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- [00:00]
A
This is an iHeart podcast. Guaranteed Human. Run a business and not thinking about podcasting, Think again. More Americans listen to podcasts than ad supported streaming music from Spotify and Pandora. And as the number one podcaster, iHeart's twice as large as the next two combined. Learn how podcasting can help your business. Call 844-844-IHeart.
- [00:20]
B
Welcome to how to Money. I'm Joel, and today we're talking student loan chaos. We're explaining it with Stanley Tate. Okay, so the whiplash that student loan borrowers have experienced over the past few years has been staggering. Payments paused, forgiveness promised, forgiveness blocked, then repayment systems completely rewritten. And now for some, is wage garnishment back on the table? Well, maybe we'll get to that today with Stanley. It's just no wonder, though, that navigating student loans has become this specialized skill. And few people know the landscape better than attorney Stanley Tate. He has helped hundreds of borrowers get out of default, qualify for forgiveness programs, secure affordable payments, and negotiate settlements. He's even helped people discharge student loans in bankruptcy. And he's helping people through his blog, his newsletter, his videos, just offering really helpful guidance to a bunch of folks out there. So with all the recent changes and confusion, knew we needed his insight on how to money. So, Stanley Tate, thank you for joining me on the show today.
- [01:39]
C
Thanks for having me.
- [01:40]
B
All right, first question out of the gate. What do you like to splurge on? What's your craft beer equivalent? I know you're doing smart stuff with your money, Stanley, for your future, but you got to have some splurge in the here and now, right?
- [01:49]
C
The splurge more recently has been on cigars. I joined a cigar lounge a few months ago, and I'm really enjoying kind of like that pastime and being able to bond and fellowship with other people and share bourbons while smoking a stick. It's very relaxing.
- [02:07]
B
There you go. That sounds like a nice way to wind down after a tough day of helping helping people out with their student loan questions.
- [02:14]
C
Oh, man. Absolutely. It's just. Just being able to zone out and not have to think deeply about other people and what's happening in the world and what's going on. That's perfect.
- [02:26]
B
Yeah. Mechanism for me sometimes we got to check out. That sounds like a lovely way to spend your time and money. Let's talk student loans, though. Can. Can you lay the framework of what's happening right now for the average student loan borrower? Like, I. I know this is kind of a big question, but where do things stand right now on the student in the student loan space from a macro perspective?
- [02:46]
C
All right, so you know that that's a really good question and I'm never quite sure how to enter it because what's happening really depends or what you perceive is happening depends on kind of your station in life. So if you're a new borrower, like someone just graduating, entering the payment market, like nothing really feels like it's happening because none of this stuff is applied to you, or at least it doesn't feel that way. And if you're someone who's had your loans for two plus decades and you watch rounds and rounds of people get loan forgiveness and yet somehow you were excluded, it feels like everything has happened and yet nothing has happened to you. And the way I look at it today is that we've had a lot of change since COVID March 2020 through today. And it's been very tumultuous where as you kind of kick this off, that things have been one way. Forgiveness, promise, forgiveness taken away, repayment plan, promise, repayment plan taken away. And it just feels very dynamic environment. And I think we're in a very static environment right now where the Education Department under the Trump administration has made their major policy change by effectively killing the save plan and leaving us with income based repayment option. And this new plan coming down the pipeline is like you're too proud. Primary options moving forward and forgiveness programs, they still exist. Public service loan forgiveness is still there. 20 to 25 year forgiveness is still there. And so nothing's really changed along those lines. Now there's some big changes happening with borrowing for future people, future generations. But that doesn't really have anything to do with your repayment and forgiveness options for federal student loans. Those have all stayed the same. And so if I was looking at it today, I would just say there's been a lot of dynamic things, but actually much is the same for you moving forward, broadly speaking.
- [04:37]
B
And the one of the things I feel like in the past couple weeks that we've talked about on the show that seems like it's a big deal was the threat of wage garnishment notices being sent out. Right. And so this month people were supposed to receive letters in the mail saying, hey, guess what? You, you've been in default, like you haven't paid your loan 270 plus days. And so we're going to start taking money from your paycheck, maybe even from, probably from your tax refund as well. Why do you think the Education Department pulled Back on that. And how nervous should borrowers who haven't paid their balance in paid on their loan in a long time, how nervous should they be?
