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What the heck is going on with student loans? · Public Education Matters

• Various student voices 0:08 Public education matters. Public education matters. Public education matters. Jeff Wensing 0:14 This is Public Education Matters brought to you by the Ohio Education Association. Katie Olmsted 0:26 Thanks for joining us for this edition of Public Education Matters. I'm your host, Katie Olmsted, and I'm part of the communications team for the Ohio Education Association and the nearly 120,000 public school educators OEA represents around the state. A lot of those educators had to take out student loans to get where they are, or they're helping their own children with student loans as they pursue their higher education dreams. And so when there are changes at the federal level to student loan programs, a lot of educators have a lot of questions about what those changes mean for them, and frankly, there have been so many changes over the last year that it's easy not to even know where to begin with the questions you need to ask. Luckily for us, we have an amazing resource with NEA Member Benefits Affiliate Relations Specialist Guy Kendall-Freas, who can answer a lot of our questions on student loans and so many other topics. We sat down with him a couple weeks ago to try to get up to speed on where things stand with student loans right now. Guy Kendall-Freas 1:37 Hello, my name is Guy Kendall-Freas. I am the affiliate relation three for NEA region three from NEA Member Benefits. Katie Olmsted 1:45 And you are the person in my life who knows the most about student loans. I have no idea. I'm starting right here saying I have no idea what's happening with student loans, because I have lost track. There have been too many changes. And I thought, hey, now is a great time to ask the guy who knows. Guy, what is happening? Guy Kendall-Freas 2:03 Well, Katie, you're not alone, and don't feel bad that you don't understand it, because it changes rapidly, and it's a challenge even for me to try and keep up on it. There are many changes that have occurred and that are coming to student loans and loan forgiveness, and this is a great opportunity to share with the education matters audience some of the things that they may benefit from knowing about as the changes are preparing to take place between now and and the Fourth of July. In the previous administration, in the Biden administration, we saw some unprecedented effort to reduce the burden of student loans and loan debt, and the result was that there was 140 million, give or take dollar, excuse me, $140 billion of student loans that were canceled for about 4 million borrowers. And that's huge. Imagine that many borrowers being able to fully engage in the economy, buying homes, increasing the education that they have, just buying things and being more financially secure. During the end of Biden administration, things were looking pretty bright as the final act was to to introduce a new income driven repayment plan, and they transitioned all the borrowers who were previously in the revised Pay As You Earn plan into this new plan in January of 2024 so and that was about a million borrowers. And quickly, there were challenges, republican challenges. And look, I'm not being partisan, it's just factual. The challenges were led from attorneys general, from from all, all GOP led states, and they tried creating every argument that they could find, and most were rejected, but they finally found a sympathetic court and put a hold on this save plan, and as a result, we have about a million and a quarter million and a half borrowers who've been in What I call Safe purgatory. The court put a hold on that repayment plan, and they keep the hold on until they've heard the arguments and issue an opinion, or until that borrower chooses another repayment plan they've heard the arguments and have not issued an opinion, and that's been made moot by that big budget busting bill that they passed back in a few months ago that is anything but beautiful as we've often described. That bill, among other things, directs the Department of Education to discontinue most of the income driven repayment plans. But. They you know already the revised Pay As You Earn was transitioned into save, which was on hold. And that leaves three other options, the Income Contingent Repayment plan, the Income Based Repayment plan and the Pay As You Earn plan. The Omnibus Budget Reconciliation bill is going to consolidate all of those into just one, the Income Based Repayment plan, but they'll tweak it a little bit to incorporate some of the features of the others. For example, the Pay As You Earn plan has a payment cap of 10% of one's discretionary income, and Income Based Repayment, capped it at 15% so in this new version of Income Based Repayment, if your loan was let prior to 2014 your payment cap will be 15% of your discretionary income. If your loan was let after 2014 it'll be capped at 10% now they've also authorized the introduction of another repayment plan. They're calling it the RAP plan, r.a.p. Repayment Assistance Program that they will introduce in July and will become the B only income driven repayment option, sort of a hybrid that will be available after July of 2028, now that plan is going to cap your payment at some percentage of income, but as incomes increase, that percentage of your payment will increase as well. One other major difference is, for some borrowers today, whose income is at or less than 150% of poverty, their payment may be zero. Under the Repayment Assistance Plan, there's no more $0 payment. There'll be a minimum of $10 it'll be required from every borrower. Katie Olmsted 7:04 Just to put that into perspective, what is 150% of the poverty level? Guy Kendall-Freas 7:09 It depends on the family size. We're a family size of one. It's around $32,000 and it increases with additional family members. Katie Olmsted 7:19 So a lot of our education support professionals, starting teacher salaries in many, many parts. Guy Kendall-Freas 7:26 And when you factor in, you know, additional family members, and you know it was liberal enough to include anticipated additional family members, those who are expected to be born in fewer than nine months, they required that the bun was in the oven. You couldn't be planning to