yeah, so first thing I would do is start with the VIN Foundation My Student Loans tool. So if you upload your student aid data file into the VIN Foundation My Student Loans tool, and if you’ve got some loans to add like if you’ve got Health Professional Student Loans or Loans for Disadvantaged Students, let’s account for those there. But that’ll help to really make sure we’ve got the accurate numbers that we’re working with. When I see people, when people share me simulations that have nice round numbers in them, I know that they’re largely guessing.
Jordan Benshea: Rounding up.
Tony Bartels, DVM, MBA: Yeah. Exactly, and we kinda want to, if we have the exact numbers to work with, let’s use them because that’s going to produce a more accurate simulation. So the most accurate way to do that is upload your student aid data file to the My Student Loans tool, and then you can send that My Student Loans information over to the simulator, so you don’t have to manually enter that information in. It’ll send your principal, any unpaid interest, and your weighted average interest rate over to the simulator. But when you get to the simulator, you want to double check that information. One of the critical pieces that you’ll want to adjust is if you’re using the autopay feature through your loan servicer, meaning your minimum monthly payment is automatically deducted from whatever bank account you set up with your loan servicer. Even if your minimum monthly payment is zero, you can sign up for autopay, you’ll receive a 0.25% interest rate reduction. So you want to decrease your interest rate by 0.25% from the information that we bring over. Now we’re working on a way to automatically adjust that for you. It’s a lot easier to tell now in your student aid data file if you’re using that autopay discount or not, so it’ll be easier for us to translate that information over to the simulator. But right now, that’s a manual adjustment that you have to make. But make sure that you’re making that adjustment.
Tips for Accurate Simulations
Tony Bartels, DVM, MBA: The other one that’s a really big one that I see is not accounting for your existing repayment time. So in the loan repayment simulator, and we don’t bring that information over automatically because it’s really hard to figure out right now. Now, hopefully, once that forgiveness count adjustment is applied before July 1st of 2024, that data will also live in your file, so we’ll be able to bring that data over into your simulation. But currently, again, that’s a manual input, and probably the biggest mistake that’s being made with simulations right now is not including the years in repayment that you’ve currently logged. Any year in repayment is currently considered forgiveness time under this count adjustment period, not in school time. So you subtract out the amount of time that you’ve been enrolled in school, veterinary school, master’s programs, undergrad, whatever. But whatever amount of repayment time that you have you want to put as years in repayment when you run your simulation, because this is one of the big errors in the Department of Education’s simulator, is that they assume everybody’s starting repayment from zero. And these plans have been around long enough now where people have 5, 10, 15, 20, 25 years of repayment time logged under the count adjustment. So you have to account for that so we know how long to run your simulation, which gives you a more accurate picture of the total repayment cost. I can’t even tell you how many times people have posted on the boards and they’re like, “I don’t get it, you keep saying how great these repayment plans are, and I don’t see any financial benefit”. I open up their simulation link that they shared with us, and it’s because they’re starting repayment from zero. That’s going to add, if that’s going to add ten years of repayment time, of course, it’s not going to look very beneficial. So If you account for that time, you’ll see that there’s a lot of benefit on the table there for you. One of the other ones is making sure that you’re using the right repayment plan, so there’s a repayment plan selection option there, again, that’s a manual input. That’s not something that we currently send over from your student aid data file. In the future, we hope to be able to do that, but right now, you’re going to have to select the repayment plan that you’re using. So select the current repayment plan, if that’s Pay As You Earn, select Pay As You Earn, if that’s income based repayment, the old version, then select IBR 2009. That’s where I see a lot of confusion too, where I see older borrowers that are using IBR and they’re eligible for the older version, they’re selecting the new version of IBR in their simulation. That’s where you want to check that income driven repayment eligibility tab and see which repayment plan you’re using. It’ll show that in your file. So you can see that information, and when you select your corresponding repayment plan, you’re selecting the right one. Now if you are anticipating or you’re currently consolidating your loans to benefit from the one time forgiveness count adjustment, then there’s an option in the repayment plan drop down that says “other deferment/consolidation”. If you’re consolidating now, then choose that option because that’ll help us to determine how to handle your unpaid interest as well as count your forgiveness time as well, because again, all of that time counts towards forgiveness under this one time count adjustment period. So just make sure you’re selecting the right repayment plan option in there as well. One of the other inputs are moving beyond the student loan inputs, now we’re in the income information section, is your taxable income. So I know everybody’s not walking around with their adjusted gross income number handy in their back pocket, but it’s time to pull it out and look. You can use your gross income as a proxy just to kinda get started, but it’s going to overestimate your payments and overestimate your cost. So you don’t want to do that, you want to use the best number that you can to hopefully improve the accuracy of the simulations. I mean, again, this stuff requires a crystal ball anyway. We want to make that as clear as we possibly can, and ideally you would use your adjusted gross income and think about what that might be from year to year and apply an appropriate projection going forward. We kinda start you off, there’s a lot of defaults in the simulator. We want to show you these numbers without making it too hard to use, so we put some numbers in there to help get you started, and I don’t see a lot of people adjusting their income inputs going forward or even their income projections. So to help improve the accuracy, you really want to pull out that recent adjusted gross income. Good news, we’re at the end of the year here. You guys are all going to start getting your W2’s and start filing your taxes, you’re going to start to see what that adjusted gross income number is and you’ll also get a feel for how much it differs from maybe your gross income.