- [05:13]
C
Well, a few questions inside of there, but one thing I want to make clear kind of from the beginning is that borrowers in default have had three plus years of opportunity to get out of default without consequence. And so if you're someone who's still worrying about this today, I think we have a larger problem about, okay, what does that mean for you to like, what will it take for you to get out of default? Finally, that's one part. Now there's a consequence part of it decide. But I think there's a core question of like, what does that even mean? Which I think goes beyond the scope of this call. But it's just something that troubles me because we've had these different programs, Fresh Start program, we had the on ramp opportunity, still gave borrowers opportunity to get out of default. Then we had another year after that for borrowers to get out of default. And now finally when wage garnishment notices go out, people start to freak out like, oh my God, my wage is going to be garnished. And yet the Department of Education pulled back. And your first question there is, why did they do that? And I think this goes back to affordability. This administration is struggling with affordability kind of concerns. And so now you're going to take out the one kind of resource that people rely on to either catch themselves up on bills or to get ahead a little bit or stock something away for a vacation or something else like that. And so I think that could be really poor, a really bad look, especially ahead of the midterms. The Department of Education collects something like 60% of its revenue for defaulted loans through wage, through tax refund offset. So I just don't think that would be a good look. But I don't think it has anything more with timing because borrowers have been given enough time notice ahead of time.
- [06:50]
B
So it's caught up. It's a political calculation.
- [06:53]
C
I don't know what other explanation there would be. Right. I don't have any insight into this. But you would say stopping it would be, oh, we need opportunity to get our systems up and running. But the treasury offset program was always up and running unless Doge or some other actor went in there and cut it and kind of dismantled and they found out later that's also a possibility. But I think the more likely thing is this is not a good look for us from an affordability standpoint.
- [07:20]
B
So I'm going to read you a line that I found interesting in the press release. When they said they were going to pause wage garnishment, they said that it will function more efficiently and fairly after the Trump administration implements significant improvements to our broken student loan system. What do you think they mean by that?
- [07:37]
C
No clue. What does that even mean? Because like the collections for offset are done by the Department of Treasury. It's just flagged through there. So it literally is just clicking a button and taking a flag on or off to keep that money or to do this. So fixing up broken student loan system, you're saying that did we miss like identify borrowers for default? I haven't seen that either. So I'm not sure what that means other than another dig at past administrations. And to be fair to this administration, the system is broken. It has been broken for years. We built a very complex product that has needed tweaks and kind of revision that is cracked under its own weight.
- [08:20]
B
I mean, I think that's so true. And then every time we try to get it back on track, like we, we do it in, in half measures.
- [08:29]
C
I don't even know what the right full measure is. Right, like this. And sorry to go aside here, but I always tell people, like, the reality is educated population is good for the entire economy of the United States and global economy. And so it is equivalent to a public utility. And yet we don't treat it like a public utility where we subsidize the cost directly. Instead, we pass it on to the backs of borrowers and taxpayers and then we create these different programs that shield the Department of Education's books from these offsets for kind of like these subsidies for years until the bill becomes due down the line and we'll deal with it there. Yeah. And is it possible that we may actually just need to consider that higher education, at least at certain institutions, should be free and we may have to pay a higher tax rate to get that done. But that aside.
- [09:20]
B
No, no, I appreciate that. What, what would you say to somebody who is in default? They've seen those headlines and maybe they haven't even recognized or realized that, oh wait, they're not going to start garnishing my wages. Should they, how should they start preparing?
- [09:36]
C
I think the very first thing I would do is actually confront ahead on. But I am a confront, a head on person by nature. But I can understand kind of emotionally, psychologically, it could be a lot to think about this debt and like the impossibility of it all because oftentimes the People I meet, they defaulted because they felt like there weren't any other repayment options, but they defaulted so long ago. The rules have changed so much that to just stay stuck and believe that there are no options today, I think is the wrong approach. So I would say if I, if I were doing this, the very first thing I'll do is contact Default resolution group or studentaid.gov and look at your loans and then identify what will my payment options be if I were to get out of default using one of the programs that the Education Department offers. And then the next question is, can I afford that payment? And if the answer is yes, cool. I think that's a very strong vote in favor of getting out of default. If you say, no, I can't, then you need to run the math on what is it going to cost you if you were being garnished and offset to say, can I afford that? If I can't afford that, then even if I really can't afford to get out of default, that's probably the better mathematical option for me. Even if it sucks for several months while I kind of dig myself off this thing. And then kind of the last thing from there is like, if you run all the analysis and you can't get out of default, you can't afford the garnishment, then it's a tougher conversation about, well, how does bankruptcy work here to help me with this thing? Is that actually a workable solution?
