Episode Transcript
Daniel Wrenne: What's up, everyone? As you may have noticed, we've been on hiatus the last few months, but we're back now and committed to releasing a couple of new shows every month. So make sure to subscribe to Finance for Physicians on your podcast platform of choice and our YouTube channel so you don't miss out.
Welcome to Finance for Physicians, the show where we help physicians like you use money as a tool to live a great life. I'm your host, Daniel Wrenne, and I've spent the last decade advising physicians on their personal finances with the mission to help them understand that taking control of their finances now means creating a future where they can practice medicine where, when, and how long they want to.
Daniel Wrenne: Jeff, what's going on, man?
Daniel Wrenne: What's up, everyone? As you may have noticed, we've been on hiatus the last few months, but we're back now and committed to releasing a couple of new shows every month. So make sure to subscribe to Finance for Physicians on your podcast platform of choice and our YouTube channel so you don't miss out.
Welcome to Finance for Physicians, the show where we help physicians like you use money as a tool to live a great life. I'm your host Daniel Wren, and I've spent the last decade advising physicians on their personal finances with the mission to help them understand that taking control of their finances now means creating a future where they can practice medicine where, when, and how long they want to.
Jeff Wenger: Hey, Daniel, it is beautiful fall here in Ohio. I'm excited to be here again.
Daniel Wrenne: And it is also Friday.
Jeff Wenger: And a Friday for us. I don't know what it is for everyone else, but.
Daniel Wrenne: Yeah. Hopefully, it's Friday for you too. It's Friday here. So that's always exciting. Y'all got any fun plans this weekend?
Jeff Wenger: We've got fall pictures with the family. So.
Daniel Wrenne: Oh, that is a, I love it. That's a, I don't know, Jeff's got more kids than I have. I have three boys and the fall pictures are always hectic and stressful in some ways, but also kind of cool. But I don't know what your experience is like with that.
Jeff Wenger: Yeah, it's one of those things. We always like the result. It's nice to have the pictures.
Daniel Wrenne: It's amazing how they get a good picture out of it.
Jeff Wenger: The process, yeah, the process—it's crazy. So, think about me, pray for me. Hopefully that we got good pictures and kids were not muddy or something.
Daniel Wrenne: We're always like how in the world did they get that kind of picture, that good of a picture out of these crazy wild animals of our children?
Jeff Wenger: So anyway–
Daniel Wrenne: Speaking of wild, yeah, that's a good segue into our discussion today, which is student loans, which continue to be chaotic and unpredictable, and who knows what's going to happen going forward. And on top of it, we have an election. So it's like chaos mixed with chaos mixed with chaos equals current student loan situation.
So, Jeff is our trustee student loan expert and has kept a pulse on all this chaos. And so we're going to talk about a little bit of the chaos and maybe even make a few predictions. We've thrown out some predictions in the past, but I think in the next few weeks, at least, well, once the election's done, we'll have a better idea, I think, of what's going to happen.
So as we're recording this is before the election. So maybe if you're hearing this after the election, we'll already know a little bit better, but anyway, so I guess maybe Jeff, we could start out. So the SAVE Plan has basically blown up, right? And that's been a pretty, pretty common questions that's been coming up with a lot of the families we work with one-on-one is what in the world do we need to do about the SAVE Plan?
Jeff Wenger: Yeah. So let's start with what happened to the SAVE Plan. It was like going to be the one plan to rule them all, right? Like the Lord of the Rings, the one ring that ruled them all. So the SAVE Plan during the summer here, summer of 2024 was about to implement some things that would both probably save people money on payments as well as accelerate forgiveness for people with really low balances or that took out really small loans.
But just as that was about to be implemented, there was a court case that came up against the SAVE Plan. Surprise! And so because of that court case, there was an injunction put in place where with a SAVE Plan, an injunction being when things are put on pause, things cannot proceed. And so what happened was the SAVE Plan was ordered not to, the Department of Education was ordered not to provide any forgiveness under the SAVE Plan or change the payment plan to that lower amount. And so what has happened as a result, go ahead, I'll stop there.
Daniel Wrenne: And then that affects like a zillion people at the worst possible time.
Jeff Wenger: Yeah. So there, because of that, now, if you're on the SAVE Plan, you're not getting credit right now towards loan forgiveness, PSLF, or the longer-term option right now. As a benefit, while this is being processed, there is a forbearance where there's zero interest-that sounds familiar–and zero payments required, and that is expected at this point. The Department of Education said it will be extended for another six months. So we're talking right at the end of October 2024. So you'd be looking at spring.
