Cracking the Code of Student Loans with The College Investor - Episode 56
In this episode, we chat with Robert Farrington, a seasoned expert in personal finance and the founder of The College Investor. Robert shares his journey from a college graduate with $43,000 in student loan debt to a successful financial blogger. He highlights the issues with student loan servicers and offers insightful advice on managing and paying off student loans. We delve into various strategies, including income-driven repayment plans and loan forgiveness programs that can help in understanding the student loan landscape making this episode a treasure trove of practical advice for anyone navigating the complexities of student loans.
About our guest:
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page or on his personal site RobertFarrington.com. He regularly writes about investing, student loan debt, and general personal finance topics geared toward anyone wanting to earn more, get out of debt, and start building wealth for the future. He has been quoted in major publications, including the New York Times, Wall Street Journal, Washington Post, ABC, NBC, Today, and more. He is also a regular contributor to Forbes.
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TRANSCRIPT:
[00:00:00] Naseema McElroy: What's up? My financially intentional people. So we are joined by Robert Farrington today and you guys are in for a treat because Robert Farrington is the O. G. of the personal finance space. He has just come up. From college, right? You've been doing this for a minute and I'm just excited for you guys to know him.
If you don't already know him, I'm a big fan of Robert Farrington because I've been following his work for a long time back when I had $200,000 in student loans.
[00:00:30] Robert Farrington: Hey,
[00:00:34] Naseema McElroy: talk about just some interesting ways to pay off your student loans, but the student loan environment, as you all know, is crazy.
Nowadays, there's things changing seems like every day. And so I'm excited. To have Robert here so we can break down some of these things. Hey, Robert, welcome to the financially intentional podcast.
[00:00:55] Robert Farrington: thanks for having me. I'm excited to be here. And let's talk about all this crazy student loan stuff.
[00:00:59] Naseema McElroy: First let's talk about the college investor and how you started that and why. Mm
[00:01:05] Robert Farrington: So, the funny thing is, is I had no intention of talking about student loans. I started the College Investor as a side hustle back when I was finishing college, because I wanted to teach the fun stuff and talk about building wealth. I want to talk about investing and side hustling and exactly what I was doing.
So I was side hustling and I was taking that extra money and I was investing it. And then, If you've invested at all, you get like dividends and you start seeing your money grow. And I thought that was the coolest thing. And I was like, Oh, everybody should know about all this stuff. And how you can make your money work for you.
And I thought it was amazing. But no one taught us about student loans. So when I graduated college, I had $43,000 student loan debt. So not your 200, but I had $43,000. And, cause what did I do? I just borrowed it. No one told me that I should try to minimize my student loan debt.
And no one said that I should, do all this other stuff, get scholarships and try to lower it. So I just, I checked the box when my financial aid came, I got my student loans and I moved on with my life. But then after college, I started having to pay these things back. And that was fine. I had a job, I was working and I was paying it, but.
All of a sudden I started getting these notices from FedLoan that said, Hey, you're late on your student loan payment. And I was like, Whoa, whoa, whoa, whoa, whoa. I'm set up on direct debit. There should be no late. And this was way before there was a student loan crisis. And everyone was talking about how terrible all these companies were, but they'd screwed up all my stuff.
So I had this little baby platform. And so what does any good blogger do? I wrote about it.
[00:02:34] Naseema McElroy: Complain
[00:02:35] Robert Farrington: I complain. I wrote this whole thing about why FedLoan is the worst student loan servicer and how they screwed up my student loan payments and all this stuff. But oh my God, it was one of my first articles to ever go viral.
And I started, I think that thing still has 700 comments and it's all these people saying, me too, I am having these issues and no one wants to hear about them. My Congress person's not listening to me. The news doesn't share that it's impossible to pay back your student loans because of all these issues.
And it really opened my eyes and I was like, holy crap, there's a problem here. No one's talking about this problem. And a lot of people are also saying Hey, I want to get to the investing stuff and the building wealth stuff, but asterisks, I have this student loan thing that no one's talking about.
So I really started learning more myself, covering it, writing about it, sharing these issues with loan servicers, sharing all the ways that you could pay off your student loans, navigate this system. And then, fast forward, here we are 10 plus years later. And that's what we're known for, is how to get out of student loan debt so you can start investing and building wealth for the future.
[00:03:41] Naseema McElroy: love that. For context, can you share like, what year you wrote that article in? Yes.
[00:03:49] Robert Farrington: 2010 time period. It was very early on, it was well over a decade ago at this point in time. And so now, of course, we hear about student loan servicers all the time. But, no one was talking about this stuff back then.
[00:04:01] Naseema McElroy: Yeah, I, that was just an interesting time in general 2009. That's like the housing prices. Then you have like people defaulting on their student loans left and right, but the services were horrible. Like I have fed loan servicing and oh my God,
[00:04:16] Robert Farrington: You
can
[00:04:17] Naseema McElroy: conversations
[00:04:17] Robert Farrington: right?
[00:04:18] Naseema McElroy: I used to have.
[00:04:20] Robert Farrington: Yeah.
