Category: Student Loans / Podcast

Student Loan Forbearance Extension – Now What?

Kelly Reddy-Heffner talks about how those with student loans should be calculating their next moves considering the most recent extension of the administrative forbearance through January 2022.

About Today’s Guest

Kelly Reddy-Heffner is a Lead Planner at YFP Planning. She enjoys time with her husband and two sons, riding her bike, running, keeping after her pup ‘Fred Rogers.’ Kelly loves to cheer on her favorite team, plan travel, and ironically loves great food but does not enjoy cooking at all. She volunteers in her community as part of the Chambersburg Rotary. Kelly believes that there are no quick fixes to financial confidence, no guarantees on investment returns, but there is value in seeking trusted advice to get where you want to go. Kelly’s mission is to help clients go confidently toward their happy place.

Summary

Tim Ulbrich welcomes YFP Planning Lead Planner Kelly Reddy-Heffner back to the show to discuss how those with student loans should be calculating their next moves considering the most recent extension of the administrative forbearance through January 2022. Kelly talks through how to maximize the time left to evaluate your loan repayment options and choose the best next steps for your situation.

Kelly walks through the recent history of administrative forbearance for student loans taking us through to the current and likely final extension set to end at the end of January 2022. During this time of administrative forbearance, recent pharmacy graduates may not have had to make any payments. Others may have allocated the funds elsewhere, new expenses may have arisen, or employment status could have changed. In response, Kelly shares some general advice on making the most of the remaining forbearance period.

The Student Loan Analysis is one way to help pharmacists feel confident with their financial decisions regarding their student loans and to map out realistic goals for repayment regardless of the type of plan. Kelly outlines how the Student Loan Analysis at YFP works, who should consider it, the information to have on hand for your appointment, and where to gather all of your loan details, whether your loans are in the federal or private sector.

Mentioned on the Show

• Learn More About Our 1:1 Student Loan Analysis with a CFP®
• YFP Planning: Financial Planning for Pharmacists
• Register for the Free Webinar: Side Hustling: Extra Ways to Make Money as a Pharmacist
• The Happy PharmD
• YFP 187: How to Maximize Your Student Loan Strategy While Federal Student Loan Payments are Paused
• Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
• Federal Student Aid
• AnnualCreditReport.com
• Get a Free Copy of the YFP Budget Template
• YFP 214: How Anna Got $127k Forgiven Through PSLF
• Federal Student Aid: PSLF Help Tool with EIN Search
• Schedule Your Student Loan Analysis Appointment
• Send in your questions here or to [email protected]

Episode Transcript

Tim Ulbrich: Kelly, welcome back to the show.

Kelly Reddy-Heffner: Thank you, Tim. I am happy to be here.

Tim Ulbrich: It’s been awhile. We had you on last Episode 187, where we talked about how to maximize your student loan strategy while federal student loans payments are paused. And that was back in January 2021, and I think at the time we thought, hey, this whole student loan forbearance thing might be coming to an end soon. And here we are again, talking about this topic and what this pending end to the administrative forbearance means. And so Kelly, kick us off by just bringing the audience up to speed on the background of the administrative forbearance on student loans and the extensions that have recently been extended one last time is what we’ve been told.

Kelly Reddy-Heffner: Absolutely. Right. So nothing has changed and yet it feels like everything has changed at the same time. The perfect feeling. Right, we originally had that administrative forbearance at the start of COVID in March of 2020 by the Trump administration. It was extended once during that presidential administration. And then now, we’ve seen with the Biden administration that it was extended two more times. So we had that extension until September, and now we have what I believe is the final time where we have until January 31. So I do think we’re coming to the end of the forbearance extensions, in my opinion. So we’re going to enjoy a few more months of 0% interest, no loan payments due, and of course those loans not having any default issues. So a couple more months, but we’re coming to the end of it.

Tim Ulbrich: Yeah, and Kelly, you and I were talking before we hit record, I think one of the challenges — and certainly there’s been some benefits during this time period. We know firsthand from many in the community that they’ve been able to through this administrative forbearance accelerate the achievement of other financial goals, and that certainly has been a positive but also coming up on the two-year mark, essentially, right? So March 2020, you know, we entered lockdown, the pandemic, we started the forbearance with the CARES Act. So this time period of two years, I think that presents an interesting challenge where perhaps folks have gotten used to having no student loan payment and perhaps other expenses that have come to be. And then I think about the classes of 2020 and 2021 specifically where student loan payments haven’t even been a thing, you know, for them because of their graduation during this time period. So I suspect, Kelly, that a lot of pharmacists, a lot of folks listening out there, perhaps clients that you’ve been working with, have been wondering, should I or should I not make payments on my student loans during the administrative forbearance? And certainly this is not meant to be and it’s not individual advice, but what are your thoughts on this? And how have you helped coach folks through making this decision?

Kelly Reddy-Heffner: Well, I think you’re right that, you know, two years is a lot of time. So we changed our financial goals and priorities changed considerably, our employment may have changed in that timeframe as well. In general, I think I speak for our podcast listeners that they are proactive. They want to be taking action. They’re listening because they want strategies to put into place. So this has been a very interesting time period. We’re feeling like we’re not doing anything with the student loans. But there are a lot of things that we could be doing in the background, which I think can have a very positive impact on net worth and put our listeners in a great position for when repayment starts again that they’ve accomplished a couple other things. So we’ve been recommending if you are, you know, having any other debts, take care of those. Anything accumulating interest should be a top priority while this federal loan is not accumulating any interest. Building up an emergency fund — so again, we may not see net worth increase because the student loan debt is paid off. But we can see positive changes because those emergency funds are improving and giving people more options and more confidence in their finances. If you are in a PSLF program or a non-PSLF forgiveness program, then we’re not making payments at all on the federal side because there’s no benefit to doing that. But if you are only paying the loans, that is your strategy, you’ve either done the math yourself or spoken to a professional and you know that that is your plan, then that really could be on the agenda. Like if it’s comfortable to make those payments on the federal loans, then that could be an activity as well. But we do need to get back into the mindset of the payments are coming back. So we are asking clients and listeners to know at least a rough idea of what the payment amount is and to bring that back into your budget.

Tim Ulbrich: Great point, Kelly, there. I think it’s time to dust off, re-dust off the budget and really look at — run the calculators, use the tools that are available at studentloans.gov, you know, what is that estimated payment going to be as we get into February 2022? And how does that work or what changes need to be made to the budget to make that work, right? And now is the time to get the practice reps so that we’re not caught off guard in the New Year and we can make some adjustments or changes and have some time to warm up to that. And I think that’s a really important point and perhaps one that folks have been thinking about but dragging their feet on for good reason because of all the talk of the extension and I think I believe, you believe, that this is likely the end of that. And so let’s get ready for those payments to begin at the beginning of February 2022.

