Banishing The Burden of Student Loan Debt | Travis Hornsby | 122 - Catching Up to FI

Episode Transcript
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(00:01):
student loan issue used to be, Ahot topic just for 20 and 30 year
olds, recent college graduates.
But that is starting to change wherepre retirees, I mean, people's in their
forties, fifties, maybe even sixties,that are still dealing with student loans.
So what happened?
Well, education prices skyrocketed.
There's a lot of thingsthat happened, right?
I would say, 35 to 55 kind of folks wentthrough, I mean, they remember 2008.

(00:25):
Like, the Gen Z, even, like,younger millennial crowd, they
have no memory of that.
But, I mean, we see it all the time.
I saw it a lot more back when I firststarted but people would go, oh shoot,
the economy is in shambles, I need togo back to school, And so a lot of 20
somethings at the time went back toschool to get more advanced degrees.
And, because the government put nocaps on the cost of education and no
limits on borrowing, lot of peopleloaded up because they could and

(00:47):
because they had no other good option,
we're talking about a student loan crisis.
So how big is this issue?
How big is this problem for Americans?
Well, I think there's kind of twotypes of ways it affects people.
One is the people who already have it.
And I will say that maybe abouthalf of the people who have student
loans, it's not a crisis at all.
Half of the people that have studentloans, they might have 10, 000 or 000 or

(01:11):
something, and it's fairly affordable.
And then there are some people withinthat that don't have degrees that went
to, not good schools or somethingdidn't finish and that 10 K is a crisis,
but , there are a whole bunch of peopleout there that it's not a crisis.
It's just a debt that they'regoing to handle just fine.
student loans are bestthought of as an income tax.
The only exception to that is if youtake on a bunch of private student

(01:33):
debt, because private student debtyou can't pay as an income tax.
So the stuff that can really get a lotof people in trouble in the student
loan world is when you take on a bunchof co signed private student loans,
and then that, really can be difficult,but if you think about the federal
student loan system as an incometax, everything starts to make sense.
Because they're going to take a percent ofyour income, generally 10 to 15 percent.

(01:53):
And so the idea is, is did your educationget you income that after you take away 10
to 15 percent of it for the student loanpayments, is that net a good idea or not?

(02:32):
All right, guys.
Hello and welcome backto Catching Up to Fi.
We're recording this in December2024, leading into the Christmas
season, but you'll be hearing thisin the first quarter of the new year.
And a lot of you will be wonderingwhich college your kid's going
to get into as of March 15th.
My nieces just got into colleges oftheir choice, early action, early

(02:52):
decision, so we're very excited.
But we're here to talk about studentloans today with one of the national
and state Expert on student loans,and we're excited to bring him to you.
But first, I want to giveyou a couple of shout outs.
Our charity of the week comesto me from Mark Troutman.
It's called the pkpcommunitycenter.
org.
Now the PKP Women's Center has an overallgoal to facilitate female empowerment

(03:15):
and gender equality to Balinesewomen and girls in the local area.
PKP empowers women by facilitating jobskills training and support programs
like Cooking and English class.
But most importantly, the Women's Centeralso provides a safe haven for divorced
women who are generally highly stigmatizedand ostracized in the community.
The job training that PKP providesare proven to help families who feel

(03:36):
stressed due to financial difficulties.
The village as a whole benefitsfrom these programs because
families can use the additionalmoney for education or nutrition.
This source of income provides betteropportunities for their children
to create more successful future.
So at this giving time of year, althoughwe're recording this in December,
it's always a giving time of year.
Think about PKP Women's Center.

(03:56):
That's P K P Community Centerwith C E N T R E dot org.
Think about them in your givingplan and you'll make a difference
around the world in Bali.
Oh, I love that, Bill.
Yeah, our second shot outtoday, Jackie, is for a podcast.
Jackie was on the show and we'regoing to give you a peek of this show
on Christmas week or Christmas Day.

(04:17):
It's called The Struggleis Real with Justin Peters.
Our friend
this
may remember from listening today,she played Monopoly or no, Jeopardy
Jeopardy.
Get your games right, man.
Financial Jeopardy.
All right, last shout out, Jackie, beforewe get started is this week's review.
And this one comes from TulipTree Finance on December 5th.

(04:37):
This podcast is a wonderfulsource of education.
Most people are supposed to be workingtowards FI, whether we realize it or not.
In my 30s, I knew nothing aboutwhat people meant by retirement
accounts or how people supportedthemselves after retiring.
I wish someone had explained this tome sooner, but better Late than never.
So Jackie, welcome back fromThanksgiving break and back in

(04:58):
the studio with Catchy Up to Fi.
Yeah, I'm glad to be here, partner.
And I am glad to haveour guest today, Travis.
We met at the first economy.
So he's a friend of theshow, friend of mine.
He is one of the, like you said probablythe best authority on student loans,
especially when it comes to breaking news.
So Travis is a speaker and founderof the student loan planner, which he

(05:20):
launched after helping his physicianwife navigate ridiculously complex
student loan repayment decisions to date.
Student Loan Planner has consultedon over 4 billion in student debt.
Travis is a chartered financial analystand a certified financial planner
and brings his background as a formerbond trader, ooh, trading billions of

(05:41):
dollars, trying to solve the studentloan crisis brought him out of debt.
of his first retirement at the age of 25.
Yeah, so young.
So he brings that same intensity toanalyzing the best repayment paths
for graduate degree professionalswith six figures of student loan debt.
Travis and his team have helped us out.
Over 15, 000 clients.

(06:02):
Wow.
Save over 983 million.
I have to ask him if they crossedover the billion dollar mark
yet on their student loans.
And he's been featured on NPR,New York times, Bloomberg business
insider, Forbes, Rolling Stone,choose a five bigger pockets, almost
all of them, but a whole lot more.
And now he's been featuredon Catching Up to Fi.
And now he's been featured on up Fi.

(06:23):
That's right.
So, welcome to the show, Travis.
We're happy to have you and your eyebrows.
You have to go to the YouTube version tosee what I mean, but love your eyebrows.
so I want to know, have you guysticked over the one what would that be?
1 billion mark?
we
have, yes.
And you know, if you hear any kindof rustling in the background, it's
actually my eyebrows accidentallybrushing the microphone.
So, this is one of those thingswhere in audio only format,

(06:45):
you're not getting the full show.
So I help people with burdens, Iwas burdened with these eyebrows.
We help people with theburden of student debt.
So, it's an exciting calling.
Well, you tweeted out there thatyou wouldn't cut your hair, your
eyebrows, or your beard until thestudent loan crisis was solved.
Is that true?
Well, it's a little bit of a white lie.
I did trim it up because I was supposed togo to a Christmas party with the wife and
she said I looked homeless, so she won.

(07:05):
But, in general, I'm definitely, alittle bit more rugged looking with
the stress that all of our communityis under right now with the pure
chaos is what I would call it withthe student loan system at the moment.
Well, last thing I want to know before weget started is your last name is Hornsby.
And I'm a big fan of Bruce Hornsby.
Are you related in any way?
Unfortunately, I'm not.
So, my dad was adopted, so namecame along with the territory.

(07:28):
Okay.
Well, speaking of your dad, youhave a fascinating story.
When you spoke at economy, thatwas one of my favorite talks
with your energy, your humor.
So tell us a little bit about your story.
You said you retired at 25.
You're not retired anymore, but takeus back to that and tell us Travis
Hornsby's financial independent story.
I mean, I think that it startsprobably with a couple key

(07:50):
figures in my life, right?
So, my grandfather, World WarII veteran very frugal person.
And he gets diagnosed with Parkinson's andthen kind of reveals, so by the way, he's
like the millionaire next door type, andI was really floored by that because this
is somebody that never liked ostentatiousthings, never spent, on anything flashy,
and lo and behold, he is, thissecret brilliant investor.

(08:11):
And I thought, wow, that's so fascinating.
And then the other side, I saw my dad,my mom working as a teacher and a nurse.
And my mom couldn't work becauseof disability at one point.
So it was like, they were trying to saveas much as they could and struggling.
And then my grandfather, kind of wasthis very frugal person who lost his
house as a kid in the Great Depression.
And that profoundly influenced himin a way where he was like, well,

(08:33):
just in case something bad happensagain, I want to be able to protect
my family, and my extended family.
And so I was just very profoundlyimpacted by that in a couple of ways.
One, on the side of I thought, well,even though he did this protect
his family, like , he had thescrews on too tight, so to speak.
He could have taken someof the pressure off.
He could have retired earlier.
I said, you have anyregrets about your finances?