start a family. That family had to be coming. But that was very generous and made sense, because you're going to reallocate some resources in anticipation of that child coming. But that it all changes. Since the court's decision is now moot. They've not issued their opinion because save goes away with the passage of the conciliation bill. So there's still about a million borrowers in save purgatory. Their loans have been in forbearance since May of 2024, they started accruing interest again last August, so borrowers are seeing their balances increase, they will automatically be transitioned to the RAP plan after July, unless they previously apply for another repayment plan, and the repayment plan that will be available to them is the Income Based Repayment plan. Now the RAP plan, in some cases, may result in a lower payment, especially for those who have loans that were let prior to 2014 but by making the election choosing a different repayment plan, now that borrower will preserve their right to choose the plan with the lowest possible payment if they take no action and are just moved to the RAP plan, there's no coming back, and it might be wise for some borrowers to make that choice now, make that change and preserve their option to choose a lower payment. And that is particularly relevant for those who have Parent PLUS loans because Parent PLUS loans going forward will have one repayment plan available for them, and that's the standard repayment plan. It's a plan that does not allow them to qualify for student loan forgiveness. So for those who are going to be getting Parent PLUS loans in the future, public service loan forgiveness. Necessarily going to be available. Katie Olmsted 10:02 Wow. Guy Kendall-Freas 10:03 We have some folks, yeah. Katie Olmsted 10:04 That's a that's a big difference for the people who are listening to this podcast. Guy Kendall-Freas 10:09 That is huge. It's always been a bit of a challenge to achieve Public Service Loan Forgiveness, because it required 120 months of payments to be made after you consolidate the Parent PLUS loan to a direct consolidation loan. And retirement may be the challenge, because they have to make those 120 payments while they're concurrently employed with a qualifying employer, but the other challenge is the only income driven repayment plan available for those loans that are Parent PLUS loans, or were Parent PLUS loans, was the Income Contingent Repayment plan, ICR, and that had a payment cap of 20% of your discretionary income. And those who have Parent PLUS loans probably have some years of experience. They're probably a little higher in the salary schedule with fewer dependents than they may have had 10 years earlier, so 20% of your discretionary income may well satisfy that loan before 120 payments are made. But there's still those who are going to be on track for forgiveness. They are highly encouraged to enroll in the Income Based Repayment plan and then be allowed to continue that trajectory. It has the additional benefit of reducing their payment from the current 20% of their discretionary income to 15. With one copyright if you intend to get a future student loan for another student or their child, all future loan payments will have to be made using the same repayment plan. So there's hope being lost for those borrowers. That was I was a special ed teacher, and I know, yeah, you can't just say negative things. You happen to throw some positive outcomes. The positive thing is, I know that Parent PLUS loans are very attractive anymore. Katie Olmsted 12:13 It's true. Guy Kendall-Freas 12:14 Starts with a 4.18% origination just to get the darn thing, and then an ongoing interest rate between 8 & 9% there are options for those who may be needing Parent PLUS loans, and who might have Parent PLUS loans that after these changes are imposed, the payment is just unmanageable. There are private loans that are available that could result in more favorable terms and a better interest rate. Of course, interest rates are subject to each borrower's particular situation, but in many cases, that may be the option that more beneficial. And of course, for any members, there's a great Student Loan Refinancing program available. Other changes with Parent PLUS loans include limits on how much you can borrow for your kiddo. For undergrad, you're limited to $20,000 per student per year with a lifetime max of 65,000. Katie Olmsted 13:24 Which is like the price of one year of tuition for a lot of places. Guy Kendall-Freas 13:28 That is just a huge challenge. And then if that child goes on to graduate school, they are limited to their grad loans for $100,000 or their lifetime, unless they're attending a professional school, medical school or law school, and that limits 200,000 but Katie, I'm pretty confident most medical school are going to have tuition that exceeds out. Katie Olmsted 13:56 Right Guy Kendall-Freas 13:57 I'm a little concerned about the future. Could have a healthcare shortage. Katie Olmsted 14:02 I'm concerned about the future of many things. I mean, we're by saying that the professional degrees don't include education, we are first off devaluing very valuable people, but also making it harder for people to enter the profession when we're already facing a cliff of just the pipeline of incoming educators is so, so much smaller than it needs to be. People are not going into this profession like they used to. Guy Kendall-Freas 14:31 Absolutely. There are fewer people answering the call because the economics don't allow it. Katie Olmsted 14:35 Right Guy Kendall-Freas 14:37 I'm not much of a conspiracy theorist, but if I were, I could easily go down the rabbit hole that there's a strategy to prevent all that those from very affluent means receiving higher education, and that would portend tragedy for our country. We need. Those dedicated education employees, dedicated healthcare professional, dedicated public employees across the country who are answering a call without regard to detriment to their own financial health. But this might might need to exclude them from future service. Katie Olmsted 15:26 The answer to that in the past was the Public Service Loan Forgiveness Program. And longtime listeners to this program remember when Guy was on with us before talking about the changes to make that actually accessible, because