Kelly Reddy-Heffner: Agree. I mean, there was a statistic out there that 90% of the over 45 million borrowers were not making payments as of March of this past year. So that is the bulk of borrowers not making those payments. So it is time to figure out what that payment might look like. Like you said, recent graduates, 2020/2021, may have had an income tax return with part of a year in residency or the full year in a residency. So that payment amount could be very low. Once they’ve started full-time employment, income has increased, if they’re on an income-driven repayment plan, that’s what drives what that payment amount is, the income. So that will have potentially changed significantly.

Tim Ulbrich: Yeah, one of the things, Kelly, I often share with new graduates or even students that are beginning to think about student loan repayment is because of the complexity of the options that are out there, both federal and private — and we’re going to come back to that here in a little bit — this is not a decision that you want to wander into. Right? We want to be intentional with understanding those options, we want to be intentional with thinking about how this fits in with the rest of the financial plan. And here we are, we’ve got months to do that, right? So let’s take advantage of this time period, the end of 2021, and let’s really get ready so that we can hit that beginning of repayment when the pause ends and we can be confident with making that decision. And as we’ve talked about on the show before, you know, choosing between Option A v. Option B v. Option C, given the amount of student loan debt that many pharmacists have, that can be very significant in terms of the amount that’s going to come out of pocket because of the nuances with the different repayment plans. So intentionality really matters here. And let’s use this time that we’ve got left before this administrative forbearance ends to make sure that we’re ready in making that decision. Kelly, Step No. 1 — so I’m somebody listening and maybe I’m not loving the energy of this episode and the reality that hey, I’ve got to get back in the game. But I’m listening, I’m ready, and whether I’m a 2020/2021 grad or perhaps I was paying prior to the pandemic and it feels like forever ago and I’ve got to get back in the game, what is the first step that listeners can take to get ready for payments to start back up?

Kelly Reddy-Heffner: Absolutely. Well, again, just knowing what we’re dealing with, like what are the loans? Taking that inventory, you know, understanding which ones are federal, which ones are private, they have very different attributes in terms of what types of options are available for repayment. So we want to know what are we working with? What do we have on the table? And again, I think figuring out some of the other lifestyle goals as well, we cannot ever undervalue like how people feel about the loans, what they really want to accomplish with other goals as well. So you can look at studentloans.gov, which will actually redirect to studentaid.gov, to get some calculators, some information. That also is the source of your NSLDS file for taking that inventory and then pulling your credit report, you can get your free annual credit report and seeing like, OK, what’s federal? What’s private? I think knowing how much you can afford is key too. So sometimes that payment amount is what the payment amount is but knowing what your budget is, what you can afford, will help determine like do you need to be in an income-driven repayment and putting a plan in place? Is refinancing a better option because you have resources available? So again, there are resources out there to assist with this. But it’s a lot of data, a lot of information, a lot of subtle nuances. Even we have to be like, hold on. What is the date of the loan? That sometimes will impact what repayment options are available, just literally the date the loan was taken out.

Tim Ulbrich: Absolutely. And so Step No. 1, you know, if you don’t have that up-to-date information is understanding all of the information about your federal and private loans. What’s the balance? You know, who is servicing those loans on the private side? You know, we should be able to quickly get information on the interest rate and the repayment terms on the federal side right now. That probably is showing as a 0% if those are qualifying under the administrative forbearance. But I love — Kelly, I talked with a couple actually just the other night who when I asked them about their student loans, you know, it was very precise. They had all the information. “I’ve got three federal loans, I’ve got one private loan.” And it was to the penny of the outstanding balance, what they had. And I loved the intentionality of hey, I don’t like the number. I don’t like that it’s $194,000. But I understand that in order to put a plan together and to be able to evaluate the options and to be able to know what we can afford inside the budget, I’ve got to understand what we’re working with first and make sure that we have all the details. Step No. 1 is that inventory. And we’re going to link in the show notes to the links that Kelly mentioned on the federal side and the private side. So the federal side, she mentioned studentloans.gov will redirect to studentaid.gov. And then on the private side, running the credit report at annualcreditreport.com. Kelly, after the inventory, you alluded to the second step, which I think is really important is what can the budget afford? And when I teach this topic of student loan repayment, that’s often something I try to walk folks through is, hey, let’s make sure we know what the budget looks like. And as we’ve said many, many times on this show, student loans, as big as they are for many pharmacists, student loans are one piece of the puzzle. So we’ve got to understand what else is going on, what other expenses are out there, what other goals are out there, so that we can determine what that budget can afford. And if we decide to do a more aggressive repayment path, what does that mean for achieving other goals? If we decide to do something like a forgiveness path or more extended path, what does that mean for achieving other goals and really looking across the financial plan? And so we’ve got a budget template for folks that want to get started or update that budget. If you go to YourFinancialPharmacist.com/budget, you can get a copy of that. And so Step. No. 1 is inventory, Step No. 2 is really looking at what the budget can afford, Step No. 3, Kelly, is probably the most confusing, the most difficult, but the most important part, which is understanding the options. And unfortunately, the hand we have been dealt as borrowers of student loans I would argue is more complex than it probably needs to be. Separate topic for a separate day. But talk to us about understanding repayment options, something you work often with our clients about, and just the magnitude of this decision.

Kelly Reddy-Heffner: Well, right. I mean, once you’re on studentaid.gov and you’re plugging in some data, I mean, you’re going to get a lot of information back about these repayment options, especially on the federal side. I mean, and they, again, range significantly. So even that date you took out the loan can have a significant impact on what options are available. So we have income-driven repayment options, which we have two that we usually recommend or work with in PAYE and RePAYE. Of course we have standard repayment as well, which is usually that 10-year term, which is a fixed payment amount, does not vary with income. We don’t lean towards extended or graduate options, just because they really perpetuate the length of time that it takes to repay the loan and often, you know, with pretty high interest paid in the process. So income-driven is usually the area where we’re operating in and also that standard repayment if we’re not refinancing. And again, just understanding like the date you took out the loan, you’re right that 0% is kind of the default on all of the data, which is hard. Like we were taking out loans when we were 18, 20. It’s not usually the ideal time for being detail-oriented about this type of information. So we can take a look at the dates the loans were taken out in the federal system and see what the interest rate was that year. But it’s a lot — it’s a lot of nuance for sure.

Tim Ulbrich: And then we’ve got, you know, on the federal side, you mentioned the variety of options. To make it a little bit more complicated, we’ve then got the private option. And we’re going to come back to talking about some common questions that we get around refinancing. I do — without going too far down the rabbit hole because we have talked about it extensively on the podcast, most recently on Episode 214, I interviewed a pharmacist who had $127,000 that was forgiven through the Public Service Loan Forgiveness. And so we’ve talked in detail about PSLF, non-PSLF, but I think it’s worth talking about again just briefly in the context as we look at the end of this administrative forbearance. So Kelly, quick dive, I don’t want folks to hear this and think, oh, I’ve got it with PSLF and non-PSLF, certainly more complicated than what we’re going to discuss briefly — but quick dive into PSLF, non-PSLF, what they are, and the main differences between the two of them.