- [11:02]
B
I want to talk about that. And maybe now's the best time to talk about that because it does. It does seem like for the longest time, discharging your student loans in bankruptcy was almost impossible. And the Biden administration did make some changes that might be one of the most, the longest lasting or, or biggest changes that could help people who really, really can't afford to pay their student loans. What's happening on the bankruptcy front and discharging loans via bankruptcy in 2026?
- [11:30]
C
Well, the law itself hasn't changed all that much. So the law basically says that you can file bankruptcy and get rid of all your other debts for the most part, except for student loans. And the only way to get rid of those is if you can show that repaying them are an undue hardship. And that's been the law going Back to like 2004, 1997 as well, but kind of evolved. The last time it really changed was 2005. The Biden administration implemented a law that was actually kind of brought up by Republicans through George Bush administration second that says, okay, we're not going to set aside the law here, but we're going to create a different policy. Ultimately, Department of Education, we own our loans. Maybe we could work out a policy about how we will analyze these and do a recommendation to the bankruptcy court about how this case should be handled. So we're not changing the law, we're just changing how we view this particular situation. And so they created this process called the attestation process, which is basically just a sworn statement that you work out after you file the bankruptcy to discharge your student loans. You fill out this attestation form that discloses your assets, your living expenses, the history of your loans, education, etc. And you give that over to the Department of Justice, who represents the Department of Education. That DOJ attorney reviews your file and makes a recommendation to the Department of Education that, yay, we should get rid of all of it. We should get rid of some of it, or we shouldn't get rid of any of it. And then based on that recommendation, your case moves forward. Now, there's a big kind of a report in the New York Times recently where they said, like, 87% of borrowers who went through this process were able to get some relief, either partial discharge or full discharge. And so, yeah, it has become theoretically easier, at least with federal student loans owned by the Department of Education, to file bankruptcy on them. Now, does that mean everyone needs to rush out and go file bankruptcy? Absolutely not. And does that mean that if you file bankruptcy, you have an 87% chance of success? No, it's just saying that based off of this category of borrowers who filed, they had a really high success rate. Now, there's some things that make people, you know, more ideal candidate for those than others, but that's really what happened. There's not a change in law, just a change in policy. And it has worked out really well for those borrowers who fit kind of some qualifications.
- [13:49]
B
And you say not for everyone. Like, if someone out there listening has a solid job and can afford their student loan payment reasonably well, they're probably not going to be a candidate for getting their student loans discharged in bankruptcy.
- [14:01]
C
Well, yeah, I don't know. That's hard because there are some of you, your listeners, who are quote, unquote, high earners, but they're single and they live in a high cost of living city. And it feels very impossible to make their rental payment or their mortgage payment and pay their student loans and pay their other bills. So I wouldn't define it like, in terms of, okay, categorically, you don't make it because you have a quote, unquote, good job. The way I think about is a little bit more nuanced. But let me give you an extreme example. There's this case out of Ohio where this young man graduates college and then files bankruptcy a year later. And this just happened like a few months ago. He files bankruptcy and tries to discharge his two loans. And the Department of Education Department just like, get out of here. You haven't made a good faith effort to repay your loans. So no matter what his hardship was, it was only short lasting. He just graduated. That's not a good candidate. Someone who is a good candidate may be at the other extreme. You are in your late 60s and you've had your loans for 20 years and your income is fixed, and there's no possible way you could ever pay these loans off. That's a good example. And then there's a middle ground. There's someone who may be earning $90,000 a year, but they're divorced, they're paying child support to their ex, and their monthly bill is still $1,500 a month on their student loans. And they're like, I cannot do this while upholding all my other obligations. That may be someone who is worth having a conversation about. Even though they have a good job and they're not really broke, they just can't keep up. And if something does happen, life happens, everything falls apart. That's someone to have a good conversation with.
- [15:40]
B
Is that a DIY process? Let's say someone identifies themselves in a position like you're describing, and they're like, yeah, no, like it's. It's become almost impossible for me to pay, and I don't see a way that I'll ever be able to. Do they need to hire a professional, a lawyer who specializes in this. Or is this something that they can, like, they can take on the system themselves?