(08:54):
And he said, yes, I wish I'dretired three years sooner.
And so that was his oneregret about retirement.
and I think about my parents, mydad just sort of felt I think pretty
stuck with his job, having three kids,and my mom not working, and he was a
teacher, didn't make that much money,so he sort of felt like he had to do.
, the work that he did thatinitially was rewarding to him.

(09:16):
But I think kind of as he got older,it was really difficult for him to show
up every day and feel happy about that.
And so I was profoundly impacted by that.
And when I was going toschool, I was like, well, I
got to kind of pay for myself,
and so I went out and got a lot ofscholarships and got paid to go to
school, which is really a blessing.
But I went to really good school,but a school that was, a step below

(09:36):
maybe what I could have gotten into.
In exchange for gettingthose merit scholarships,
so that was really helpful for me.
Coming out with no debt.
And then I just lived kindof like a monk for the first
three years out of graduation.
So lived in a quasi finishedbasement and drove a questionable
car at times was extremely frugal.
Like, people made fun of me, butI would be at my desk and a lot of

(09:56):
times we didn't have enough time toeat during the bond trading hours.
And so I would just bring like a thingof carrots and a block of cheese.
And people thought I was a freaking weirdoand I was, so I had this 80 percent
savings rate, something obscene, and soI stashed away enough to be able to not
work for an extended period, as manypeople in this movement, I found the Mr.
Money Mustache blog the early 2010s,realized, oh wait, this whole math

(10:18):
makes sense, the 4 percent rule, ifyou get a certain number of assets, you
can afford to not work, possibly fora real extended period of time, so did
consider myself early retired at 25, Butwhat I wasn't anticipating in my model
is getting married and having kids.
Boom.
That'll change everything.
kind of threw me for a loop.
My wife said, yes, , you're financiallyindependent if you live in a mobile
home in a rural area, but not ifyou want to have a normal house and,

(10:41):
normal , lifestyle for your kids.
And so essentially I was startedto do this do alone stuff
because it was interesting to me.
I had a skill set of Excel modeling.
And then that allowed me toget into Student Loan Planner.
Quick time out there because what youdid with your time freedom or your
early retirement, which was like aretirement pause, is also interesting.
I mean, at 25, my kids are 25,they're still figuring it out.

(11:02):
You'd already figured it out.
And you exited the workbuilding to do what, though?
What did you do?
Well, I traveled for about 18months, but I worked on a lot of
projects in between that period.
And so just a little bit of abackground on me personally.
It's kind of another kind of a weirdstory, but I'll just share it anyway.
So I had a near death experience.
So when I was about 20 years old, Iwas driving home from winter break

(11:25):
in college, and I was next to a semitruck, and the weather was really bad.
And the semi truck threw a bunchof water up on my windshield.
It couldn't see anything as I wastrying to pass him on the left.
, And so I tapped my brakes to back offof him, but I went into a big puddle
of water in the interstate, hydroplanedinto a tree at 70 miles an hour.
So, I don't want to go into the graphicdetails, but definitely could have died.
and didn't.
And so you kind of have people thatgo through those kinds of experiences,

(11:47):
I think often have survivor's guilt,or, something like that, where it's
just like, wow can't just do my 9 to 5now, I have to, justify why I survived
when so many people don't, when theygo through something like that, right?
So I think I had an unusual burdenpsychologically that most 20 somethings
don't have that still think they'reinvincible and so I also had a, really bad

(12:09):
knee injury when I was younger as well.
And so the combination of those kindsof things, I sort of had this maybe
call it an older man view of my ownmortality at a very young age, which
kind of ended up being a blessing,
because that urgency, I had urgency of,okay, if you're not feeling like you're
in a job that you're called to, well,then if you don't need the finances,
then you have an obligation to yourself.

(12:30):
to separate yourself from thatand try to find whatever it
is that you are meant to do.
And so that was the reason for thereal urgency in my case was just that
psychology of knowing I don't have alot of time, knowing I need to spend
it in a way that I was meant to.
And the early retirement thing, I did itwithout much of a plan to be quite honest.
And the time that I got refreshedme because I was, Questioning

(12:54):
everything about what should I doin life, all these normal things
that 20 somethings go through.
And that 18 months gave me spaceto be creative and to kind of
think about what came next.
Well, you talked about your sad bondtrader face, and you showed us the
sad bond trader face at the economyconference, and I urge everybody
to watch Travis's lecture at theeconomy conference, but then your
sad bond trader face turned intosort of a happy world traveler face.

(13:17):
But that didn't carry you into,meeting your wife and getting married.
That posed a bit of anobstacle, didn't it?
I did.
Well, I mean, so my wife's in medicine.
Medicine, as you know, Bill, is veryhierarchical and structured, right?
And so you put in your time, you advance,you have a limited number of vacation
days, and you have to be somewhere.
You can't just, in most cases, Imean, obviously with the rise of

(13:38):
telehealth, there's a little, someexceptions, but if you're a surgeon,
you certainly have to be in a location.
And so this idea of me being locationindependent kind of a digital
nomad, that did not compute withwhat my wife was felt called to do.
And we were dating at the time andeventually, had to sort of put up or
shut up and figure out what I wanted todo with that, and when we both decided,
yeah, we want to pursue this relationship.

(14:00):
I was living at the time in St. Louisand, essentially got an ultimatum
from her dad when I asked his blessingto marry his daughter, that was
sort of like, go get a job or else.
I was like, what's or else?
And he's like, well, I won'tcome to the wedding because you
won't have my blessing.
Very traditional.
My wife's Asian American, so verytraditional family and family of
immigrants that, expected, didn'tunderstand, frankly, I think, this

(14:22):
idea of early retirement and FI and,like, that wasn't their experience,
their experience was workingtheir tails off just to make it,
and just, they did not understandthat privilege that I had of
being able to do what I did.
And so, essentially, I was doingthis student loan stuff at the
time just sort of as a hobby.
and it was a hobby that wasmaking me money, but I wasn't
taking it super seriously.

(14:42):
And so when he sort of gave me thatultimatum, it was kind of a blessing
in disguise because then I doubled downon that, got more serious with it, and
then Pseudolome Planter really startedtaking off beyond myself at that point.
That was around 2016 type of time frame.
so Travis, I have a question.
Was the first student loanproject that you worked on?
Was that your wife's student loans?

(15:02):
That's a great question.
I think I probably would say yes to that.
mean, hers were the first onesthat I tried to figure out.
after I figured hers out, , sheessentially was the one that gave me
the idea, hey, you should go talk tomy friends that also have this problem
because they're confused as well.
And then I got the business model ofessentially charging for the service
of giving people advice on their loans.
And because of the complexity,something like 95 percent of the

(15:23):
time I was saving somebody fivefigures just because it was that
confusing at the time and it still is.
But back then there was evenless information out there
about how to manage things.
And so I was able to just get peopleon different repayment plans, help
them be aware of how , their loansworked, and what forgiveness options
they were eligible for, when theyshould consider refinancing or not,
so just a lot of different things.

(15:44):
let's take a step back and sort of the10, 000 foot view because student loans
have become a part of personal finance.
They're an integral part of almosteverybody's personal finance.
And we're talking abouta student loan crisis.
So how big is this issue?
How big is this problem for Americans?
Well, I think there's kind of twotypes of ways it affects people.
One is the people who already have it.

(16:05):
And I will say that maybe abouthalf of the people who have student
loans, it's not a crisis at all.
Half of the people that have studentloans, they might have 10, 000 or 000 or
something, and it's fairly affordable.
And then there are some people withinthat that don't have degrees that went
to, not good schools or somethingdidn't finish and that 10 K is a crisis,
but , there are a whole bunch of peopleout there that it's not a crisis.

(16:26):
It's just a debt that they'regoing to handle just fine.
Now there are a whole bunch of peopleout there where it is a crisis.
So it's kind of one of those thingswhere student debt, you can't really
say it's black and white, there'sall these shades of gray with it.
And I would just say that there's ahuge number of people out there that
have six figures of student loans.
So they might have really good incomes,but they also have even larger loans.
And there's a lot of people in between.

