Episode Transcript
Daniel Wrenne: The important thing to think about is file jointly versus file separately. If that file separately is gonna potentially add value in your circumstances, you want to run those numbers.
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: Mr. Wenger. Jeffrey, how are you, bud?
Jeff Wenger: Oh man. It's been a cold winter with lots of snow this year.
Daniel Wrenne: Yep. We're getting some today.
Jeff Wenger: Yeah. We get a little bit. It's nothing like a couple of weeks ago where we just kept digging and digging and digging.
Daniel Wrenne: Yep. Well, it’s a season of cold and winter weather, but it's also a season of tax preparation.
We're not gonna talk too much about taxes, maybe a little bit. But in particular, we're gonna talk about student loans, which we tend to, Jeff and I love talking student loans, but we will talk so there'll be some tax topics we're gonna cover today as they relate to student loans. So we'll dip into a little bit of that and then talk some student loan updates.
So that's all my good points.
Jeff Wenger: Speaking of taxes, yeah. Have you done your taxes yet?
Daniel Wrenne: I have submitted 100% of what was requested to prepare the business's taxes and personal taxes. So it's in their court. That doesn't always mean that it's gonna get done on time. Hopefully, it is, but yes. I've done my taxes. How about you?
Jeff Wenger: So I still prepare my own taxes at this point.
Daniel Wrenne: Oh, yes.
Jeff Wenger: Yeah, I know, right? It's been H&R Block. I got the history there now, so it's not worth the transition.
Daniel Wrenne: You know what? I probably would be still preparing my… I don't know.
Jeff Wenger: But I used to take a—if there was a day off in November or I was, just a day off, at some point I'd be like, “Ooh, I'm gonna pre-run my income tax return just for a fun day off.”
And I've changed. I haven't done that in the last couple of years.
Daniel Wrenne: Yeah.
Jeff Wenger: But yeah, so that'll be fun. A nice little tax return. Always. I always like doing that. I don't know.
Daniel Wrenne: Yeah. Jeff's a geek like that. I am as well. Okay, so student loans. So we're gonna talk SAVE plan. I'm the SAVE plan is… Give us an update, Jeff. I'm gonna,
Jeff Wenger: Yeah. Yeah. So of course, the SAVE plan introduced several years ago, and then it's been at the center of some litigation for a couple of years now. Actually, it's been on pause for almost two years, a year and a half about now at this point.
A little bit longer. But so we got a lot of people. This was a plan that REPAYE transitioned into SAVE, and then it's been put on ice for a while. But there's a lot of people on it still. And since July of 2024, it's been in a forbearance. As of December, there was an announcement from the court that is hearing that case that said, “Hey, a settlement has been reached. It's was still awaiting approval, but it would end the SAVE plan. And that borrowers on that plan would need to transition to a new plan or a different plan shortly soon.”
Daniel Wrenne: Yeah.
Jeff Wenger: Not a definition of when soon is, but…
Daniel Wrenne: That sounds about right. So anywhere from like next, tomorrow to three years from now, probably?
Jeff Wenger: Yeah. Tomorrow to three years from now is probably a reasonable range. You're pretty safe with that one. Yeah, I think, probably two of the likelier options, and this is just crystal ball land. So when I'm wrong, I’m wrong. But I was thinking that maybe, as this is approved, maybe when there are income-driven dates that come around, that might be a time that it happens.
Or with the introduction of the Repayment Assistance Plan, the RAP plan from the administration this summer. Might also be a time where they go and go ahead and say. We are gonna force you off. You gotta make a decision now.
And maybe if you don't make a decision, you're going to our new beautiful plan, the repayment assistance program.
Daniel Wrenne: Yep.
Jeff Wenger: That's my guess. But in any case, sometime in the next year I think is pretty realistic.
Daniel Wrenne: So more info to come on that still kinda vague, but there is a little bit of definition. And it is ending so soon, we'll say, okay. So yeah. Taxes. If we're preparing for taxes, what do my student loans have to do with my taxes?