[00:04:21] Naseema McElroy: just like. I'm just trying to pay this off.
Can you explain to me how to do it? And I was just like you paid. So I'm like, but no, I want to pay in advance. And they're just like, okay we'll make it. So your payment isn't due until it was just always a headache, like every time. And I was just like, let me just pay them off to get them out of my life because it was just so time consuming.
It was horrible. It
[00:04:45] Robert Farrington: No, you nailed it. And I think that was also, it's still the problem today is that I think, people with student loans are calling their loan servicers and they're hoping for help. They're hoping for financial advice. But you have to remember that this call center rep is a minimum wage worker that is not your financial advisor.
They might've only had two weeks of training and they have a little flip chart. And it's Oh, the person said this. So like flip, flip, flip. I should say this. And there's no real help when it comes to your student loans by calling your loan servicer. Yes. They'll say certain things, but.
They're also relying on you to say certain things so that they can maybe point you in the right direction. They're not here to hear your story. They're not here to know your whole financial situation. They're not here to help you optimize things. They're here to get you off the phone as fast as they can so that they can get to the next phone call and maybe look good on their metrics.
[00:05:39] Naseema McElroy: A hundred percent and of the college investors like platform. How much of it now is still focused on student loans?
[00:05:47] Robert Farrington: It's still a big part of our platform. Yes. We talk about banking and investing and all these tangential things, a lot of saving and paying for college now too, because we found that we all grew up right outside about this stuff, 13 years ago, and now here we are with kids and I get a lot of people that are like, Hey I want to avoid this problem for my children.
[00:06:07] Naseema McElroy: Opting out.
[00:06:09] Robert Farrington: Yeah, so we talk a lot about saving for college, paying for college. I also have this mission, like I want to help people avoid it. So I love talking to like high schoolers, like that are on that decision path. It's Hey, like this is what could happen if you overborrow for college.
Like, how do we avoid it? How do we stop it? And then of course you just have all these tools and services. Like as much as we want to say, like the world of finance is like simple. It's just math. No matter what, you're going to encounter a tool or a service. You're going to need a bank account. So again, I want to help people make better financial decisions so that you're not stuck at like a big bank.
That's like charging you monthly fees because all that money could go to building wealth and it frustrates me when there's so many great options out there and people are like my dad banked at X, Y, Z, big bank. I'm going to bank at X, Y, Z, big bank. And it's no.
no.
[00:07:01] Naseema McElroy: Please don't, Please
don't, but I love that your platform is just focused around making sure people are optimizing their money and it's constantly evolving and it's definitely a great resource that I use. I love your articles. I always use it as a reference point, especially when I was writing my book, but I just want to take a moment because you've touched on something that just hit my soul.
We're of that generation, like that first generation that had access to massive amounts of student loans and we were in our teenage years. We didn't understand how this stuff worked and we are suffering through it as an adult. And number 1, I just want to give those people grace because when I post about my $200,000 student loans, people are like, Oh, are you stupid?
You signed up for it. It's your fault. No, like that was the option that was given. I did not fully understand that process and how come it's my fault when I'm an 18 year old signing these massive papers, how come it's not the bank's fault for offering that to me?
[00:08:01] Robert Farrington: Hey, I, I just tweeted this out the other day and it's that old saying, if you heard the saying that, if you borrow $10,000 and don't pay your $10,000, it's your fault. But if you borrow a million dollars and don't pay your million dollars, it's the bank's fault. There gets to be a, There gets
[00:08:16] Naseema McElroy: Yes,
[00:08:16] Robert Farrington: a point where like the system is wrong and I'm actually a very accountability driven person.
And I do think that people need to take personal accountability for the decisions they make around this whole college experience. But on the flip side, like you said, we grew up at a time when it was like, everyone goes to college or you're a failure. That's what like our teachers and our guidance counselors were telling us.
And then also like they built this system where it's like, Hey, it doesn't really matter what the cost of college is. Click this email box and you're good. And they don't tell you the financial repercussions. There was very little education. And now, granted, it's a different day to day and there's a lot more tools and a lot more ways to understand how the system works, people are trying to put accountability on the system, which is great.
And granted, it's not working out really well clearly, but at least there's more conversations about this. But yes, accountability is on the borrower, but on the same time, like they made this decision in a system that like pushed you along in a certain path.
Right?
[00:09:16] Naseema McElroy: Yeah, if it wasn't so easy to do We wouldn't have done it they streamlined it in a way. So in normalized it for us and so we didn't How could you even conceptualize how that would affect you in adulthood? If this is something that you've never experienced You're a child. You've never paid bills.
You've never done these things And so I just want people give people grace, but at the same time I'm like, okay, I paid off my student loans. Okay. I wish I would have gotten them forgiven, but I have paid them off. So I haven't come through the other side of it and I'm grateful that I don't have to go through it.
But I have also set my kids up so that they don't have to do it. I say, I've given them an option out of that scenario. I am not letting them pay for school for college, at least not take on student loan debt. So they have their 529 set up. So yes, it is, but that's a very like trauma response, very much response to the things that I had to go through dealing with student loans, but definitely like the environment of student loans has changed substantially.