(16:47):
where you have 50, 000 of debtand you're making 50, 000 but
it feels like this brutal billthat you have to handle, right?
And I think in particular studentloan borrowers are struggling at the
moment because of the way I would saythis is the government's policy over
the past really since the beginningof the pandemic has sort of allowed
borrowers to put it in their rear viewmirror and not think about their loans.

(17:09):
Right, there's been almost four yearsworth of student loan pauses, and
they've also extended how long theno credit reporting has been in terms
of reporting to negative informationto credit bureaus if you don't pay.
And they've made it so that you canask for forbearances really easily.
They've made it so that you don't haveto recertify your income if you're
on an income driven repayment plan.
So borrowers have not felt a pinchwith their student loans in many years.

(17:30):
And they're about to certainly feelthe pinch of that in the second Trump
administration and that's going to be abig Thing that people are going to have
to be prepared for to make sure they don'tbackslide on their financial progress
Before we jump into that, I want tolook at sort of prospectively, because
18 year olds are making financialdecisions they probably shouldn't
be saddled with, and their parents,our generation, the late starter
generation needs to help them with this.

(17:52):
What in your mind is prudent Loan amountto look at based on expected income after
college for both undergrad and grad school
It's a great question, I think thatmain goal of college From everything
that I've seen the goal should beto get a bachelor's degree if you're
gonna go yeah, that's if you're notgoing to go to some sort of shorter
term certificate or associate programwith like very tangible skills.

(18:15):
what I see happen is like there's,really two kinds of crisises.
I think there's people who neverfinished their programs and now they
have the debt, but they don't havea degree to get them the earnings
that they need to pay off the debt.
That's, a huge issue inthe student loan world.
And then there's folks that take on allthe, get tons of education, have a huge
amount of debt relative to their incomes.
And that's also an issue.
The reason why I said it the waythat I did is, is student loans are

(18:37):
best thought of as an income tax.
The only exception to that is if youtake on a bunch of private student
debt, because private student debtyou can't pay as an income tax.
So the stuff that can really get a lotof people in trouble in the student
loan world is when you take on a bunchof co signed private student loans,
and then that, really can be difficult,but if you think about the federal
student loan system as an incometax, everything starts to make sense.

(18:58):
Because they're going to take a percent ofyour income, generally 10 to 15 percent.
And so the idea is, is did your educationget you income that after you take away 10
to 15 percent of it for the student loanpayments, is that net a good idea or not?
And that's what I try to refocuspeople's minds on a lot, because
everybody thinks about the debtas this insurmountable burden.
But if you know loopholes and rulesand strategies for dealing with student

(19:20):
debt, it actually doesn't have toget in the way of your journey to FI.
It doesn't have to stop you fromachieving your dreams, right?
There's some rare exceptions likethe private student loan co signing
situations that I mentioned, but that'sthe exciting part is that, pretty much
if you have almost any federal studentloan balance, I can take somebody's
situation and show them, hey, you thoughtyou can never retire in your life.
You can actually retire at 65.
Or, hey, you thought you were nevergoing to hit financial independence ever.

(19:43):
Actually, you can hit it at 45.
And so you just have to kindof actually look at the rules
and not let it scare you.
you have any rules of thumb forstudents going out there say i'm
going to be A social worker andi'm going to earn 40 to 50 thousand
dollars post undergrad social workdegree when do I start getting nervous
about how many loans i'm taking on?
so here, I'm going to try to blowpeople's mind with this one because

(20:04):
I like the social worker example.
So I'll give you a real lifeexample of somebody that was a
mental health counselor, okay?
And this is a real interestingone because I think the person
tried to do another program andthen was not able to finish.
And so she had six figures of debt froma program she was not able to finish.
She goes back, gets a mentalhealth counselor degree or master's
degree, something like that.
Has something like 400,000 of student loans.

(20:26):
So, you might say, oh my gosh, 400, 000of student loans, 50, 000 income, this
woman is in deep trouble, But, as crazyas it sounds, based off of the rules that
Congress created, which didn't createthem, we didn't create them, right?
They're the rules that Congress createdthem, and so it's a dumb system, but
they made it, and so you might as welldo what the system encourages you to do.

(20:48):
The smart thing in her situation.
was literally to go backand get another degree.
And that might sound really dumb,but let me explain kind of why.
So she would have to take on, for aprogram that would accept her, another
200, 000 to 300, 000 of student debtfor you a different kind of, more
advanced counseling field, right?
Now, it's quite likely this womanwas going to make about 80, when she

(21:09):
was done with that three year degree.
So if you go back to that thinkingof student debt as an income driven
repayment, it's a tax, So if you makethat 80 to 90K and you lose 10 percent
of it, well, you're going to lose 10percent of it if you make 80 to 90K, but
you're also going to lose 10 percent ofit if you make 50, And so since there
is no cap on student loan borrowing,which many people say there should be,
but because there is no cap and youcan take out as much loans as you want

(21:31):
for graduate or professional school.
the smart thing for her situation wasto go back and get another degree to
make 80 to 90k and lose 10 percent ofthat instead of earning 40 to 50k and
losing 10 percent of that while stillowing a huge amount of student debt.
So, that shows the problemin the system, right?
Because that is not a good system, like,to, allow schools to make huge profits.

(21:51):
for people's education and to notworry about that and not think about
the negative implications for, howmuch society has to pay that could
have gone into other public goods,
that's a valid concern, but imagineknowing somebody that has 400,
000 of student loans with a 550,000 income is actually not in
a bad position, which is crazy.
so Travis, I have a question for you.
So when you were saying that , there'sunlimited borrowing through

(22:14):
the federal student loan systemfor professional and graduate.
So for undergrad, however,there is a limitation each year.
Is that like around what 15, 000?
Like what's the amount
It's even less, it's like000 depending on if you're an
independent or dependent student.
I mean, it's tiny.
so this is kind of what happens to peopleis for the undergrad system, you can still
access the limited borrowing, but it hasto be through the Parent PLUS program.

(22:36):
And so the Parent PLUS programcan cover the gap between what the
student can borrow in their ownname and what the school wants.
And so, the Parent PLUS program is,It's very expensive in terms of the
terms are not as generous as theother loan programs out there, but
you can get unlimited borrowing.
but I would say this, if somebody isable to get the bachelor's degree.
Then their world opens up because you'vegot federal student loans you can borrow

(22:59):
and for folks that do the co signedprivate student loans That is the primary
risk in the student loan world becausethose have to be paid back they can
garnish you are getting a judgment againstyou if you don't pay those So those are
the loans that actually are troubling.
So as weird as it sounds, A 30, 000private student loan is actually a
lot more significant than in termsof handling it than a 300, 000

(23:21):
student loan if it's federal, andthat's the weirdness of the system.

(25:08):
so Travis we're mostly goingto talk about federal student
loans, but you mentioned private.
Can you give us a clear distinctionbetween private student loans
and federal student loans throughthe Department of Education?
Sure, so, there's really twotypes of private student loans.
One is like , you need a co signer andyou don't have a Parent PLUS borrower.
They don't take out theParent PLUS loans for you.
And you have unmet needfor your undergrad program.

(25:28):
You got to cover, gothere and attend there.
And so you go throughan underwriting process.
Your co signers got better creditthan you do or longer credit.
And they pledge that they're gonna, Beresponsible for that debt if you can't pay
it and that's the private student loan.
That's the kind of originationside of private student loans.
Now, the other side of it is if youprivately refinance your student loans.

(25:49):
And that's kind of been on ice formany years because there's been so many
0 percent interest pauses going on.
would you take a private loan if you,have 0 percent through the government?
But back, before the pandemic,somebody might have a 7 or 8 percent
federal loan and they would, basicallyhave a private lender pay that off
and take out a loan through theprivate lender that's maybe 5%.
And so that can save people money too.
the two types of private student loans.