Kelly Reddy-Heffner: Absolutely. And I mean, I think there are still questions. Like it has improved our level of information, but the PSLF rules are very specific. You do need to work for the right type of employer in a nonprofit setting, and you can check an EIN number now in some of the PSLF tools on studentloans.gov, which is helpful. You do need to be in the right kind of loan. So we still see that as a little bit of a problem at times. Like it does need to be in a direct type of loan. So if we see FELL loans, we see HPL loans, we see Perkins, those don’t automatically line up to qualify. And that’s where some of the confusion still exists. You do have to be in the right repayment plan. So in income-driven repayment, there are some nuances with standard repayment that require a little bit of conversation if you’re in standard. You have to make the right amount of payments. It’s 120. And you do need the documentation. So as FedLoan servicer changes to a new servicer, this is an area that we are focusing on and just reminding borrowers to make sure that they have their data documented. Go onto FedLoan, take a screengrab of where your cumulative payments are. Of course the best part is it’s a tax-free situation. In contrast, the non-PSLF forgiveness is a longer time period. So instead of being 10 years, it’s 20-25 years. 20 or 25 depends on some nuances with grad loans and the type of repayment plan that you’re in. And again, it doesn’t matter if you work for a nonprofit. You can have any employer to qualify for non-PSLF forgiveness. It really is based more on the amount of loans compared to income for that program. And then there is a tax consequence at the end. I think that tax consequence is one of the things that maybe will continue to be evaluated by the current presidential administration, like are we keeping that? Are we not keeping that? It would have an impact on people in that program. So yeah, there’s some pretty significant differences between those two programs.

Tim Ulbrich: Kelly, when I talk with folks about non-PSLF and the way I describe these is, you know, PSLF I think is a little bit better known by folks just because it’s gotten so much press and attention, although maybe not the best press. But it feels like folks are more aware and educated. I describe non-PSLF as the lesser-known forgiveness option in the federal system. And I think when I see folks’ reaction, there’s kind of this range of emotion from, ‘Oh my gosh, 20-25 years, like I’ve got a tax bill known as the tax bomb at the end of this, like who in the world would do this?’ Right? And then you start to talk a little bit about, OK, well, depending on the debt load, depending on some of the strategies around this, depending on if we think about saving for that tax bomb, maybe it’s not as overwhelming as it can seem. But certainly that’s a long period of time and, right, there’s some complexities here with the tax piece. So in your conversations with clients at YFP Planning, like does this have a role? How often does this come up? And are folks, you know, worried about some of those things that I just raised in terms of that tax piece as well as the timeline?

Kelly Reddy-Heffner: Yes. I mean, that is a long time to be, you know, in a repayment strategy. So right, we do do an analysis to see like what do the numbers look like? Often, these decisions are very emotional. 20-25 years is a long time. So we try to refocus on the factual components like what does the actual repayment look like? Like how does the payment amount per month compare if you refinance or accelerate a repayment? What is the overall forgiven amount? Sometimes, that number is quite compelling. Like if you are seeing, you know, six-figure digits of what’s forgiven, then we really do have to see like is that a viable option, despite the fact that it can be a little overwhelming to think of a 20-year time span. So yeah, we do carefully look at really all that factual data and then try to talk through the emotions behind it and what it means in terms of other things that you might be able to achieve in that timeframe. Sometimes it does make it much easier to buy your first home, to pay off something else, to be able to meet your monthly budget. Sometimes accelerating repayment is not affordable.

Tim Ulbrich: Yeah, absolutely. And I think this is a good reminder of — and many folks that I’ve talked with I can sense that sometimes, the overwhelming feeling, beyond just the number of the amount of debt they have, is that nagging feeling of like, I know there’s so many options out there, and I’m not sure I understand the differences between them and a desire to feel confident in that understanding and then making a decision that you know has evaluated other parts of the financial plan is ultimately best for their individual situation. And I want folks to not underestimate how important that feeling can be, especially with momentum and the rest of the financial plan, to confidently choose the repayment option that you know has been evaluated and is really best for your personal situation and to hopefully feel empowered and educated throughout that process as well. So Kelly, on the private side, refinancing is a topic that we talk about often on this show. It’s one of the most common questions that I get in terms of should I or should I not refinance? What should I look for in a lender? You know, what are some of the considerations in the refinance process? And I want to hit some of that because I think there’s probably many folks that are listening that maybe refinanced before the pandemic and have been excluded from this administrative forbearance or folks that have delayed refinancing and are wondering like, when might I pull that trigger? You know, thinking about what might or might not happen in interest rates. And so I suspect the conversation around refinancing is going to heat up as we saw the activity around refinancing really at historic levels before the pandemic hit back in January and February of 2020. So first of all, Kelly, what is refinancing? Give us the definition.

Kelly Reddy-Heffner: Absolutely. And it is — the two terms consolidation and refinance are very different. They’re used interchangeably, which is not quite right. So you know, as opposed to consolidation, which is taking federal loans for convenience or to be in a position to be in income-driven repayment or to qualify for forgiveness, consolidation is taking like a bunch of federal loans and putting them into like one or two subsidized or unsubsidized. So still federal, interest rate really is not impacted. It definitely doesn’t lower the rate. It may open up other opportunities for different federal programs. Refinance is either taking your federal loans and moving them into the private sector, which is a one-way transaction. Like once you’ve moved into private, that’s it. Or you have existing private loans and you refinance them into other private loans. So very different, very different what is happening there.

Tim Ulbrich: Yeah, and I think folks are likely somewhat in this holding pattern, right? I think in terms of, as I alluded to just a couple minutes ago, like hey, I think refinancing is the play or perhaps they’ve evaluated that, but what do I do? We’ve got several months left of administrative forbearance, rates may or may not go up, there’s offers that are out there that might help minimize some of that concern. But like what might I be giving up as well? And I think that’s one of the other questions and considerations folks need to be thinking about is what is different? So it’s not identical from the federal side to the private side with refinancing. Important note here is that every private lender can be a little bit different. So you know, we’re generalizing as we’ve put them together. But what are some of those main differences or things that folks need to be looking for as they consider what might be different from what they have in the federal system versus what they’re pursuing in the private market?