And I just feel like since COVID it has exponentially changed. And it seems it was like a set in stone kind of way that you approach student loans until we got to COVID. And then we got to this pause and now every month there's like a lawsuit, a change in payment and like all these kinds of things.
So I do not envy people that have student loans right now. It's just so people who are in that place where they're still having student loans, like what do they do? Who do they turn to?
[00:10:44] Robert Farrington: Absolutely. So one, I don't envy having student loans, but honestly, if you were going to have student loans, today is the
day
to have student loans because there are more options and programs and forgiveness than ever before. And finally, they're trying to actually fix the system because the irony is a lot of these programs actually already existed.
But they were like doomed by operational failure of our government. And so it did take lawsuits and it did take things to finally, get things moving in the right direction. So where do we start? I first off always recommend people get organized with their student loans and their finances in general, because we can't have a great conversation about what to do next.
If you don't know where you are now, and it's always let's talk about what you owe, have all lay them all out there. I also want to know what you own. I want to know what's coming in all your income and then what's going out. Because the cool thing with student loans today is that there's a lot of levers that we can pull.
Especially if you have federal student loans and especially if you work in public service there are so many things that you can do to potentially pay very little or nothing on your
[00:11:53] Naseema McElroy: Oh,
[00:11:53] Robert Farrington: loans. You personally could also start building some wealth. Getting some money in a 401k or IRA and get your loans forgiven down the road.
And so it might, this is crazy to say, but it might not make sense to make extra payments and try to pay off your, your $200,000 in student loans. Like you might've been wealthier today. Of course, like hindsight's always 2020. And I'm not trying to put you down, but you could have maybe been wealthier today.
If you didn't pay off those student loans as aggressively as you did. Now, granted, it sure as hell feels good to have no student loans.
[00:12:25] Naseema McElroy: But listen, listen, I'm, and I'm frowning right now because I have done this analysis, Travis Hornsby, of
[00:12:32] Robert Farrington: I love
[00:12:33] Naseema McElroy: like years ago. We broke it down right when I, right after I pay my student loans off and he, I was in public service loan forgiveness. I was in the program, but I was just, like I said, I was tired of fed loans.
I work at a place that has a 403B and a 457. So I could have dropped my taxable income so much and paid so little. And then by this time had the majority of my balance forgiven, but just in Optimizing my investments instead of maximizing my student loan payments that alone in those couple of years I paid off my student loans was $80,000 like $83,000.
[00:13:13] Robert Farrington: so for those of you listening, you hear that it's so weird to think about, but by not paying as much to your student loans, you would have been $83,000 wealthier when you were said and done, and that's, what's so crazy today and it's like mind blowing because all we hear about in the media is you got to pay off your student loans, you got to pay off your student loans.
It's no, you need a plan for your student loans that could involve paying them off. But it might not. And so here's why it's all this stuff post COVID, right? So if we were having this conversation five years ago, maybe not but here we are today. So first off, there is this brand new student loan repayment plan.
It's called save. S A V E. And this thing is a game changer. And here's why it's a game changer is it is an income driven repayment plan. And what that means is that it sets your student loan payment at a percentage of your income. And we've had these before, right? You've heard of IBR income based repayment or pay as you earn.
Those ones were all 10 percent or 15 percent of your income. This new save plan 5 percent of your discretionary income. So, if you were just today, like looking before COVID and now today you cut your student loan payment every month and half, just because the calculation lowers it to 5 percent of your discretionary income.
The other thing it did though, was change the definition of discretionary income. To 225 percent of the poverty line, there's some math in there, right? So what that means though, is before the other plans, IBR was 150%. So that also means you get to shelter more income before you even have to make that 5 percent calculation on your student loans.
And so for a lot of people, this means that you could have a 0 a month student loan payment legally. Or a very low payment. And so just put some context in there. If you're like a single person, you have to make about 50 K a year before you even make a student loan payment. And if you're a family of four, it goes up to 68, 000 a year in income before you even have to make anything above a 0 payment.
that's
[00:15:22] Naseema McElroy: taxable income, right
[00:15:24] Robert Farrington: Correct. That
is
[00:15:25] Naseema McElroy: then
[00:15:26] Robert Farrington: income.
[00:15:27] Naseema McElroy: if you're making a hundred thousand dollars with a family of four Then dropping your, contributing to like me, that's 40, 000 in my, in my 403B or my 457, that drops me down to 60. I wouldn't even have to make a payment basically because
[00:15:44] Robert Farrington: it. So it's like suddenly you can start saving for yourself and building your own. So how do you do that? You do your four Oh three B you do your four 57. You may be doing IRA. If you're eligible for a health savings account, you do a health savings account. All these things are putting money into your own wallet.
And guess what? You don't have to pay the government as a result of that. And so there's a lot of levers that we can pull. The other aspect of the SAVE plan, which is really cool, is that the problem was when you and I had student loans, if we had an income driven repayment, our loan balance would grow, right?