(26:11):
And, the ones that usually involvemore economically vulnerable people
are the ones that when people takethe loan out in the first place from
an origination perspective just toattend school, if that makes sense.
Right.
And so those would be taken through like a, Bank of America, whatever your local bank
is, credit unions and things like that.
Okay.
Gotcha.
So they wouldn't have the federalprotections like you would through

(26:32):
the Department of Education.
Okay.
So, honestly, all the different, Iguess provisions and all like, for
instance, the student loan pause.
That's a good example.
So it was four years.
Like you said, you had to have afederal student loan, maybe in some
cases, a parent plus loan to beable to have your payments pause.
But if somebody got a studentloan from Bank of America,

(26:52):
their payments weren't paused,
right?
Okay.
. So big distinction there.
Okay.
right.
And that shows you the example,like name a debt that would have
zero percent For four years and No
interest no payments nothing like Ican't think of a debt like that I mean
basically what we have in America isa system where Here's kind of maybe
an analogy the Democratic Party wantsour student loan system to be like

(27:13):
Europe but can't get that passed.
And so there's all these loopholes to tryto make it as much like that as possible.
And Republicans are, kind of ignore it.
And willing to pretend thatthe bad accounting is not true.
And they just like to ignore itand worry about other things.
that's like historicallybeen the two systems.
Is you kind of have Republicansthat just don't care about it.
and then Democrats you have folks that,, that are just trying to advocate to get,

(27:35):
more free college, because they believethe free colleges should be a public good.
And so what's happened, I think, though,with the Biden administration's policies
is you've got more of like a workingclass coalition on the Republican side
and a more educated class of voters onthe Democratic side in a way that wasn't
like that when I first started doing this.
I am anticipating that we're going to see.
Kind of a pendulum swing againstthe generosity that we've seen

(27:58):
the past few years on studentloans in the coming years.
And so, that's one thing that borrowersthat have federal student loans do
need to be aware of so that they knowwhat they're, entitled to in the law.
And what are things that were donethrough executive action that might
not be available for them that,might happen in the next few years.
Yeah, it sounds like therecould be some change.
Well, anytime there's a change inadministration, but this student

(28:19):
loan issue in particular seemedto be two very different thoughts.
So, okay.
when we brought you on here,the reason why, our audience,
we are a little bit older.
I would say demographics between35 and 55 or something like that.
Now, the student loan issue used tobe, A hot topic just for 20 and 30
year olds, recent college graduates.

(28:39):
But that is starting to change wherepre retirees, I mean, people's in their
forties, fifties, maybe even sixties,that are still dealing with student loans.
So what happened?
Well, education prices skyrocketed.
There's a lot of thingsthat happened, right?
I would say, 35 to 55 kind of folks wentthrough, I mean, they remember 2008.
Like, the Gen Z, even, like,younger millennial crowd, they

(29:00):
have no memory of that.
But, I mean, we see it all the time.
I saw it a lot more backwhen I first started.
But people would go, oh shoot, theeconomy is in shambles, I need to go
back to school, And so a lot of 20somethings at the time went back to
school to get more advanced degrees.
And, because the government put no capson the cost of education and no limits
on borrowing, lot of people loaded upbecause they could and because they had
no other good option, So tons of people,I think, during the financial crisis

(29:23):
especially, just got a lot of education.
It was expensive and then theygraduated and some of them may or may
not have had the success they wantedto or gotten the fast start that they
wanted to with their education and sowhat's the path of least resistance?
Forbearance, deferment, pauses,putting payments off, right?
Getting on extended repaymentoptions that don't really cover
much of the principle, but only paymostly just the interest, right?

(29:44):
So I think that that's how we've hadthis growth in the age of student
loan borrowers is a lot of folksneeding that wanting to go back.
And then what happens is when thosefolks have kids in 2008, I mean
I don't want to upset anybody.
That was a while ago, I mean,I'm feeling, kind of old.
I remember what I was doing in2008 and now, I'm like, wow, man,
Travis, you've seen some things,

(30:05):
So, 2008 is a long time.
So, like, people could have had Man,if I could do my math right, like,
you've had people that are basically,could have been born around 2008 that
are going to college, almost, right?
And so, when you have that happen, sothat all these 20, 30 somethings taking
out debt for their education, or slowwalking the payback of their debt because
they had to, they had kids, they maybehad a difficult housing market that

(30:25):
they were trying to get into and thenthey have the kids go to school and,
and what happens is this is kind ofhow all the, messed up stuff happens,,
let's say your kid wantsto go to Notre Dame.
Let's say Notre Dame.
Hopefully nobody's going to getupset with this analogy, this big
Irish fan, but I'll do it anyway.
So you go there and then they say,congratulations, you've been admitted,
and the cost is only, 40, 000 a yearand your jaw drops, And maybe you have

(30:48):
100, 000 income as a family, right?
But you can't afford 40, 000 a year.
And they only give the child 5, 000 ofdebt, so now you've got 35, 000 and you've
got to figure out how do I cover this gap?
Oh, I could send them to communitycollege and then they can transfer to,
Indiana University or something like that.
Or I can just dig deep andjust do whatever it takes
to send them to Notre Dame.
And the Parent PLUS Loan Program willgive you that unlimited debt with, very

(31:11):
little up front paying other than seeingthe size of the loan, And so the parents
will just say, yeah, I guess , I'm goingto go ahead and let them go to Notre Dame.
And they go.
And then they pile on that debt andthen what happens is in two years,
the child number two comes alongand says, wait a second, child
number one got to go to Notre Dame.
I don't want to go to Indiana University.
I want to go sing the fight song too, Andso then you have that child apply and it's

(31:33):
like, well, Are you going to say no tothat child when the first one got a yes?
And so now, from those four years,you have about 150, 000 of student
loans, of parent plus loans.
Maybe that's not even including your own.
And then you decide, okay,well, the second child, I'm
just going to do the same thing.
And then suddenly before you know it, youhave 300, 000 of student loans and you
have 100, 000 income, but a traditionalsort of Ramsey Susie Orman kind of mindset

(31:57):
about debt is not going to be able tohandle 300, 000 of debt on 100, 000
income unless you want to work till 75.
And the reason that the personended up in the 300k of debt
is kind of complicated, right?
One is because people said yes.
They didn't say no when theyhad the power to say no, right?
But two, why do banks have underwriting?
Why do lenders haveunderwriting standards?
Why do you have a maximum, back enddebt to income ratio on a mortgage when

(32:20):
you're trying to qualify for mortgage?
It's to try to limitthe risk to the lender.
That's the reason they do it.
But it's also has the impactof protecting consumers.
It protects the consumer for signingup for a loan that they like,
probably statistically cannot affordto repay, but there's none of those
protections on the student loan systems.
Why?
Because the big universities makesure that they get paid because that
would have a huge negative impacton them if they had caps on loans.

(32:43):
So it's just this real complicated system.
that's kind of why it's a mess.
Well, the more I listen to you, themore I'm hearing housing bubble,
housing bubble, housing bubble.
It's the way you described ourstudent loan system in the United
States, it sounds like a loan bubble.
is.
Well, I think it is, but I don'tthink it necessarily poses like the
risks that a housing bubble does.
And there's a few reasons for that.

(33:04):
There's not a huge securitizationmarket on student loans.
It's 90 something percent ownedby the federal government, right?
And the federal government canultimately just, print money if
it wanted to and cause inflationto pay back its obligations,
so the big question mark I wouldthink would be, if you ever do have
caps and borrowing, it could put alot of universities out of business.
And so that could have anegative impact on the economy.
People lose their jobs, campusesshut down, so that would be the,

(33:26):
maybe the economic risk of all this.
But at, student loans, even thoughthey're one point zillion dollars
or trillion dollars, I mean, it is afraction of the liabilities that exist
for Medicare, Medicaid, social security.
So those three programs dwarfthe worst case scenario for
student loans by a long shot.
And so I would just call it, asignificant problem that we all face as a
society, as individuals and collectively.

(33:48):
But there's bigger problems out there.
And so student loans, it's sort oflike, it could be the worst case
scenario imaginable on student loans.
Just roll that, kick that candown the road another 20 years
and we're at 4 trillion or 5trillion of student loan debt.
And it's still not going tobe as significant as, some
of those other problems.
Well, the cost of education has escalateddramatically over the normal inflation.