Jordan Benshea: Well, and also if you’re going to recertify.
Tony Bartels, DVM, MBA: Exactly. Yeah, you want to look at that and see, oh, do I want to use this number, or do I maybe want to use a pay stub that shows maybe a lower income number. So yeah, that’s a great opportunity to start looking at those differences between your gross income and your adjusted gross income now.
Tax Filing and Loan Repayment
Tony Bartels, DVM, MBA: Tax filing status, so I also get a lot of people, they’re like, oh, I ran my simulation and I don’t really see a benefit to using SAVE, am I missing something? And in most cases, those people ran one simulation, they’re married, their spouse is earning some income, and they’re showing that they’re going to pay their balance to zero before they reach forgiveness, and that’s fine. That could be how you want to handle your loans, and it could be the best outcome for paying off your loans. But you also want to see what your simulation might show if you filed your taxes separate from your spouse. So the new SAVE plan, unlike the previous version of RePAYE, allows you to exclude your spouse’s income from that calculation as long as you’re filing your taxes separately from your spouse. That can make a huge difference. So if you can exclude your spouse’s income and it doesn’t cost you too much to file your taxes separately from your spouse, you may see 100’s of 1,000’s of dollars difference in your projected repayment costs if you exclude your spouse’s income. So if you’re married, you really have to run at least 2 simulations. One looking at your loans filing if you file your taxes jointly and one if you file your taxes separately from your spouse. Now, if your spouse also has student loans, it’ll probably make sense for you to file jointly. But if your spouse doesn’t have student loans and is earning income, it could very well make sense for you to file that tax return separately from your spouse, especially if you live in a community property state. The two biggies be in California and Texas. So those are the two most populated states. Maybe New York is in there somewhere, but New York is not a community property state, but California and Texas are, and there’s a lot of veterinarians who live and work in California and Texas. You have kind of an extra set of options if you file your taxes separately in a community property state, which might otherwise lower your monthly payment on your student loan significantly if you’re using a plan like SAVE. So there’s a way for you to select the community property state option in the family information section in the simulator. So if you live in one of those states, make sure you’re exploring that when you run your simulation as well.
Jordan Benshea: Yeah. Those are all really good tips, and especially I mean, the goal obviously that we have with this tool is to make things easier. So sometimes there can just be some things lost in translation and helping colleagues understand how to use it to their benefits really beneficial. So I think, hopefully, those tips will help the process.
Tony Bartels, DVM, MBA: Yep. Absolutely.
Jordan Benshea: Yeah, we’ve covered a lot in this episode as we head into 2024. Is there anything else you think our listeners need to know?
Tony Bartels, DVM, MBA: No.
VIN Foundation Support and Resources
Tony Bartels, DVM, MBA: We do have the special VIN and VIN Foundation Student Debt Message Board area where you can get individualized counseling help, whether you’re a VIN member or not. So, we can help kinda counsel you through that. So if you’re seeing things that don’t quite make sense or you’re taking all of these tips and you’re using them and you still have questions, that’s what the Student Debt Message Boards are for. So you can get the questions answered that, the answers that you need, and your colleagues get to learn from that exchange as well. So that’s where a lot of this information comes from. That’s why we’re able to see and process and understand the good, bad, ugly when it comes to student loan repayment and disseminate that information onto you all.
Jordan Benshea: Yeah, and as always, all this information that we’ve shared, we will have information in the episode notes, so make sure to check those. We will also, as always, have a lot of links and helpful information. So check the episode notes. Always feel free to ask questions and reach out. We’re here to help, and Tony, thank you so much for your just dedicated effort and time to support colleagues. I know this is a tireless effort from you and Becca and the student debt education team, and just so grateful because I know that this has helped. We’re hearing how this is really helping a lot of colleagues and definitely decreased stress and anxiety, and so we’re very grateful. So thank you very much.
Tony Bartels, DVM, MBA: Well, thank you. Thank you for having me and allowing us to get this information out. We definitely hope it helps, and please provide us feedback and let us know how else we can improve it to make it more specific to help with your circumstances.
Outro
Jordan Benshea: Absolutely, everybody please reach out and let us know, and we’ll see you again soon on the next episode. Thank you. Thank you for joining us for this episode of the Veterinary Pulse. Please check the episode notes for additional information referenced in the podcast. If you enjoyed this podcast, please follow, subscribe, and share a review. We welcome feedback and hope you will tune in again. You can find out more about the VIN Foundation through our website, VINFoundation.org, and our social media channels. Thank you for being here. Be well.
