March 27, 2025 • 20 mins
Questions? Thoughts? Send a Text to The Optometry Money Podcast!
In this episode, Evon Mendrin, CFP® dives into the latest twists in the federal student loan landscape—and what they mean for optometrists using income-driven repayment (IDR) plans. There’s big news on SAVE plan court rulings, loan consolidations, and IDR recertifications. But more than that, Evon explores the deeper question: What are the tradeoffs you accept when choosing an IDR path toward forgiveness?
Whether you’re a recent graduate figuring out your repayment plan or a practice owner managing loans alongside business goals, this episode breaks down the current student loan climate and the ongoing volatility—and why you should base your decision on math and personal tolerance for policy uncertainty.
💡 What You’ll Learn:
- The most recent updates to federal student loans
- What’s happening with student loan consolidation and past payment history
- Why IDR recertification deadlines have been pushed back—and what to do if yours wasn’t processed
- The current status of IDR applications (they're back!) and why servicers aren’t processing them (yet)
- The key tradeoffs to consider when planning around forgiveness vs. full repayment
- How student loans compare to other long-term financial decisions in terms of uncertainty and control
🔗 Resources & Links:
- Eyes On The Money Weekly Newsletter – Sign up and get your 2025 Financial Guide
- Student Loan SAVE Plan Court Case Guidance
- Have a question or want to dive into your student loan strategy? Reach out at podcast@optometrywealth.com
The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:04):
Welcome back to the OptometryMoney Podcast we're helping ODs
all over the country make betterand better decisions around
their money, their careers, andtheir practices.
I am your host, Evon Mendrin,Certified Financial Planner
practitioner, and owner ofOptometry Wealth Advisors, an
independent financial planningfirm.
Just for optometristsnationwide, and thank you.
(00:26):
Thank you so much for listeningtoday.
Appreciate your time and yourattention.
And there is more news relatedto income-driven repayment plans
and student loans.
I had just recently put out apodcast episode about student
loan updates, and almost everytime I put out some content
about student loans, somethingelse changes almost immediately.
And so I.
(00:47):
There have been some prettyimportant updates recently.
Wanted to, touch on that on thisepisode here.
And I also wanted to talk abouttrade-offs, the trade-offs that
we are accepting when we areusing income-driven repayment
plans towards forgiveness.
And so first things first, let'sdive into some of the most
recent news and updates here.
(01:08):
Some of these as recent asyesterday, March 26th.
and so yesterday, yesterday, theDepartment of Education updated
its SAVE court case guidancewebpage, and I'll throw a link
to that in the show notes withsome important updates here.
the first one we notice is that,as expected the entire SAVE plan
rule.
(01:28):
The entire rule that allows forthe SAVE plan and put on pause.
So not just particular parts ofthe SAVE plan, but the entire
rule that created it or allowedfor it, which is important.
'cause this was a huge, a hugerule that not only allowed for
the change from REPAYE to SAVEand all of the new payment
calculations on SAVE but it alsochanged how consolidations were
(01:50):
handled.
So in the past, consolidationsessentially erased all past
payment history towards IDR, andit replaced your loans with new
consolidation loans and what thenew rule what they were
improving here is thatconsolidations would have led to
a weighted average of thepayment history for the loans
(02:12):
that you're consolidating,rather than just erasing all of
that.
all of that past paymenthistory.
So with that put on pause, thisis a big question mark in terms
of what happens now withconsolidations today moving
forward.
So, be cautious if you'reconsolidating.
You know, unless you are arecent grad with very little
payment history.
Just be cautious with thoseconsolidations.
(02:33):
And the other thing it handleswas how family size is
calculated for your IDR paymentcalculation and which
potentially may end up in thefavor of married borrowers with
kids.
if it's going back to the oldway that family size was
calculated and.
And there is also something weknew already.
There is also no forgivenessapproved right now while you are
(02:56):
on any income-driven repaymentplan except IBR.
your payment counts.
So if you are making payments onSAVE or I guess you can't
anymore, but if you had madepayments on SAVE or if you're
making payments on Pay As YouEarn, the payments are still
counting.
But if you reach the 25 or 20year mark.
And you try to get thatforgiveness, you wouldn't be
(03:18):
able to get it under Pay As YouEarn or under SAVE you'd have to
switch onto IBR.
And so those are some of thethings that are impacted by the
entire final rule being put onpause.
the other thing we saw is thatthe site now explicitly in the
guidance states that the buybackprogram is still available for
PSLF.