(34:09):
I think it's inflated at seven to eightpercent a year or something like that.
Will that ever stop?
How do we stop that kindof escalation in cost?
You have to cap the borrowing.
I think that everybody likesto pretend in student loan land.
So folks like to pretendthat all the debt's going to
be paid back when it's not.
And I think that the reality is weprobably need to give more grant
assistance to low income borrowers.

(34:30):
And we should just call it, whatit is, which is grant assistance
that people need and make it morebased off of who needs it the most.
But, I mean, frankly, instead we have asystem that gets sort of the assistance,
really, I mean, frankly, probably inthe wrong hands in some cases in terms
of if you care about income distributionsand things like that and equity and
I agree with you on that, Travis,because I always say I have like a love

(34:52):
hate relationship with student loansbecause I know that I wouldn't have
been able to get out of undergrad if Ididn't have the help of a student loan.
Before then, I was trying to workas much as I could, but because I
was working, my grant money got cutto nothing and I stopped applying.
So then I had to get a student loan,which again, the grant would have
afforded me to finish, but becausethe grant was cut to nothing, I ended

(35:13):
up having to get a student loan.
So it helped me in that regards,but we know that most people
don't know what to borrow.
And at first generation collegestudents, I mean, that's even worse.
I was first gen, so I had no idea.
How much I should borrow.
Most people don't if they'regoing for the first time.
So all of there's a wholebigger conversation around that,
but it's just so interesting.
So what was the percentage of peoplethat were over 35 that had student loans?

(35:38):
It's like right around 80%, I think.
I mean, gotten really, yeah, we call itlike the graying student loan crisis.
I better be careful here.
I'm in that, soon to be in thatcategory, but think that, one
positive thing I can say, right?
So, People do pay a percent oftheir income for the loans, right?
That's how normally works.
And so, government does get some oftheir money back, not all of it, right?

(35:59):
I think in a lot of cases it'skind of almost like a zero percent
interest loan if you run the presentvalues of all the payback, And so
it's just, again, basically, we havea very complex system because of
the way Congress does accounting.
The way Congress does accounting, Idon't want to get super into the weeds
there, but they, take all the interestincome and they classify that as income.
When a lot of that interest income isnever going to actually happen, and so
it makes it look like Congress is makingthis very reasonable balanced budget

(36:22):
kind of thing, but it's not actuallygoing to work out that way because the
interest gets paused or subsidized, Ithink that probably if you said how do
you fix the problem, you probably cut offthe worst programs that have the worst
debt to income ratios, you probablycap borrowing, you probably pull back on
how many for profit schools are allowedto participate in the program, right?
But all of those groups havespecial interests that protect them.

(36:44):
So I think that given thatall that exists, I think that
you could throw your hands up.
But what's a lot more helpfulis to say, well, what can I do?
What can I do as an individualto not let this get in the
way of achieving my dreams?
And that's the part that's exciting to me.
Right.
And what about the cost of education, likethese schools and what they are charged?
it's almost like I never hear thatreally brought up in the conversation.

(37:06):
, Bill was saying when he went tomed school, it was almost nothing.
He didn't have any student loans.
Mine was even reasonable, but nowthe cost of education has escalated.
So it's like, I guess, at what pointdo we start to look at that piece?
we're seeing, I think the first schoolscharge 100, 000 plus for tuition annually.
we've reaching that point.
Well, I think that, if you wanted to getreal blunt about it, like in economics,

(37:30):
like they talk about consumer surplus,which is how much extra value a consumer
gets relative to what they paid.
And so if you think about what's thevalue of a medical school degree, I
mean, Bill, obviously you went througha lot of pain and suffering for that.
So I want to be
careful what I
say here.
show you my scars.
I know, but, , say you pay 300, 000 fora medical school degree, Compared to
other things that someone that's smartthat goes to medical school could do.

(37:51):
Maybe that's not a good financialdecision, but if you compare
just overall, spending 300, 000.
To become a physician and sacrifice yourbody and your, life to do residency,
you come out and you make, 200, 000,some people a lot more than that.
If you just run the math on that, thefinances on that, That ROI is really
good compared to being, a bachelor'sdegree only and stopping at that level

(38:14):
and the unemployment rate is lower, andthe stability of your income is higher.
So if you think about dollar costaveraging, your ability to dollar cost
average and invest during periods ofeconomic downturn is much enhanced.
And so the, value of that educationis astronomical compared to
just a bachelor's degree only.
Now there are some programs that havevery little value out there, like

(38:34):
financially and economically, but Ithink what schools realized is, okay,
if we give somebody this dental degreeor this pharmacy degree or this, all
these professional degrees, the valueof that degree is so much higher in
terms of lifetime earnings than whatthey were charging that they just frankly
realized that they could charge more.
And the only obstacle to themcharging more was a lender that
would be willing to pay for it.

(38:54):
Right?
And so when the government tried toexpand access and got into the market
more aggressively and said, we want tohelp expand access to make sure that
all people can get into these fieldsand not just folks that have savings,
and families that can afford it.
That's a good thing, but schools tookadvantage of it, schools just essentially
knew that the value that consumers weregetting from those educations were so
much greater than what they were payingthat they could jack the price up and

(39:17):
nobody would say anything about it.
And we are seeing some pushback insome areas, like law school, there was
a pushback a few years ago on pricesbecause the job market wasn't as good.
Pharmacy school, I think there'ssome pushback right now with like
the job market not being as good.
But the only thing that stops the priceescalation is either, a constraint of.
Capital that will fund it or peoplehaving a slower job market where,

(39:38):
becoming a fill in the blank.
It's not as attractive.
It's just, going into the trades, right?
I do think that's why we'reseeing a little bit of a
slowdown in higher education.
It's not because of anything that'shappening with Congress or the
student loan market being limited.
It's just because, during the pandemic,people are like, wow, I can be a plumber
and make 100, 000 a year or, I can goto, This certificate program and come
right out and make 70, 000 a year.

(39:59):
Why do I need education for that, right?
But what I think happens is then you havea recession, a lot of people lose their
jobs, the instability of not having ahigh education and, kind of exposed,
and then everybody values educationagain and the schools, , lick their chops
because they can keep raising the prices.
So Travis, let me ask you this.
So possibly part of the reason why olderstudent loan borrowers or the average

(40:20):
age of student loan borrowers is growingup is because now you have these income
driven repayment plans that is like 20 to25 years if it's not the public service.
that a part of it?
a huge part of it because likethere's not a rational reason to pay
down debt in a lot of cases, right?
if I have the 300, 000 of loansand 100K of income, I need to
pay 10 percent of my income.
So that I can afford to save forretirement so I can send, my kids

(40:43):
to, good afterschool programs so thatI can enjoy the occasional vacation
and pay for my, reasonable middleclass house, so people, I would say
in a lot of cases are making rationaldecisions to do income based programs.
And the Biden administrationtried to supercharge this.
They had 9 million people on the saveplan out of, Forty million borrowers and
that number was exponentially increasing.

(41:03):
I think if they had left that plan inplace, they would have had maybe half
of all borrowers paying on that plan.
And then, half of all the people onthe safe plan were paying nothing.
Now, Travis,
know.
to us what the save plan is?
Well, the save plan by the timethis comes out, it's probably
going to be the former save plan.
but it was, the signature initiative ofthe Biden administration on student loans.
And the goal was to simply just makeit so that people didn't have to pay as

(41:25):
much of their income towards the loans.
And so it was just they updatedthe formula and made it so
that your first first payment.
let's say 40 to 60, 000 of earningswould be, you'd pay nothing on that.
And then you'd only pay 10 percentor actually five to 10 percent
on everything above that number.
And that was extraordinarilygenerous compared to the past.
And eventually you have thisconservative advantage in the courts.

(41:45):
Eventually, elected Republicansdecided to try to use that to their
advantage by trying to stop that stuff.
So they sued to block that.
And it's because save plans notin the law, they're probably
going to be able to overturn that.
And.
What the consequence of that is, is justborrowers might pay a little bit more.
And that's actually not something thatpeople need to be super worried about,
because there's things like income basedrepayment that are written into the law.

(42:08):
And that means that people willstill be paying a percent of their
incomes if they have federal studentloans, unless it's a bad deal.
If you have such a high income thata percent of your income would be
really, really high, well, maybe it'sbetter just to treat it like a debt
and just get it onto a really sound,payment schedule that, to pay it off.
There's nothing wrong aboutpaying off your loans.
I'm very much a fan of that.