- [16:02]
C
All right, so let me ask this by way of example. I don't think anyone should ever perform surgery on this stuff. Makes no sense. But could you theoretically represent yourself in this thing? Yeah. And I remember I got quotes to build a fence in my backyard, a nice modern vertical fence. And the quotes I thought were outrageous. They wanted like $12,000 to do it. I was like, you know what? This is like $3,000 worth of kind of materials and maybe two days of labor, and I'll handle it myself. And I'm doing this in St. Louis. It's 105 degrees outside, and I'm mixing 25 bags of 50 pound bags of concrete by hand because my dumb self didn't realize it could rent a mixer. And I was like this was a terrible idea. But along the way I get the fence in and the fence looks great and I'm so proud of myself. Two weeks later, wind came by and knocked that thing the hell over because I didn't dig the post long enough. So did I need a professional standpoint to get a fence up? No. Is it beneficial to kind of plan for things that you don't consider and things like that? Absolutely.
- [17:05]
B
Yeah. Okay. I appreciate that. I want to talk about income driven Repayment plans. Take a quick break and we'll talk about the changing system there in just a sec.
- [17:18]
D
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B
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- [18:01]
D
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- [18:13]
B
All right, we're back. Still talking with Stanley Tate, talking about student loans and kind of what's happening right now in the space. And one of the big changes, Stanley, is to income driven repayment plans. They keep changing. The save plan gets rolled out and people are like woohoo thrilled. You know for a lot of people it's going to mean their, their payment is non existent or close to it. And now that's, that's not, that's not gonna be around much longer. Right. It's in the process of being dismantled. What how should borrowers decide which plan is best for them now? Especially with rap coming down the pike.
- [18:47]
C
Yeah, so the wrap plan is not yet available, but that's the new repayment assistance plan that was created by the Trump administration that also ties payments based off of your income and family size that'll likely be available sometime this summer. But if you're someone who's in save and you've been stuck in forbearance and you're trying to figure out where to go next. I think everything starts with the numbers. You start by just running the numbers saying what will my payment be under the remaining plans? For the vast majority of people it's going to be income based repayment or pay as you earn are going to be their two primary options there at least for income based options, if you look at those numbers and you're like cool, I can swing this, then you likely want to enroll in one of those plans. I say likely because the only kind of factor that changes is, is if save was cheap enough for you where you could realize the benefit of loan forgiveness over time, then it makes sense for you to stay in that plan that working towards loan forgiveness. But it is possible that you flip over to pay as you earn or ibr that you may not realize the benefit of forgiveness or may not have as great a value to you and you may need to switch over to a repayment plan not based on your income but actually based on paying it off. And so that's where it gets a little tricky. I think the direct answer for most people is that you go look at income based repayment or pay as you earn if you're eligible and just say can I afford the payments? And if you can today, then you probably make that switch. If you look at it and say well I'm probably not going to get a lot of forgiveness over here. I'd rather just pay it off. Then you need to look at other plans like extended, graduated or standard that amortize a debt that pay the loan off over time rather than relying on forgiveness, forgiveness that you may no longer believe in because of what's happened with student loans.
- [20:33]
B
If you're in forbearance on the safe plan and you know at some point you're going to need to move to, you're going to, you're going to be forced essentially to get onto another plan. Does it make sense to stay put for the time being or does it make sense to start assessing your options and potentially moving beforehand?
- [20:48]
C
For the vast majority of people it just comes down to affordability. Like once they lock in on what are my plan options, the next question is should I move today or not? And that just is an affordability question. And so if you're someone who can afford it easily today, then I'm not sure what you're waiting around for. But if you're someone who needs to kind of cut things, pay other things off, etc. Or it's going to be really, really tight for you. When a move happens and you'd rather delay that pain, then it makes sense to delay. So there's no wrong or right answer. You should do this or shouldn't do that. It's really kind of like just starting with, can I afford this new payment that's headed my way? Yes. Can I do it easily. Cool. I think you should move today. But if you're someone's like, this really sucks. It's gonna be hard for me. I need to do other things. Then you hold off as long as you can.
- [21:35]
B
Okay. What about. Tell me more about the RAP plan that's coming around in July. Is that right?
- [21:40]
C
Yeah. So. Well, we, we think July. We're not sure. Legally it's supposed to be by July, but who knows. But this RAP plan is like ibr, like Save. It offers payments based off of your income and your family size. It also promises loan forgiveness after X number of years of paying on it. Now, like Save, it also offers an interest waiver. So any unpaid interest is waived on a monthly basis. But unlike any other program that's ever existed, it does one other thing. It makes a payment of up to $50 towards your principal balance. So not only is your balance not growing, but it could also decrease over time just by application of the program. Now that's great, but there's a trade off. The trade off is unlike any other program. It is much longer in terms of loan forgiveness. So where Save offer loan forgiveness as early as 10 years, Pay as yous Earn offered loan forgiveness after 20 years and IBR after 20 to 25 years. Rapp offers it at 30 years. So now you have to wait five extra years for this thing. And that five extra years could be really costly to you. It could also not just financially, but also emotionally and kind of mentally. Just the load of carrying it. So that, that is a trade off. But it does have a lot of ups to it, upsides to it.