Jeff Wenger: Oh, with taxes and student loans. Of course. All these payment plans, the pay as you earn, income-based repayment, income contingent repayment, and that new RAP plan that's coming out will all be—they're defined. They calculate your payment based on the adjusted gross income or AGI, and that's a…
That's certainly a tax term, tax lingo. Actually, it's a really important number just for a lot of different calculations that are out there. But basically, they take that number, and then if you wanna be really simple, you could say whatever plan you're on, 10% or 15% of that gives you about what your payment would be.
With most of the plans that are out there, there's still another like poverty-level factor that gets deducted. So it changes things from there. But big picture, AGI determines what your student loan payment will be.
Daniel Wrenne: Yeah, and it's a delay too, 'cause it doesn't determine your payment now because you kinda have to think ahead maybe one or two years from now.
It’s like when you go to do income recertification at some point in the future, or I guess the next time you do income recertification after having filed the current tax return would be when those numbers would be coming into play, right?
Jeff Wenger: Right, right. So Daniel, did you know that I know you know this, but that I think it's just sweet that student loans. They have an anniversary, like it's February still while we record this, the month of love. And even your student loans have an anniversary and that date is sometimes buried deep in your student loan text file.
Sometimes the servicers have it out there like your next recertification date is such and such. But at that date, so let's say Daniel, you had student loans, and in July of 2026 is your next recertification date. At that point, the default is to go back and say, what was your most recent tax return?
And they will pull AGI from that to determine what your payment will be.
Daniel Wrenne: And that's where they get the percent, they basically take a percentage of your AGI, sometimes a little more complicated than that, but 10 or 15% of your AGI-ish. So that's your annual payment for your student loans for the next 12 months.
And so if you're going for PSLF, that has major really it's important anytime, but if you, especially if you're going for PSLF, ideally, your payment is as low as possible at all times. So it has major impact potentially on the that dollar amount.
Jeff Wenger: Right, right. So I can think of, there are probably two kind of big things to factor in when you're thinking about that payment calculation.
And that's how do you—again, the question is how do you keep the AGI low for student loan payments? And so two questions that come up are usually, should I file together or separately from a spouse? Because if you file together, your AGI from you and your spouse, all income gets funneled into one spot, and it shows up as one big number.
You file separate, each person has their own tax return and then each person has their own AGI. So that's one question to be considering. The other is the timing, like do I want to use this year's tax return or not? So I think those are two questions to get into and explore.
Daniel Wrenne: Yeah. So I think maybe for today, at a minimum big picture is like the filing status of filing jointly versus filing separately.
That's super important to be aware of around tax time. The year's already done. This is February 2026. So 2025 is done. There's nothing much you can do about your income at this point, other than you can choose potentially to file taxes separately, which can have major impact on your student loan payments in certain circumstances.
But that gets complicated. I would say we could dig into that, but we don't wanna put you to sleep and get into the weeds when it's not applicable to everybody. But that's just important thing to think about is file jointly versus file separately. If that file separately is gonna potentially add value in your circumstances, you want to run those numbers.
And then the timing is, the second thing you mentioned is like… you can get aggressive with that.
Jeff Wenger: Oh yeah. I wasn't even going to go with the ultra aggressive, but I guess I have to now that we mentioned it. The easier choice on when, I'm not talking about timing now.
We just mentioned Daniel has student loans. Sorry, Daniel. He has a recertification date. It's coming up this summer. And we said, when you have recertification, they will pull your most recent tax return by default.
That's the option. So with taxes, one option you do have, you can extend your personal tax return until October of the year you're in basically for any reason. It's an automatic extension. And so if Daniel were to file an extension for the 2025 taxes that are due now, and he didn't have that actually filed until October, what's the most recent tax return on file?
Daniel Wrenne: The older one, which…
Jeff Wenger: The older one, 2024. So a whole year ago.
Daniel Wrenne: Now, is it a legitimate, you said for any reason I can file an extension, would one of those reasons be so that my student loan payment can be lower?
Jeff Wenger: So I don't think that would be a great reason. I think yeah it, you don't have to put a reason.
Daniel Wrenne: Yeah.
Jeff Wenger: On the extension. I think it's automatically ranted, but just say, I need more time to figure out my taxes.
Daniel Wrenne: Technically, what I would suggest is like. If you get audited, that's where they may go under your taxes. They may get into poking big holes in your reasoning behind all. Especially if you were like filing jointly, filing separately, filing jointly, filing separately.