Like everything you didn't pay, did you actually start at 200 grand or did you borrow like 140 and it
[00:16:25] Naseema McElroy: It's, it was 180, it only got to 200 because I had paid it down so fast. I paid it down over two years. So
[00:16:36] Robert Farrington: but, but it kept growing,
[00:16:37] Naseema McElroy: yes, exactly.
[00:16:39] Robert Farrington: so the save plan stops that. If your payment is below how much you're supposed to pay, the interest that would have normally been added to your student loan now gets forgiven. And so the whole premise is if you're on the save plan. Your loan balance will never grow more than you borrowed it.
Of course you got to pay it. The amount you borrowed is like the upper limit, but let's say it's $50,000 bucks, let's say your payment zero. So even though you're making no progress to that $50,000, your $50,000 amount will also always stay $50,000, which is really cool. And then. You get the forgiveness potential.
There's programs out there, but save itself has built in loan forgiveness. It's not sexy. It's after 20 or 25 years, but let's just say life didn't work out. You could have graduated at 22. And by 42, that balance is done. It's forgiven. And so
[00:17:31] Naseema McElroy: that's me. That's where, that's most of my audience. That's where we're at, right? We're in our, we're in our late thirties, forties, like we're right there. So if we're not there, we're on the cusp of being there. So it's exciting because it offers a whole bunch of potential where you're not like, you had those uncles that has student loans, just sitting around forever, they in their 60s, 70s with student loans.
And that was definitely my reality, right?
But to have that opportunity, it's crazy.
[00:17:58] Robert Farrington: absolutely. So let's talk about something that is very important though. So if you are in your like late 30s early 40s, there is the potential that you have a student loan from before 2009. If that is you, you need to take some action right now, before April, because if you have these old loans, these old loans are called FFEL loans, federal Family Loans.
But you look on your, like your dashboard, your fed loan dashboard, whatever dashboard, and it says FFEL before your loan. You need to consolidate your student loan before April. And the reason is, is that all of these new programs that we're talking about apply to direct student loans and every single federal loan after 2009 was a direct loan.
But every loan before 2009 was not a direct loan. And the reason is like legal loopholes. The government can't help you with these old loans. Like you have to get a new loan, but they're doing a bunch of cool things. They're counting your old payments. If you consolidate. And get a new direct loan before April they will count all the payments you made on your own loan.
And you could already be at that forgiveness level. So they're going to do what's called the IDR recalculation and they will calculate and see if you qualify. And even if it's a 25 year period, if you got a loan, you could be close. And so you could be seeing forgiveness in the next couple of years.
But if you don't consolidate, you could be left holding the bag. And I don't want to see that. So please, please, please. If you're listening to this, if you have old FFEL loans, please go consolidate. It's the actual opposite of what we told you to do for. And when I say we, I say student loan people, the government, we told you never to consolidate because it resets the clock
[00:19:42] Naseema McElroy: Mm
[00:19:42] Robert Farrington: right now, it doesn't reset the clock and you need to.
So the clock starts counting for you.
[00:19:48] Naseema McElroy: Yes, and I think a thing, an important thing to note when you say consolidate, it's just a stupid student loan term for refinance because
[00:19:56] Robert Farrington: No, no, no, no. Don't say the word refinance. Consolidate is consolidate.
[00:20:00] Naseema McElroy: but, the, the, the reason why I'm trying to differentiate it is because you can consolidate one loan. Usually consolidation means a combination of loans, but it's just a way of
[00:20:13] Robert Farrington: We're not speaking English. We're speaking
[00:20:14] Naseema McElroy: Yes.
[00:20:15] Robert Farrington: student loan lingo. So, you can consolidate one loan to one loan. Which is Not English, but hey, that's what we call it. The reason I stopped you though, on the refinance though, is because refinancing is a specific student loan term. That means I'm going to take out a private loan.
And I'm going to replace my other loans. And so you don't want to necessarily refinance your federal loans. Most people don't. There's some very sexy advertising from these companies. There's a big stadium named after a company. Those are student loan refinancing companies. And you probably should not refinance your federal student loans.
But consolidating your loans is a, is a good thing to do.
[00:20:54] Naseema McElroy: yes, and I, and thank you for bringing that up because I think, and there was a point in time where there was a good you could do a good argument for taking your student loans and your federal student loans and making them private. For the interest rates were super competitive and there are short repayments and all this kind of stuff.
But now, in this environment, if you do that, you lose all these protections that you have, and you lose access to all those special programs that we're mentioning because. You have now taken them into a private arena. It's a whole different area to play in. And so thank you for clarifying that because I did not mean refinance in the sense of taking your loans out of federal student loans, even though the fans get on my nerves, but they offer a lot of protections and these access to these programs.
So for example, before the pandemic, if you had consolidated into a private loan, taking your loans out, you did not qualify for all the pauses and all of that stuff. That people got taken advantage of, during a pandemic with the federal student loan. So they, this is a time where if you have federal student loans, you keep those federal student loans.