Kelly Reddy-Heffner: In order to really evaluate a refinance, usually the primary objective to refinance is interest rate. So if you can get a better interest rate, that can be a compelling reason to refinance. But you’re absolutely right that there are tradeoffs to doing that. So you know, high level, I think there is a little of FOMO, like ‘Oh my gosh, interest rates are low. Are they going to go up in the next week?’ And then this becomes not a viable strategy. We have been monitoring interest rates throughout the summer, and they’ve been pretty steady. Like we’ve even seen them go down a little bit and kind of back up a bit, but pretty steady. We have seen some interesting programs or offers from private lenders where they kind of offer this 0% bridge. That was happening for a bit. In general, you know, the couple big things are with the federal loans, we have seen the protections in action. Like we know there is a very tangible like ah, that is what a federal protection means because of the CARES Act. In general, you know, will the loans be discharged? That’s a big question if something happens to someone. In the federal loan program, they are discharged for death and for disability as well. On the private side, it really depends on the lender. So that is something if we’re working with a client who’s considering a refinance, we are looking at the fine print to see what the discharge status would be. In terms of, you know, can I pay extra towards a refinanced loan or even a federal loan, the answer is usually yes in both cases where you can accelerate some repayment if that’s the appropriate strategy to take. But in general, we don’t have income-driven repayment on that refinance side. So if your income goes down, which you know, is something we hope doesn’t happen to our listeners but occasionally it does either by choice or not by choice, you know, is a job opportunity amazing and you’re willing to take a slight pay decrease? In the federal program, you can provide documentation that your income has gone down and have that income-driven repayment re-evaluated and lowered. That’s not a feature of a private loan system. So the payment is what it is.

Tim Ulbrich: And I think you articulated well there why it’s so important that folks are running the numbers, right? You mentioned the primary goal is to effectively lower the interest rate. And for many folks, that savings can be significant. If you’re talking about $150,000-$200,000+ of debt and you’re seeing a spread of 1-3%, whatever it might be, on interest rates depending on their personal situation, like that math adds up. So what I encourage folks is run the math but don’t stop there, right? Be thinking about these other things. You mentioned some tangible examples we have seen are the benefits of the federal program, the CARES Act being one. Just last week or it might have been the week before, the announcement from the Department of Education about over $5 billion being allocated to those that have a total or permanent disability in terms of loan forgiveness. So again, another tangible benefit and them improving the ease of that forgiveness process for those that have a total and permanent disability. So there are differences, and the savings may be there and often that may make sense, but just make sure you’re also considering some of these other factors as well. So we have I think outlined fairly well that navigating student loan repayment certainly on your own given the factors that we’ve discussed can feel overwhelming. I’ve been there, and I think aside from exit counseling that folks get, there really isn’t a whole lot of assistance in figuring out which repayment option is going to be best for your personal situation. And therefore, folks might get defaulted into the standard 10-year repayment plan or wonder, am I in the best repayment plan for my personal situation? And that is why we developed an offer a custom one-on-one student loan analysis. In this service, the goal is that we’re working one-on-one with you to lay out all your options so that you can confidently choose a repayment plan that hopefully will save you the most money and that ultimately aligns with other financial goals. And so in doing this, you’ll work with one of our YFP Planning Certified Financial Planners to inventory your loans, both federal and private, evaluate eligible repayment options, including the ones we’ve discussed here today, student loan forgiveness, income-driven repayment, private refinancing, and then ultimately try to determine what that best repayment strategy is for your situation. So Kelly, you are the lead for us on conducting these one-on-one student loan analyses. I know it’s something you also do frequently with clients of YFP Planning that are participating in our comprehensive planning services. So talk to us a little bit more about this service, the student loan analysis, and what folks can expect.

Kelly Reddy-Heffner: Well, especially now, as there are so many unknowns, we do struggle with like what is the next best step? And I think we do — I hope — help clients get some clarity. Like sometimes there are options and knowns beyond what we think are available. So I’d say one of the biggest objectives of doing the analysis is putting confidence in a next step. So this is the information we have available. So I think it is an ideal option for any borrower who wants to have a strategy in place so that they can make other good decisions about the rest of their financial plan. So it is an ideal opportunity to build some confidence and to say like, ‘OK, here are my various options.’ You know, we look at within the confines of the federal program what the options are in terms of income-driven repayment, which payment plan might be best, do a comparable with refinancing, look at non-PSLF forgiveness, and really put out the facts of these are the options that are available and help talk through what is best for that individual client and that household. It is not ideal for folks who have already refinanced everything into the private sector because already, the options are significantly more limited. You’re in the private sector, you could potentially refinance again for a lower rate — and I think that is a question we get a fair amount, like can I refinance again? It is different from a home mortgage refi. The process is a little bit different. It does have a credit component, though. You know, you are getting a hard credit check if you refinance. So that can have an impact, but you know, there’s not closing costs. It is a little different. So yeah, you know, if you can get a better rate, it’s certainly worth looking into. But for those clients, I feel like we best help people who still have some federal and are deciding like what is that next best step.

Tim Ulbrich: Yeah, I agree, Kelly. I think for — you mentioned, you know, the service is not necessarily for everyone. So folks that have already refinanced and because there is less options at that point — you mentioned it is a one-way street earlier. But for many folks I suspect who are, ‘Hey, I’ve still got federal loans. I’m wondering about forgiveness, PSLF or non-PSLF,’ or those that do think PSLF is the path forward, do I have all my ducks in a row? What might be some of the strategies or things that I’m thinking about for optimizing that strategy? Or if I’m not pursuing Public Service Loan Forgiveness, does non-PSLF forgiveness make sense if I work for a non-qualifying employer? Or might I evaluate that refinancing? And how do I do some of that analysis and consider some of the things one might be giving up by making that move from the federal to the private. And so for folks listening, if you’re ready to get help in mapping out your plan, I think now is a great time as we, again, head into this home stretch on the last several months before that administrative forbearance ends, you can go over to YourFinancialPharmacist.com/SLA, where you can get more information about the service, get a little bit more information about Kelly, what’s included in the service, what the service costs, and then you can book that right there as well and get on Kelly’s calendar. Again, that’s YourFinancialPharmacist.com/SLA. Kelly, really appreciate your time and your expertise and the contribution that you made to the community on the show today.

Kelly Reddy-Heffner: Thank you. I’m excited for listeners to really feel like they can make that forward progress and have some confidence in a decision. So I know sometimes, especially during the last two years, we have that feeling of being in a little bit of a holding pattern. But use the time wisely. Prepared is a strategy. So never underestimate the opportunity of having those ducks in a row.

Tim Ulbrich: Great advice. And certainly last but not least, if you’ve been listening to the show for a while and you like what you’ve heard, please do us a favor. If you could leave a rating and review on Apple Podcasts or wherever you listen to the show, that would help other pharmacy professionals find this show. And if you have a question that you would like us to answer or feature on an upcoming episode, you can reach out to us at [email protected]. Have a great rest of your day.

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How to Maximize Your Student Loan Strategy While Federal Student Loan Payments are Paused

On this episode sponsored by LendKey, Kelly Reddy-Heffner, YFP Lead Financial Planner, joins Tim Ulbrich to talk through how those with federal student loans should be maximizing their student loan repayment strategy during another extension of administrative student loan forbearance.