They're gonna be like, What's up with that? Like, why are you doing that? So they might say what's the reason, essentially? And so I would not want to be in a position where I'm getting audited and I have to say, I filed separately so that my student loan payment could be lower, because that's kinda like a little bit of a… it could be considered like the, what do you call it? The rule, the pro—not the pro ratta…
Jeff Wenger: Oh. So yeah, this is where I think it gets a little bit funky. 'cause there's such a thing as called the step transaction document.
Daniel Wrenne: There you go. That one. That's like the catchall.
Jeff Wenger: Yeah, with taxes. Basically, if you're taking multiple steps to get around a rule for taxes, they can go back and say, well, you just took multiple steps to do the thing we you couldn't do.
So you have violated that.
Daniel Wrenne: Now, technically, the student loan thing is not a tax thing.
Jeff Wenger: Yes.
Daniel Wrenne: Me personally, I wouldn't want to be in that position where I have to say that's my reason.
Jeff Wenger: Yes. So certainly, consult whoever's working with your taxes on this to work through it and file that extension.
But yeah. I think as I'm thinking through it, I would be thinking, Hey if I was ever quizzed on this, I would be asking, I needed more time to figure out the best filing status for me.
Daniel Wrenne: And consistency is also, I think, good if you're having to make a case, it’s like I consistently need more time, and like I typically take the most time I can take, and I've filed extensions for the past five years, and that's not gonna look super concerning. A lot of accountants automatically file an extension. Like I know of accountants that a hundred percent, they file extensions on a hundred percent of their tax returns, just like that's the default.
AD BREAK
Daniel Wrenne: 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 are established physician trying to figure out how to pay for your kids' 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 W-R-E-N-N-E financial.com.
AD BREAK END
Daniel Wrenne: Maybe that's enough tax for today. We gotta talk about the PSLF buyback too.
Jeff Wenger: But yeah, I think so, just the timing of it, that's what to consider those, how do you file separate or joint because that impacts your payment and it could significantly reduce it depending on how your incomes are set up.
And then also just if you had a higher tax year in 2025 than 2024, that's something to consider is, does the timing of the filing impact that payment or the recertification?
Daniel Wrenne: Yep. So definitely two big things to think about. For sure, consult your tax advisor. Talk, talk to us. If you're working with us, we can throw an input.
So PSLF buyback. That was the last point we were gonna cover. We're gonna try to do this in what, 5 or 10 minutes or less. And we're not gonna be able to get through all this, but we will, at a minimum, give some updates on it. So PSLF, buyback. Yeah.
What are we talking about here?
Jeff Wenger: Yeah. PSF buyback, like that's something, or a program or an option that's impacting more and more people now as time has gone on with the SAVE forbearance especially.
Daniel Wrenne: They didn't count—
Jeff Wenger: Core idea. Yeah. The core idea is that this buyback program exists to let these, the PSF borrowers to pay four months that did not count in the past as long as they coincided with a PSLF employer. So government, employment, nonprofit. And this was introduced right before the SAVE plan forbearance. And so I think the idea here was that there aren't gonna be that many people that this is going to impact.
Daniel Wrenne: Now it's like everybody.
Jeff Wenger: With the SAVE plan forbearance, not counting. Now there are a lot of people finishing up those 120 months of employment that have forbearance months that they want to go back and purchase. And I guess maybe some quick stats here. These are gonna sound like maybe put some people to sleep.
Daniel Wrenne: Just read 'em fast.
Jeff Wenger: Hope it's a peaceful rest, but, in January, there is a, so there's a backlog on these PSLF buyback requests now. It's up to 86,520.
Daniel Wrenne: So what does that mean for people? Does that mean that it's probably gonna be super slow to…?
Jeff Wenger: So there are, yeah, 86,000 in the queue at this point, and that's increased over the last month by about 3,000. So the queue is getting longer.
Daniel Wrenne: So don't expect them to process these applications for buybacks fast.
Jeff Wenger: Right. In the last month, 2,400 or so were being actually processed. So that means that about 5,000 or so were actually submitted like between what was processed and the growth in that backlog. That means there are probably about 5,000 new ones that came in.
Daniel Wrenne: Okay.
Jeff Wenger: And about 2,000 were actually approved for PSLF buyback.