there had been a lot of people who probably could have qualified, but there was just a hold up in the paperwork and all the things. There were changes that happened. Lots of people got life changing loan forgiveness after doing their their 120 payments, or whatever. And it sounds like Public Service Loan Forgiveness is becoming more out of reach again. Guy Kendall-Freas 16:00 So not necessarily. It may be a little harder to achieve based on whether that education is achievable, right, and the limits that are being placed, it will be harder, it will be impossible to achieve for those who have Parent PLUS loans. But the good news is that public service loan forgiveness is still available. There is some concern from some folks about the news of 2026 brings in the tax ability of loan forgiveness, and that is true, except for public service loan forgiveness, future loan forgiveness, Perkins loan forgiveness and a couple other specialized programs. What is taxable is loan forgiveness under an income driven repayment plan for the general public that would would have taken about 20 years to achieve, and under this administration, will take 30 years to achieve, I guess, the good news there is that there won't be much of a balance to have to pay tax on after 30 years of payment for those borrowers who are looking to get out of the safe purgatory, you know they'll need to contact their loan servicer to change their repayment plan. Be prepared. It takes some time. There is a huge backlog at the loan servicers with borrowers who have who have applied for a change of repayment, as well as those who have requested buyback of months in forbearance. You know Katie, when we started to really talk about student loans and loan forgiveness started the pandemic, we had all loans put into forbearance from March of 2020 until August of 2023, and during those 43 months, anyone who was at the same time employed by a qualifying employer, got credit towards the 120 payments that they need. Those who are in the safe purgatory don't have that advantage, those months do not qualify. However, if that borrower has been employed by a qualifying employer for 120 months or more, they can request from their loan servicer a buyback of any or all of the month that their loans were in deferment. They would simply make the payment that would have been due at that time, but making it at a later date. So perhaps, if they get a tax refund this year. This might be that might be found money that they could use to buy back some of the months. But the caveat is, you have to provide the 120 months of service already that's added to the backlog. It is taking 30 to 60 days, sometimes a little more, but there is a processing forbearance that your loans can go into to prevent you from paying more money than you'll need to on your loan make these changes. It's it's frustrating you know, prior to the Biden administration, we had four years of Trump during which 7000 loans were forgiven over that four year period, then we entered a four year period with over 4 million forgiven. These will be some challenging time, but education employees are resilient people. They seem to be laser focused on the work that they're called to do, without regard to the rest of the challenges that they face, whether it's how they teach or what they teach, or the impact of their loans as the burden. But it's wonderful that both NEA and OEA are here for them, for those members who are needing more assistance or who want to stay current, there is the NEA student debt navigator, powered by Savi. It's available at no cost for every NEA member for their first year or first 12 months of use, and a very discounted rate, around $60 in subsequent years. But there's also a do it yourself level and KDM so cheap, at least, that's what I'm told and I absolutely would take the 12 months of service at no cost, and subsequent years, I'd be inclined to look at do it yourself, which gives me all the access to the tool, but doesn't provide electronic submission of paperwork, but it's at no cost. Katie Olmsted 20:55 I mean, free is a great value. $60 a year, an exceptional value, considering how much money this may be able to save you when you are armed with the information that you need to make the best choice for your situation. And that's, I think one of my big takeaways is, you know, I'm I'm not able to keep track of all the changes. I'm not I sort of tuned out because I was overwhelmed, and thank goodness you got me back on the right track here, but people could stand to look at, I mean huge losses and huge burdens if they are not taking the right steps right now to try to to navigate this. Guy Kendall-Freas 21:34 Absolutely. You know, over the past few years, I've worked with hundreds of our members, some of whom had given up. They've been paying on their loan for so long, and it just seemed impossible. But there is, there is hope here. There is the opportunity. It requires staying current. Those who enroll in the student debt navigator will have access to weekly webinars. It's it's not interactive, but it provides the opportunity to hear changes as they occur. There's one this afternoon, for example, when I'm jumping out just to make sure that anything I've said to you today is still accurate. Katie Olmsted 22:20 Well, and that's a good reminder. I'm talking to you guy on February 25th this will drop in a couple weeks, and lord knows, things might change again between now and then. So absolutely, people should be getting on to those webinars. Guy Kendall-Freas 22:34 You're doing a great service for those in the education community, whether they're OEA members or they're members of the community, thank you for this opportunity. Katie Olmsted 22:45 Our sincere thanks again to Guy for his expertise and guidance on this and so many other things. Guy's guidance is one of many perks of the NEA member benefits program for all OEA members, go to neamb.com to check it all out, and while you're online, make sure you subscribe to public education matters wherever you get your podcasts, so you don't miss an episode in the future. New episodes continue to drop every Thursday this season, as we continue to dive into the issues shaping the public education landscape in our state every day. Because in Ohio, public education matters. 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