About Today’s Guest

Kelly is a Lead Planner at YFP. She enjoys time with her husband and two sons, riding her bike, running, keeping after her pup ‘Fred Rogers’. Kelly loves to cheer on her favorite team, plan travel and ironically she really loves great food but does not enjoy cooking at all. She volunteers in her community as part of the Chambersburg Rotary. Kelly believes that there are no quick fixes to financial confidence, no guarantees on investment returns, but there is value in seeking trusted advice to get where you want to go. Kelly’s mission is to help clients go confidently toward their happy place.

Summary

Kelly Reddy-Heffner, YFP’s newest Lead Financial Planner, breaks down what we know and don’t know about student loans right now, her process for helping financial planning clients navigate their student loans, how to choose a repayment plan, and whether borrowers should refinance their student loans when payments resume.

Kelly explains that things are changing rapidly when it comes to student loan payments resuming. While there is a lot that we don’t know about student loans right now, we do know that the most recent stimulus package didn’t include an expansion to the administrative forbearance, interest rates are still low but are starting to slightly increase, and that President Biden’s transition team announced that they would extend the student loan payment and interest freeze when he takes office, although we don’t know when that will be.

While there are many unknowns for the future of student loans, Kelly urges borrowers to get a clear picture of their debt, look at potential opportunities for forgiveness, and think about their capacity for repayment and the opportunity cost of other financial goals. Kelly explains that there are a lot of factors that go into deciding which student loan repayment strategy is best, like the borrower’s budget, behavior, and mindset and that while student loans are an important piece of the financial plan, they can’t be looked at in a silo.

To help pharmacists determine how to best tackle their student loans, YFP offers a one-on-one student loan analysis. In the student loan analysis, one of our certified financial planners works with you to evaluate which repayment option and strategy is best for your situation. They’ll help you inventory your loans, analyze the debt, give recommendations, calculate repayment amounts with different options, provide insight on whether consolidating or refinancing is necessary, and offer next steps to you.

Visit www.yourfinancialpharmacist.com/studentloananalysis to learn more about this service.

Mentioned on the Show

• LendKey: Refinance Your Student Loans
• YFP Planning: Financial Planning for Pharmacists
• Student Loan Analysis: A One-on-One Customizable Plan to Tackle Your Student Loans
• Schedule Your Student Loan Analysis
• YFP Facebook Group
• Seven Figure Pharmacist by Tim Church PharmD and Tim Ulbrich, PharmD
• The Pharmacist’s Guide to Conquering Student Loans by Tim Church, PharmD
• Baker’s Dirty Dozen: Principles for Financial Independence by Joe Baker, MBA with Lindsey Jordan Baker
• Tim Baker, CFP® and Director of Financial Planning
• Current Student Loan Refinance Interest Rates
• Federal Student Aid
• YFP Podcast

Episode Transcript

Tim Ulbrich: Hey, everyone. Tim Ulbrich here. And before we jump into today’s show with YFP lead planner Kelly Reddy-Heffner to discuss considerations while federal student loan payments are still paused, we want to make sure you have the most up-to-date information. We recorded this episode last week, but today, Jan. 20, 2021, there was an executive order signed by President Biden on his first day in office related to student loans. President Biden has directed the Department of Education to extend the administrative forbearance on qualifying federal loans through Sept. 30, 2021. Prior to today’s news, the freeze on payments and interest accruing was set to expire at the end of this month. So stay tuned to this show and updates in the YFP Facebook group for continuing discussion on the implications of this news to those that have federal loans and were waiting to hear whether or not payments would restart in February. As we talk about on the show today, now is the time, while this administrative forbearance period continues, to weigh all of the repayment options and strategies and determine the one that is best for your personal situation so that you can hit the ground running with a solid plan come October 2021. And of course, for those with private loans and non-qualifying federal loans, there is no reason to wait on making that decision. Alright, let’s jump into today’s show. Kelly, welcome to the show.

Kelly Reddy-Heffner: Thanks, Tim. Thanks for having me.

Tim Ulbrich: Well, I’m excited for this episode. And I sense our listeners are eager as well, considering the topic as well as the times. And before we jump into talking about student loans and important considerations for borrowers given the current situation, let’s do a proper introduction of you to the YFP community. We’re ecstatic to have you as a part of the YFP team as our newest lead planner. And I know our clients and community will benefit greatly from your insights and from your expertise. So tell us a little bit about yourself, your career path into financial planning and ultimately becoming a Certified Financial Planner.

Kelly Reddy-Heffner: Thank you. Yeah. So I’m really happy to be a part of the YFP team and of course to be on the podcast today. So I actually started out after getting my MBA working in continuing education for pharmacists. So I did that for a number of years. I loved it. But my husband, who is also a healthcare professional, we always seemed to have a ton of questions about our money and how to manage our finances. So we had pursued getting some expert assistance. But I’ll be honest, we were not considered great clients. You know, we had student loan debt, we were just starting retirement accounts. So to answer all of our endless burning questions, I went back to school, got my CFP, started a business. I wanted to really help other people like myself understand their big money decisions. So I knew of Tim Baker through our planning network for financial planners. I saw a job post, piqued my interest even though I wasn’t looking for a job, and the rest is history. YFP is the perfect mix of my interests. So I’m really happy to be a part of the team.

Tim Ulbrich: Well, we’re excited to have you. And I never want to take for granted someone’s willingness to come on and do a podcast. So I appreciate you being both interested and willing to do this. And knowing you’ve been working with many of our clients already, even since you joined us, on student loans and given the news that seems to be changing daily at the moment around this, we wanted to dig back in on this topic, knowing we’ve got some new information that is obviously timely that we want to make sure our community and of course our clients are aware of as well. So we, of course, have talked about student loans on the podcast a lot. And for those that have been listening for some time, you know that. But as I have alluded to, we’re in a unique situation, and the time that warrants us to revisit this topic here in January 202. And as we’ll talk about, depending on what the Biden administration does or perhaps doesn’t do regarding student loans, there’s a lot that we don’t know right now about the future of student loan payments, about interest rates, about possible loan cancellation or not, possible expansion of Public Service Loan Forgiveness, but we want to make sure that no matter what the next steps are with federal student loan repayments, that you are prepared, that you’re confident in understanding and evaluating those options, and you’re ready to tackle them with an intentional plan. I keep telling folks, this is the perfect time, while we’re in this time period of the administrative forbearance, now is the time to tidy up your student loan repayment plan to make sure that you’re ready to hit the ground running when that administrative forbearance ends, whenever that would be, so you feel confident in walking into the next steps as it relates to your student loans. So Kelly, at the time that we’re recording this, mid-January 2021, what do we know and what do we not know about federal student loan payments and interest rates?