(42:28):
What I don't like is where it's theonly option and then people let, the
dreams, Get shut down because you gotto pay your loans off and again going
back to full circle where I talked aboutmy near death experience, like, you've
got limited time on earth if you paydown your loans, congratulations You'll
be the same level of happiness Afteryou paid off your loans that you were
before a lot of people listening to thispodcast trying to reach that financial

(42:52):
independence A lot of people don't evenrealize hey, you can make some changes
right now that allow you to be happierthat don't necessarily involve you
being fully retired and not working.
A lot of people don't realize that.
Like the kind of the Coast Fi movement,where you can not, have to save anymore
because you've already saved enough.
Flexibilities around people workinga little bit less, working part time
hours or, restructuring some of theirfinances to reduce the burden of

(43:14):
their cash flow where they don'thave to be under much pressure.
That's stuff that gets me real excited.
It's people that don't have to beas stressed they are currently, and
they don't have to wait as long asthey think they need to wait to get
more of the stuff they want now.
And in that regard, youhave a couple of rules.
You mentioned the one to fiverule and the 25 to 30 rule.
Can you go over that for me again?
Well, 5 rule are we talking aboutjust having enough that you could

(43:37):
do something for an extended period?
Yeah.
So I think that a lot of folks, ifyou're in lower end of the age range,
the 35 to say 45 camp a big thing thatcan change your life is just getting
enough saved that you can afford totake one to five years off of work.
It doesn't have to be something thatyou, have a huge amount of money for,
but if you can just get yourself toa point where you can take a break

(43:57):
my friend Julian would call it asabbatical, From Montana Money Adventures
is her site back in the day, right?
So it's like, The goal is to be ableto take a break, and that can be
transformational, because it can allow youto get some head space, it can allow you
to refresh yourself, it can allow you toavoid burnout, and maybe it's not one to
five years, maybe it's just six months,or maybe you switch jobs or something,

(44:18):
and you build in a three month buffer soyou can get a little bit of relaxation in,
cause I know with physicians,sometimes the worry is, well, you're
gonna lose your skills, right?
And then the 25 to 30 sometimes yousay so many rules and you spout off so
much, you forget your own rules, right?
But I think that one is just beingable to afford a long term retirement.
I think is what that onewas mentioning, Bill.
And, just being able to have enoughmoney where if you can have 25 to

(44:40):
30 years of no income, you will verylikely pick up extra side hustles.
You will figure out ways to modulateyour expenses if you need to.
There's ways that you can, get higherpayouts from social security, get into the
ACA, do strategic rollovers of retirementassets to hit specific AGI thresholds
where you can not have to worry abouthealth insurance and things like that.
So let me know if came up with adifferent rule a while back that I missed.

(45:03):
That's essentially it, because you're abig fan of not letting your student loans
drive the bus, letting your life drivethe bus, and then the student loans will
get taken care of in due course, notdoing the Dave Ramsey, gazelle intense
approach, because it's going to be anearly retirement extreme deprivation
approach, as opposed to a balanced 50 50

(45:24):
Well, here's kind of like an example.
I love examples, , so one of the exampleswe run into all the time is somebody
who's 50 years old, who has 200, 000 instudent loans, maybe six figures save
for retirement, but she thinks she'sdone for, like she can't retire ever.
All these decisions that she'smade are just, unfixable, and
she probably even feels shame orguilt and blames herself for it.
and I understand where somebody would feelthat, but they don't need to feel that.

(45:46):
And so some of the ways tocounteract that it's like, okay,
well, what's your cash burn?
And a lot of times these are middleclass folks in terms of their spending.
They're not extravagant inmost cases from what I've seen.
It's really people with pretty normalexpenses that face this problem.
And so if this person, let's say thatthey're able to maybe strategically
defer or forbear their loans alittle bit to kind of catch up a
little bit on retirement savings,then And then you model out, well,

(46:10):
what is their actual payments?
Well, now we just need to figure out away for that person to make it to 70.
Well, think there's twothings in that case.
One would be making sure you don't haveto worry about healthcare expenses.
So you try to do some strategicstuff to get into the Affordable
Care Act if you need to.
Whenever you're kind of going tocut back on hours or try to retire.
And then you try to avoidclaiming Social Security until
you've got your max benefit.

(46:30):
And if you do those things, maybe alongwith kind of, Figuring out if there's
any other optimizations on your big fixexpenses, like maybe you have enough
equity in your house to downsize andnot have a mortgage, for example.
So if you do those kinds of things,suddenly somebody's paying 10 percent of
their income in retirement, which mightbe really, really low in terms of the
realized income, And then they're able tojust make it to social security, medicare.

(46:51):
And then it's sort of like, well, youmight not have enough money for, viking
river cruises , every month, but youmight have a really solid retirement and
somebody thought that was impossible.
And so that's the stuff that's excitingis have to kind of help somebody realize,
wait a second, what do you want?
Why do you want it?
What kind of calling do you haveFor your life, and how do we just
take this fear, and this stress,and this worry, which I certainly

(47:13):
struggle with too in life, right?
And say, well, let'sdebunk this with math.
That's what I like about the world thatI inhabit, is I can pretty much debunk
99 percent of people's student loanrelated worries with just pure math, and
then just let it sit with people, andthey realize, I'm not trapped anymore.
Yeah, I appreciate
that.
The thing I like, Travis, is you takea holistic, meaning whole person,

(47:36):
whole financial person approachto student loans, where student
loans are often seen in a vacuum.
Tell us a little bit about yourorganization, Student Loan Planner,
because that's evolved in of itself.
And you just talked about lookingat the loan in total of what
your financial life is and yourentire health span and work span.
Can you tell us what Student LoanPlanner offers people and I'd

(47:57):
like to be interested to know.
What percentage of the people you workwith are actually these older student loan
borrowers or parents that come to you withthese quote unquote student loan crises?
I mean, just off the top of my head, it'sprobably a third or pretty recent grads.
Probably a third of what I would callmid career or early career professionals
that are in their, thirties or forties.
And then maybe a thirdare, seniors or parents.

(48:19):
And it's, kind of we deal with mostlypeople with six figures of student debt
because that's what paid service makesthe most sense for, so our paid service
is a few hundred bucks and we do anhour consult and then, , any follow up
questions you have covered for a fewmonths after that, three months after
that or so, and what we do is we transformthe way you're handling your loans, so
we help you think through what are allthe loopholes you could use, what are all

(48:39):
the worst things that can happen, whatare all the best things that can happen,
and here's your plan A, here's your planB, here's your plan C, so we give you a
bunch of options where it's not like just.
Oh, here's my plan.
And so that's the, sort of one offconsultative approach that we offer.
And then we also started a financialplanning business, mostly for student
loan borrowers that need a deeper sortof level of help in their finances.

(49:00):
So a lot of people want to take it astep further and say, well, how do I, my
student loans are based on my income, howdo I minimize my taxable income, right?
Legally, how do I, take advantage of, actually setting up the solo 401k or the
SEP IRA or the, 401k profit sharing planat work so that I can lower my taxable
income and not have as big of a hit interms of what I get to actually invest.

(49:22):
So those are like different kinds of,Paid services and there's also the free
services, which is at studentloanplanner.
com And it's just a bunch of calculatorsbunch of blog articles we have a
newsletter that people like to read oncea week and So the whole dream of this
was to have a whole bunch of people thatcan't afford us get a lot of help for
free and then the people who Would losea lot more money if they didn't use us

(49:44):
and they can't afford us to have thatpaid service for folks that want it.
So that's kind of what we do in a nutshell
So if you
100, 000 of student loans, you're50 years old, you have 100, 000 of
student loans, behind in retirement,and and come to you, what kind of
an ROI are they going to see out of aconsultation with a student loan planner?
and they earn six figures,they have six figures of debt.

(50:04):
Yeah, it depends on the profession.
I think our average savings, projectedover the life of the loan, of course.
Some people do save the moneyimmediately, but it's about 60,
000 or so, I think, per borrower.
Now, somebody who's a physician or adentist is that savings is probably
gonna be more tilted towards like100, 000 or something like that.
And then somebody who's, maybea social worker or a physical
therapist or something, thatmight be tilted a little bit more

(50:25):
towards lower end, like 40, right?
So the way we do it is just to have thattransparent flat fee for the advice.
And, people can check our reviews to see Idon't think I say this arrogantly, right?
But you read the reviews and peoplecan make up their own minds, we
do care a ton about being the best.
I think that really mattersin something like this.