- [23:05]
B
It's kind of insane to think about people having their student loans as long as they have a mortgage.
- [23:10]
C
But why, why is that insane though? I want to make sure I understand because like globally this isn't like out of control. Like in the uk. That's what they do. You pay on it for up to 30 years and then it retires at a certain point. Same thing with Australia. So we're not out of step, like. And I can criticize this administration on a lot of things, but this plan isn't out of step with that. But I do agree that, wow, this education that got, I'm carrying it for as long as a mortgage. But also, you don't have to choose these programs. Right. You could choose to do something else.
- [23:44]
B
Well, and I think that's, that's one of the things we talk about regularly on the show is what degree are you getting? How much are you paying to get the degree? What is the value in return for going to school? And clearly the lot of American people have lost faith in the value of a college education. They don't see it as valuable as it used to be. And I think a large part of that isn't because the education has degraded so much. That might be a little bit of it. I think it's because the costs have risen so much. And so that degree that I could have gotten for 30 grand, well, that seems reasonable. If that Same degree costs 120, then it feels far less enticing. And you have to really run the numbers as a high school student and parent of a high school student before you decide to latch yourself to student loans of that magnitude.
- [24:30]
C
Yeah, I really wish people actually did that more because I, I talk with a lot of borrowers and they are aware of the financial cost of things, but the emotions went out, especially if they have like an older child that they already paid and made a mistake with. They feel like now somehow they're depriving the second and third kid of a similar opportunity. So they're making an emotional decision no matter what the math says. And then there are also, there's other times when the thing they're solving for is not what makes the most financial sense. It's the thing that makes me feel good about myself. Well, my kid got into this school, so I'm going to find every way I can to pay for it, even though it's going to wreck me financially or make things really difficult for me. And so that's always the hard part is I find that people aren't really making dollars and cents decisions. They're really making emotional decisions that are guiding the way there 100%.
- [25:28]
B
I think you're right. I think there's a lot of that. And yet you pay the price for it. If that's, if that's, if you let the motions be the job, you pay the price.
- [25:36]
C
Taxpayers pay the price in August, kind of prices paid across the board.
- [25:40]
B
So when somebody, listeners are out there thinking about which repayment plan makes the most sense for them, is the lowest payment typically the best thing to prioritize or who, who out there should be focused on paying off their loans faster.
- [25:54]
C
Yeah. So the rough kind of back of the envelope math I do is if you're, you're someone who has a reasonable shot of paying off your loans. If your income to student loan debt ratio is like 1.25 to 1. So for example, if you owe $125,000 in student loans and you make $100,000 in student loans, I'm sorry, in income, you have a reasonable shot at paying back the debt. And if you're one to one, that's a greater shot. And if you're like, you know, 0.5 to 1, even greater shot. You're not really on a forgiveness path. But anytime you start creeping up past that 1.25 to 1, then forgiveness becomes more the lane you have to operate on. Just by way of math. Unless you have other people subsidizing your cost of living for an extended period of time because there's just no other way to make it work, the amortization schedule is going to eat you alive.
- [26:47]
B
So I read about the, the new student loan lifetime borrowing cap. How impactful is that going to be for people moving forward? Because before and in some ways like it was pretty bad because you could borrow as much as you wanted and that created a problem too it seems like. So is this going to be helpful in preventing people from borrowing more than they would otherwise be able to pay back?
- [27:10]
C
Well, I don't know if it's going to prevent them from borrowing more than they otherwise would be able to pay back, but it's going to mitigate how much taxpayers are kind of carrying this burden of individual borrowers. And like this was a time when there was uncapped limit on borrowing and now there's a cap. And so it just mitigates how much you can borrow, but it doesn't guarantee a return on investment for that person. And so I think there's going to be a very messy middle of borrowers who are caught in between because there was no real off ramp for people that are have already started a process of borrowing. There is some. But if you are someone who has for example parent plus loans today for a kid in year one, your repayment options go away. If you borrow a loan after June 30 this year, you could only there's no longer income based options. It's you have to pay it back. Well, how does that work out for someone who was already planning on income based and that was their game plan for it. There's no longer option. So does it will this Work long term? Likely, yes. Until some other problem presents itself and then it no longer works and we need to adjust. Will there be people that are absolutely crushed along the way 1000% because that's just the nature of changes. Will this be better for us overall? I hope. Because right now we have to admit it's kind of ridiculous that you will spend a hundred thousand dollars a year on an undergraduate education that makes no sense. Yeah, there's no degree that's going to pay that back over four years. There's no job where that works out.