Daniel Wrenne: Is that the same department of education that doesn't keep their word? Is that the one? Yes, that's the one.
Jeff Wenger: That's the one. So that may mean that forbearance lasts even longer.
Daniel Wrenne: Anywhere from six months to forever.
Jeff Wenger: Yes. That's where we stand. The issue with that forbearance is that it is not counting towards PSLF, which is what most of our families are worried about is that this is an issue. That's where we stand right now. Everything's on pause with the SAVE Plan. Zero dollar payments, zero interest right now.
Daniel Wrenne: Yeah. And completely up in the air, but there's still a, what, the option to buy back payments if you, well, that's a future thing, but I think a lot of people, maybe before we get into that–well, there's a few different types of situations, but there's a pretty decent chunk of people that are like right at the end of their 10 years.
And they're like, just, we're about to finish and then the switch, they got switched over to SAVE because they were in repay or whatever, and then all this thing blew up before they had their 120. And so they kind of got wrapped into this freeze thing where they're not getting PSLF.
What's happening with them? Maybe you can clarify. Like if I was at like 115 payments when all this stuff blew up.
Jeff Wenger: Okay. Yeah. So yeah, if you're at 115 payments when that stuff blew up, and at this point, that forbearance is expected to last well into it when you've made 120. So number one, if you still have the qualifying employment, keep certifying that, make sure that gets logged.
But once you reach what should be your 120th payment, You can, at this point, still submit your application for PSLF, and then at the same time or just after that, you can, on the portal there at studentaid.gov, submit a reconsideration request, and it has a form on there that you fill it out, you say I am–there's specific language that goes into that. It's all on studentaid.gov. If you search for buyback program, it's pretty well-outlined, but you got to put in that specific wording and then you put the time periods that you're looking to buy back credit.
So that would be if you had a period of forbearance or deferment, you can now buy that credit back at what you would have paid during that time. And so this is an option. We actually have several families going through that now.
Daniel Wrenne: So I don't have to just wait it out. If I was at 115 when it blew up, I'm probably close to 120 now or past then. And so I would go ahead and file for PSLF, and then make sure I'm requesting to get those buyback payments. So then they come back to me and say, “Hey, you owe this much money.” And then it's forgiven.
Jeff Wenger: Yes. If you pay that money within 90 days, then it's forgiven. So good luck.
Daniel Wrenne: What happens if you don't?
Jeff Wenger: Then you don't get forgiveness on that. I think you can still go back and apply again later or something like that, but it's a good idea to go in knowing what you could be paying on that.
But it's, if it's been these five months and it's been paused, you probably have a good idea of what you would've been paying. It would be close to that payment that you were paying before it stopped, so.
Daniel Wrenne: Right. And if you're earlier in on payments, well, I guess you're not worried so much about PSLF. You're more, or like the forgiveness part of it. You're more thinking like, “What am I gonna do with this repayment plan?”
Jeff Wenger: Yeah. You know what, we should do another episode on the buyback program itself.
Daniel Wrenne: I know.
Jeff Wenger: ‘Cause I think that'll be super helpful.
Daniel Wrenne: Yes.
Jeff Wenger: That'll be fun with that one. That would be fun.
Daniel Wrenne: Yeah.
[Midroll] Let's take a quick break to talk about our firm, Wrenne Financial Planning. The goal of our podcast is to empower you to make better financial decisions. But sometimes the best financial decision you can make is to work with someone who understands your financial goals and has the expertise to keep you on track to reach them.
That's where Wrenne Financial Planning comes in. We are a full-service financial planning firm that works with over 400 physicians and their families across the country. We charge a transparent monthly flat fee for our services and offer virtual meetings you can take from anywhere. Best of all, you'll get to work with a team that specializes in working with physician families.
So whether you're starting out and wondering how you'll balance your student loan payments and saving for a home, or you're an established physician trying to figure out how to pay for your kid's college and how much you need to save to reach financial freedom, we can help. I'll put a link in the show notes to schedule a no-obligation meeting with one of our certified financial planners.
Wrenne Financial Planning LLC is a registered investment advisor. For more information about our firm, please visit wrennefinancial.com. That's wrennefinancial.com.