Kelly Reddy-Heffner: Yeah, absolutely. And I agree with you, Tim, like this is a perfect time to really think about these issues. So what we do know is over the past 10 months, we’ve had a federal student loan forbearance where folks have had $0 payments, 0% interest accumulated. We know that the stimulus package that was recently passed did not include a provision to expand student loan relief. We know just from our client base and again, from my own personal experience, we know student loan debt is a huge issue, especially for healthcare professionals. So we know that interest rates have been incredibly low over the past several months, but we know that they’re starting to creep up a bit as well. We know that Biden’s transition team has announced that they’ll extend the payment and interest freeze, which was set to expire on Jan. 31. So those are the things that we know. But then there’s a lot that we don’t know as well. So we don’t know exactly what that expansion means. We don’t know, you know, for how long. We don’t know if there’s also going to be a $10,000 forgiveness, that has been discussed. I would anticipate an expansion, an extension of that $0 payment, 0% interest, to probably be for about six months. I’m not taking any bets or wagers, and I know the timing’s going to be pretty amazing for whether I’m right or wrong, we’ll know pretty quickly. I don’t think the $10,000 is quite as likely, but that has been discussed. So we don’t know how much interest rates will increase or change in 2021 either. It’s harder — that is harder to predict, I think. I think rates will rise but slowly. So I was looking at some data from Credible, and I could see the average variable rates for, using an example of like refinancing for student loan debt, five-year term, borrowers with good credit, like 720 or higher, so it was a record low of 2.75% in June. And then we’re seeing like 3.26% in December. So we know the rates have come up some. I think that it’s really important to also say we don’t know the continued impact of the pandemic on jobs, payroll, and income security either. So we know some things, but there’s a lot more that we don’t know.

Tim Ulbrich: Yeah, great synopsis, Kelly. And I agree with your I guess projections, we could call them. And I want to be clear to the listeners, as you have, some of what we’re talking about, it’s changing so quickly. And as you mentioned, there’s a lot of things we don’t know. You know, we’re expecting to see that extension happen, how long, nobody knows the answer to that. Hopefully we will know very soon. As you mentioned, there’s been discussion around some debt cancellation. I agree with you, probably unlikely for a variety of reasons. But again, time will tell. But we do know that we’ve seen an increase in rates that’s happening, which presents an interesting question on where refinance does or doesn’t fit. We’ll come back to that here in a moment. So you know, my question, Kelly, as I hear you talking about that, putting myself in the shoes of a listener who’s perhaps facing $150,000-200,000 of debt, they’ve enjoyed this time period of administrative forbearance, perhaps able to put that money towards other goals such as paying down credit card debt or beefing up their emergency fund, or some other things. And now the question is, you know, what do I do going forward? And so as you’re working with clients that are coming on board as client of YFP Planning and they’re in this situation today, how do you approach coming up with a game plan to tackle the debt, especially given the current situation and the unknown future? What does this process look like?

Kelly Reddy-Heffner: Sure. I mean, we start out with just a basic, you know, objective of figuring out where are we at with this? So we want to have a clear picture of the debt. Is it federal, private? What is their employment type? Are they working for a for-profit organization? A non for-profit? Is there an opportunity for forgiveness? And then we’re looking at importantly, their capacity for repayment and what are the opportunity costs of repayment versus just like you referenced, some of those other goals: paying down credit card debt, some other important financial issues. So we really do need to look at a client’s unique circumstance and their perspective on repayment. There are a lot of factors to consider.

Tim Ulbrich: And when we’re thinking about paying back loans, especially after the administrative forbearance, obviously it’s a good idea to check in, take stock of the loans that one has, understanding their interest rates, understanding the loan servicer that they’ll be working with to repay those loans. So talk us through more of the process of how you help folks get a snapshot of what their current situation is.

Kelly Reddy-Heffner: Yeah, absolutely. So it is always a good idea to be taking a look at where your student loan debt is, even if you had a plan in place or you’re just starting out. The management of our financial resources, they change with different things that happen. You know, the stimulus certainly changed how you might have been planning to repay the debt. So we start with some basics, you know, studentaid.gov is a good resource, a borrower’s credit report, and then we can see what debt is outstanding. You know, it’s challenging at the moment. Studentaid.gov is defaulting to $0 payment, 0% interest. So sometimes, we need to dig a little deeper and see some of those earlier loan documents. But before the CARES Act, you know, hopefully folks have some information on file to help us with that. But the recognition of the debt is a key step in taking control of the situation. Debt can be very overwhelming, so we have to recognize it for what it is and then get to work. So again, borrowers often have a good idea that hey, we have a significant student loan debt issue, but they’re not quite sure of the details. Borrowers have increased their knowledge thanks in part to podcasts like ours, and we have some other great resources available as well. We have some books and additional materials. But a good strategy is the baseline knowledge. But a great strategy is in the details of the payment type, the interest rate, decisions to consolidate or refinance, and that’s where a borrower may be challenged to differentiate between the details. A full inventory definitely is the first step. And although it’s a bit cumbersome, it’s critical to understanding what your best options are.

Tim Ulbrich: And I love what you said there, Kelly, you know, debt can feel overwhelming. We have to recognize it for what it is and then get to work on a plan. You know, thinking back to my own personal journey, it’s almost like you’ve got to open up the closet and see the scary monster before you’re ready to address, you know, the situation. Like and I think it’s easy sometimes to say, let’s sweep it under the rug. I’d rather not just think about this. Often when I work with student pharmacists on this and we do a session where we have them inventory their loans or other things, there’s that moment of like, do I really want to know? Do I really want to know what I’m dealing with? But you’ve got to be able to uncover that and obviously as you referenced, the inventory is so important to then be able to determine what might be the best student loan repayment plan and path heading forward. So once folks have that inventory, once they know what they’re working with, once they have that snapshot, the question then is where do you start? So what are the main payoff strategies, Kelly, that folks have to think about when paying off their student loans, at least in terms of staying in the federal system?

Kelly Reddy-Heffner: Absolutely. So you’re right, I mean, once you’ve pulled the Band-Aid off, which is both a, you know, hopefully a bit of a cathartic episode, you know, here we go. We know what we have to work with. Then it, you know, we’re looking at a couple different things. We start out by figuring out does the person, the borrower, qualify for PSLF or non-PSLF forgiveness? Is that an option? I also think it’s really important to understand does the borrower have the financial capacity to repay the loans at the current rate? Or are they already struggling with the repayment with other things that are going on? We definitely have to take note of that. Then we’re looking, you know, are they in the right repayment plan to accomplish income-driven repayment and/or forgiveness. If the payments are affordable and folks are really comfortable with the payment amount, then we start looking, well hey, can we create a strategy where maybe you can accelerate the repayment? Maybe you do need to think about a refinance. So yeah, we’re right off the bat just looking at those high-level things to get started.

Tim Ulbrich: And so just as you mentioned there, you know, a few different options: PSLF, non-PSLF forgiveness, we’ve talked about these on the show before. You know, thankfully I think because many of our listeners have been following for awhile, we can throw around terms like IDR and income-driven repayment, people know what we’re talking about. But even beginning to think of those, there’s so many options, right, that people have to consider. We haven’t even yet talked about the refinance on the private side. So the million-dollar question is, how do you when working with an individual, how do you help them determine which strategy is going to be the best one for their personal situation?