- [28:48]
B
Do you think there's going to be more potential need for, for private student loans? Like for a minute there it seemed like private student loans were, nobody needed them. Like the, the rates were, were incredibly low at the federal level.
- [28:59]
C
Private student loan lobbyists got their money over the last couple years.
- [29:04]
B
What do parents need to know about privacy?
- [29:05]
C
Yeah, private student loans, they're going to have a resurgence just because by nature of borrowers decisions aren't going to change in terms of the schools that they want to go, but they're going to leverage themselves even further further by taking out these private student loans. And there's going to be a rush over years one and two bodies lenders to snatch up all the prime borrowers they can. And then in years three, four, five, we're going to move on to subprimes and the rates are going to be upwards of 15, 16, 17%. And then we're going to have a cliff in years 6, 7, 8 where like there's nothing left and people aren't able to afford it and they thought they were going to be able to pay it back and they weren't. And the economy is going to change on itself. But for right now, 2026, 2027, 2028. Yeah, I think private lending is going.
- [29:53]
B
To be awesome, wouldn't you say? Awesome? What do you mean?
- [29:57]
C
That means there's going to be a lot of transactions being made of people borrowing private student loans because that's just the nature of. But I don't think it's the, I don't know if it's necessarily the right decision for people because by awesome for the lender, maybe not awesome for the borrower, but they're getting what they want and what they contracted for, which is this money to pay for something school and then they're going to have this opportunity to kick the can down the road while their kid is in school and then when they exit the problem is going to hit and they're not going to Know what to do. And we saw this during COVID where people had private student loans and they graduated, job market was trashed, kid owes $200,000, parent is co signed on it, grandparents co signed on it, and there's no opportunity to ever pay this loans off. And now we have to have difficulty conversations about settlement and bankruptcy moving forward. But the lenders made out well.
- [30:49]
B
And that's because, right. There are no regulations in place on private student loans the way there are on federal or very few. Right. So there is no income based repayment with private student loans.
- [31:02]
C
Right. Nor why would there be. They don't have the same societal interest in having an educated population the same way as the government does. So why would they subsidize it? You're borrowing something that we recognize you can't afford to pay back or you're not a good bet to pay back. That's why your co signer is there to backstop it. But that's not the nature of how things people have these conversations. They say, I'm gonna take out these loans for you as the kid, but you're gonna pay it back. And the kid is like, yeah, I'm gonna pay it back. And then enter a job market where oh my God, this is trash. But it's been this way for years where like, I don't know about you, but it's took me six to eight years to get my kind of like adult britches on where I actually could feel like I could handle it. My income kind of stabilized out and I was able to start like really planning forward. But that didn't happen in year one. I know very few people that's the case for. So the parent ends up on the hook anyways, but they don't think about it that way. And so they just end up over committing to a thing and it becomes a problem down the road.
- [32:00]
B
So. So would you say private student loans are the worst kinds of borrowing that individuals can do? Should those be off the table? Does that mean if you have to resort to private student loans, you should be looking for a cheaper option for school? You should be finding other ways to help you pay for it. You should be getting a part time job. Is it that cut and dry?
- [32:21]
C
I don't think so. And this is where I make a terrible interview because I can't just say do this or that because what problem are you solving for? Right? So once you run out of federal student loans, you need to be able to pay for it. What are your options? You may have equity that you could borrow against your home, do you do that? Do you borrow from family or friends? Do you take against your retirement? Or do you take out a private student loan that has an interest rate that you may not be able to pay back, but it doesn't put your. It may not put your house in jeopardy the same way. It may not do this or that or retirement. So could you do that?
- [32:54]
B
Like.
- [32:54]
C
Yeah, I think they serve a purpose. As long as you understand what are the pros and cons of them, then if the problem you're trying to solve is I need to get my child into this school and I will do that by any means necessary, who am I to stand in your way and just say, don't do that? That's a terrible idea. Yeah, we could all agree it's a terrible idea. We're going to do it anyways because we're solving a different problem.