So for any ODs that are workingat the VA or.
(03:41):
currently Kaiser or even atribal employer, a government
employer, that's something thatis still available for you.
the other thing we saw and thatwe heard about recently was that
IDR recertification dates havebeen pushed back to February,
2020 sixth at the earliest formost, for most borrowers.
(04:02):
And this was something that wasalready happening for anyone on
the SAVE plan.
For anyone on the safeforbearance, your
recertification dates werepunted out into the next year,
and, with all the stuff going onwith the IDR applications and
recertification requests beingtaken off of the website.
From the Department ofEducation, a lot of people that
(04:24):
were, were getting close totheir recertification dates.
Were trying to figure out what,what do we do?
And us as Advisors to thosepeople, were also trying to
figure out what's the best wayto, to try to handle that
recertification deadline.
So basically they punted, right?
So they, They for, for mostborrowers, they've punted,
they've pushed yourrecertification date on all of
(04:47):
the income-driven repaymentplans into 2026.
Specifically, it depends onexactly how that's handled.
Depends on your recertificationdate.
So if you had to recertify yourincome and family size on or
before February 20th.
And you recertified successfullybefore February 20th, and the
(05:11):
servicer processed it andcalculated a new payment.
Unfortunately, that's yourpayment.
There's, there's nothing we needto do, or there's nothing you
can do.
We can't go back to what yourpayment was.
If it was successfully handledand done and processed before
two 20, then that's yourpayment.
It doesn't impact you.
if you tried to recertify beforeFebruary 20th, and it was not
(05:34):
processed by your servicer, thenyour recertification date is
pushed back into 2026, Februaryat the earliest, February 20th.
At the earliest if you weresupposed to recertify and
didn't.
Your repayment amount is nowbased on the standard plan.
You need to submit arecertification request as soon
(05:54):
as possible to get your paymentslowered and, and based on your
income and family size.
so that's something you'll needto do if you just didn't
recertify at all and weresupposed to, so that's if you
were supposed to re-certify onor before 2/20.
If you weren't required tore-certify until after February
20th, then your recertificationdate is pushed back one year.
(06:18):
So gives us a little moreflexibility there with
everything that's going on.
And I, I think that makes sense.
I think everyone, including theDepartment of Education and, and
servicers, need some time aswell as borrowers to, to figure
out how this is all gonna workand what the courts are gonna
do.
So, gives us more breathing roomhere.
But for those of you on SAVE Iwant you to keep a close eye on
(06:39):
this because.
I, regardless of when yourofficial recertification date
is, if it's likely or if it'seven possible that the SAVE plan
is struck down by these courtcases, it's possible that you'd
need to apply for one of theother income-driven repayment
(06:59):
plans.
It's possible you'd be forced toswitch onto another one, which.
As of right now, how that worksis that if you try to apply or
switch to a new income-drivenrepayment plan, that's also
going to require you to reshowyour income and family size
again, you're going to have torecertify again.
So for borrowers that arecurrently going through the SAVE
(07:20):
forbearance, and really for anyOD on any income-driven
repayment plan.
With about a month away fromApril 15th, tax filing.
The deadline, I'd be carefuland, and really thoughtful about
how you're filing your taxes.
First of all, you'd wanna beaware of whether you should or
shouldn't be filing taxesseparately if you are married.
(07:41):
so that's number one.
Number two, it may make sense tofile an extension or perhaps
specifically a, a married filingseparate extension.
Because if in the event thecourt's rule and SAVE goes away
and you're forced to switch ontoa new plan.
It gives you more time to eitherreuse 2023's tax return if it's
(08:04):
much more favorable than 2024'swould've been, or just gives you
more time to decide how to fileyour tax returns if you're
married.
So talk with your own financialPlanner, your own tax advisor
to, to go through your studentloan planning and, and see what
makes the most sense for you.
But I think in, in some casesthat extension.
(08:24):
Which remember is an ex is anextension to file your tax
return.
It's not an extension to pay atax that might be due, that
still needs to be paid by April,April 15th.
But in certain cases where I seethe borrowers on SAVE I might
recommend an extension just togive us more breathing room the
next exciting bit of news isthat IDR applications are back
(08:47):
online, which should havehappened a long time ago, at
least for IBR.
IBR was not and never was atrisk.
Here.
It's allowed by statute, it's inthe law, but, as a result of the
recent.
Ruling from a court of appeals.