Daniel Wrenne: So they're getting approved. It's just slow.
Jeff Wenger: Getting approved. It's slow. What that means if you wanna, now you can wake up from your nap, but if you were to submit an application, we'd be looking at a timeline.
If they keep that pace up for current ones in the queue of two years or more for the processing.
Daniel Wrenne: That's crazy. And this is at the end of your PSLF is when you apply for this, right?
Jeff Wenger: Yes. So you do need to already have the 120 months of employment to make this application. And so I guess anecdotally, I can verify from some of the families we worked with that the program exists and you can have your loans discharged through it
Daniel Wrenne: And you have had success. People successfully buy back payments, right?
Jeff Wenger: Yeah. We actually had maybe this sounds like a small number, but our first one, at least, my first one that I work with in the last month,
Daniel Wrenne: I mean that…
Jeff Wenger: This individual submitted it back in October of 2024. So it like 16 months or so.
So that was 16 months or so of waiting. But earlier in February, got a letter that said, Hey, this has been processed. We don't have you as owing anymore. So they didn't even have a payback amount. If the Department of Education does say that you would owe something, you'd then have 90 days to make that payment.
Since this person didn't have a payment due, they said your loans are eligible for the buyback, the process forgiveness in 60 to 90 days.
Daniel Wrenne: That's a substantial value while worth waiting couple years in that.
Jeff Wenger: It is. It's worth waiting for those that it makes sense to, fortunately, this individual needed like three payments and was a very early person to apply.
Daniel Wrenne: But still potentially…
Jeff Wenger: So he was one of those 2,400 that were processed last month.
Daniel Wrenne: Yeah. Yeah. The takeaway if some of you guys are listening, forgot about the buyback program, which easy to do, there's so many new changes in student loans. It's still around.
And if you're going for PSLF and you had periods of time where you were not making payments for various reasons, this potentially is a big benefit to consider, right?
Jeff Wenger: Oh yeah, it's absolutely, if it applies to you, you should hopefully be planning to use it when it's your turn, basically.
Daniel Wrenne: You have to wait till the end.
That's a kind of unfortunate, you gotta wait till the very end of the PSL period, which is 120 payments.
Jeff Wenger: Right. And so I guess as I was thinking about this, I was thinking what advice are we giving many of the families that we work with on this? And so I just wanted to give a few action items that you might consider.
If you just put yourself in the best position for buyback, because I think more and more people, as that safe forbearance has gone on are actually already eligible with the employment that they have. And that number just continues to grow at this point. But the first one that I had was actually.
There's not really a whole lot of help in staying in the SAVE forbearance at this point. So if you are still working on those months, like I would consider getting onto one of those other repayment plans and just having current and future months already qualifying, like take as much out of that equation as possible.
Now that doesn't help with the months that are already in forbearance. What do you do next? What I would suggest is to do a quick check on what's actually going to apply for you. What are the months that might be eligible? And so I would do that by get all your employment certified.
So anytime you spend at a nonprofit or government job, send in your PSLF form, have the employer sign off on it, get an up-to-date count of employment months. Then once that's processed, if you go to studentaid.gov, you can actually look at the history of payments and whether they're eligible or ineligible.
And for everyone that says ineligible, there's a little dropdown, and you can look at it, and it'll give you the reason why it's ineligible. Some of them are gonna have a couple of bullet points. One might say employment is not certified; in that case, you need to certify it. But it would also say if there was one for forbearance or deferment or just a payment plan that didn't count for whatever reason, those are the months if they already have the employment or they will have the employment if you don't want to do the employer thing yet.
To note, say, hey, these are gonna be the ones that I'm eligible to buy back and start to count those in your possible PSLF count. 'cause the the tracker that's on there doesn't, so you're gonna have to add those back in on your own to say, Hey, how close actually am I?
Daniel Wrenne: So if I got, so if I have a hundred qualified according to their records, and then I see that I have 20 of these potential buyback months, then per my account, I'm at 120?
Jeff Wenger: Oh, right, yeah, exactly. And that's going to, if that was the case, if you were in the SAVE plan, especially this forbearance, you're probably at about those 20 forbearance months at this point anyway.
So that might be you, like if that…
Daniel Wrenne: Yeah, I do have student loans.