- [33:14]
B
Yeah. All right, Got more questions to get to with Stanley, including what about getting your advice, student loan advice from the Internet. How does he feel about that? And also what's going on with the Education Department that's supposed to be defunct? We'll talk about that and more right after this. I'm talking with Stanley Tate. We're talking about the student loan chaos and trying to make some sense of the changes. And Stanley, appreciate your level head. As, as student loan policy has shifted, what do you. What are the most common misunderstandings that borrowers are having right now? And maybe what are your clients most worried about?
- [33:58]
C
I think the common misunderstanding is just like how I have people who want an affordable payment, but they also are worried about the interest accruing and then they also want to work towards loan forgiveness, but then they don't trust the loan forgiveness is going to happen. And so they play this like messy middle playground of, okay, I'm going to take the income based repayment option, pay less, and then when I get a large chunk of cash, I'm going to just make a contribution towards one of the loans and try to pay it off. And that seems good on paper, but it actually doesn't. That doesn't how. Not really how life works out because you can't really ride two horses at one time the way people try to do their. If you need the lower payment, then you're not really amortizing the debt. The interest is going to grow. But the game you're playing is a forgiveness game at that point. The strategy you're on is working toward loan forgiveness after 20 to 25 years. So it really doesn't make any sense for you to try to pay extra on the interest, but you're psychologically worried about it and so you want to do something about that because it freaks you out. But again, student loans are operating by a totally different set of rules. Unlike your other debt, no other debt comes with loan forgiveness the same way. So you have to lock into that strategy. Now, if you're someone who doesn't really trust it and you don't think it's going to be there, then maybe you should, instead of making periodic lump sum payments, perhaps you take that lump sum of cash that you have available and put it in a high yield savings account and keep stocking that away. Stocking away, stocking away. And then when you can afford to pay off the whole thing, now you make a decision, do I keep working towards loan forgiveness or do I take out this money I saved and just pay it off and be done? But trying to ride two horses at the same time doesn't really work out. And that's like one of the biggest misconceptions I see all the time, that it actually hurts borrowers.
- [35:43]
B
For people who truly are worried about loan forgiveness options going away, what would you say to that person?
- [35:49]
C
I say I understand your concern, but we haven't seen that yet in 30 years. And this has been the most aggressive administration, the overhauling student loan programs moving forward. And they didn't get rid of any forgiveness programs. They cut save. But there's still a path forward to get income driven repayment forgiveness. And be technical here, Income Driven Repayment idrd, as in dog describes a category repayment plans based on your income. Inside of that category there's Save, ibr, icr, and then Pay as yous Earn. Your credit under Save, your credit under Pay as yous Earn is fully transferable to any other plan in that category. So the government under this administration has left forward that type of forgiveness. I don't see that going away for existing borrowers moving forward. But I can see the government stop offering it in the future for new borrowers. But if you're someone with a loan, I don't see that going away. And understand people with concerns about public service loan forgiveness and kind of the changes that were being talked about there that may be coming down the pipeline in the future. But PSLF still exists and people are still getting forgiveness today. So I don't think you need to worry about that today. But if you are worried, set that money aside, hold on to it, and when you have to make that decision in the future, then make it then I don't see that there's any need to get ahead of it today.
- [37:09]
B
What sort of bad information are you seeing out there in the student loan pay off?
- [37:13]
C
Pretty much everything on TikTok.
- [37:16]
B
I was going to say TikTok and Instagram Reels have to be big culprits.
- [37:20]
C
No, no. I think the biggest thing really is related towards loopholes for forgiveness. There aren't any loopholes for forgiveness. There are literally like four main paths towards relief. There's public service loan forgiveness because you work for the government or nonprofit. There is 20 to 25 year forgiveness because you pay based on your income under one of those plans. There's total and permanent disability because you become totally or permanently disabled according to your doctor. The VA are supposed come to security. And then there's borrowed defense to repayment for people who went to these kind of schools that advertise in the middle of the day on Jerry Springer and things like that. And that's the full kind of like nature. There's these small other programs, but for the most part there are no loopholes here. And so I think the most important thing to remember is that there's really not an easy way out of this. We have to figure out, am I on up pay it off strategy or am I on a forgiveness strategy? And once you lock that in, the question then becomes, when do my facts change enough where I move from say, forgiveness to a pay it off or pay it off to a forgiveness? And because it's not a decision that you make one time, it's a decision I think you analyze, at least on an annual basis, where you're saying, am I still on the right path? Forgiveness or pay it off.
- [38:37]
B
What's the current status of the Education Department in the aftermath of the 2025 executive order? Like, it's not supposed to be around much longer.