The Department of Education justsort of put everything on pause.
It didn't allow us to switch iDRplans didn't allow us to
(09:08):
recertify income.
So it's, it's good to seeprogress here.
This looks like it was a resultof the lawsuit brought by the
American Federation of Teachers,however.
Even though the IDR applicationsare back online, it doesn't look
like any servicers are actuallyprocessing them yet.
In fact, on their webpage, theDepartment of Education
(09:30):
specifically says,"although IDRapplications are now available,
loan services are still updatingtheir systems in accordance with
the court's actions.
Servicers will begin processingapplications in the near
future." So.
we don't know when that's gonnahappen.
you probably are also stillseeing your servicer update your
recertification date or, or youranniversary date.
(09:51):
So that's probably somethingyou'll start to see happening
behind the scenes as well.
But although they're available,they are still not yet being
processed unfortunately.
if you look at the application,you're gonna see that ICR is
there, IBR is there and Pay AsYou Earn is there.
SAVE is no longer an option andone thing just to keep in mind
is that there are two versionsof IBR.
(10:12):
If you were a new borrower withno federal loan balances as of
seven of 2014.
You are eligible for the newincome based repayment, the new
IBR, which is a near twin of PayAs You Earn if you're eligible.
That's probably where it's goingto make sense to head.
That's one of the topconsiderations.
(10:34):
If you had loans before then ifyou had federal student loans
before, then you would beeligible for the old version of
IBR, which has a less favorablepayment calculation and a 25
year forgiveness timeline.
So, as long as Pay As You Earn'savailable, you might prefer Pay
As You Earn instead.
And one last thing to keep inmind is that you would need a
(10:55):
partial financial hardship tohop onto the IBR and Pay As You
Earn plans, which means thatyour payment calculation when
calculated under IBR or PAYEwould be less than the standard
10-year payment plan based onthe loan balance as you're
trying to get into these plans.
So if you saw a dramatic rise inyour income over the last year
(11:16):
or so, or for those of you whohaven't recertify your income
since COVID and over that timeperiod, saw a pretty big rise of
your income, that's somethingyou want to keep in mind as
well.
So the drama continues, but it'snice to see the IDR applications
back online.
It's nice to see a little bitmore breathing room in terms of
the recertification dates.
I saw that it caused a prettygood amount of borrowers, some
(11:38):
stress, so I, I'm glad to seethat.
And at the end of the day, we'restill waiting to see what the
court rules.
And then we can go from there.
So we're still waiting on thatcourt case as it relates to SAVE
once we have more information,we can start to make more,
definitive decisions.
And so with those updateswrapped up, I wanna talk a
little bit about trade-offs andspecifically the trade-offs that
(12:02):
we accept when usingincome-driven payment plans
towards forgiveness.
As I often say, there are threegeneral approaches to tackling
student loans.
Number one, you're either payingit all down to zero.
Treating it like any other debt.
Number two, you're usingincome-driven repayment plans
towards either PSLF or 20 or 25year taxable forgiveness.
(12:25):
Or number three, you're using amix of the two, and you're using
IDR plans as sort of a temporarystepping stone before switching
routes down the road and payingit down more aggressively and
the right way forward is a mixof math and personal
preferences.
The math would tell us when weproject out the math, the math
would tell us what is the mostlikely, least costly way to
(12:49):
handle the loans.
Depending on your loan size,your interest rates, and your
income and your family size, andhow those change over the next
20 or 25 years, the higher theloan balance relative to your
income, the more the math shiftstowards forgiveness, especially
when the loan to income ratio issomewhere around two to one.
(13:10):
And this also depends on theopportunities you're able to
take advantage of when it comesto tax filing, when it comes to
split income, for example, in acommunity property state and
your filing taxes married filingseparately.
Another example is being able totake advantage of pre-tax
contributions to retirementaccounts like 401k plans, things
like that to bring down yourincome for student loan
(13:32):
purposes.
And when comparing the math, youare comparing the total
principle of the debt, plus theinterest that you're paying for
full payback versus the totalamounts of payments you make
plus the tax at forgiveness forthe IDR route.
That's sort of the math you'recomparing and bringing it,
(13:53):
importantly bringing it intotoday's dollars.
Whenever you're comparingdifferent repayment plans or
different, different sets ofcash flows over very different
time horizons, like 10 years, 20years, 25 years.
You wanna bring those paymentsinto today's dollars.