Yeah,
[00:22:04] Robert Farrington: everyone gets all interest, interest, there's interest on my federal student loans. Mathematically, the interest on your student loans, your federal ones, does not matter anymore. One, because of the SAVE program, and I just talked about it, I just You don't pay, you just don't pay it.
Number two is the forgiveness programs. Who cares if your loan balance grows to a million dollars, if it's getting forgiven, it's getting forgiven, like the interest doesn't matter. And then also just, if you want to do math, the math on your student loans the biggest driver, 60 to 70 percent of your total student loan payment over, 10 to 20 years is always the principal 70 percent of it.
So that's just, if you wanted to do the math all the way out. Future interest sucks. No one wants to pay it, but please don't go freaking out. Cause your student loans, like 7%, like it honestly doesn't matter anymore, which is also very counterintuitive to what we've all been taught about interest.
Now it definitely matters on your car loan. It matters on your credit card, but when it comes to your student loan, the interest really doesn't matter anymore.
[00:23:00] Naseema McElroy: Yeah, this is a whole different world. But like I said, like there was arguments for it like earlier on, but now, now that we have these programs, I would definitely say, don't worry about the interest. And I think the other thing is, is that, we have these people in personal finance that are like super dogmatic about all kinds of loans.
And, I can definitely say that I drank the Kool Aid and I was just like, I need to get rid of all of my debt. And there was a smarter way to do that. And
[00:23:30] Robert Farrington: should not be part of your debt snowball or your debt avalanche or whatever approach you want to take. They have to be in this other box, but again, it's very counterintuitive. I want to see you debt snowball that credit card and your car loan and all this other stuff. But I want to see you build some wealth and there might be a better approach to your student loan of minimizing your payment so that you can pay as little as legally allowed, because we don't want to break the law, but legally allowed.
[00:23:57] Naseema McElroy: Just like taxes. Like you, you all try to get them taxes down anyway, whatever way you can legally. Okay.
[00:24:04] Robert Farrington: exactly. It's our job as Americans to pay the government as little as legally allowed,
and that includes your student loans.
[00:24:12] Naseema McElroy: But I really liked that reframe. Take your student loans out of whatever debt equation you have. So you have two buckets. You have your credit cards, your car loans, all that, all those other loans are in one bucket. Your student loans, you need to treat them separately. Do not include them in the same repayment process.
So when people are talking about, should I pay down debt or invest? The first answer should be, it depends what kind of debt do you have, right? Is it student loan debt or is it like this high interest credit card debt? Okay. If you got student loans, let's talk about it, and then in essence, like it could also help these other areas, but we have, because it'll free up extra money if you do it the right way to be able to attack these things.
So it's really hard. For me to listen to people that have these dogmatic approaches, like all debt is bad, pay off your debt without looking at the personal, impersonal finance.
[00:25:08] Robert Farrington: You nailed it. And that's the thing because the end goal should be to build more net worth, more wealth for yourself. And sometimes when you get in these dogmatic approaches, you end up just throwing good money away. And that can be frustrating because then you fast forward the clock and you're just like, Oh man, I could have had more.
That could have enabled me to achieve my other financial goals, which maybe it's buying a house. Maybe it's, getting my kids ready for college debt free. Maybe it's retiring early. I don't know. Everyone's got their own goals, but having more money in the pot should help you enable to achieve those goals.
[00:25:41] Naseema McElroy: Yes, I love that. Are there any other clever ways we should know about paying off our student loans?
[00:25:49] Robert Farrington: Yeah let's talk a little bit about public service loan forgiveness. First off, there's a lot of loan forgiveness programs out there. We actually calculated out, there's over 80 different student loan forgiveness programs
out there. And
[00:25:59] Naseema McElroy: idea. I'm thinking there's two or three.
[00:26:02] Robert Farrington: No, there's a lot of ways to get loan forgiveness.
In fact, we estimate that over 50 percent of all student loan borrowers qualify for some type of loan forgiveness. It could be partial, it could be total, but hey, any kind of free money is a win in our book. With that being said, public service loan forgiveness is the quote unquote best, most popular program 10 years or 120 qualifying payments, you get your total balance forgiven on your student loans.
But this program, a lot of people got jaded on early on because it did not work as planned and not by any fault of the borrowers. It failed from an eclerical administrative government error. They were not ready to process these applications. They did not have it set up. People were stuck in like processing limbo to get their loans forgiven.
But also people were pulling the trigger really early thinking they qualify, and they didn't qualify. So Public Service Loan Forgiveness just started in October 2009, but the qualifications didn't actually go into effect until 2011.
So to qualify, just to do some math, 10 years, like people weren't even going to actually start qualifying until 2022. Because it takes 10 years and so that was a big part of the problem as well is that people were I said, spray and pray. They were just filling out these applications, throwing them in there, hoping they get loan forgiveness, which then also just jammed up a machine that was not even ready to handle.
The process. So what it requires, though, let's break it down. Because it's actually really easy to qualify. Number one, work in public service. And this is so broad. You can work for the federal government, the state government, local government, public education, military. firefighter, police officer, public health, which is like doctors, nurses.