- [38:47]
C
Right? I don't. So the current status is they still exist and they're still processing things. And there's talk about offloading the loans to different departments, maybe Department of Treasury, maybe sba. But none of that has happened as of yet. And even if it does happen, it doesn't change. Kind of like your obligations on the debtor payment plans moving forward, that will still be there. But right now, the Department of Education exists, it is crippled. Undoubtedly, if this were a table with four legs, it will be on its last leg right now. And yet it's still trudging along and working. So may there be some changes before this administration leaves office? Possibly do. I think that's Likely, given everything else that's going on. No. But could Linda McMahon, as acting secretary, find a way to really close down this Department of Education for good? Maybe. But I don't know how that changes anything to do with your repayment and forgiveness options, except for possibly more likely delivering you even less effective customer service solutions moving forward.
- [39:54]
B
All right, last question. What parting words of wisdom do you have for people who feel like their student loans are burdensome and they want. I don't know, it doesn't even have to be specific advice like get on this plan. Right. And obviously every situation is. Is unique. But what would you say to those folks who feel like they're struggling and nervous about repaying their loans?
- [40:15]
C
Is this a podcast where I get to cuss?
- [40:18]
B
No, we try to refrain.
- [40:19]
C
Okay, so the way I would say it would be more direct and how I'm going to say it here, which is like, live your best freaking life possible despite the student loans. Don't pass up love. Don't pass up jobs. Don't pass up other things because you're worried about the student loan debt. We will find a way to tackle the student loans and to make them fit around your life, but it does come at cost. We may not get rid of them as aggressively as you would like, and yet you will have that love that you are holding out for. I see far too many people that stop living life because the thought of this debt hanging around forever freaks them out. But it's not even just a thought. It's the thought that is uncoupled from actual kind of consequences. Understanding what are the real consequences here, and then what are my real options available? I'm not promising anyone that you'll have a perfect solution that works. It doesn't exist. Yeah, but can we mitigate the damage that allows you to kind of balance. Balance everything? Absolutely. So I always want people to live their best freaking life possible despite their student loans. And we'll find a way forward.
- [41:29]
B
Dude. Great way to end it. Stanley Tate, thank you so much for joining me. Where can how to Money listeners find out more about you and your content?
- [41:36]
C
All right, Easiest place to go is just check us out@tatq.com or if you pop in, Stanley Tate, lawyer, It's going to pop right up.
- [41:42]
B
Awesome. We'll link to it in the show notes too. Thanks, Stanley.
- [41:45]
C
Thank you.
- [41:47]
B
Oh, man. What. What a great combo with Stanley Tate. And I just appreciate too, in an area of incredible headlines and a lot of change, there's. There's just a lot of freak out in the student loan space. And I feel like Stanley is such a solid presence with good advice without being over overly reactionary. And I just think we're in a time where, and I get it, I totally get it where there, there are abundant reactions and a lot of fear. And I think Stanley cuts through that really well by offering his thoughts and advice and insight without just being like hair on fire. And so what he said too, I love this. I think it makes total sense that a lot of people. My big takeaway is that he said, pick a strategy and stick to it. You can't ride two horses at the same time. And it's understandable why someone would say, well, I just, I don't know that I trust, you know, forgiveness to stay around. And so I feel like I have to do both of these strategies at the same time in order to feel comfortable. And then even at the end, right, what he was saying was like, live your life. And it's really, it's really hard. I think it's really, for a lot of folks, it's become easy, it's become normal to let student loans influence a lot of life decisions. And I just, I just appreciate his way of thinking saying, well, they can't change every future decision you make and they might be with you for a while. Whether you are on the income driven repayment plan and you're saying, listen, I'm going to try to pay these loans off in quicker than before, you know, trying to get some sort of forgiveness or whether you're on the long term forgiveness route. There are, there are ways, I think to, despite the impact of student loans in your life, live your life and to not allow those to dictate most of the choices you make or many of the choices you make, whether it's about love, starting a family, all that kind of stuff. So thought, yeah, Stanley had a lot of good insight. If you are interested to hear more from him, I will put links to his YouTube channel, his newsletter. His newsletter is spot on every time it comes out. And just if you are in the, hey, I need a helping hand in the student loan space. Stanley is definitely a great place to turn, but that's going to do it for this episode. Hope you enjoyed it. We'll see you back here on Friday for a fresh Friday flight. Until next time, best friend out.
- [44:35]
A
This is an Iheart podcast. Guaranteed human.