Jeff Wenger: To the current conundrum, the SAVE Plan and that issue, like it's exploded. I think that's what you titled this or what you called this or like it is exploded. So what do you think we–what do you want to talk about with that?
Daniel Wrenne: We just have to, yeah, so like what's the game plan with it? What do we do with it? And what are the potential scenarios that–how does it play out, I guess, is what it comes down to. ‘Cause if it's exploded, does that mean it's forever gone or is it like, and I know it, you know, the court case and whatever, but what's going to happen when you predict the future?
Jeff Wenger: Well, before we get to any predictions, why don't I start with just really kind of what the worst case looks like? This is not to strike fear into the heart of our listeners, Daniel.
Daniel Wrenne: Let's do it. Strike some fear.
Jeff Wenger: Just to say, this is a potential worst-case. The worst case of this is that the SAVE Plan was built on the framework of two other plans that have existed for years now since the Obama administration. So that's built on the same framework as the revised pay as you are in plan, which is what it replaced, repay, and also the pay as you earn plan, PAYE. And so the worst case scenario is that the SAVE Plan is struck down. It's gone. And the entire framework that it was built on is gone as well.
If that is the case, there are only two plans left, income-based repayment and income contingent repayment practice. And actually, right now, income contingent repayment is not even an option. So it's down to income-based repayment, which is its own statute, its own law.
It's probably safe. But the issue with that is, so there are good things about the IBR plan, it can cap your payment, but the payments on that plan are usually higher, about 50% higher than they would have been on revised pay as you earn, repay, SAVE, or even more than 50% higher than it would have been on SAVE and the pay as you earn plan.
The other issue is that you have to have what's called a partial financial hardship to get on that plan. And so what would happen if all these other options were gone because of this court case, that could be the only one left. And you might have to come up with, you might not be eligible at all. There might be some creative ways to get on that plan if you have gaps in income or something like that, but it could be very difficult for those that maybe you were a resident starting as intending in 2019 when everything was paused.
And then it's, you know, only incomes skyrocketed since then, at least compared to being a resident, and now you're not eligible. So what do you do if you can't get on an income-driven plan for PSLF? That's the worst case is that you can be stuck.
Daniel Wrenne: And that's most likely, it's more likely to happen. The higher your income as a ratio of debt. So if you have super high student loans and medium income, it's probably not an issue, but like if you have lower than average–we're talking about physicians–like lower than average position student loan amounts and way higher than average income, that's probably in the cards is a potential problem area.
Jeff Wenger: Yes. And compared to those other plans that could be gone in that worst-case scenario, the payment is higher too. So it's just harder to qualify for that one even then, yeah, you hit that cap and that's a problem for getting on the plan. So that's the worst case. Don't go running for the hills or anything like that right now. I'm not saying that's likely, but that is a worst-case scenario.
Daniel Wrenne: Good to know the worst case. What's the best case?
Jeff Wenger: Best case? The best case is that the SAVE Plan stays intact just the way it is, or maybe the SAVE Plan is in place, but without that shorter-term forgiveness for people that had, again, this is probably not applying to our audience, but if you took out less than $12,000 for undergrad, like that forgiveness maybe is gone or gets changed.
But if the SAVE Plan just stays in place, and I would say if it does stay in place, the likelihood of this forbearance counting, again, retroactively being pretty high as well. So the time that was in forbearance counting and then also the plan staying in place, I think that's a possibility as well because it is built on the same framework as revised pay as you earn and pay as you earn was by the same power that the Department of Education has there.
And so if those plans are okay, and they have been for years, people have relied on those plans for over a decade now, if those were okay, then is something else built on the same framework okay? Possibly. I think there's a chance.
Daniel Wrenne: We'll see what the courts say.
Jeff Wenger: That's what they say. They're saying there's a chance, right? You're saying there's a chance.
Daniel Wrenne: You're telling me there's a chance.
Jeff Wenger: Still think that the best case is probably unlikely though, so.
Daniel Wrenne: Unfortunately. What is your, are you thinking maybe it ends up somewhere in the middle?
Jeff Wenger: My, yeah, again, crystal ball here. I'm looking at it, shaking it up. It's a little hazy. If I'm not exactly right on this, then I'll own that. This is just a guess. It's just a guess.
Daniel Wrenne: Just a prediction.