But here's the thing. We talk about these careers. It doesn't matter what your career is. You just got to be employed by one of these places. So you could be like a custodian. You could be a maintenance person. You could be like a parking lot attendant. It doesn't really matter. You just have to be employed by one of these organizations in any capacity.
That W2, you get a tax time just needs to have their name on it. That's all that matters. And so we talk a lot about teachers, right? But it's no, it's all the staff members there, every single one of them from the principal to like the aid to the duty at recess, like they all count.
So that's number one. Number two is you got to fill out this form. And now it's online, which is cool. So you can go to the, it's called the P S L F help form. And if you can write your name and address, you can fill it out. Cause that's all it takes like name, address, social security number.
And then you need to get your boss or your HR person to sign it to say yes. So and so actually did work here full time for this period of time. And that can be a little tricky, but a lot of these companies, especially like school districts and hospitals and things, they're pretty good at it now.
You can even email this form to them. They DocuSign it and it goes. So then you have to have a qualifying repayment plan. And this is on you. This is on you as a student loan borrower. You gotta be on a qualifying plan. So what counts? All the income driven plans count. So that new save plan we were talking about, it counts.
Income based repayment counts. What doesn't count? There's really only two that don't count. The extended plan. So if you're on that 25 year extended plan, it does not count. And the graduated plan, don't know why those two don't count, but they do not count. Just don't be on those. Every other
[00:29:38] Naseema McElroy: But if you are on those, you can consolidate into one of the other
[00:29:44] Robert Farrington: You don't even need to consolidate. You just go in and just change it. You
[00:29:47] Naseema McElroy: Oh, okay.
[00:29:47] Robert Farrington: and you just change your repayment plan. So go in there and change your repayment plan to one that counts. And then you just need to do this for 10 years. So that's the other hard part is you gotta fill out this form every year.
You gotta send it in, but you do it for 10 years. And you can get your loans forgiven. You can also go
backwards in time. Maybe you're hearing this the first time and you're like, Oh my God, I've been employed at this, school district for the last six years. What do I do? You're gonna have to do a little legwork because you're gonna have to go find your HR department and then get them to sign off on it, but you can go back in time too, and you can get your qualifying payments to count today.
And the cool thing is, is that COVID pause that we had for, 42 months. Guess what? That was. Zero payments that you didn't make actually count for every single month that you were employed. So you could be like a third of the way there already but you got to fill out that, that form. And that's really, if you look at the data, what has held people back, people did not fill out the form and, or they did not fill out the form correctly.
And the number one thing they didn't put on the form was like their employer's tax ID number. Cause who knows it, but you can go find it,
[00:30:52] Naseema McElroy: your W too, isn't It Yeah.
[00:30:57] Robert Farrington: I'm just telling you fill out the application. This is look at the government's here's here's $50,000, but you got to do this form.
You owe it to yourself to fill out the form accurately and fully and make sure that you keep a copy of it and you hold them to account. Like you owe it to yourself. No one's going to care more about your money than you. Like you got to go and make sure you do this right.
[00:31:18] Naseema McElroy: Oh, that was a lot. But also I wanted to talk about the public service loan forgiveness during COVID. The qualifying institutions also expanded so there were some institutions that traditionally didn't qualify for public service loan forgiveness. And then they started to qualify during that time.
I had a friend who was a nurse in her instance. She had been paying on her loans forever and her institution didn't qualify. And she said 1 time. She just logged into HR site and there was a form to fill out. So she filled out the form. Lunch. He hadn't been paying during the pause and then she got this letter, like $120,000 of her loans were wiped out.
[00:31:54] Robert Farrington: definitely. A lot of that was in the health care space,
too. So California and Texas, we do things different here in California. I don't know why, but like you'd work at the hospital, but you also were not legally allowed to be employed by the hospital, which is like just the most asinine thing like ever.
And so that's what happened to a lot of doctors and nurses is that you, you're like, I work at the hospital, but no, you're not legally allowed to be employed by the hospital. You have to be employed by a third party. And this is why our healthcare system like charges so much money because there's all these layers and the, the
[00:32:24] Naseema McElroy: Don't blame it on a nurse's salary. Okay. Cause I'm tired of y'all coming for me for how much I get paid. It is not me is all these other layers. Okay.
[00:32:32] Robert Farrington: 100%. And as a result, though, they couldn't get loan forgiveness because they legally had to be employed by a company. It's just dumb. And so they're trying to fix some of this bureaucratic stuff. But I think this just shows the bureaucracy that is really the problem that we're dealing with it.
And then all these loan servicers, too. We all have to remember I love bashing on, we bashed on FedLoan. I like bashing on all of them. But if you're listening to this and you're struggling, realize that all these companies are just contractors for the Department of Education. Your real beef is with the government, your senator, your congressperson, because they're the ones that aren't funding these companies very well.