You might hear that called netpresent value, but you want to
(14:13):
see it on an apples to applesbasis.
And when it makes sense to gofor the IDR route and you choose
to go that direction, you'remaking a choice of trade-offs,
do you take the route that islikely to be the best option
mathematically based on theassumptions you're using?
Or do you want to limit thevolatility?
(14:35):
Of student loan policy decisionsand government decisions, and
just pay off the debt regardlessof what the math says.
What's your tolerance for theups and downs with government
policy?
because when you're going, whenyou're using income-driven
repayment plans towardforgiveness.
The math going that directionmay be more favorable, but you
(14:57):
are adding more work to yourlife.
Or if you're working full-timewith an an advisor like me, we
are doing more work together andyour advisor's handling a lot of
the thinking there, but you'readding more work to your life.
You need to keep an eye on allthese different changes in
policy.
You need to recertify yourincome and family size every
(15:17):
year.
You need to make sure you'rehandling the tax filing
decisions appropriately.
taking advantage of pre-taxdeductions and pre-tax
contributions, and you've gottakeep an eye on this over 20 or
25 years for long-term taxableforgiveness.
And over those 20 years, forexample, you may see five
(15:38):
different presidentialadministrations with vastly
different opinions of how thisshould work and, and all forms
and variations of congressesover the years.
And so.
Yes, when going towardsforgiveness, it may be the most
mathematically optimal routebased on the assumptions you're
using, but you're also adding alot of that volatility and
(16:00):
stress and work that you have todecide how you feel about that,
or you have to decide whether toget the help you need in order
to take, to take advantage ofthese, which this is no
different than any otherlong-term financial planning
decision.
For example, when we useretirement accounts, we use.
And we make a decision to usepre-tax contributions versus
(16:21):
Roth contributions.
We're making an assumption, abet about future tax laws 20,
30, 40, 50 years from now.
Or if you're buying rental realestate and you are factoring in
that depreciation expense andthe ability to offset your
rental income using thatdepreciation expense, or if you
are relying on 1031 exchanges,well, you're relying on tax law
(16:45):
staying a certain way as long asyou own these properties.
Or for estate planning, forexample, estate planning is
making decisions about anuncertain future, taking into
account tax laws and estateplanning laws, and all of those
things can change at any givenmoment as long as you're alive
and so any long-term financialplanning decision.
(17:07):
Includes uncertainty aroundgovernment policy and
congressional legislativeaction.
Now, the big difference is thatstudent loans are a hotly
debated, highly chargedpolitical topic.
You don't see a lot of people.
Hotly debating whether peopleshould invest in, in an IRA, for
(17:28):
example.
but student loans, you're gonnasee a lot of different opinions,
a lot of very heated opinionsaround how the student loan
system should be handled,whether forgiveness should be,
should be available at differentthings like that.
So knowing that, knowing thatthis decision is, is a decision
of trade-offs, just like anyother financial decision, it's a
decision of trade-offs.
(17:48):
Do you go with the math or wouldyou prefer, would you rather.
Limit your exposure to politicalvolatility and just pay off the
debt.
That is a personal preferencedecision.
That's a personal decision andregardless of all this, I still
think at certain federal loan toincome ratios, it's going to
(18:09):
make sense for families to planfor forgiveness, especially if
we can take advantage of allthese exciting planning
opportunities.
And I think it makes sense toplan with the information that
we have at hand and leave openthe opportunity to adjust down
the road if needed.
And so what you need to decideas first you project out what is
the most likely mathematicallyoptimal route for you, and what
(18:32):
is your own preference?
What is your own tolerance forthe ups and downs that can come
with student loan policy, Andyou have to decide which trade
off makes the most sense foryou.
But don't make that decision onfear alone.
Please start with the math, makean informed, educated decision,
and then go from there.
(18:53):
So wanted, to talk a little bitabout that because we, we've
seen a lot of opinions,especially with everything going
on lately.
we've seen a lot of opinionsabout this, and, and we've seen
a lot of volatility around thisfrom going back from COVID where
things were swayed very heavilyin the favor of borrowers to
now, starting to sway the otherdirection.
(19:14):
And it's important to knowwhich, which of these aspects of
student loans are really.
Are really in the hands of apresidential administration and
the Department of of Educationversus what is encoded in law.
For example, as we've beentalking about IBR, the income
based repayment plan is encodedin law.
So we have to have a goodunderstanding of that as well.
(19:35):
So that we're not driven byfear.