(50:46):
That we always want to be on theactual cutting edge of all of this.
And so we are always paying attentionto not only what's going to happen right
now, but what's going to happen next.
Because what happens with studentloans is, There's always next.
There's always the next administration,the next program, the next
plan, the next, initiative.
And it can make people's headsspin, because it's such an unstable

(51:07):
area of government policy, becausethere's no consensus on what to do.
So that's the, approach we tryto take, and I'm blessed to be
able to, help people with it.
I would double down on that.
I've been listening to Student LoanPlanner for a long time, Travis,
but like, for instance, if there'slike breaking news at three o'clock
on Friday, and then guess what?
Student Loan Planner has breakingnews talking about it two hours later.

(51:28):
So you could tell you liveand breathe through that.
This stuff you give away so much for free.
The podcast, I always callpodcasts, just a free classroom.
And then you've got a lot of stuff onyour website again, for people that
may not need the one on one service.
But if you do you were generous enoughto offer our audience a discount,
we'll put that in the show notes, butyou get a chance to kind of see what.

(51:49):
You are talking about what how passionateyou are about student loan planning,
and I believe in going to, the morereputable sources that you know, know
what the heck they're talking about.
you're certainly one of those people.
so I do have a question.
So we talked about like the regular incomedriven repayment plans of 20, 25 years.
The public service loan forgivenessfor our people that are government

(52:12):
workers, non profit workers,that's even better, right?
Yeah, that's ten years, so that canbe real rapid, , I mean, there's
a lot of programs out there wherepeople might not even realize they
even have a lot of credit alreadybecause there's been all these updates.
And that's one of the big questionsis, how much of the stuff that
President Biden did will PresidentTrump's team actually implement?
And a big question that Iwould have if I was a borrower.

(52:34):
And the good news is a lot of it will beimplemented because, it's just, be too
hard to unimplement, and then some of thethings probably will be limited restricted
in this coming four years or so,
to revisit this probably come February20th after we've had a month to see
how rapidly things have changed.
Now, one thing I do want to do,Jackie, before we let Travis

(52:54):
go, is talk about Krista and Ed.
Because we had Krista and Ed on our showto talk about their story, and one of
the parts of their story, and we wantto give them some follow up, a little
surprise, was their student loan history.
Do you want to tell Travis about theirstudent loans and see what he has to say?
Yeah, and just to clarify this wasa case study that was done at economy
and then we did a follow up withthem on our podcast and I'll drop the

(53:16):
video to that in the show notes, butthey did have a student loan issue.
Now, I was the student loan personthere because I learned a lot from you,
Travis, but here was their scenario.
So Krista, I believe she was withone of those for profit schools that
I think is supposed to get forgiven.
So I don't know any updates on that.
These for profit schools
What a great question.
I mean, would expect that there mightbe relief handed out at the very

(53:37):
last second in the waiting hours,the Biden administration, where they
try to rush all of that through.
There is
Right, I mean there's a settlementcalled Suite V Cardona where all these
borrowers are supposed to have a veryaccelerated time frame to have all of
their debt, evaluated for forgivenessand it's mostly just supposed to be
forgiven, but like anything there aresome, legal challenges going on and,

(53:58):
the new administration could decide totry to slow walk that strategically to,
maybe try to challenge it, but causeif you think about Suite V Cardona,
Cardona was secretary of education.
That secretary of education underthe Biden administration wanted
the settlement to go through.
Right?
So if you get a person in there thatdoes not want the settlement to go
through, they could try to, maybe tryto slow things down quite a bit there.
Yeah.
And that brings another question.
So I remember when we were talking toKrista, I don't know if you remember

(54:20):
this bill, but she was saying that herreason for going to a for profit school
was because they were more flexible.
She was a single mom and she could goin the evenings and things like that.
So that kind of makes me thinkabout, is there any like certain
demographics groups that are moreimpacted by student loans than others?

(54:40):
Well, it's definitely a, peoplecall it a women's issue and
issue communities of color.
I mean, it definitely impacts thosecommunities disproportionately.
But like I said, a lot of therelief has just been sort of.
Broad brush and not targeted forthe people who need it the most.
I mean, so I'll give you just anexample is the student loan pause.
If you pause everybody's interest,somebody that went to medical school that
has 400, 000 of student loan debt gets30, 000 a year of interest subsidies.

(55:03):
It's somebody that works at Starbucksthat, got taken advantage of by a program
that misstated their employment finding,has 10, 000 of student loan debt.
That person maybe got 500 ofinterest subsidies, right?
So you might say, well, it's fair becauseit's pausing everybody's interest.
Well, people that have more debtactually disproportionately tend to
have a lot higher incomes, right?
So what they did is theypaused everybody's interest
with this blunt instrument.
But, I mean, not only do they pause theinterest, they also counted all the paused

(55:26):
payments towards forgiveness credit.
So what happened, is a lot of folks thatget, have PSLF qualifying employment
that would normally be paying, two,three, four thousand a month, ten percent
of their incomes that are working athospitals, like physicians, for example,
they got all that paused, and theygot all that credited towards PSLF.
And so there's a lot of like I thinkthe class, the med school class of
Something like, maybe 2014 or something,probably the people that qualified

(55:48):
for PSLF have probably paid a grandtotal of maybe 5, 000 on all of
their student loans, ever,
like, in terms of people thatgraduated med school around 2014.
Physicians work hard.
Physicians really go througha lot of abuse and difficult
circumstances and deserve help, right?
I'm not saying physicians don't, but theproblem is, is just we're not thinking
about, what are all the downstreamimpacts of all these new loan policies,
because it's just chaos, and it's notfought through, and it's just sort of

(56:10):
like broad strokes, and that's fine,because broad strokes, like that's the
way a lot of programs work in life,because life's not fair, and so you as a
person, as a borrower, can say, insteadof saying the system's ridiculous,
and I just can't do anything aboutit, you can learn all these rules
and try to help you better yourself.
And, it's kind of like all the hacksy'all probably talk about, right?
Mega backdoor roths, and, gettingthe whatever distribution where you

(56:31):
can get access to your money at 55
72,
yeah, 72T and then
yeah, you know, and, and exactly.
And so obviously those thingskind of help people that are
disproportionately in the know.
So it's like, well, you can, beout of the know and not benefit
from this stuff or you can bein the know and benefit from it.
And then eventually maybethey make changes, but that's
one of the reasons, right?
Why we try to stay a lotmore at Student Loan Planner.

(56:52):
We try to say, we try not to spend a lotof time on saying the way things should
be, because ultimately we know that.
Frankly, I just don't have a lot ofimpact or control over the way things are.
So what I can say is what I dohave a lot of impact over is,
helping educate you on the way youcan change things for your life.
And that's the exciting stuff is,you just kind of have to figure
out whatever's going on out there,take the best stuff that will help

(57:15):
you bring it in and let's use thoseloopholes, like the rich people do
What
try to help your family.
that is huge.
Thank you I couldn't have said it better.
But let me ask something onbehalf of Ed, Chris's husband,
and then we'll let you go here.
So for Ed he was scheduled to pay offhis federal student loans in 2027.
Now, again, I tried this stuffin and did all my research.
They stumped me.

(57:35):
So I had to do some digging.
So we had the question of was theforgiveness going to be tax free.
He was not on publicservice loan forgiveness.
This is just regular income driven.
Okay.
So they live in Wisconsin.
So They were going to have to paytaxes for the state of Wisconsin.
That's one of the three states.
But the other big questionwas on a federal level.
Wasn't there a law that said even ifyou weren't on public service loan

(57:58):
forgiveness, if you were doing an incomedriven repayment plan, that forgiveness,
the forgiven amount would be tax free.
But does that continue after 2025?
the American Rescue Plan that wasput forward in 2021 expires at the
end of 2025, which is where that taxfree forgiveness provision exists,
and so expires, and with the unifiedRepublican control of Congress and

(58:19):
the White House, they could extendit or not, and so that's definitely
a risk that they would need to take.
A couple thoughts, though.
Do we know what their occupations are?
what are the,
technology.
And then both of them do that?
No.
So the husband is, I. T. The wife,Krista, she just went back to work.
She loves to read and nowshe works at a library.
So she does work for a government agency.