These companies get 22 a year and on average they only get 400 per loan servicer for the whole time of 23 years that they have to service your loans. That's how much money they make off of you. They're ain't making any money. And so when the government's asking them to do all these things, all these companies are like, I don't have any money to hire more people to answer phone calls or process this paperwork faster or anything like, yeah, the ones you do, you should not screw up.
But on the flip side, like our government isn't giving these companies the resources. So just like you would hold an employee accountable, it's not the cashier at the store's fault. When the manager makes a terrible policy decision, you need to hold the manager of the store accountable. And that's what we need to do is the department of education is really the problem.
And then take it back another level. It's Congress and the administration. That's a problem. They're the ones not giving these companies the resources. They're holding them accountable now. I don't know if you've seen in the news, like they're finding a money and not giving them payments.
Because they are screwing up the work they are doing. So we can't, but they're not blameless, but like on the flip side they are just a call center. And if the government doesn't give them enough money to staff their call center, they're not going to staff their call center. Like they're not a charity.
They're not doing it, for no, nothing.
[00:34:22] Naseema McElroy: But I think that it speaks to this kind of environment that we're seeing now with these loan servicers are just like the litigious nature of student loans, like these people going to court and all these changes and them holding the government accountable and being like, no we can't really do that.
And I, I don't remember ever seeing that growing up. This is all new to me. And so I think that's part of that accountability. Like actually taking place. And so it's very interesting to see, but
[00:34:52] Robert Farrington: getting better results, but granted, it's two steps forward, one step back, two steps more, one step back.
[00:34:58] Naseema McElroy: in this process, I feel like you said, if you have student loans, you're benefiting from like the uncertainty because until there are some finite answers, how can they hold you accountable for paying your student loans and you're getting credits in the meantime,
[00:35:12] Robert Farrington: Yeah, so that's one thing that's happening right now is that they said, 7 million borrowers still haven't resumed their student loan payments, and a lot of them are actually in an extended forbearance because these loan servicers could not process their paperwork and get their payments right and all this stuff.
And so the government's just giving you more free. Monthly payments until they can figure it out. So at least now they're not holding the individual loans or individual borrower, responsible for their mistakes, which is a big change. And it's benefiting them honestly, because you could be racking up public service loan forgiveness months.
You could be racking up other forgiveness months towards save, and you're not having to make those payments. So it's you're getting the benefit. Hopefully you're saving that money, investing it for yourself to build some wealth.
[00:35:56] Naseema McElroy: That part, but that's what this I just learned this week about the administrative forbearance. Of course, forbearance and student loans was like a bad thing for us, traditionally. But it's on the loan servicer side. So they are putting you on a period of not having to pay until they get their act together.
And they're giving you the credits as if you had paid. So it's just this is like the wild, wild west of suit loans right now. And if you know how to play the game, you could really come up.
[00:36:23] Robert Farrington: You absolutely can. Like each month. You think about all the savings that you could be paying off all that other debt. You could be invested in building. We actually ran the numbers during COVID forbearance. And if you had the average student loan payment before COVID and you didn't pay your loans, but you took that and you invested it, that would have grown by $7,000 over the COVID forbearance.
So you would have been $7,000 richer, investing your student loan payment every month and not doing
[00:36:50] Naseema McElroy: And that's the average payment. And let me tell
[00:36:52] Robert Farrington: That's the average
[00:36:53] Naseema McElroy: what my payment was 1, 900 a month. Okay. And that is not unrealistic for a lot of people.
[00:36:59] Robert Farrington: Totally.
[00:37:00] Naseema McElroy: That calculated over those amount of years, that's six figures right there.
[00:37:05] Robert Farrington: Hundred percent.
[00:37:07] Naseema McElroy: Okay, so we, we really di dove into public service loan forgiveness, but you said there's 80 other
[00:37:13] Robert Farrington: Dude, there's so many. So we talk about, so there's the, if you're just in an income driven repayment plan, you get loan forgiveness. We talked a little bit about that. It's not sexy. It's 20 or 25 years, but it's something. So life doesn't work out at something, but then there's all these like little niche programs.
And some of my favorites are the state programs. So depending on what state you're in, your state could have loan forgiveness programs for you. And, some of them are pretty generic. Like you work as like a nurse in a nurse shortage area. You could get loan forgiveness, which actually like, it sounds like, Oh, am I going to have to go to the middle of nowhere?
And it's no,
you know, some of these big, some of these big cities could have like nurse shortage areas. So that could add to your loan forgiveness. Same thing with doctors, but it also doesn't have to be like an RN too. You could be like a, an LPN, low, just come out of community college, first job.
Like you get loan forgiveness for that community college work. So the cool ones though, that I really are Maryland. Maryland has a home buyer student loan forgiveness program.
So you buy a home in Maryland they will pay off your student loans, like up to a certain amount. But what they do is they do this weird thing is where you get a loan on your home and they add your student loan to your loan balance of your home, but it's 0%.