We, we, we can have a goodunderstanding of how to make
decisions.
And so, hopefully that washelpful for you.
I'm sure as soon as this isposted, there will be even more
updates, but, if you want tokeep an eye on what's going on
with student loans or any otherfinancial planning topic related
to personal finances related totax planning, related to,
(19:57):
practice finances, what you'dwant to do is sign up for my
weekly Eyes On The MoneyNewsletter.
I will post a link to that inthe show notes.
You can go and sign up there andI write about all of this stuff
and more.
try to keep ODs out there as upto date as possible.
So let me know.
Of course, if you have anyquestions,
podcast@optometrywealth.Com andwe'll catch you on the next
(20:17):
episode.
In the meantime, take care.
Welcome back to the OptometryMoney Podcast we're helping ODs
all over the country make betterand better decisions around
their money, their careers, andtheir practices.
I am your host, Evon Mendrin,Certified Financial Planner
practitioner, and owner ofOptometry Wealth Advisors, an
independent financial planningfirm.
Just for optometristsnationwide, and thank you.
(00:26):
Thank you so much for listeningtoday.
Appreciate your time and yourattention.
And there is more news relatedto income-driven repayment plans
and student loans.
I had just recently put out apodcast episode about student
loan updates, and almost everytime I put out some content
about student loans, somethingelse changes almost immediately.
And so I.
(00:47):
There have been some prettyimportant updates recently.
Wanted to, touch on that on thisepisode here.
And I also wanted to talk abouttrade-offs, the trade-offs that
we are accepting when we areusing income-driven repayment
plans towards forgiveness.
And so first things first, let'sdive into some of the most
recent news and updates here.
(01:08):
Some of these as recent asyesterday, March 26th.
and so yesterday, yesterday, theDepartment of Education updated
its SAVE court case guidancewebpage, and I'll throw a link
to that in the show notes withsome important updates here.
the first one we notice is that,as expected the entire SAVE plan
rule.
(01:28):
The entire rule that allows forthe SAVE plan and put on pause.
So not just particular parts ofthe SAVE plan, but the entire
rule that created it or allowedfor it, which is important.
'cause this was a huge, a hugerule that not only allowed for
the change from REPAYE to SAVEand all of the new payment
calculations on SAVE but it alsochanged how consolidations were
(01:50):
handled.
So in the past, consolidationsessentially erased all past
payment history towards IDR, andit replaced your loans with new
consolidation loans and what thenew rule what they were
improving here is thatconsolidations would have led to
a weighted average of thepayment history for the loans
(02:12):
that you're consolidating,rather than just erasing all of
that.
all of that past paymenthistory.
So with that put on pause, thisis a big question mark in terms
of what happens now withconsolidations today moving
forward.
So, be cautious if you'reconsolidating.
You know, unless you are arecent grad with very little
payment history.
Just be cautious with thoseconsolidations.
(02:33):
And the other thing it handleswas how family size is
calculated for your IDR paymentcalculation and which
potentially may end up in thefavor of married borrowers with
kids.
if it's going back to the oldway that family size was
calculated and.
And there is also something weknew already.
There is also no forgivenessapproved right now while you are
(02:56):
on any income-driven repaymentplan except IBR.
your payment counts.
So if you are making payments onSAVE or I guess you can't
anymore, but if you had madepayments on SAVE or if you're
making payments on Pay As YouEarn, the payments are still
counting.
But if you reach the 25 or 20year mark.
And you try to get thatforgiveness, you wouldn't be
(03:18):
able to get it under Pay As YouEarn or under SAVE you'd have to
switch onto IBR.
And so those are some of thethings that are impacted by the
entire final rule being put onpause.
the other thing we saw is thatthe site now explicitly in the
guidance states that the buybackprogram is still available for
PSLF.
So for any ODs that are workingat the VA or.
(03:41):
currently Kaiser or even atribal employer, a government
employer, that's something thatis still available for you.
the other thing we saw and thatwe heard about recently was that
IDR recertification dates havebeen pushed back to February,
2020 sixth at the earliest formost, for most borrowers.
(04:02):
And this was something that wasalready happening for anyone on
the SAVE plan.
For anyone on the safeforbearance, your
recertification dates werepunted out into the next year,
and, with all the stuff going onwith the IDR applications and
recertification requests beingtaken off of the website.
From the Department ofEducation, a lot of people that
(04:24):
were, were getting close totheir recertification dates.