Kelly Reddy-Heffner: I am going to get a little bit of heck for saying, it depends. So that’s our famous standard statement in the financial planning industry. But it really does. I mean, we can’t undervalue the role of a budget and the mindset of our borrower in determining the strategy. But we also are looking at opportunity cost as well. So in a prior podcast, Tim Church had alluded to that. He was saying he and his wife were thrilled to pay off the debt, but then he had some thoughts like, what if? and wasn’t sure he had taken the best path to being debt-free. So being debt-free in general is a great outcome. But then we start asking the questions, what if a borrower with $120,000 salary and $200,000 in federal debt, what if they could make payments in income-driven repayment, qualify for a non-PSLF forgiveness, save for the tax bill at the end — which by the way, has also been discussed as something that maybe this administration will do away with.

Tim Ulbrich: Correct.

Kelly Reddy-Heffner: Yeah, what if they could increase their savings and pay off credit card debt and have a pretty decent nest egg in 20 years? So then we start thinking like, well, what really is the best strategy for clients? And again, it is very individual. With private loans, the decision points are just so much more, you know, easily digestible: lower interest rate, highest affordable payment, get it done. With the federal loans, we see a lot more nuances and they become more difficult to sort through. When you’re on track for forgiveness, there’s no benefit to making extra payments, it’s hard to see the balance remain the same or even increase. It goes against the pull we feel to get rid of the debt as quickly as possible. But we really do need to look at what is the best overall picture for a client to have both now and down the road as they make these decisions.

Tim Ulbrich: And I think that’s a good segue, you know, Kelly, when you mentioned in the private system, the decision points are much easier. You’re evaluating interest rates, trying to get the lowest interest rates, highest affordable payment, and you get done. And so I think that really warrants the discussion of am I pursuing forgiveness or not? Because if you think about this as a decision tree, if I make that decision that PSLF or non-PSLF forgiveness is in play, then obviously you’re staying in the federal system. If not, well, now we’re going to begin to evaluate private options in terms of refinance. Let’s talk about forgiveness, specifically PSLF for a moment. What makes this strategy appealing? And we’ve talked about it before of course before on the show of some of the logistics and some of the potential concerns, so what makes it appealing? And should pharmacists take advantage of it? Or is there a time when someone should steer clear of it?

Kelly Reddy-Heffner: Absolutely. Great question. I mean, PSLF is a good option for borrowers who are working in nonprofit sector with Adjusted Gross Income and payment protections where it looks like there will be an amount to be forgiven at the end. So they’re working towards those 120 payments, but it is a process. You know, we talk about that in our student loan analysis, just the paperwork, and it is a very specific process. Borrowers who have an Adjusted Gross Income that will significantly increase over time or an overall amount of debt where very little will be forgiven, it may not be ideal. So of course, we say for those who are looking for the program or thinking about being in that program, if you are thinking about going into for-profit at some point, you should proceed with caution. Again, the balance of the loan will likely not decrease in PSLF, so after five years of nonprofit work, if you decide to switch to for-profit, you’re potentially looking at a similar student loan debt liability even though five years have passed. Unfortunately, there’s no half credit, you know, for half the payments. So you know, if you’re thinking about that, it may not be the ideal route to go.

Tim Ulbrich: Great point. Worth reiterating. There is no half credit for half the payments. So important as people think about choosing that option. So Kelly, then what about non-forgiveness options, a.k.a paying it back. What are the options that are here?

Kelly Reddy-Heffner: Absolutely, going old school. Yes. What if we just paid them back? So for borrowers with federal loans, you know, they’re really weighing that lowest interest rate versus the federal loan protections. So this year — often in the past, when we talked about the federal loan protections, it was this idea just kind of floating out there. But this year, we see exactly what that means to have some of those protections. So we’ve seen a couple different things going on, but if borrowers were financially able to still make payments or increase payments this past year, they maybe should consider refinance in the future. So the current 0% rate is literally impossible to beat at the moment, right? So but I do feel like there’s a little bit of a growing thought of like FOMO, the Fear of Missing Out. Like I’ve got 0% now with federal, but I know private lenders, you know, are maybe in the 2-3% range. I don’t want to miss that refinance rate when the 0% is done. But again, a lot of planning is finding that unique balance between what we know, what we anticipate in the future, and then what we’re willing to do to accomplish our goals. So everything is a tradeoff for sure.

Tim Ulbrich: Yeah, and as you mentioned early on, we’re coming up at the time we release this episode, we might even have more information at that time, but obviously we expect some announcement that would come out that would give us an indication on if that’s going to be extended in terms of the 0% rate and if so, for how long. And that will give us an important piece of information in the planning process. And to that point, you know, since the CARES Act was established and the administrative forbearance was extended twice, I think many pharmacists — as you’ve alluded to here briefly — have been wondering if they should or shouldn’t refinance their loans. And I think this warrants some brief discussion on refinancing, again, as we use this time period to really take a close look at our repayment options and plan. So just remind our community, what is refinancing? And what ultimately is the goal when somebody refinances loans?

Kelly Reddy-Heffner: So yeah, refinancing is a very — what I like to say a private loan term because we’re talking about moving from a federal loan to a private loan. And it is a one-way transaction. So once you’ve made the decision to go from federal to private, that’s it. You can’t move back to the federal loan. It’s also a reference point for moving from one private loan to another. So if you have a private loan and you want to refinance, you’re moving into another private loan, the purpose in my opinion is always related to improving your interest rate or the term of the loan. Maybe it’s to remove a cosigner. But the purpose of that refinance is nearly always a better interest rate and maybe you’re decreasing the amount of time that you’re paying the loan.

Tim Ulbrich: And so overall, just given the time that we’re in, what’s your take on refinancing? Is it something that should or shouldn’t be done? When is it OK to start refinance again? And of course, I need to say — although it should be assumed — that of course this is an individual both consideration and determination. But generally, how are you considering refinancing in the moment?

Kelly Reddy-Heffner: Sure. I mean, as you said, it is a very individual, unique decision to be made. And I use the example, if a borrower has a $120,000 salary and $150,000 in federal loans, they’re likely not on a trajectory to have any debt forgiven. So then it makes sense to consider a refinance. But as you mentioned earlier in the intro, we really are in a unique environment at present. So if, you know, if by the end of January, I learn that I have 0% interest extended for six more months and that $10,000 forgiveness amount is still floating out there, I think I need to continue in the federal program and I watch the interest rates in the private sector. Ideally, our borrowers are making payments to lower the principle balance to take full advantage of that 0%. So again, if you’re in PSLF or non-PSLF forgiveness, making those payments is not really a great strategy. But if you are just paying down the debt, you know, I’d love to see our borrowers be in a position to take advantage of that 0% and like I said, keeping an eye on those interest rates in the private sector.

