Student Loan Repayment with Danielle and Lindsay Clark from Savi

Jul 26, 2022

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On this episode of Financially Naked: Stories from The Financial Gym, our host is Danielle Thomas, Level 2 Certified Financial Trainer at The Financial Gym. She is joined by Lindsay Clark from Savi. Lindsay is a fierce champion for the student loan borrower - having accumulated enormous student debt over the course of her undergraduate and graduate studies at Yale and Columbia, respectively. Having worked in advocacy and financial technology for nearly a decade, Lindsay brings a deep understanding of the urgency behind providing solutions for student loan borrowers. As Director of External Affairs, Lindsay built and continues to lead our front-line efforts to assist America's 46 million borrowers.It's been over two years since the government first paused federal student loan payments and interest, and for so many borrowers it's been out of sight and out of mind. With the possibility of cancellation and updates to policies passed with Covid relief, there's a lot of news and support for borrowers out there. Savi helps America's 46 million student loan borrowers easily lower their payments and find forgiveness. Lindsay is here to share some of the highlights and things to watch out for if you're a borrower.

Podcast Notes

Savi was founded in 2017 by student loan policy experts and advocates. Since repayment options and forgiveness programs are new, clunky, and can be challenging to comprehend, Savi is designed to help!
They work with borrowers across the country to help them be more informed and empowered as borrowers and consumers. From understanding repayment options to navigating the application process, all the way to crossing the finish line.
Where to get started if you have student loans:
- Understand the different repayment options. For federal student loan debt, there are programs and various payment plans (some income based) available. When considering which is the best fit for you, think about where you will be five and ten years in the future.

Income Based Repayment:

Excellent for people who may be struggling to make the monthly payment for folks newly out of school, looking for their first job.

The required payment is based on your income and considers tax filing, rather than basing it on the amount of debt.
Some borrowers do not take advantage of these plans, including Lindsay when she was first paying back her loans.
These income-based plans are a much better option than forbearance. At the end of these plans, loan forgiveness is an option if you're eligible. While the programs aren't perfect, there are planned improvements in the coming years.
In general, any debt forgiven under an income-based repayment plan is considered taxable income on your taxes that year.
There was recently a law passed that grants tax-free forgiveness for these repayment plans through 2025. It may be extended past that, but we don't know yet.

Public Student Loan Forgiveness Program (PSLF):

This program started in October of 2007. Unfortunately, there are a bunch of technicalities required for forgiveness to be granted that a lot of borrowers were not aware of. Out of the 100,000 applications, less than 1% were accepted.
Requirements:
- Be employed by an eligible institution
- 120 qualifying payments
- Be on an income-based repayment plan and have a qualifying loan type

In general, people met the employer requirement, but did not have the correct type of loans and weren't on the right type of payment plan.
Right now, there is a limited waiver for the PSLF program where they've expanded the requirements around loan type and payment plan. This will only be available until October 31, 2022, but expands the number of eligible borrowers.
If you applied and were rejected in the past, you may now be eligible and should take action before October. Since the expansion, over 100,000 borrowers have been granted forgiveness.
If your loans are forgiven through the PSLF program, the forgiveness is tax-free.
One of the biggest issues surrounding the student loan crisis is that there is hardly any communication from the institutions supporting borrowers and there is a barrier to entry. You can read studentaid.gov all day long, and still not be clear on all of the information.
This waiver did not get a lot of attention, and a majority of people don't know they might qualify for forgiveness.
Any news on another extension on payment pauses or possible cancellation?

As of now, payments are set to resume on September 1, 2022.
This has become such a political issue, Lindsay predicts it is unlikely they'll turn payments back on right before the midterm election, and she would not be surprised if it was extended further. As of now, payments will resume.
To prepare, be aware of your federal provider and the current payment due. Three of the largest loan servicers announced they are ending their contracts, so many people will be transitioned to other servicers. If you're not sure where your loans are currently, make sure to find out that info.
If you're unsure where your loans are held, you can check studentaid.gov. The username and password will be from when you took out the debt but can be easily reset if you don't remember. All of the loan and grant information should be available there, along with who is holding the loans now.

Loan cancellation was a huge campaign promise and there is pressure on lawmakers to make it happen. It might look like $10,000 may be forgiven and have income limits.
The rising cost of higher education is what is fueling the debt crisis and while forgiveness will provide relief to some borrowers, it does not fix the problem. This is not a matter of either or, it's a matter of addressing both sides of the crisis.
If someone has debt out there and has never logged in or made a payment, what should they do?
- The government recently announced Fresh Start, which will bring any borrowers out of default once payments resume. It would be a mass reset for roughly 8 million borrowers who are in default, many of whom have balances less than $10,000.
- This is separate from loan rehabilitation, which is a process that can take up to nine months.
Lindsay assures us the momentum and direction of the policy are positive and we're going to see good changes come through. She's more optimistic than she's ever been and hopes these will help improve the system.

Connect with Savi BySavi.com

Meet The TrainerMeet Danielle Thomas, Level 2 Certified Financial Trainer