Were trying to figure out what,what do we do?
And us as Advisors to thosepeople, were also trying to
figure out what's the best wayto, to try to handle that
recertification deadline.
So basically they punted, right?
So they, They for, for mostborrowers, they've punted,
they've pushed yourrecertification date on all of
(04:47):
the income-driven repaymentplans into 2026.
Specifically, it depends onexactly how that's handled.
Depends on your recertificationdate.
So if you had to recertify yourincome and family size on or
before February 20th.
And you recertified successfullybefore February 20th, and the
(05:11):
servicer processed it andcalculated a new payment.
Unfortunately, that's yourpayment.
There's, there's nothing we needto do, or there's nothing you
can do.
We can't go back to what yourpayment was.
If it was successfully handledand done and processed before
two 20, then that's yourpayment.
It doesn't impact you.
if you tried to recertify beforeFebruary 20th, and it was not
(05:34):
processed by your servicer, thenyour recertification date is
pushed back into 2026, Februaryat the earliest, February 20th.
At the earliest if you weresupposed to recertify and
didn't.
Your repayment amount is nowbased on the standard plan.
You need to submit arecertification request as soon
(05:54):
as possible to get your paymentslowered and, and based on your
income and family size.
so that's something you'll needto do if you just didn't
recertify at all and weresupposed to, so that's if you
were supposed to re-certify onor before 2/20.
If you weren't required tore-certify until after February
20th, then your recertificationdate is pushed back one year.
(06:18):
So gives us a little moreflexibility there with
everything that's going on.
And I, I think that makes sense.
I think everyone, including theDepartment of Education and, and
servicers, need some time aswell as borrowers to, to figure
out how this is all gonna workand what the courts are gonna
do.
So, gives us more breathing roomhere.
But for those of you on SAVE Iwant you to keep a close eye on
(06:39):
this because.
I, regardless of when yourofficial recertification date
is, if it's likely or if it'seven possible that the SAVE plan
is struck down by these courtcases, it's possible that you'd
need to apply for one of theother income-driven repayment
(06:59):
plans.
It's possible you'd be forced toswitch onto another one, which.
As of right now, how that worksis that if you try to apply or
switch to a new income-drivenrepayment plan, that's also
going to require you to reshowyour income and family size
again, you're going to have torecertify again.
So for borrowers that arecurrently going through the SAVE
(07:20):
forbearance, and really for anyOD on any income-driven
repayment plan.
With about a month away fromApril 15th, tax filing.
The deadline, I'd be carefuland, and really thoughtful about
how you're filing your taxes.
First of all, you'd wanna beaware of whether you should or
shouldn't be filing taxesseparately if you are married.
(07:41):
so that's number one.
Number two, it may make sense tofile an extension or perhaps
specifically a, a married filingseparate extension.
Because if in the event thecourt's rule and SAVE goes away
and you're forced to switch ontoa new plan.
It gives you more time to eitherreuse 2023's tax return if it's
(08:04):
much more favorable than 2024'swould've been, or just gives you
more time to decide how to fileyour tax returns if you're
married.
So talk with your own financialPlanner, your own tax advisor
to, to go through your studentloan planning and, and see what
makes the most sense for you.
But I think in, in some casesthat extension.
(08:24):
Which remember is an ex is anextension to file your tax
return.
It's not an extension to pay atax that might be due, that
still needs to be paid by April,April 15th.
But in certain cases where I seethe borrowers on SAVE I might
recommend an extension just togive us more breathing room the
next exciting bit of news isthat IDR applications are back
(08:47):
online, which should havehappened a long time ago, at
least for IBR.
IBR was not and never was atrisk.
Here.
It's allowed by statute, it's inthe law, but, as a result of the
recent.
Ruling from a court of appeals.
The Department of Education justsort of put everything on pause.
It didn't allow us to switch iDRplans didn't allow us to
(09:08):
recertify income.
So it's, it's good to seeprogress here.
This looks like it was a resultof the lawsuit brought by the
American Federation of Teachers,however.
Even though the IDR applicationsare back online, it doesn't look
like any servicers are actuallyprocessing them yet.
In fact, on their webpage, theDepartment of Education
(09:30):
specifically says,"although IDRapplications are now available,
loan services are still updatingtheir systems in accordance with
the court's actions.
Servicers will begin processingapplications in the near
future." So.
we don't know when that's gonnahappen.
you probably are also stillseeing your servicer update your
recertification date or, or youranniversary date.