(58:39):
I guess it would be state or county.
And what, like, what aretheir big goals in life?
Like, do they have any big dreams?
Like, what,
They
got a lot of big dreams.
Well,
they wanted to retire in 10 yearsfrom their case study, right?
Yeah.
that was a big dream.
They wanted
big, uh, 10
years.
And like, where are They at?
Like,
They have four boys,
and then, how old are the boys?
What's the age range?
They're mostly like Teenagers, Theymight have one that's like eight or nine.

(59:02):
coming,
right?
they have.
That was one of their other goals.
Yeah.
help take care of their college.
do they have a significantamount of assets right now or no?
I would say mid range
range, yeah.
They were definitely on their way.
sure.
want to go live abroador live in the U. S.?
Or what's their big
Probably living in the U. S. Maybelater on abroad, but the kids, while
the kids are younger or going off tocollege, I don't think that they have

(59:25):
a desire to go to another country.
in life?
Like, is there something
They are.
very
happy.
They're very happy.
yeah, they are happy.
They got a great love story.
So that's a lot of their happiness.
They
got four great boys and things like that.
And we need to refer ouraudience back to that show.
We'll put it in the show notes.
Listen to that show.
And this is follow up for Ed andKrista, but it applies to everybody.
I think that what I'm hearingis that, he shouldn't worry

(59:46):
about the forgiveness in 2027.
I mean, there's something calledthe insolvency rule that basically
says if your debt's larger thanyour assets, then the debt's
forgiven tax free no matter what.
So that law would stillbe in place in 2027.
So that's, if they don't have alot of assets, if they do have
a lot of assets by definition.
They could pay the taxburden handle it, right?
And so there might be sometax planning they could do.
Maybe they work a little bit less than2027 and stay in a lower tax bracket.

(01:00:09):
Maybe they think if there's any kindof bonus depreciation maybe if they're
involved in any kind of side hustlesor something, maybe they could look
into any kind of, short terminaldepreciation or bonus depreciation.
If they got business stuff goingon, did not worry about the tax hit.
And then for her going for profitschool, I think that she just needs to
Decide you want to try to actually gofor the front door forgiveness, which
is the borrower defense stuff And thenmaybe she might put her application in

(01:00:33):
and get a three year forbearance whilethey're figuring that out Maybe they
say no Maybe the next administrationis the democratic administration and
says yes or alternatively She couldjust try to see if she could go for
that public service forgiveness optionif the debt's federal And then also not
have to worry about it in wisconsin isa community property state, which what
that means is that's another loophole.
You can basically split somebody'sincome 50 50 on a tax return, federally.

(01:00:56):
And then you can do one of two things.
You can say, well, I'd rather use50 percent of my spousal income,
because that's a low number, orI'd rather use my actual income
showing from my pay stubs directly.
And if he's in tech and she's likemaybe a librarian or something,
my guess is she makes less.
So she could probably do that split.
on the tax return and then submitlegally her other proof of income
and get super low payments whereit's not going to be much of a hit.

(01:01:19):
and the reason I asked for all those otherthings, right, is, is they also could
have frankly just gone back and gottenanother degree if they weren't happy.
And if they had been in medical somethingor maybe they were like a lower , middle
level medical person, maybe they couldtake that next step up the occupational
sort of, hierarchy of, maybe they're a.nursing assistant or something like that,
maybe they want to become a nurse ormaybe they're already a nurse and they can

(01:01:39):
become an MP or maybe they're, somethingelse and they want to become PA, right?
Like, you could do a lot of that kindof stuff with an extra degree if they
already have a lot of debt and, butgiven that they're in these, more
sort of very common occupations,right, more common occupations I think
that that's probably, The way thatthe loans don't have to hurt them.
They just have to think, okay,enjoy your boys, enjoy togetherness.

(01:02:00):
I would probably recommend to them moreof a traditional plan, like if they're
not already up to their eyeballs instudent debt, I would probably say,
probably try to go that whole, communitycollege and in state kind of route
and try to pay it the traditionalway to not take on the stress, right?
But if they had had way more debt.
That I probably say, well, yeah, youprobably need to think about Parent
Plus, especially with four boys.
And you want to put the Parent Plusloans in the lower income spouse's name.

(01:02:23):
So you want to put it, probably inthe person who's in the public sector,
in the librarian's kind of name.
Because the idea there is youcould maybe, work for 10 years
after the, the Youngest done.
Maybe go straight up for forgiveness orjust keep it long term because the math
makes sense to hold on to it long termand just treat it like an income tax.
So I think that the student loansdon't have to impact any of that.
They've got a pretty goodsituation it sounds like.

(01:02:44):
And this is why we love Travis.
Okay.
He just walked us througha live student loan plan.
So Krista and Ed, you gota lot of food for thought.
And so Travis, if someone else wants towork with a student loan planner or they
want to find you and get more information,tell us where people can find you.
Look at the show notes, right?
But in this case, the discountlink, is in the show notes.

(01:03:05):
So you definitely want to gothere if you want to hire our
services, because you get 100 off.
So if you go into the show notesfor the show, scroll down, find the
link, click on that if you book.
And it's a hundred dollarsoff our usual rates.
And if you just want the free stuff,that's just studentloanplanner.
com.
You'll see a spot where you can downloadone of our calculators, like the usual
trade your email for the freebie thing.
And if you like the updates you get inour newsletter, you can stay on there.

(01:03:27):
And if you don't, obviouslyyou can unsubscribe.
if you like listening topodcasts, probably do because
you're listening to this.
We have the Student Loan Planner podcastyou can find if you just type in Student
Loan Planner on any podcast platform.
So a lot of options for both thediscounted stuff thanks to you guys,
and then also the free stuff as well.
Well, Travis, thank you so much becauseI also, before we let you go, want to
know what's in the future of StudentLoan Planner and what's in your future,

(01:03:51):
because I'm going to nominate you forspecial counselor to the Department
of Education and fixing the problem.
respectfully decline invitationjust kidding, but no, I think in my
future, hope to help borrowers, I'mtrying to be a lot more focused on.
The present.
So one of my gifts is being able tohelp people look way off in the future.
One of the weaknesses that causesis in my own life, it's sometimes

(01:04:13):
hard to just stop, look aroundand say, today is a wonderful day.
Right?
And so for me, that's one thingI'm working on is just trying
to be more present, trying tobe more living in the present.
and in terms of professionally, I'mhoping that I can just help people
through this very stressful year ofstudent loan chaos that I know is coming.
And so people are going to be worried.
They're going to be stressed.
They're going to be fearful.

(01:04:34):
Their payments are going to go up inmany cases and we can help people.
We can take down thetemperature of the stress.
We can reduce the burdenon people's minds.
So that part of things I really enjoy.
So that's what we're going tobe working on the next year.
And if you ask me the nextfive years, I, beats me.
I mean, hopefully I'm still herehealthy, happy and maybe doing a the
last time we did the economy conferenceit was right before the pandemic.

(01:04:56):
So just hopefully a very healthy,happy maybe another talk at a
conference somewhere or something.
That sounds good to me in five years.
I think that's a great place to close.
Travis is here helping youto maximize the present.
He doesn't want our late starters tobe mired in the shame of the past,
feel burdened by their student loans.
He wants to unburden you so thatyou can live your best life now,

(01:05:17):
not waiting for when the studentloans are paid off or forgiven.
Right, Jackie?
that is right.
It's been great having you Travis.
And I know our audience will love whatyou had to say because a lot of times
we do get so worried about the far offfuture that we forget about the now.
So it's been great hanging out with you.
Hopefully see you soon ateconomy or somewhere and
keep doing what you're doing.

(01:05:37):
You've been growing like crazy.
So thank you for joining us today.
Wonderful to be here.
All right.
Thank you, Travis.
We'll see you next time.
Next year, we're going to get an updateon all the changes that have happened
in the student loan planning arena.
All right, guys, we'll see younext week on Catching Up to Fi

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Banishing The Burden of Student Loan Debt | Travis Hornsby | 122