Tim Ulbrich: Yeah, and one of the things, Kelly, that I have an eye out for is I think given the circumstances that those who had already refinanced before the CARES Act, as they all know too well and we know were left out of the administrative forbearance because there wasn’t any protections or benefits that those were in the private system, I wonder if that’s going to have people second-guessing refinancing as a move going forward, even if through the analysis and mathematically it’s the better move to make. And so that takes me to the question of what considerations should people be thinking about before refinancing their loans and what differences there are between the federal and the private system and what they may or may not be giving up.

Kelly Reddy-Heffner: So right, outside of those working towards any forgiveness, I think the biggest consideration is that federal protection, which we’ve seen highlighted this year and what that impact could be. You know, there is a lack of flexibility with borrowers in the private sector where they don’t have the same income-driven repayment options. So if you have a job loss, you know, it can be a little bit different of a process to navigate that. Some of the private sector companies have gotten better with that. Really, if you’re looking at interest rates too, which is a big consideration, you know, if I can reduce my interest rate from like 4.8% to 2.8% on a $200,000 loan debt, you can save some money for sure. So I use the example, in five years, you could save $10,000 in interest. Over 20 years, it’s $30,000. So interest is a major consideration. But again, we’re always looking to see what really is the best strategy. I like the 0%. I like making a dent in my principle and any accrued interest if I’m not working for forgiveness. And then I’m still, like I said before, keeping an eye on those private interest rates to see how their movement is going. And of course, we’re going to keep updating folks on this topic because we know it’s super important.

Tim Ulbrich: Great insights, Kelly. And I think as we have spent the better part of 20 minutes or more really zooming in on student loans, I feel the need to zoom out. One of the things that I say often on this show and to our prospective clients and to people in the community is you can’t just look at one part of your financial plan in a silo. And this includes analyzing your student loans and determining a plan to pay them off. So what else do folks need to consider? What else do they need to weigh and keep in mind when deciding what their game plan is going to be?

Kelly Reddy-Heffner: Yeah, Tim, you are absolutely right. I mean, the past several months have been a really unique opportunity to have a bird’s eye view of an individual student loan debt burden, not counting those working towards forgiveness and what they were able to accomplish in the past several months. So we have seen the following or some combination of the following: We have borrowers who are in a financial place to take full advantage of that 0% and they continued to make payments, resulting in a bigger impact on principle. But we’ve also seen folks who have used this time to make payments on things that were still accruing interest, which is great too. So they have paid down other debts. But then we also have situations where borrowers who have had employment challenges, are struggling financially, and they could not do either. So this helps give us a really clear idea of what a borrower might be able to accomplish in 2021 and if a refinance is viable. So we’re still looking at employment status and security. You know, we still have folks who have changes in their job and income and need to navigate through that. What other debt do they have? What is cash flow looking like? And then what are other financial priorities? I can’t say enough too, like borrower behavior and perspective on the loans is a major — a major component. You know, if someone’s really motivated, then we’re having those conversations to really look at things and say, what can we accomplish? But again, these are all pieces. We can’t look at one piece of the financial plan without looking at others.

Tim Ulbrich: I’m so glad, Kelly, you mentioned borrower behavior and perspective. We often say it’s the math plus how you feel about the debt, right? You’ve got to consider the numbers and look at the options and make sure you understand what would be coming out of pocket, what you’d be paying each month, how much interest you’d be paying, what would be forgiven. But you have to also layer on top of that, you know, how do you feel about the debt? How does your significant other or spouse feel about the debt? And how might that or might it not impact the direction that you take with your repayment plan? And so as we wrap up here, and you’ve provided incredible insights and obviously are well versed in this topic, it dawns on me that there are just as we said at the beginning, so many individual considerations, so many nuances to student loans, unfortunately a system probably more complicated than it needs to be. But when we’re dealing with six figures of student loan debt or more, many of our clients are north of $150,000-200,000, we know that the median indebtedness for today’s graduate is now north of $170,000, and so the decision between Path A, B, C and keep going on can be the difference easily of tens of thousands of dollars. And so we need to invest the time to understand these options, we need to invest the time to evaluate what those options are and to feel good about choosing the best path forward that is that for one situation, which takes me to our student loan analysis, which is a service I mentioned at the front end of this episode of something that we offer at YFP. It’s a one-on-one service intended to help folks really understand, evaluate, determine their best repayment option going forward. But what we haven’t talked about before on the show, Kelly, is what folks can expect through that service if they were to sign up. So talk to us about what you do as you work with a client through a student loan analysis and ultimately what the deliverable of that is.

Kelly Reddy-Heffner: Yeah, absolutely. And I view this as a next step from all the knowledge that we’re acquiring in podcasts and reading our book and becoming more knowledgeable and of course, you know, recognizing that this is a significant issue. Then we’re looking at a very personalized, like you said, one-on-one. We’re doing the inventory of the loans, we’re going to provide an analysis with recommendations for next steps. Part of that process looks at payment amounts and projections, whether a consolidation or refinance makes sense. We ask clients to provide a budget amount so that they can give some input into how much they can afford to put towards this effort. I think one of the best things about this is it really gives clients a clear estimate of what to expect. But in an awesome way, it gives people a lot of confidence. Like having a plan where they can put it into action, you know, put these pieces of the puzzle in place, and then start focusing on some other aspects of their financial goals, I hear a lot of reaction like, reduces stress, increases confidence, just feeling good that there’s a plan. And you know, maybe down the road, you need to revisit the plan. But there’s something in place to get you started.

Tim Ulbrich: Yeah, absolutely. And what I sense and hear from folks often, Kelly — and I’m sure you do even more than I — is that just having — even if the debt number isn’t going to move, right, at least for the short term, you know, $200,000 of debt is $200,000 of debt. But it’s a different feeling when you have momentum and peace of mind knowing that you’ve evaluated the options, you’ve applied them to your personal situation, and you feel confidently in the plan, in the plan that you’re pursuing going forward and so that you can begin to focus on other financial goals. So I think it’s an important point to mention not to underestimate the peace of mind that can come with this as well. So for those that are interested, you can schedule your student loan analysis by visiting YourFinancialPharmacist.com/studentloananalysis, all one word. Don’t wait as I think now, as we’ve been talking through the show, is the perfect time to get your loan repayment plan in place or to get a second opinion on a strategy that you’re currently utilizing. And for a limited time, we’re going to be sending a copy of our three YFP-published books. That would be “Seven Figure Pharmacist,” “A Pharmacist’s Guide to Conquering Student Loans,” and “Baker’s Dirty Dozen: Principles for financial independence” to anyone that signs up and purchases a student loan analysis by the end of January. So we want to get the tools and resources in your hands, not only to attack student loans but also to continue to progress with your financial plan in 2021. So again, YourFinancialPharmacist/studentloananalysis. You can purchase the analysis there, sign up for a time right away with Kelly to get that going. And as always, if you liked what you heard on this week’s episode of the Your Financial Pharmacist podcast, please leave us a rating and review on Apple podcasts or wherever you listen to the show each and every week. We appreciate you joining us, and we hope you have a great rest of your week.

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