(09:51):
So that's probably somethingyou'll start to see happening
behind the scenes as well.
But although they're available,they are still not yet being
processed unfortunately.
if you look at the application,you're gonna see that ICR is
there, IBR is there and Pay AsYou Earn is there.
SAVE is no longer an option andone thing just to keep in mind
is that there are two versionsof IBR.
(10:12):
If you were a new borrower withno federal loan balances as of
seven of 2014.
You are eligible for the newincome based repayment, the new
IBR, which is a near twin of PayAs You Earn if you're eligible.
That's probably where it's goingto make sense to head.
That's one of the topconsiderations.
(10:34):
If you had loans before then ifyou had federal student loans
before, then you would beeligible for the old version of
IBR, which has a less favorablepayment calculation and a 25
year forgiveness timeline.
So, as long as Pay As You Earn'savailable, you might prefer Pay
As You Earn instead.
And one last thing to keep inmind is that you would need a
(10:55):
partial financial hardship tohop onto the IBR and Pay As You
Earn plans, which means thatyour payment calculation when
calculated under IBR or PAYEwould be less than the standard
10-year payment plan based onthe loan balance as you're
trying to get into these plans.
So if you saw a dramatic rise inyour income over the last year
(11:16):
or so, or for those of you whohaven't recertify your income
since COVID and over that timeperiod, saw a pretty big rise of
your income, that's somethingyou want to keep in mind as
well.
So the drama continues, but it'snice to see the IDR applications
back online.
It's nice to see a little bitmore breathing room in terms of
the recertification dates.
I saw that it caused a prettygood amount of borrowers, some
(11:38):
stress, so I, I'm glad to seethat.
And at the end of the day, we'restill waiting to see what the
court rules.
And then we can go from there.
So we're still waiting on thatcourt case as it relates to SAVE
once we have more information,we can start to make more,
definitive decisions.
And so with those updateswrapped up, I wanna talk a
little bit about trade-offs andspecifically the trade-offs that
(12:02):
we accept when usingincome-driven payment plans
towards forgiveness.
As I often say, there are threegeneral approaches to tackling
student loans.
Number one, you're either payingit all down to zero.
Treating it like any other debt.
Number two, you're usingincome-driven repayment plans
towards either PSLF or 20 or 25year taxable forgiveness.
(12:25):
Or number three, you're using amix of the two, and you're using
IDR plans as sort of a temporarystepping stone before switching
routes down the road and payingit down more aggressively and
the right way forward is a mixof math and personal
preferences.
The math would tell us when weproject out the math, the math
would tell us what is the mostlikely, least costly way to
(12:49):
handle the loans.
Depending on your loan size,your interest rates, and your
income and your family size, andhow those change over the next
20 or 25 years, the higher theloan balance relative to your
income, the more the math shiftstowards forgiveness, especially
when the loan to income ratio issomewhere around two to one.
(13:10):
And this also depends on theopportunities you're able to
take advantage of when it comesto tax filing, when it comes to
split income, for example, in acommunity property state and
your filing taxes married filingseparately.
Another example is being able totake advantage of pre-tax
contributions to retirementaccounts like 401k plans, things
like that to bring down yourincome for student loan
(13:32):
purposes.
And when comparing the math, youare comparing the total
principle of the debt, plus theinterest that you're paying for
full payback versus the totalamounts of payments you make
plus the tax at forgiveness forthe IDR route.
That's sort of the math you'recomparing and bringing it,
(13:53):
importantly bringing it intotoday's dollars.
Whenever you're comparingdifferent repayment plans or
different, different sets ofcash flows over very different
time horizons, like 10 years, 20years, 25 years.
You wanna bring those paymentsinto today's dollars.
You might hear that called netpresent value, but you want to
(14:13):
see it on an apples to applesbasis.
And when it makes sense to gofor the IDR route and you choose
to go that direction, you'remaking a choice of trade-offs,
do you take the route that islikely to be the best option
mathematically based on theassumptions you're using?
Or do you want to limit thevolatility?
(14:35):
Of student loan policy decisionsand government decisions, and
just pay off the debt regardlessof what the math says.
What's your tolerance for theups and downs with government
policy?
because when you're going, whenyou're using income-driven
repayment plans towardforgiveness.
The math going that directionmay be more favorable, but you
(14:57):
are adding more work to yourlife.
Or if you're working full-timewith an an advisor like me, we
are doing more work together andyour advisor's handling a lot of
the thinking there, but you'readding more work to your life.