Jeff Wenger: But I think one of the more likely outcomes is that just based on the makeup of the courts that the case is going through both, it's in the Eighth Circuit right now, that probably means nothing, but then there's also the U.S. Supreme Court that makeup there, and their decisions in the past, I think it's likely that the SAVE Plan goes away. But what I would guess would happen is that the system maybe reverts back to what it was pre-SAVE Plan, where we still have revised pay as you earn, pay as you earn, and all the other options. I think that's a possible outcome where this gets struck down and we kind of revert back to what was.
Daniel Wrenne: Man, I'd hate to be a student loan servicer right now. You're like, “I don't know what to do.”
Jeff Wenger: Yeah. Let me give a plea out to those of you that have to deal with your student loan servicers. First of all, my heart goes out to you because I know it's difficult with wait times on the phone and frustration because things are not working the way they should be for you.
But man, if you can lend them a little grace, be persistent. Advocate for yourself, but if you can be kind to those poor guys and gals that are on the phone, the rules are always changing on them. They're getting yelled at a lot. And I mean, let's just be frank that they're not necessarily, at least not starting out as highly trained for that job. So they're probably learning as they go to navigate that too. You went to school to be a doctor or something like that, right? Likely, if you're listening to this and I'll just tell you those call centers, they are not paid to find the best talent so.
Daniel Wrenne: Yep. Yeah. Take it easy on the servicers.
Jeff Wenger: Take it easy on them. Advocate for yourself though. That doesn't mean to roll over and do nothing for yourself, but–
Daniel Wrenne: Yeah. Well, and so that, I guess a lot of this is gonna probably get shaken out in the courts and it doesn't tie into the election necessarily, right? Like directly, but maybe, well, there's some secondary stuff that, well, that's just your leadership too, and the president has kind of established all this executive power stuff tied to student loans.
Jeff Wenger: Yeah, so I think where the election might come into play with this case specifically is in how it's handled if an appeal is needed or after the ruling of this eighth circuit, whatever they decide, you know, is the administration that's in power at that time, satisfied with it? Will they continue to take that case up to an appeals court, to the Supreme Court, or will they leave the decision as is? And say, “Oh, nope, they ruled. They're good.”
It seems, so just a little background that Eighth Circuit is, tends to be a little bit more on the conservative side than the U.S. Supreme Court, both are, or have conservative appointed judges as a majority, but it is more likely to have an extreme outcome, I would say out of that Eighth Circuit, the lower court ruling. And so if extreme being like blow it up, blow it up. And so I would say if we have a Trump presidency, then we are probably more likely to have a little more chaos with the student loan plan and what happens after that, maybe closer to the worst-case scenarios there.
And then I would guess with a Harris victory that still not necessarily at the best case scenario for student loans, but I think you're probably more at this case goes back up to the Supreme Court, which tends to be a little bit more moderate overall in the rulings and we get maybe to that status quo where things revert back.
And so that's where, that's how I'd say the election plays in. It's who is guiding this court case and the appeals because it's already being litigated. So we can't, that's not stopping.
Daniel Wrenne: My prediction is it'll be chaos either way ‘cause it's been chaos forever. As long as I've been involved in PSLF-related stuff, which has been forever like a long time, it's always been chaotic.
Every time they get in there to try to change stuff, it makes it even more chaotic. So it just seems to be how it goes. So we'll keep an eye on it though. And I know Jeff's watching it. So we'll jump back on here and provide updates as all this chaos shakes out. Any parting words, Jeff, from you on your end or parting words of advice for our audience related to all this.
Jeff Wenger: Yeah. I'd say all the news is kind of scary. It is kind of chaotic like Daniel said. In most cases right now, the best action to take is just to maintain the status quo. If you already have a plan in place for your student loans, stick with it for now. You can maybe do a few things by lowering your income right now, saving your retirement plans pre-tax, do things like that to set yourself up where if we have a ruling and you need to qualify for that worst-case scenario, you're more likely to by reducing that income, by doing good things like saving in your 403b and 401k.
Daniel Wrenne: Yeah. Do that either way.
Jeff Wenger: Yeah. We're big advocates for that. But if you haven't been, if you have the option to maximize that, maybe do that as a proactive measure so that you're in the best position possible if you need to make changes.
Daniel Wrenne: Nice. Well, thanks for jumping on, Jeff. It’s always fun to talk student loans with you and–
Jeff Wenger: Always.
Daniel Wrenne: I'm sure we'll be talking soon about it ‘cause they'll– always seems like there's all kinds of craziness coming up. So appreciate it, Jeff.
Jeff Wenger: Alright. Well, see you next time.
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