[00:38:25] Naseema McElroy: Oh
[00:38:26] Robert Farrington: and then they give you like a tax credit every like year and then they pay off that difference for you. So little funky program, but basically it's called the Maryland Smart Buyer Program. You buy a home in Maryland and you can get your loans forgiven. It's
[00:38:38] Naseema McElroy: So that's interesting. So i'm wondering like when you When you're applying for the loan, do you qualify for more of a loan because they don't calculate in that student loan payment
[00:38:49] Robert Farrington: Yeah, they don't. It's a special program and then they'll pay it off. Kansas does a similar one as you move to certain areas in Kansas and they'll give you student loan forgiveness. Maine offers student loan forgiveness for anyone that wants to be an engineer in the state and they do it as a state tax credit.
And so every time you file your taxes, if you prove that you worked in Maine as an engineer, like they'll give you some money towards your student loan. So there's a lot of these little like niche programs out there that do cool things that you could just keep adding to your student loan forgiveness bucket, right?
And that's why it's like, it might not be total, but it's free money. And so I encourage everyone to like Google your state. See what's too low forgiveness options are there because you should be taking advantage of them if you qualify.
[00:39:27] Naseema McElroy: It sounds like 99 percent of people can qualify for some type of student loan forgiveness. And it's just if you're anywhere close to my target demographic, which is in that later 30s, 40s age range, you probably don't have to pay your student loans for much longer if you take advantage of these things.
So this is an exciting time!
[00:39:49] Robert Farrington: Absolutely. There's so many options. There's so many programs, but again, no one's going to be out there telling you these things. You're not going to get a call from your loan servicer who says, Hey, you qualify. Ain't going to happen. You need to do the homework and you need to figure it out.
[00:40:03] Naseema McElroy: and fill out the form. And it's not that hard. Okay. Yes. That's it. Robert. Let us know how we can connect with you as
college investor and what other things are you working on? Are you excited about right now?
[00:40:21] Robert Farrington: Absolutely. So you can find us at the college investor. com. You can also find us on your favorite social platform at the college investor. And you can find us for everything about student loans and paying for college. One of the other things we do every year is our tax stuff. So we just finished all of our tax reviews.
So if you're looking at how am I going to file my taxes this year, you can come check us out. We'll steer you straight. So you don't fall into this trap where you're like, I'm going to get my taxes done for free. And then by the time you're done, you're like upgraded to like the a hundred dollar,
cause it's a thing, so everything says start for free. You start, you spend an hour and then all of a sudden you're like, what do you mean I'm paying 120
[00:40:56] Naseema McElroy: Mm hmm. Add
[00:40:57] Robert Farrington: seeing people fall into that trap. So come over, you check us out and we'll steer you straight on what works for you.
[00:41:04] Naseema McElroy: And it's not state specific, right?
[00:41:07] Robert Farrington: It's not state specific, no. There's some new programs out there, like the IRS Direct File Program. It's not going to work for you. So don't, don't get your hopes up. We've already tested it, reviewed it maybe next year. It's the first year of it.
They got to work out some kinks. And the reason why though is It's like they launched with you can't even have like interest income and dividend income. So it's they just, if you have a W2 job and you're in like 12 States, like maybe but it's probably not gonna be the best option when there are free options out there for you.
[00:41:37] Naseema McElroy: I like that. You guys have vetted all these programs. You've done all the legwork So that takes a lot of pressure off of somebody because taxes are already this thing. That's so daunting and believe me I hate
[00:41:49] Robert Farrington: They are, and then there's also this whole thing where there's this mad rush to get their refunds, right? And people are like, what can I do, what can I do to get my refund going? And I hate people just throwing good money after bad. it's just like a big pet peeve of mine.
[00:42:01] Naseema McElroy: Yeah, I hate it too. And what what is the the tax money the tax services that you guys offer? What is it called?
[00:42:07] Robert Farrington: We just do a review of
all the ones out there. So we've you can come and find it. It's on our homepage, our best tech software awards. We've, we've reviewed them all. The TurboTax, the H& R Blocks, FreeTax USA, Cash App, all of them. We've tried them. We've reviewed them. We'll steer you straight depending on what you got going on with your situation.
[00:42:24] Naseema McElroy: But everything pretty much lives at the collegeinvestor. com and all your socials. You can connect with you,
[00:42:30] Robert Farrington: Exactly.
[00:42:31] Naseema McElroy: is just, this is great, Robert. Who would have thought talking about. Student loans could be so much fun.
[00:42:38] Robert Farrington: It's, having a student loan sucks, but I also like to remind people that you have a lot of financial leverage you can pull. Don't get so disheartened when the student loans actually you could have that money all forgiven potentially, and you could build wealth, and you could do this stuff.
It doesn't work for everybody. There's always that person that's they don't have a lot of options. But a lot of student loan borrowers have a lot of options, and I love seeing people build wealth. While paying off or eliminating their student loans.
[00:43:04] Naseema McElroy: I love that too. And I just, people just don't know what they don't
[00:43:08] Robert Farrington: They just don't
[00:43:09] Naseema McElroy: and I think that you provided so much great information for them. So I really appreciate you being on the podcast today. Thank you so much.
[00:43:17] Robert Farrington: Thank you.
Hey there I’m Naseema
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