You need to keep an eye on allthese different changes in
policy.
You need to recertify yourincome and family size every
(15:17):
year.
You need to make sure you'rehandling the tax filing
decisions appropriately.
taking advantage of pre-taxdeductions and pre-tax
contributions, and you've gottakeep an eye on this over 20 or
25 years for long-term taxableforgiveness.
And over those 20 years, forexample, you may see five
(15:38):
different presidentialadministrations with vastly
different opinions of how thisshould work and, and all forms
and variations of congressesover the years.
And so.
Yes, when going towardsforgiveness, it may be the most
mathematically optimal routebased on the assumptions you're
using, but you're also adding alot of that volatility and
(16:00):
stress and work that you have todecide how you feel about that,
or you have to decide whether toget the help you need in order
to take, to take advantage ofthese, which this is no
different than any otherlong-term financial planning
decision.
For example, when we useretirement accounts, we use.
And we make a decision to usepre-tax contributions versus
(16:21):
Roth contributions.
We're making an assumption, abet about future tax laws 20,
30, 40, 50 years from now.
Or if you're buying rental realestate and you are factoring in
that depreciation expense andthe ability to offset your
rental income using thatdepreciation expense, or if you
are relying on 1031 exchanges,well, you're relying on tax law
(16:45):
staying a certain way as long asyou own these properties.
Or for estate planning, forexample, estate planning is
making decisions about anuncertain future, taking into
account tax laws and estateplanning laws, and all of those
things can change at any givenmoment as long as you're alive
and so any long-term financialplanning decision.
(17:07):
Includes uncertainty aroundgovernment policy and
congressional legislativeaction.
Now, the big difference is thatstudent loans are a hotly
debated, highly chargedpolitical topic.
You don't see a lot of people.
Hotly debating whether peopleshould invest in, in an IRA, for
(17:28):
example.
but student loans, you're gonnasee a lot of different opinions,
a lot of very heated opinionsaround how the student loan
system should be handled,whether forgiveness should be,
should be available at differentthings like that.
So knowing that, knowing thatthis decision is, is a decision
of trade-offs, just like anyother financial decision, it's a
decision of trade-offs.
(17:48):
Do you go with the math or wouldyou prefer, would you rather.
Limit your exposure to politicalvolatility and just pay off the
debt.
That is a personal preferencedecision.
That's a personal decision andregardless of all this, I still
think at certain federal loan toincome ratios, it's going to
(18:09):
make sense for families to planfor forgiveness, especially if
we can take advantage of allthese exciting planning
opportunities.
And I think it makes sense toplan with the information that
we have at hand and leave openthe opportunity to adjust down
the road if needed.
And so what you need to decideas first you project out what is
the most likely mathematicallyoptimal route for you, and what
(18:32):
is your own preference?
What is your own tolerance forthe ups and downs that can come
with student loan policy, Andyou have to decide which trade
off makes the most sense foryou.
But don't make that decision onfear alone.
Please start with the math, makean informed, educated decision,
and then go from there.
(18:53):
So wanted, to talk a little bitabout that because we, we've
seen a lot of opinions,especially with everything going
on lately.
we've seen a lot of opinionsabout this, and, and we've seen
a lot of volatility around thisfrom going back from COVID where
things were swayed very heavilyin the favor of borrowers to
now, starting to sway the otherdirection.
(19:14):
And it's important to knowwhich, which of these aspects of
student loans are really.
Are really in the hands of apresidential administration and
the Department of of Educationversus what is encoded in law.
For example, as we've beentalking about IBR, the income
based repayment plan is encodedin law.
So we have to have a goodunderstanding of that as well.
(19:35):
So that we're not driven byfear.
We, we, we can have a goodunderstanding of how to make
decisions.
And so, hopefully that washelpful for you.
I'm sure as soon as this isposted, there will be even more
updates, but, if you want tokeep an eye on what's going on
with student loans or any otherfinancial planning topic related
to personal finances related totax planning, related to,
(19:57):
practice finances, what you'dwant to do is sign up for my
weekly Eyes On The MoneyNewsletter.
I will post a link to that inthe show notes.
You can go and sign up there andI write about all of this stuff
and more.
try to keep ODs out there as upto date as possible.
So let me know.
Of course, if you have anyquestions,
podcast@optometrywealth.Com andwe'll catch you on the next
(20:17):
episode.
In the meantime, take care.
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