Jeff Wenger: Yeah. Yeah, he does. And he has to recertify him in July. So get on that. Mark it in your calendar, Daniel, but.
Daniel Wrenne: If you're not at 120, you gotta wait till the 120?
Jeff Wenger: Yes. So for the actual buyback itself, and that's probably where I think I mentioned 2,400 applications processed, 2000 were approved, roughly.
My guess, if I were to bet is a lot of those were somebody that had forbearance months but didn't have the employment. And there's a draw to I wanna get these counting. And so a lot of people apply, but maybe didn't have that 120 months. So at this point, I would actually say, get to that 120 months, get that employment certification into your employer that month, get that process.
So it's already on the books for studentaid.gov to, to see their department of education. And then fill out that buyback form so that you're already in the easiest category to process.
That way, you're not waiting for 20 months, then you get the denial that, oh, you didn't have your employment certification up to date.
Maybe you didn't even, I would still keep certifying employment after you submitted that, but yeah, that would be terrible to just reenter the queue after that and be like, I just never recertified my employment.
Daniel Wrenne: Yes. It's an easy step.
Jeff Wenger: Yeah. Yeah.
Daniel Wrenne: All right.
Jeff Wenger: I guess if you're one of those people that loves student loans and are on the student loan forums and Reddits and things like that, and there are a few different things that keep showing up there.
Do they make any difference? We don't really know, but. Some people do 'em anyway. Some of 'em are low effort, some of 'em are higher effort. But some people have suggested that if they filed their complaint on studentaid.gov, then oh, my application got processed. That doesn't mean there's a resolve of that complaint necessarily.
But that's a very low effort. That takes five minutes to go to studentaid.gov and submit a feedback complaint about it.
Daniel Wrenne: I bet they have a lot of'em.
Jeff Wenger: And a similar vein, and this is one that probably goes fewer places at this point because of the changes that have happened to the consumer protection bureaus and stuff like that.
But you can try and file a case with the ombudsman with the student aid, and then maybe the highest effort one to work on, and maybe the possibly one that actually get a case looked at would be contacting your congressman's office about it. Say, Hey, I've submitted for this, it's been three months, six months.
It's been 10 years since I applied. Yeah, contact them before 10 years, I think.
Daniel Wrenne: Two years. One year maybe.
Jeff Wenger: Yeah. At one year, make that contact anyway. Try it. But yeah, just to say, Hey, it's been this long. I've been hanging in limbo. I've been paying my taxes. I've been voting for you the whole time.
Daniel Wrenne: I'm thinking about not less…
Jeff Wenger: Just looking for resolution on this. And. See if that helps to move the case to the front of the line at some respect. Again, those are not tried and true options. We don't know if there's a correlation between those. Some people report…
Daniel Wrenne: Can't hurt…
Jeff Wenger: They've done this and then loans were forgiven.
So yeah, effort versus reward, some of those are easy. Some of those take a little more effort.
Daniel Wrenne: Nice. Well, any parting thoughts on… I think we hit the high points PSLF buyback options.
Jeff Wenger: Yeah. Yeah. So if you're on SAVE, get a plan to get off of save because it's gonna change sometime.
Be thinking about that tax times upon us all and it impacts student loans and that buyback is impacting more and more people, so just put yourself in the best position to resolve that when it's time to.
Daniel Wrenne: Yeah, now's the time to be thinking about this. Like we're recording this in February.
Maybe it'll come out in March, early March, but you want to give yourself some wiggle room where it's not like April 15th. You gotta have a little lead time prior to filing your taxes, ideally to look at this, especially related to the tax return. And so sooner the better.
Jeff Wenger: I guess if it's April 15th, you're probably gonna do the extension.
Daniel Wrenne: Just file an extension, right.
Jeff Wenger: You're gonna do that strategy one way or the other. You're extending.
Daniel Wrenne: There we go. We got our reason. All right.
Jeff Wenger: Alright, it was fun to talk taxes and student loans. Like nobody will talk to me about this stuff in my daily life, so I just appreciate the outlet to talk to you, Daniel.
Daniel Wrenne: Yeah, I enjoy it. I'll talk about it anytime. Thanks for coming on, Jeff.
Jeff Wenger: Alright, we'll see you again next time.
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